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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 0-24720
BUSINESS OBJECTS S.A.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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THE REPUBLIC OF FRANCE NONE
(JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
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1 SQUARE CHAPTAL, 92300 LEVALLOIS-PERRET FRANCE
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(408) 953-6000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
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NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS: REGISTERED:
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American Depositary Shares,
each representing one Ordinary Share Nasdaq National Market
Ordinary Shares Nasdaq National Market*
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* Not for trading, but only in connection with the American Depositary Shares.
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Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act: None
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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.
[X] Yes [_] 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-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the ADS on February 27, 1998
as reported on the National Market of The Nasdaq Stock Market, was
approximately $177,642,000. Shares of Common Stock held by each officer and
director and by each person who owns 5% or more of the outstanding Common
Stock have been excluded in that such persons may be deemed to be affiliates.
This determination of affiliate status is not necessarily a conclusive
determination for other purposes.
The number of outstanding shares of each of the issuer's classes of capital
or common stock as of February 27, 1998 was 16,784,154 Ordinary Shares of FF1
nominal value, including 13,412,210 American Depositary Shares (as evidenced
by American Depositary Receipts), each corresponding to one Ordinary Share.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant has incorporated by reference into Part III of this Form 10-K
portions of its Proxy Statement for Registrant's Annual Meeting of
Shareholders to be held June 3, 1998.
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Unless otherwise stated, references herein to the "Company" or to "Business
Objects" are to Business Objects S.A. and its consolidated subsidiaries.
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TRADEMARKS
BusinessObjects, the Business Objects logo, BusinessQuery, BusinessMiner,
BusinessAnalyzer, Microcube, PowerReport, Rapid Deployment Template,
ReportScript, Semantically Dynamic, SmartSpace, Universe Repository and
WebIntelligence are trademarks or registered trademarks of Business Objects
S.A. All other trademarks or trade names referenced to in this Annual Report
on form 10-K are the property of their respective owners.
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REPORTING CURRENCY
All financial information contained in this document is expressed in United
States dollars, unless otherwise stated.
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AMERICAN DEPOSITARY SHARES
Pursuant to a program sponsored by the Company, ordinary shares of the
Company (the "Shares") are traded in the United States in the form of American
Depositary Shares ("ADSs"), each ADS representing one Share placed on deposit
with The Bank of New York, as depositary (the "Depositary") and issued and
delivered by the Depositary through its principal office in New York City at
101 Barclay Street, New York, New York, 10286. Under the terms of the Deposit
Agreement (the "Deposit Agreement") dated September 22, 1994 and amended May
8, 1996, Shares may be deposited with the Paris office of Banque Paribas, as
custodian (the "Custodian"), or any successor or successors to such Custodian.
The Depositary provides a variety of services to investors, as more fully set
forth in the form of Deposit Agreement filed as an exhibit to the Company's
Registration Statement on Form F-6 filed with the Securities and Exchange
Commission on August 22, 1994.
Under the original Deposit Agreement two Shares converted into one ADS.
Following the amendment of the Deposit Agreement on May 8, 1996, one Share
converts into one ADS. This had the effect of doubling the number of
outstanding ADSs, producing the same result as a 2-for-1 stock split. Except
where otherwise indicated, all ADS and per ADS information contained herein
has been adjusted to give effect to this amendment for all periods.
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TABLE OF CONTENTS
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PART I
Item 1. Description of Business........................................ 4
Item 2. Description of Property........................................ 14
Item 3. Legal Proceedings.............................................. 14
Item 4. Submission of Matters to a Vote of Security Holders............ 14
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters........................................................ 15
Item 6. Selected Financial Data........................................ 16
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 17
Item 8. Financial Statements and Supplementary Data.................... 30
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure........................................... 49
PART III
Item 10. Directors and Executive Officers of the Registrant............. 49
Item 11. Executive Compensation......................................... 49
Item 12. Security Ownership of Certain Beneficial Owners and Management. 49
Item 13. Certain Relationships and Related Transactions................. 49
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-
K.............................................................. 50
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FORWARD LOOKING STATEMENTS
In addition to historical information, this Annual Report contains forward
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act, as amended.
The forward-looking statements contained herein are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those reflected in the forward-looking statements. Factors that might cause
such differences include, but are not limited to, those discussed in the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Business Factors." Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's analysis only as of the date hereof. Business Objects undertakes
no obligation to publicly revise these forward-looking statements to reflect
events or circumstances that arise after the date hereof. Readers should
carefully review the risk factors described in other documents the Company
files from time to time with the Securities and Exchange Commission, including
reports on form 10-Q to be filed by the Company in 1998.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
INDUSTRY BACKGROUND
Companies around the globe are looking for ways to further leverage business
information across the enterprise in order to become more competitive. Today,
this information exists in many places: application systems such as enterprise
resource planning, human resources, and finance; data warehouses and data
marts; and custom applications for specialized use.
In order to take full advantage of corporate data and gain a competitive
advantage, organizations need to empower end users with data access for more
effective decision making. However, many organizations do not have the tools
needed to fill this business requirement.
The decision support industry was born out of this need for companies to
deliver access to information to their employees, and enable them to make
faster, more accurate decisions. Faster access to information means companies
can be more competitive, take advantage of new markets, and push decision
making down to the front lines of the organization.
COMPANY
Business Objects was organized in 1990 as a societe anonyme, or limited
liability company, under the laws of the Republic of France to develop, market
and support integrated enterprise decision support software tools. The
Company's principal executive office is located at 1 Square Chaptal, 92300
Levallois-Perret, France. The Company has wholly-owned subsidiaries in the
United States, United Kingdom, Germany, the Netherlands, Belgium, Spain,
Australia, Sweden, Canada, Singapore, Japan and Switzerland. In addition, the
Company also has a majority interest in a subsidiary in Italy.
The Company's decision support tools are designed to allow non-technical end
users to access, report, and analyze information stored in corporate data
warehouses, data marts, and business applications. The Company's software
enables end users to perform powerful queries by using a "semantic layer," a
patented technology that maps complex databases to a business representation
understandable by non-technical end users. Data retrieved by these queries can
then be analyzed using various tools and sophisticated reports can be produced
to present the results of the analysis. The Company's products are distributed
worldwide through both direct and indirect sales channels to organizations in
a wide range of industries. As of December 31, 1997, Business Objects
estimates that it had licensed its software to over 5,800 customers,
representing approximately 700,000 licenses in over 60 countries.
Business Objects introduced its first products in 1990 in response to a
growing need for software tools that enabled end users to independently
access, analyze and report on data stored in relational databases. The Company
evolved its products over the following years in response to user needs and
built a strong market leadership position. The Company's current solution and
its core product, BusinessObjects version 4.1, is based on five fundamental
principles:
Business-Oriented Representation of Information. The Company's software
eliminates the necessity for end users to understand the details of
database structures and permits end users to work with their own business
terminology to execute queries, generate reports or analyze data. This
result is accomplished by transforming the technical details of database
structures into business representations, or universes of business
"objects" of information, that are meaningful to end users. The universes
of objects are pre-defined by the Information Systems (IS) staff and made
available to end users in a shared repository, who can then combine objects
such as "Sales Revenue", "Products", or "Customers" dynamically to
formulate a query. As a result, the IS department is no longer required to
define queries for individual users, and it can, by defining even a limited
number of objects, provide end users with substantial query potential.
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Intuitive and Reliable Query Technique. The Company's software insulates
users from the complexities of the Structured Query Language (SQL) and
provides a query technique based on a logic more intuitive to the end user
than traditional query techniques, resulting, the Company believes, in both
greater ease of use and better accuracy of results. The user need only
specify, in a query panel, the objects he desires to retrieve, any
applicable conditions on these objects and the sorting order of the
results. The user does not have to understand particular technical
concepts, such as location of data, definition of information elements, or
the relationship between different database tables. The use by end users of
a meaningful business vocabulary, predefined by database experts, reduces
the potential for improperly defined queries that may result in erroneous
results.
Comprehensive, Integrated Suite of End User Tools. The Company's
comprehensive, integrated suite of end user tools permits end users,
following a single query of the database, to generate a wide variety of
reports and graphs and to perform various forms of analysis, including
multidimensional analysis or online analytical processing (OLAP), and data
mining.
Repository-Based IS Staff Set-up, Control and Security. The IS staff can
efficiently administer the deployment of the data access solution within an
organization through the use of a central relational repository, where
universes of objects are centrally defined, maintained, and stored by the
IS staff. The IS staff can also control the use of available computer
resources by preventing or deferring the execution of queries that consume
excessive amounts of processing time or return large amounts of data,
thereby overloading the system. Further, by being able to assign specific
universes of objects to particular end users, the IS department can
maintain control over data access security throughout the enterprise.
Enterprise-wide Interoperability. The Company's software products have
been developed to provide enterprise-wide interoperability, for platforms
including Microsoft Windows (Windows 95, NT, and 3.1) and Unix Motif, and
most major databases, including Oracle, Sybase, IBM DB2 and SQL/400,
Informix, Microsoft SQL Server, DEC Rdb, and Teradata and a number of
legacy mainframe databases. This interoperability is effected either
through the use of native middleware or through open interfaces, such as
Microsoft ODBC. The product also supports multidimensional databases or
OLAP servers, such as Oracle Express, Arbor Essbase, and Informix Metacube.
BUSINESS STRATEGY
The Company's objective is to continue to be a leading supplier of software
products for the worldwide enterprise decision support tools market. The
Company's strategy is focused on the following elements:
Concentrate on Decision Support Tools. The Company continues to focus on
decision support tools designed to facilitate, on an enterprise-wide basis,
the access, analysis, and reporting by end users of information stored in
corporate data warehouses, data marts, and business applications. The
Company plans to continue investing significant resources in research and
development both to enhance its core, end user data representation and
query technology and to develop new or enhanced analysis and reporting
products. The Company may also license technology from third parties in
order to broaden its scope of products.
Maintain Enterprise-wide Focus. The Company intends to ensure that its
products can be used in conjunction with major desktop computer operating
systems and corporate databases and to adapt its products to the latest
developments of these different technologies. The Company's objective is to
make "seamless" the access and sharing of information across heterogeneous
enterprise-wide environments. In particular, the Company enables its
technology for use on intranets and for use in conjunction with leading
multidimensional databases.
Diversify Channels of Distribution. In order to accelerate worldwide
market penetration, the Company is broadening its sales strategy, which has
historically focused on the direct sales approach, by furthering its
telesales organization and the development of indirect sales channels
consisting of VARs, system integrators, consulting partners, distributors,
and resellers. This strategy is designed to reach organizations that could
not otherwise have been effectively reached by the Company's direct sales
staff.
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Maintain Global Orientation. From its earliest stages of development, the
Company's strategy has been to develop a global organization. The Company
has developed a strong presence both in Europe and in the United States and
is expanding operations in the Asia/Pacific region. This approach enables
the Company to provide the international presence and support required by
large multinational customers and to develop product and business
strategies that will permit it to be competitive on a worldwide basis. The
Company considers its global orientation to be an essential component of
its success and culture.
Offer Quality Customer Service and Support. The Company believes that
offering responsive and highly skilled customer service and support is a
key competitive factor. The Company has established and intends to enhance
and expand its worldwide customer service and customer support
organization. In particular, the Company hired a Vice President of
Worldwide Customer Support in early 1997 and reorganized its customer
support organization to be centrally managed. Customer services currently
offered include software maintenance and support, customer education and
training, and post-sales consulting services.
TARGET MARKETS
The Company's software is designed for medium to large business
organizations and governmental institutions. The Company's marketing strategy
is focused on the following four target markets:
Users of Data Warehousing/Data Marts. Data warehousing, which has emerged
recently as a popular architecture for decision support functions, is an
information system whereby organizations install one or more servers to
supplement existing mainframes or other systems on which mission-critical
transactional applications run. These organizations regularly download data
from their transactional applications to the "data warehouses" that are
used as information servers for end users. Data marts are smaller scale
data warehouses that are focused on a particular business unit or specific
function. These approaches enable end users to access data without
incurring the risk of "corrupting" production databases, or slowing down
the running of the mission-critical transactional applications. In
addition, transactional applications usually only contain six to twelve
months of data, whereas data warehouses and data marts, over time, will
contain years of information. Because decision support is the main
objective of data warehousing, the Company considers its software to be a
key component of the data warehousing project, as it provides the end user
decision support at the front-end to the downloaded data.
Users of Packaged Client/Server Business Applications
Software. Organizations implementing complex client/server packaged
business applications from vendors such as SAP AG, Oracle Corp.,
PeopleSoft, Inc., and The Baan Company frequently require comprehensive end
user data access and reporting functionality. The Company's software
provides significant value to these organizations in its ability to handle
the complexities of the underlying databases of these applications. In
addition, the Company has developed a series of predefined objects, called
Rapid Deployment Templates (RDTs), for use with certain of these
client/server packaged business applications, thereby providing to
organizations using such applications a set of predefined universes which
facilitate the implementation of the Company's decision support solution.
The Company intends to continue to develop, independently or in conjunction
with others, RDTs for use with specific applications. The foregoing
expectation is a forward looking statement subject to a number of risks and
uncertainties including those set forth under the caption "Business
Factors--Rapid Technological Change and New Products".
Users of Custom Developed Client/Server Business Applications
Software. These organizations have a number of end users using IS or third
party developed applications in a relational environment and have
accumulated a large volume of data in their databases. The Company believes
that the exposure of end users to the benefits of relational databases has
stimulated the demand for access to the data. By allowing end users to
independently access data, generate reports, and perform analyses, the
Company's software enables these organizations to take better advantage of
their substantial investments in relational database and client/server
technology.
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Companies Sharing Data Over the Internet. These organizations want to
provide their customers, partners, and suppliers with access to information
about their relationship over the internet. For example, a medical
equipment distributor could provide their suppliers with self-service
access to inventory and sales information. While this currently represents
an insignificant portion of the Company's current business, this is a
potentially large new market for the Company. There can be no assurance
that this market will develop or that the Company will be successful in
penetrating this market.
PRODUCTS
The Company provides a complete suite of decision support tools including
query, reporting, online analytical processing, data mining, and decision
support software (DSS) administration for both client/server and internet
environments.
The client/server product line is called BusinessObjects. It consists of an
end user toolset and an IS toolset, both of which are provided in different
versions for each of the operating systems supported by the Company's software
(Windows 95, Windows NT, Windows 3.1, and Unix Motif). Versions for Microsoft
Windows currently represent the substantial majority of the Company's
installed customer base.
The Company also has a new, thin-client platform, called WebIntelligence,
that allows end users to perform ad hoc query, reporting, and analysis over
the web. WebIntelligence began production in December 1997. WebIntelligence
works with any client platform that has a Java enabled web browser. On the
server side, WebIntelligence is initially available on Windows NT.
Both the client/server and web platforms utilize the BusinessObjects IS
toolset that allows IS professionals to set up and maintain the environment
for deploying the platforms. At the center of the Business Objects environment
is the "semantic layer"--a meaningful, business representation of data between
the users and the database. This semantic layer is made up of universes of
business "objects" which end users combine to run their queries. Through the
use of an intuitive, point-and-click interface, the IS staff defines objects
by assigning a Structured Query Language (SQL) equivalent to a particular
business term, and specifies data dimensions and hierarchies for
multidimensional analysis. The IS staff then specifies the relationships
between the different tables of the relational database. Once created, this
semantic layer is available to end users through a central repository and may
be modified by the IS staff in response to the changing needs of the end users
or to changes in the database structure. Both the client/server and web
platforms can utilize the same semantic layer.
After selecting the appropriate universe of business objects, an end user
performing a query specifies in a query panel the objects he desires to
retrieve, any applicable conditions on these objects, and the sorting order of
the results. Once the query is formulated by the end user, a powerful engine
incorporated in the Company's software determines the SQL equivalent of the
query and sends it to the host database. The engine determines the appropriate
database fields and tables required, the relationships between the different
tables, the "group" functions and other query specifications. An important
feature of the engine is its ability to redefine dynamically the meaning of an
object, based on how it is combined with other objects within a query. For
example, the object "Sales Revenue" has one meaning when combined in a query
with the object "Customer", i.e. sales revenue by customer, and a different
meaning when combined with the object "Product", i.e. sales revenue by
product. Once a query has been executed, the results are returned to the end
user in the form of a microcube, allowing for the use of other desktop
computer tools to present or further analyze the data.
The IS staff is able to manage corporate data access from a central point
through the use of a "universe repository". The universe repository is a set
of relational tables where the IS staff stores universe definitions, such as
objects and table relationships, and user authorizations. Once a universe is
stored or modified in the repository, it becomes automatically available to
all authorized users, which significantly reduces maintenance and simplifies
administration. The centralized design also allows database administrators to
control access to data by adding an additional layer of security on top of
security features supported by different relational database management
systems.
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BusinessObjects, the client/server platform, is made up of several End User
components, including the following:
Reporter. Reporter includes a query engine that permits the selection of
universes of business objects and the independent formulation of queries by
combining objects in a query panel. Once data is returned by the system,
users employ a report generator that enables them to create and edit
sophisticated reports. The report generator is fully "wysiwyg" ("what you
see is what you get"), is directly linked to the database, utilizes
templates to accelerate report preparation, and allows the inclusion of
bitmap images and Microsoft Object Linking and Embedding (OLE) documents.
Reporter also includes a graph generator that enables end users to produce
a variety of different graph types and representations in two or three
dimensions. The U.S. suggested list price for Reporter is $595 per user,
subject to volume discounts.
Explorer. Explorer is an analysis tool that operates as an integrated
add-on to Reporter. Explorer provides users with integrated
multidimensional analysis functionality to "slice and dice" their
information and "drill" into levels of detail, while still using the report
as a base document. The U.S. suggested list price of Explorer is $695 per
user, subject to volume discounts, and requires that the user has licensed
the Reporter module.
Reader/Driller. BusinessObjects Reader and BusinessObjects Driller are
new product modules available for users who need to read reports but do not
require the ability to do ad hoc query. BusinessObjects Reader provides
read-only capabilities. BusinessObjects Driller enables end users to read
and drill into pre-defined reports. The U.S. suggested list price is $195
for Reader and $350 for Driller, with a minimum quantity of 200 users.
WebIntelligence is the Company's new, thin-client platform.
WebIntelligence allows users to perform ad-hoc query, reporting, and
analysis over the world wide web. Through its distributed architecture and
100% Java query applet, WebIntelligence eliminates the need for client-side
installation and maintenance of both application software and database
middleware, providing organizations with a cost-effective way to broadly
deploy DSS capabilities, and extend DSS beyond the organization to reach
suppliers, partners, and customers. WebIntelligence was first shipped in
December 1997, and on the server side, is initially available on Windows
NT. The U.S. suggested list price is $595 per user, subject to volume
discounts.
The following add-on products are available for end users of BusinessObjects
in addition to the Company's core products:
BusinessQuery for Excel. BusinessQuery for Excel is a query tool based on
the BusinessObjects query technology that has been specifically designed
for Microsoft Excel users. It is fully integrated with Excel and allows end
users to retrieve data directly within an Excel spreadsheet. As in the case
of Reporter, the universes and objects provided to end users are designed
by the IS staff using the IS toolset. BusinessQuery for Excel is licensed
as an add-on to Reporter for a US suggested list price of $150 per user,
subject to volume discounts, and as a standalone product, without a need
for Reporter, for a US suggested list price of $350 per user, subject to
volume discounts.
BusinessMiner. BusinessMiner is a data-mining tool that lets end users
discover trends hidden in their business data and then display the trends
for easy analysis in the form of a decision tree. The product includes
charts and graphs to easily visualize results and wizards that guide users
through the mining process. BusinessMiner works with data retrieved by
Reporter or directly with other data sources. BusinessMiner is licensed as
an add-on to Reporter for a US suggested list price of $495 per user,
subject to volume discounts, and as a standalone product, without a need
for Reporter, for a US suggested list price of $995 per user, subject to
volume discounts. The object code for BusinessMiner software is in-licensed
from a third party pursuant to a non-exclusive license agreement expiring
May 2001. The agreement is automatically renewable for an additional two
years, unless either party gives notice within 18 months of the expiration
date.
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In order to set up and maintain the Business Objects environment, the
Company provides the following tools designed for IS professionals:
Designer. Designer allows the IS staff to design and maintain universes
of objects. It includes a Quick Design wizard that lets IS staffs create
universes in just a few steps. Designer is a graphical tool that also
includes powerful routines for automatic design checking, including loop
detection and resolution. The US suggested list price for Designer is
$1,995 per IS staff, subject to volume discounts.
Supervisor. Supervisor is an object-based security module that allows the
IS staff to assign and modify the rights granted to users and groups of
users. Supervisor lets IS staff easily manage access to BusinessObjects
resources including documents, universes, objects, and even menus, as well
as control end users' utilization of centralized resources. The US
suggested list price for Supervisor is $1,995 per IS staff, subject to
volume discounts.
Document Agent Server. Document Agent is a production reporting server
that allows users to schedule the execution and distribution of queries and
reports to save time and computing resources. Document Agent processes
requests in the background and forwards reports to the user and others as
specified, including publishing to the web. The US suggested list price of
Document Agent is $4,995 per server, subject to volume discounts.
Data Access Drivers. Each end user module and IS toolset includes a
relational database management system (RDBMS) driver that enables users to
connect and retrieve data from a particular database. The Company offers
RDBMS drivers for the major relational databases, and customers can
purchase additional RDBMS drivers for different databases. The US suggested
list price for an additional RDBMS driver is $100 per user, subject to
volume discounts.
Rapid Deployment Templates. The Company has developed a series of RDTs
for organizations needing to access data stored in packaged applications
from vendors such as SAP, Oracle and PeopleSoft. An RDT is a deployment
"starter kit" which consists of predefined "objects" that map underlying
data structures in the application to business terms such as "Customers",
"Orders" and "Materials" meaningful to end users. Related objects are
grouped into "classes" and a set of classes belonging to a functional area
such as finance or marketing can be grouped together into a "universe".
SALES AND MARKETING
The Company markets its software and services through its direct sales
organization in the United States, France, the United Kingdom, Germany,
Belgium, Italy, Spain, Canada, Australia, Sweden, the Netherlands, Japan,
Switzerland and through non-exclusive international distributors in a number
of European, Asian, and Latin American countries, and South Africa. Currently,
the Company's products are marketed in over 60 countries, with the United
States, France, and the United Kingdom being the Company's main markets.
Although the Company has traditionally employed a direct sales approach in
marketing its software and services, an important aspect of its current sales
and marketing strategy is to expand its use of indirect sales channels such as
VARs, system integrators, consulting partners, distributors, and resellers.
This strategy is designed to enable the Company to increase its market
coverage and reach organizations which could not otherwise have been
effectively reached by the Company's direct sales staff. The Company is
seeking to build and maintain relationships with RDBMS VARs that sell
application software based on a relational database and whose typical
customers are business users in need of a decision support tool, and with
hardware vendors, which offer hardware platforms, and, in many cases, have
comprehensive data warehouse programs in which they sell complete solutions,
including databases, middleware, and front-end decision support tools.
Hardware vendors represent an important point of entry into the data
warehousing market. See "Target Markets". The Company also uses resellers,
mainly vertical application specialists and regional resellers, to cover
markets in which the Company has only a limited presence.
The Company's sales and marketing organization is comprised of sales teams,
each consisting of field sales, field technical support, telemarketing and
telesales personnel. Each sales team is responsible for the coordination
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of both direct and indirect sales within the territory and works closely with
third party VARs, system integrators, consulting partners, distributors and
resellers. In order to reduce conflict between its direct sales force and its
third-party sales channels, the Company's compensation structure rewards sales
personnel based on the total sales generated within that territory, both
direct and indirect. The Company believes that sales teams leverage the skills
of its sales personnel, encourage cooperative sales efforts and maximize
revenue generation and customer service.
The Company focuses its initial sales efforts on the IS department of a
particular organization while also seeking to involve end users through
demonstrations and product trials. Typically, the Company will perform one
demonstration to the IS department which will be followed by a trial period
during which the IS department, assisted by the Company, will develop a
prototype. Such prototype will then be the subject of a demonstration to end
users. The sales cycle varies from customer to customer, and generally
requires from two to six months or longer, especially in larger transactions.
To support its sales effort, the Company conducts marketing programs,
including advertising, direct mail, public relations, seminars, demonstrations
at customer sites and at the Company's offices, appearances at trade shows,
and ongoing customer communications programs.
CUSTOMER SERVICE AND SUPPORT
The Company believes that providing a high level of customer service and
technical support is essential to customer satisfaction and the Company's
success. To achieve this goal, the Company provides post-sales technical
support, customer education and training, and after-sales consulting services.
Post-Sales Technical Support and Software Maintenance. The Company provides
a hotline telephone support service, which is staffed by technical personnel
and which is supported by a computerized call tracking and problem reporting
system. In addition, customers have access to a technical web site providing
technical and product information. The Company's VARs, system integrators,
consulting partners, distributors, and resellers provide additional customer
support. Initial product license fees do not cover software maintenance.
Customers are entitled to receive new software enhancements and maintenance
releases and post-sales technical support for an annual fee.
Customer Education and Training. The Company offers a comprehensive
education and training program to customers, including IS staff and end users,
and third-party consultants. Training classes are offered through in-house
facilities at the Company's offices in San Jose, California and Chicago,
Illinois in the United States, in the United Kingdom, France, and other
locations. These facilities are complemented by a network of independent
certified training centers in the Company's principal markets throughout the
world. The Company intends to further the development of this network. The
foregoing statement is a forward looking statement subject to a number of
risks and uncertainties including those set forth under "Business Factors--
Product Distribution and Support". The Company also provides onsite training
services upon request by customers.
After-Sales Consulting Services. The Company provides consulting services to
its customers through its own staff or through certified consulting partners
with recognized expertise in the implementation of client/server products.
These consulting services generally consist of assisting customers in
developing universes of objects and deploying the Business Objects software
throughout the customer's end user community.
PRODUCT DEVELOPMENT
The Company believes that innovation, timeliness of product releases, and
high product quality is essential to maintain its competitive position in the
market. Consequently, the Company dedicates considerable resources to research
and development efforts to enhance its existing products and to develop new
products. To date, the Company has relied primarily on internal development of
its products, but has in the past and may in the future continue to license or
acquire technology or products from third parties.
10
<PAGE>
The Company's software is a decision support tool designed for use in both
the client/server and web computing environments. The software industry is
characterized by rapid technological advances, changes in customer
requirements, and frequent new product introductions and enhancements. In
particular, some industry analysts believe that the recent emergence of the
internet/intranets, and in particular the worldwide web, with its new mode of
user operation, could negatively impact the market for traditional
client/server tools. The Company believes that its future success will largely
depend upon its ability to enhance its current products and to develop and
introduce new products that keep pace with technological developments such as
the world wide web, respond to evolving customer requirements and achieve
market acceptance. Any failure by the Company to anticipate or respond
adequately to technological developments and customer requirements, including
advances in RDBMS or other database technology and desktop computer operating
systems and environments, any significant delays in product development or
introduction, or any incompatibility of new products with the most up-to-date
operating systems and environments then available to the Company's customers,
could result in a loss of competitiveness and could have a material adverse
effect on the Company's financial performance.
The Company believes that current customers and future potential customers
will require decision support products like BusinessObjects version 4.1 which
can be utilized over an intranet. The Company has recently released
WebIntelligence, which is deployable in an intranet environment, and utilizes
world wide web technology. The first release of WebIntelligence allows users
to execute queries and prepare reports directly from a Java-enabled web
browser.
COMPETITION
The Company's products are specifically targeted at the decision support
software tools market. The principal competitive factors affecting the market
for the Company's products are ease of use, functionality, product
architecture, price, product quality, breadth of distribution, customer
support, and name recognition. The Company's products compete in four main
market sectors, the query and reporting market, the multidimensional analysis
or OLAP market, the emerging desktop data mining market, and the market for
integrated products or product suites that provide query, reporting, and
analysis.
In the query and reporting market, the Company's main direct competitors
include Cognos Incorporated, Brio Technology Inc., Oracle Corp., and Seagate
Technology, Inc. In the multidimensional analysis or OLAP market, the Company
faces direct competition from Cognos and Andyne Computing Ltd., as well as
indirect competition from Oracle, Seagate Technology, Inc., Microstrategy,
Inc., Arbor Software Corp., and Microsoft Corp. Many of the Company's
competitors have longer operating histories and significantly greater
financial, technical, sales, marketing and other resources, as well as greater
name recognition and a larger installed base, than the Company. In addition,
many competitors, particularly relational database management system vendors,
have well-established relationships with customers of the Company. The
Company's competitors could in the future introduce products with more
features and lower prices than the Company's products. These companies could
also bundle existing or new products with other more established products in
order to compete with the Company. The Company's focus on decision support
tools may be a disadvantage in competing with vendors who offer a broader
range of products. Furthermore, as the decision support market develops, a
number of companies with significantly greater resources than the Company
could attempt to increase their presence in this market by acquiring or
forming strategic alliances with competitors of the Company.
During 1997, the Company generated approximately 31% of its revenues from
its operations in North America. This market is highly competitive. The
Company believes that its continued success is partly dependent on its ability
to operate successfully in this geographic region. Marketing activities and
purchasing decisions made by companies in this region influence purchasing
decisions made by companies on a worldwide basis. The inability of the Company
to compete successfully in this region, or the ineffectiveness of its
marketing activities, could have a material adverse affect on the Company's
results of operations and financial condition.
Although the Company has recently been increasing its sales through indirect
channels, revenues from such sales channels currently represent a smaller
portion of the Company's total revenues than direct sales and there
11
<PAGE>
can be no assurance that the Company will be able to continue to attract
indirect channels that will be able to market and support the Company's
software effectively. For the year ended December 31, 1997, the Company
realized 58% of its licensing revenues directly and 42% through indirect sales
channels, compared to 66% and 34%, respectively, for the year ended December
31, 1996.
MANUFACTURING
Substantially all of the Company's CD duplication, printing of user manuals,
packaging and manufacture of related materials are performed to the Company's
specifications by outside sources. To date, the Company has not experienced
any material difficulties or delays in manufacture by third party suppliers.
However, an interruption in production by a supplier or suppliers could result
in a delay in shipments of the Company's products and adversely affect the
Company's results of operations.
PATENTS AND INTELLECTUAL PROPERTY PROTECTION
The Company currently has one patent issued in the United States, number
5,555,403 relating to a "Relational Database Access System Using Semantically
Dynamic Objects". The Company is currently engaged in litigation asserting
that one of its competitors infringes this patent. See Item 3, Legal
Proceedings. There can be no assurance that any current or future patents will
provide the Company with competitive advantages or will not be challenged by
third parties, or that the patents of others will not have an adverse effect
on the Company's ability to do business. Furthermore, there can be no
assurance that others will not independently develop similar or competing
technology or design around any patents that may be issued to the Company. The
Company believes that it owns or has licensed all proprietary rights relating
to its software. The Company relies on a combination of the protections
provided by applicable copyright, trademark and trade secret laws, as well as
on confidentiality procedures and licensing arrangements, to establish and
protect its rights in its software. Despite the Company's efforts, it may be
possible for unauthorized third parties to copy certain portions of the
Company's products or reverse engineer or obtain and use information that the
Company regards as proprietary. In addition, although the Company's name
together with its logo is registered as a trademark in France, the United
States, and a number of other countries, it may be difficult for the Company
to assert ownership rights in the name "Business Objects". Policing
unauthorized use of the Company's products by customers or preventing the name
of the Company's software from becoming part of the public domain is
difficult. The laws of certain countries do not protect the Company's
proprietary rights to the same extent as do the laws of the United States or
France. Under French law, the rights of the Company in its software are not
patentable but are protected under copyright law and infringements by third
parties can be enjoined. While the Company's competitive position may be
affected by its ability to protect its proprietary information, the Company
believes that factors such as the technical expertise and innovation skills of
its personnel, its name recognition and ongoing product support and
enhancement may be more significant in maintaining the Company's competitive
position.
The Company licenses its software products to customers on a non-exclusive,
non-transferable basis. License agreements typically provide that the licensed
product may be used solely for the customer's internal operations and for a
specified number of named or concurrent users. With respect to US customers,
the Company may rely on "shrink-wrap" license agreements for the protection of
its products. A "shrink-wrap" license agreement is a printed license agreement
included within the packaged software that sets forth the terms and conditions
under which the purchaser can use the products. Such licenses take effect upon
the opening of the product package.
The Company also licenses a portion of its technology to third parties.
Specifically SPSS Inc. and Alsoft have licensed the Business Objects query
technology and incorporated it into their products, BusinessQuery for SPSS
from SPSS Inc., and BusinessQuery for GeoConcept from Alsoft.
The Company licenses certain software from third parties for sub-licensing
by the Company to its customers, and also licenses certain software programs
from third parties and incorporates them in the
12
<PAGE>
Company's software products. Generally, such agreements grant the Company non-
exclusive, worldwide licenses with respect to such software. The utilization
of such third party software involves risks additional to software developed
in-house. Third party providers may cease or alter their operations, terminate
the relationship, or be generally unable to fulfill their obligations. Such
events may require the Company to seek alternative technology which may or may
not be available on commercially reasonable terms.
In the future, it may be necessary or desirable to obtain licenses relating
to software programs from third parties, and there can be no assurance that
the Company will be able to obtain the necessary technology or similar
technology on commercially reasonable terms. Also, there can be no assurance
that third parties will not assert infringement claims against the Company in
the future with respect to current or future products or that any such
assertions may not require the Company to enter into royalty arrangements or
result in costly litigation.
The Company has entered into source code escrow agreements with a limited
number of its distributors and end users requiring release of source code.
Such agreements provide that such parties will have a limited, non-exclusive
right to use such code in the event that there is a bankruptcy proceeding by
or against the Company, if the Company ceases to do business or if the Company
fails to meet its contractual obligations. The provision of source code escrow
agreements may increase the likelihood of misappropriation by third parties.
The Company is not aware of any infringement or claims of infringement by
its products on the proprietary rights of third parties. There can be no
assurance, however, that third parties will not claim such infringement by the
Company with respect to current or future products. The Company expects that
software products will increasingly be subject to such claims as the number of
products and competitors in the Company's industry segment grows and the
functionality of products overlap. Any such claim, with or without merit, can
be time consuming and could result in costly litigation and require the
Company to enter into royalty and licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable by
the Company or at all.
EMPLOYEES
As of December 31, 1997, the Company had 757 full-time employees, including
116 in research and development, 401 in sales and marketing, 137 in customer
service and support and 103 in finance and administration. The Company's
employees are not represented by any collective bargaining organization, and
the Company has never experienced a work stoppage.
The Company's success depends to a significant extent upon a number of key
management and technical personnel, including Bernard Liautaud, its Chief
Executive Officer and Co-Founder, the loss of whom could adversely affect the
Company's business. The Company maintains a key person life insurance policy
with proceeds payable to the Company on the life of Mr. Liautaud. The loss of
the services of key personnel could have a material adverse effect on the
Company. In addition, the Company believes that its future success will also
depend in a large part on its ability to attract and retain highly skilled
technical, management, sales and marketing personnel. Competition for such
personnel in the computer software industry is intense, and there can be no
assurance that the Company will be successful in attracting and retaining such
personnel.
Under French law, management is required to hold monthly meetings with a
delegation of elected employee representatives to discuss, in particular,
employment matters and the economic condition of the Company and to provide
appropriate information and documents relating thereto. As required under
French law, one employee representative is entitled to be present at meetings
of the Board of Directors of the Company, but does not have any voting rights.
FOREIGN AND DOMESTIC OPERATIONS
See Note 13 of Notes to Consolidated Financial Statements.
13
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
The Company's corporate headquarters are located in Levallois-Perret,
France, a suburb of Paris, in a leased facility consisting of approximately
37,000 square feet. The lease term expires in 2005; however, the Company has
the option to cancel the lease without penalty in 2002. In addition, the
Company leases approximately 58,000 square feet in San Jose, California for
its U.S. headquarters under a lease expiring in 2001. The Company leases
additional facilities and offices in Puteaux, France; Maidenhead, England;
Koln, Germany; Utrecht, the Netherlands; Sydney, Australia; Tokyo, Japan;
Madrid, Spain; Stockholm, Sweden; Zaventem, Belgium; Rome and Milan, Italy;
Geneva and Zurich, Switzerland; Ontario, Canada and in the United States in
California, Texas, Illinois, Massachusetts, New Jersey, Georgia, Maryland,
Michigan, Minnesota, Colorado, New York, Pennsylvania and Connecticut.
ITEM 3. LEGAL PROCEEDINGS
During January 1997, the Company filed a lawsuit in United States District
Court for the Northern District of California against Brio Technology, Inc.
for alleged patent infringement. The lawsuit alleges that Brio Technology,
Inc. infringes the Company's United States Patent No. 5,555,403 by making,
using and selling its product known as BrioQuery Enterprise. The Company's
complaint requests that the defendant be enjoined from further infringing the
patent. See "Business Factors--Legal Proceedings".
In addition, the Company is involved in various legal proceedings arising in
the ordinary course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
14
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The ADSs are quoted on the Nasdaq National Market under the symbol "BOBJY".
Neither the ADSs nor the Shares are listed or quoted on any other quotation
system or securities exchange. The following table sets forth the range of
quarterly high and low closing bid prices of the ADSs (each ADS representing
one Share) on the Nasdaq National Market for each full quarterly period within
the two most recent fiscal years.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1997:
Fourth Quarter............................................... $14.00 $ 9.75
Third Quarter................................................ $10.88 $ 6.75
Second Quarter............................................... $11.75 $ 7.38
First Quarter................................................ $16.00 $ 9.38
1996:
Fourth Quarter............................................... $20.25 $ 8.75
Third Quarter................................................ $41.50 $11.75
Second Quarter............................................... $55.50 $32.25
First Quarter................................................ $46.88 $18.75
</TABLE>
The depositary in respect of the ADSs is The Bank of New York. Each ADS
registered on the books of the Depositary corresponds to one Share. As of
February 27, 1998, there were 48 record holders of American Depositary
Receipts evidencing 13,412,210 ADSs. As of February 27, 1998, there were
approximately 91 holders of record of the Company's 16,784,154 Shares. The
Company has not, since its formation, declared or paid any dividends on its
common stock. The Company intends to employ all available funds for the
development of its business and, accordingly, does not intend to declare or
pay any cash dividends in the foreseeable future.
15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the
Consolidated Financial Statements and related Notes thereto appearing
elsewhere in this Annual Report on Form 10-K. The selected statement of
operations data for each of the three years in the period ended December 31,
1997 and the balance sheet data at December 31, 1997 and 1996 have been
derived from the Consolidated Financial Statements of the Company, which have
been prepared in accordance with U.S. GAAP.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994 1993
---------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND PER ADS DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
License fees.......... $ 78,478 $ 64,451 $ 48,782 $ 24,306 $ 11,563
Services.............. 35,775 20,686 11,824 5,881 2,540
---------- --------- --------- --------- ---------
Total revenues...... 114,253 85,137 60,606 30,187 14,103
Cost of revenues:
License fees.......... 3,773 3,235 2,107 1,466 944
Services.............. 13,107 6,780 4,044 1,619 724
---------- --------- --------- --------- ---------
Total cost of
revenues........... 16,880 10,015 6,151 3,085 1,668
---------- --------- --------- --------- ---------
Gross margin............ 97,373 75,122 54,455 27,102 12,435
Operating expenses:
Sales and marketing... 68,115 50,038 30,666 16,154 7,739
Research and
development.......... 14,050 10,634 8,071 4,299 2,353
General and
administrative....... 11,076 7,402 5,706 3,447 1,855
---------- --------- --------- --------- ---------
Total operating
expenses........... 93,241 68,074 44,443 23,900 11,947
---------- --------- --------- --------- ---------
Income from operations.. 4,132 7,048 10,012 3,202 488
Net interest income and
other.................. 1,673 1,849 1,999 383 120
---------- --------- --------- --------- ---------
Income before minority
interest and provision
for income taxes....... 5,805 8,897 12,011 3,585 608
Provision for income
taxes.................. (3,184) (3,737) (3,963) (1,208) (378)
Minority interest in
losses ................ 256 -- -- -- --
---------- --------- --------- --------- ---------
Net income.............. $ 2,877 $ 5,160 $ 8,048 $ 2,377 $ 230
========== ========= ========= ========= =========
Net income per Share and
ADS--basic............. $ 0.17 $ 0.32 $ 0.51 $ 0.18 $ 0.02
========== ========= ========= ========= =========
Net income per Share and
ADS--diluted........... $ 0.17 $ 0.30 $ 0.49 $ 0.17 $ 0.02
========== ========= ========= ========= =========
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994 1993
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents and short-
term investments....... $ 39,013 $ 42,171 $ 46,702 $ 30,849 $ 3,658
Total current assets.... 80,020 70,057 66,669 40,915 9,509
Total assets............ 94,340 80,770 71,013 45,237 11,201
Total current
liabilities............ 43,541 28,915 24,431 10,435 6,652
Long term obligations... -- 19 121 93 164
Shareholders' equity.... 50,799 51,836 46,461 34,709 4,385
</TABLE>
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Actual results could
differ materially from those projected in the forward-looking statements as a
result of certain factors including those described in the line item
discussion of the Company's financial statements set forth below and in the
section titled "Additional Factors That Could Affect Operating Results". The
Company assumes no obligation to update the forward-looking information or
such factors.
OVERVIEW
The Company develops, markets and supports decision support software tools
for the client/server and Intranet market. The Company's revenue is derived
from license fees and charges for services, including consulting, training and
maintenance. Revenue from product licensing is generally recognized on
shipment of the product, provided that no significant vendor or post support
obligations remain and that the collection of the receivable is deemed
probable by management. Consulting and training revenues are recognized upon
performance of the related services. The Company recognizes the revenue
associated with software maintenance contracts on a pro rata basis over the
life of the contract, which is typically one year.
In October 1997, the Financial Accounting Standards Board issued Statement
of Position No. 97-2, "Software Revenue Recognition" (SOP 97-2). The Company
will be required to adopt this standard in its first quarter of fiscal year
1998. The criteria for recognizing revenue under SOP 97-2 are generally more
rigorous than the previous accounting standard and, in some cases,
significantly more rigorous. Due to uncertainties which exist with respect to
the appropriate interpretations and manner of implementation of SOP 97-2, the
effect on the Company is uncertain but could be significant.
Sales in the Company's various markets are subject to risks inherent in
international business activities, including, in particular, general economic
conditions in each such country, overlapping of differing tax structures,
managing an organization spread over various jurisdictions, unexpected changes
in regulatory requirements, complying with a variety of foreign laws and
regulations, and the longer accounts receivables payment cycles in Europe.
Other risks associated with international operations in general include import
and export licensing requirements, trade restrictions, and changes in tariff
and freight rates. See "Business Factors--Multinational Operations and
Currency Exchange Rate Fluctuation".
During April 1997, the Company acquired 51% of the outstanding shares of a
division of Datamat Ingegneria dei Sistemi S.p.A., its Italian Distributor, in
exchange for $1,300,000 in cash. The purchase agreement provides for a
call/put option that gives the Company the right to purchase and Datamat
Ingegneria dei Sistemi S.p.A. the right to require the Company to purchase an
additional 29% of the shares of the division in 1998 and the remaining 20% of
the shares in 1999 for an amount determined using a net asset and revenue
based formula. The Company has accounted for the acquisition using the
purchase method. Goodwill of approximately $1,539,000 was recorded as a result
of the initial purchase of shares, and is being amortized over three years.
The additional purchase price will be fully allocated to goodwill, and will be
amortized over a three-year period beginning with the month that the
incremental outstanding shares are purchased.
During May 1997, the Company acquired all the outstanding shares of its
Swiss distributor in exchange for approximately $900,000 in cash. The Company
has accounted for the acquisition using the purchase method. Goodwill of
approximately $1,058,000 was recorded as a result of the purchase, and is
being amortized over three years.
The Company operates on a multinational basis and a significant portion of
its business is conducted in currencies other than the U.S. dollar (mainly the
French franc, the British pound sterling, the Italian lira, the German mark
and the Japanese yen). Fluctuations in the value of currencies in relation to
the U.S. dollar have caused and will continue to cause dollar-translated
amounts to vary from one period to another. Due to the
17
<PAGE>
number of currencies involved, the constantly changing currency exposures, and
the substantial volatility of currency exchange rates, the Company cannot
predict the effect of exchange rate fluctuations upon future operating
results. To date, the Company has not undertaken hedging transactions to cover
its currency transaction exposure.
The effect of inflation on the Company's financial position has not been
significant.
In view of the Company's significant growth in recent years, the Company
believes that period-to-period comparisons of its financial results are not
necessarily meaningful and should not be relied upon as an indication of
future performance. In addition, the Company's revenues and operating results
can vary, sometimes substantially, from quarter to quarter as a result of
various factors. See "Business Factors."
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's consolidated
statements of income as a percentage of total revenues for the periods
indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Revenues:
License fees................................. 69% 76% 80%
Services..................................... 31 24 20
------- ------- -------
Total revenues............................. 100 100 100
Cost of revenues:
License fees................................. 3 4 3
Services..................................... 11 8 7
------- ------- -------
Total cost of revenues..................... 14 12 10
------- ------- -------
Gross margin................................... 86 88 90
Operating expenses:
Sales and marketing.......................... 60 59 51
Research and development..................... 12 12 13
General and administrative................... 10 9 9
------- ------- -------
Total operating expenses................... 82 80 73
------- ------- -------
Income from operations......................... 4 8 17
Net interest income and other.................. 1 2 3
------- ------- -------
Income before minority interest and provision
for income taxes.............................. 5 10 20
Provision for income taxes..................... (2) (4) (7)
Minority interest in losses.................... -- -- --
------- ------- -------
Net income..................................... 3% 6% 13%
======= ======= =======
Gross margin
License fees................................. 95% 95% 96%
Services..................................... 63% 67% 66%
</TABLE>
REVENUES
<TABLE>
<CAPTION>
1997 CHANGE 1996 CHANGE 1995
(DOLLARS IN THOUSANDS) -------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
License fees.......................... $ 78,478 22% $64,451 32% $48,782
Percentage of total revenues.......... 69% 76% 80%
Services.............................. $ 35,775 73% $20,686 75% $11,824
Percentage of total revenues.......... 31% 24% 20%
Total revenues........................ $114,253 34% $85,137 40% $60,606
</TABLE>
18
<PAGE>
Total revenues increased to $114.3 in 1997 from $85.1 million in 1996 and
$60.6 million in 1995, representing increases of 34% from 1996 to 1997 and 40%
from 1995 to 1996. For all years, licenses from BusinessObjects represented
substantially all of the Company's license fees and the remaining portion of
the Company's total revenues were comprised of revenues from other products
and services related to licenses of BusinessObjects. In the future, any factor
adversely affecting licenses of BusinessObjects would have a material adverse
effect on the Company.
During the second quarter of 1996, the Company experienced a significant
negative impact in its operating performance from the introduction of a new
release, version 4.0, of its main product BusinessObjects. The product, built
on a 32 bit architecture only ran on Windows 95 and NT and did not run on
Windows 3.1, the predominant desktop operating system at the time. Also after
introduction, the product experienced a significantly longer period than
expected to achieve stability of operation, and contained a number of "bugs"
resulting from the significant rewriting and re-architecting of the product.
Version 4.0 reached an acceptable level of stability of operation on Windows
3.1 as well as Windows 95 and NT in the fourth quarter of 1996, in which
period the Company's revenues increased significantly from the third quarter
continuing on into 1997. During September 1997, the Company began shipping
version 4.1 of its BusinessObjects product.
LICENSE FEES. Revenues from license fees in 1997 increased approximately
$14.0 million or 22% over the prior year as compared with an increase of $15.7
million or 32% during 1996. These increases in license fees reflected
increased unit licenses of the Company's existing software products and the
expansion of the Company's product offerings, including an increase in the
number of relational databases supported by the Company's software. The
increase in license fees also resulted from growth in all major geographic
areas. European sales increased 25% from 1996 to 1997 as compared to a 35%
increase from 1995 to 1996. North American sales increased 11% during 1997 as
compared to 16% during 1996. License fees in the Asia Pacific region increased
57% during 1997 as compared to 219% during 1996.
The Company plans to continue to enhance its current software and develop
new products. As a result, the Company anticipates that license fees, which
represented approximately 69% of the Company's total revenues in 1997
(substantially all of which consisted of licenses of BusinessObjects), will
continue to represent a substantial majority of its revenues for the
foreseeable future. However, it is expected that the percentage of license
revenues to total revenues will decrease in the future as the growth in
service revenue exceeds the growth in license revenue. The Company expects
that the market penetration by, and number of the Company's competitors will
increase, and, as a result, the growth rate in the Company's license fees in
the future may not be as high as the growth rate in such license fees achieved
in the past.
SERVICES. Revenues from services consist of consulting revenue, training
revenue and maintenance revenue. Revenues from services in 1997 increased
approximately $15.1 million or 73% over the prior year as compared with an
increase of $8.9 million or 75% during 1996. The increase in revenues from
services during both years was due primarily to increases in maintenance
revenues related to increases in the Company's installed customer base and the
renewal of support contracts, and to a lesser extent increases in training and
consulting revenues. As market penetration by, and the number of competitors
increase, the growth rate of the Company's installed base and, consequently,
maintenance revenues may not be as high as growth rates achieved in the past.
The Company anticipates increasing its efforts in selling maintenance,
training and consulting services, and expects that service revenues should
continue to represent a significant portion of its total revenues.
COST OF REVENUES
<TABLE>
<CAPTION>
1997 CHANGE 1996 CHANGE 1995
(DOLLARS IN THOUSANDS) ------- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C>
Cost of license fees.................... $ 3,773 17% $ 3,235 54% $2,107
Percentage of license fees revenues..... 5% 5% 4%
Cost of services........................ $13,107 93% $ 6,780 68% $4,044
Percentage of services revenues......... 37% 33% 34%
Total cost of revenues.................. $16,880 69% $10,015 63% $6,151
Percentage of total revenues............ 14% 12% 10%
</TABLE>
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LICENSE FEES. Cost of license fees, consisting primarily of materials,
packaging and freight, increased approximately $0.5 million or 17% in 1997
over the prior year as compared with an increase of $1.1 million or 54% during
1996. Cost of license fees as a percentage of revenue from license fees
remained relatively constant during 1997, 1996 and 1995.
SERVICES. Cost of services, consisting of the cost of providing consulting,
training and maintenance, increased approximately $6.3 million or 93% over the
prior year as compared with an increase of $2.7 million or 68% during 1996.
The increases in costs during both years were primarily due to increases in
headcount to support the Company's consulting, training and maintenance
activities and, to a lesser extent, to the subcontracting of training
activities.
OPERATING EXPENSES
<TABLE>
<CAPTION>
1997 CHANGE 1996 CHANGE 1995
(DOLLARS IN THOUSANDS) ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Sales and marketing.................... $68,115 36% $50,038 63% $30,666
Percentage of total revenues........... 60% 59% 51%
Research and development............... $14,050 32% $10,634 32% $ 8,071
Percentage of total revenues........... 12% 12% 13%
General and administrative............. $11,076 50% $ 7,402 30% $ 5,706
Percentage of total revenues........... 10% 9% 9%
Total operating expenses............... $93,241 37% $68,074 53% $44,443
Percentage of total revenues........... 82% 80% 73%
</TABLE>
SALES AND MARKETING. Sales and marketing expenses in 1997 increased
approximately $18.1 million or 36% over 1996 as compared with an increase of
$19.4 million or 63% during 1996. Sales and marketing expenses consist
primarily of salaries and other payroll related expenses such as commissions
and amounts paid for product promotion activities. The increase in absolute
dollars in sales and marketing expenses is attributable to the expansion of
the Company's sales and marketing organization that grew to 401 people at
December 31, 1997 from 298 people at December 31, 1996 and from 233 people at
December 31, 1995. The increase in headcount supported the opening of new
regional offices in the United States and offices in new subsidiaries, as well
as expansion of personnel in existing offices. Sales and marketing expenses
are expected to continue to increase in absolute dollars in the future but may
vary as a percent of revenue.
RESEARCH AND DEVELOPMENT. Research and development expenses increased
approximately $3.4 million and $2.6 million during 1997 and 1996,
respectively, as compared to the prior year, representing year over year
increases in expense of 32% for both periods. Research and development
expenses consist primarily of salaries, related benefits, third party
consultant fees and other costs. The increase in absolute dollars in research
and development expenses is due to increased staffing and associated support
for software engineers required to expand and enhance the Company's product
line. From December 31, 1996 to December 31, 1997, the Company's research and
development organization grew from 104 to 116 people. As of December 31, 1997,
the Company had not capitalized any software development costs and all
research and development costs have been expensed as incurred. See Note 1 of
Notes to Consolidated Financial Statements. See "Description of Business--
Product Development." Research and development expenses are expected to
continue to increase in absolute dollars in the future but may vary as a
percent of revenue.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
approximately $3.7 million in 1997 or 50% over 1996 as compared with an
increase of $1.7 million or 30% during 1996. General and administrative
expenses consist primarily of salaries, related benefits, fees for
professional services including legal and accounting services and amortization
of goodwill. The increase in absolute dollars in general and administrative
expenses is primarily due to increases in staffing to support the Company's
growth, increases in reserves for accounts receivable, increases in
expenditures for legal and accounting services and from the amortization of
goodwill related to the acquisition of the Company's distributors in 1997.
Goodwill amortization
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expense is included in general and administrative expenses and totaled $0.6
million in 1997 and $0.0 in 1996 and 1995. General and administrative expenses
are expected to increase in absolute dollars in the future but may vary as a
percent of revenue.
NET INTEREST INCOME AND OTHER
<TABLE>
<CAPTION>
1997 CHANGE 1996 CHANGE 1995
(DOLLARS IN THOUSANDS) ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net interest income...................... $1,088 (30)% $1,556 (29)% $2,205
Net exchange gain (loss)................. $ 585 100% $ 293 -- $ (206)
</TABLE>
Net interest income and other income totaled $1.7 million, $1.8 million and
$2.0 million in 1997, 1996 and 1995, respectively. The decrease in net
interest income in 1997 compared to 1996 was primarily due to a decrease in
the Company's cash available for short-term investing and a decline in
interest rates. The decrease in interest income in 1996 compared to 1995 was
predominantly due to lower interest rates. The increase in net exchange gains
(losses) in 1997 and 1996 was predominantly due to gains on dollar denominated
intercompany receivables caused by the general strengthening of the U.S.
dollar against the French franc.
INCOME TAXES
<TABLE>
<CAPTION>
1997 CHANGE 1996 CHANGE 1995
(DOLLARS IN THOUSANDS) ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Provision for income taxes............... $3,184 (15)% $3,737 (6)% $3,963
Effective tax rate....................... 55% 42% 33%
</TABLE>
The Company had provisions for income taxes of $3.2 million, $3.7 million
and $4.0 million in 1997, 1996 and 1995, representing 55%, 42% and 33%,
respectively, of the Company's income before such provisions in the respective
periods. The lower effective tax rate in 1995 resulted from available research
credits in France and the utilization of tax loss carryforwards in the United
States. The increase in the effective tax rate in 1996 and 1997 was primarily
due to limitations on the Company's ability to offset net losses for tax
purposes in certain jurisdictions against taxable income in other
jurisdictions, as well as the unavailability of research credits. The
effective rate was also impacted in 1997 by an increase in the French
statutory tax rate from 36.7% to 41.7% effective January 1, 1997.
As of December 31, 1997, a valuation allowance of approximately $5.6 million
has been provided against a total net deferred tax asset of approximately $6.8
million, which consists primarily of the tax benefit of net operating loss
carryforwards and differences in the timing of items for tax and financial
reporting purposes. Approximately $3.5 million of the valuation allowance is
attributed to deductions for stock options, the benefit of which will be
credited to additional paid-in capital when realized. The Company's
expectation for realizing the remaining portion of this deferred tax asset is
based upon the existence of both taxable temporary differences and sufficient
taxable income in the carryforward period of certain jurisdictions. At the end
of 1997 and 1996, the Company had net deferred tax assets of $1.2 million and
$0.9 million respectively.
At the end of 1997, the Company had aggregate net operating loss
carryforwards of approximately $11.3 million. Approximately $7.6 million of
these net operating loss carryforwards were in the United States and will
expire in the years 1998 through 2013 if not utilized. Utilization of the U.S.
net operating losses may be subject to an annual limitation due to ownership
change limitations provided by the Internal Revenue Code and similar state tax
provisions. The net operating loss carryforwards in the United States are
primarily attributable to deductions for stock options, the benefit of which
will be credited to additional paid-in capital when realized. The Company has
German, Singaporian, Canadian and Italian net operating loss carryforwards of
approximately $2.5 million, $0.5million, $0.3million and $0.2 million,
respectively. These net operating loss carryforwards can be used only to
offset future operating income generated in the respective country. Tax losses
in Germany and Singapore can be carried forward indefinitely. Tax losses in
Canada and Italy can be carried forward for seven years and five years
respectively. Pursuant to the Singaporian Tax Code, use of the net operating
losses may be limited if certain changes in ownership occur. See Note 10 of
Notes to Consolidated Financial Statements.
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<PAGE>
The Company received notice from the French tax authorities in 1996
asserting deficiencies in French corporate income taxes for the Company's
taxable years 1993 and 1994. The Company contested the asserted deficiencies
through the administrative appeals process and has received official notice
from the tax authorities that most reassessments are cancelled. The amounts
ultimately assessed and accepted by the Company were insignificant to the
Company's results of operations.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
1997 CHANGE 1996 CHANGE 1995
(DOLLARS IN THOUSANDS) ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Working capital......................... $36,479 (11)% $41,142 (3)% $42,238
Cash, cash equivalents, and cash
investments............................ $39,013 (7)% $42,171 (10)% $46,702
Net cash provided by operating
activities............................. $ 8,919 118% $ 4,095 (70)% $13,699
Net cash provided by (used for)
investing activities................... $ 6,701 316% $ 1,611 134% $(4,744)
Net cash provided by financing
activities............................. $ 1,208 (40)% $ 2,025 676% $ 261
</TABLE>
As of December 31, 1997, the Company had cash, cash equivalents and short-
term investments of $39.0 million, a decrease of $3.2 million from December
31, 1996. The Company provided cash from operations of $8.9 million in 1997,
as compared to $4.1 million in 1996. Net cash provided in 1997 primarily
resulted from net income and non-cash charges for depreciation and
amortization expense, and increases in accounts payable and accrued payroll
and deferred revenue, offset by increases in accounts receivable.
Accounts receivable increased to $35.1 million at December 31, 1997 from
$24.2 million at the end of 1996. The increases in accounts receivable
resulted primarily from the growth in revenues. Accounts receivable days'
sales outstanding (DSO) was 88 days at December 31, 1997 and 84 days at
December 31, 1996. In general, due to the level of European sales which tend
to have longer collection cycles, and the historical pattern of revenue
generation towards the end of each quarter, the Company anticipates that
accounts receivable and DSO will continue to be substantial in the future.
The Company's investing activities consisted primarily of the purchase and
sale of short-term investments, the acquisition of distributors totaling $2.6
million in 1997 and $0 in 1996, and expenditures for fixed assets totaling
$6.3 million in 1997 and $8.3 million in 1996. The Company has no significant
capital commitments and currently anticipates that additions to property and
equipment for the next year will be comparable to recent past years.
In 1997, the Company's financing activities provided $1.3 million from the
issuance of shares upon the exercise of employee stock options and the
issuance of shares under employee stock purchase plans. In 1996, the Company's
financing activities provided $2.2 million from the issuance of shares upon
the exercise of employee stock options and the sale of shares under employee
stock purchase plans. The Company used $93,000 and $170,000 for the repayment
of capital lease obligations during 1997 and 1996, respectively.
The Company believes that cash from operations together with existing cash
and cash equivalents and short-term investments will be sufficient to meet its
cash requirements for at least the next 12 months.
BUSINESS FACTORS
Statements contained in this Management Discussion of Financial Condition
and Results of Operations and elsewhere in this Annual Report on Form 10-K
include forward looking statements that involve a number of risks and
uncertainties. Among the factors that could cause actual results to differ
materially are the following:
Variability of Operating Results; Seasonality. The Company's revenues and
operating results can vary, sometimes substantially, from quarter to quarter.
License fees, which represented approximately 69% of total revenues in 1997,
are relatively difficult to forecast due to a number of reasons, including the
timing of the introduction of products or product enhancements, competition
and pricing in the computer software industry,
22
<PAGE>
the size and timing of individual license transactions, variability of the
Company's sales cycle, customer order deferrals in anticipation of new
products and customers' budget changes. The Company's software products are
generally shipped as orders are received. As a result, license revenues in any
quarter are substantially dependent on orders booked and shipped in that
quarter. The Company has often recognized a substantial portion of its
revenues in the last month of a quarter, with these revenues frequently
concentrated in the last weeks of a quarter. Because the Company's operating
expenses are based on anticipated revenue levels and a high percentage of the
Company's expenses are relatively fixed, a minor delay in the recognition of
specific revenue can cause significant variations in operating results from
quarter to quarter and may result in losses. For example, the Company plans to
continue to increase its expenditures to fund greater levels of research and
development, a larger direct sales and marketing staff, development of new
distribution and resale channels, broader customer support capability and the
additional general and administrative staffing necessary to support these
functions. To the extent such expenses precede or are not subsequently
followed by increased revenues, the Company's results of operations and
financial condition could be materially and adversely affected.
Similar to many companies in the software industry, the Company generally
experiences a lower revenue growth (and may experience a decrease in revenue)
in the first quarter of the year than the immediately preceding quarter. The
Company believes that this seasonality in revenues has been primarily due to
the concentration by some customers of their larger capital purchases in the
fourth quarter of the calendar year, and their consequent lower purchasing
activity during the following quarter. In addition, the Company's European
operations generally have lower revenues in the summer months due to the
generally reduced economic activity in Europe at such time, and this serves to
build up a demand in the fourth quarter.
Dependence on Principal Product. The Company generated the majority of its
total revenues from licenses of BusinessObjects in 1997, and the Company
expects that revenues from such licenses will continue to represent a
substantial majority of its total revenues for the foreseeable future. The
remaining portion of the Company's total revenues is comprised of revenues
from other licensed products and services related to licenses of
BusinessObjects. As a result, any factor adversely affecting licenses of
BusinessObjects would have a material adverse effect on the Company. The
Company's future financial performance will depend in part on the Company's
successful development and introduction, and customer acceptance of new and
enhanced versions of BusinessObjects and other products. In addition,
competitive pressures or other factors may result in significant price erosion
for BusinessObjects that could have a material adverse effect on the Company's
results of operations and financial condition.
Competition. The Company's products are specifically targeted at the
decision support software tools market. The principal competitive factors
affecting the market for the Company's products are ease of use,
functionality, product architecture, price, product quality, breadth of
distribution, customer support, and name recognition. The Company's products
compete in four main market sectors, the query and reporting market, the
multidimensional analysis or OLAP market, the emerging desktop data mining
market, and the market for integrated products or product suites that provide
query, reporting, and analysis.
In the query and reporting market, the Company's main direct competitors
include Cognos Incorporated, Brio Technology Inc., Oracle Corp., and Seagate
Technology, Inc. In the multidimensional analysis or OLAP market, the Company
faces direct competition from Cognos and Andyne Computing Ltd., as well as
indirect competition from Oracle, Seagate Technology, Inc., Microstrategy,
Inc., Arbor Software Corp., and Microsoft Corp. Many of the Company's
competitors have longer operating histories and significantly greater
financial, technical, sales, marketing and other resources, as well as greater
name recognition and a larger installed base, than the Company. In addition,
many competitors, particularly relational database management system vendors,
have well-established relationships with customers of the Company. The
Company's competitors could in the future introduce products with more
features and lower prices than the Company's products. These companies could
also bundle existing or new products with other more established products in
order to compete with the Company. The Company's focus on decision support
tools may be a disadvantage in competing with vendors who offer a broader
range of products. Furthermore, as the decision support market develops, a
number of
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<PAGE>
companies with significantly greater resources than the Company could attempt
to increase their presence in this market by acquiring or forming strategic
alliances with competitors of the Company.
During 1997, the Company generated approximately 31% of its revenues from
its operations in North America. This market is highly competitive. The
Company believes that its continued success is partly dependent on its ability
to operate successfully in this geographic region. Marketing activities and
purchasing decisions made by companies in this region influence purchasing
decisions made by companies on a worldwide basis. The inability of the Company
to compete successfully in this region, or the ineffectiveness of its
marketing activities, could have a material adverse affect on the Company's
results of operations and financial condition.
Although the Company has recently been increasing its sales through indirect
channels, revenues from such sales channels currently represent a smaller
portion of the Company's total revenues than direct sales and there can be no
assurance that the Company will be able to continue to attract indirect
channels that will be able to market and support the Company's software
effectively. For the year ended December 31, 1997, the Company realized 58% of
its licensing revenues directly and 42% through indirect sales channels,
compared to 66% and 34%, respectively, for the year ended December 31, 1996.
Rapid Technological Change and New Products. The market for decision support
tools is characterized by frequent product introductions and rapid
technological change. In the second quarter of 1996, the Company introduced a
new release of its BusinessObjects product, version 4.0. The development of
this next generation of BusinessObjects required the implementation of
significant architectural changes and extensive rewriting of the product
source code. New products when first released by the Company, may contain
undetected errors or "bugs" that, despite testing by the Company, are
discovered only after a product has been installed and used by customers.
Products that have been extensively rewritten, such as version 4.0, may take
longer to achieve stability of operation, than products which have been less
extensively rewritten. In 1996, the Company experienced material adverse
effects on results of operations resulting from "bugs" and a significantly
longer period than expected to achieve stability of operation of its version
4.0. There can be no assurance that errors will not be discovered in the
future, causing delays in product introduction and shipments or requiring
design modifications which could adversely affect the Company's competitive
position and operating results. In addition, there can be no assurance that
new products or product enhancements developed by the Company will achieve
market acceptance.
During September 1997, the Company began shipping version 4.1 of its
BusinessObjects product. The new version includes enhancements to the core
product, new intelligent agent functionality and features to support the broad
range of users across an enterprise. Version 4.1 of BusinessObjects is
available for Microsoft Windows 3.1, Microsoft Windows 95 and Microsoft
Windows NT. The Company plans to have version 4.1 available for Unix Motif.
The delay between the availability of the Microsoft Windows versions and that
of the Unix Motif version could result in certain customers delaying their
purchase of, or not purchasing at all, the Company's current products, and
could have a material adverse impact on the Company's financial performance
and results of operations. The Company currently does not plan to make version
4.1 available for Apple Macintosh. The prior version of BusinessObjects was
available for Apple Macintosh. While less than 2% of the Company's installed
base is on this platform, the non-availability of version 4.1 for Apple
Macintosh could cause certain customers to not purchase the Company's current
products and could have a material adverse impact on the Company's financial
performance and results of operations.
Version 4.1 was designed primarily on and for use with Microsoft Windows 95
and Windows NT. The Company believes that Microsoft Windows 3.1, and not
Windows 95 or Windows NT is currently the predominant operating system used by
its existing and potential customers, and that the rate of adoption of Windows
95 and NT is slower than original industry forecasts. While the Company has
released version 4.1 for use with Windows 3.1, implementation is more
difficult, performance may be slower and its response times unacceptable to
users. Poor performance of version 4.1 on Windows 3.1 could have a material
adverse impact on the Company's financial performance and results of
operations. The efficient use of version 4.1 also requires a personal computer
with greater performance characteristics and Random Access Memory (RAM) than
is
24
<PAGE>
required for the efficient use of version 3.1 of BusinessObjects. This could
impact the rate at which customers purchase and implement version 4.1 and
could have a material adverse impact on the Company's results of operations
and financial performance.
The Company believes that current customers and future potential customers
will require decision support products like BusinessObjects version 4.1 that
can be utilized over an intranet. The Company has recently released
WebIntelligence, which is deployable in an intranet environment, and utilizes
world wide web technology. The first release of WebIntelligence allows users
to execute queries and prepare reports directly from a Java enabled web
browser.
WebIntelligence requires development by the Company of server-based
components, an area in which the Company has not developed products in the
past. Development also requires the use of new emerging technologies such as
the Java programming language and IIOP (Internet Inter-Orb Protocol), which
may contain "bugs" or not yet operate properly. Additionally, the Company is
relying on certain software that it licenses from third parties that is
integrated with the Company's internally developed software to develop
WebIntelligence. There can be no assurance that this third party software will
not contain "bugs" or operate properly, and that the software will continue to
be available to the Company on commercially reasonable terms. The first
release of WebIntelligence supports Microsoft NT as the operating system for
its server-based components, rather than Unix, which is the current
predominant operating system for web servers.
Manufacturing. Substantially all of the Company's CD duplication, printing
of user manuals, packaging and manufacture of related materials are performed
to the Company's specifications by outside sources. To date, the Company has
not experienced any material difficulties or delays in manufacture by third
party suppliers. However, an interruption in production by a supplier or
suppliers could result in a delay in shipments of the Company's products and
adversely affect the Company's results of operations.
Patents and Intellectual Property Protection. The Company currently has one
patent issued in the United States, number 5,555,403 relating to a "Relational
Database Access System Using Semantically Dynamic Objects". The Company is
currently engaged in litigation asserting that one of its competitors
infringes this patent. See Item 3, Legal Proceedings. There can be no
assurance that any current or future patents will provide the Company with
competitive advantages or will not be challenged by third parties, or that the
patents of others will not have an adverse effect on the Company's ability to
do business. Furthermore, there can be no assurance that others will not
independently develop similar or competing technology or design around any
patents that may be issued to the Company. The Company believes that it owns
or has licensed all proprietary rights relating to its software. The Company
relies on a combination of the protections provided by applicable copyright,
trademark and trade secret laws, as well as on confidentiality procedures and
licensing arrangements, to establish and protect its rights in its software.
Despite the Company's efforts, it may be possible for unauthorized third
parties to copy certain portions of the Company's products or reverse engineer
or obtain and use information that the Company regards as proprietary. In
addition, although the Company's name together with its logo is registered as
a trademark in France, the United States, and a number of other countries, it
may be difficult for the Company to assert ownership rights in the name
"Business Objects". Policing unauthorized use of the Company's products by
customers or preventing the name of the Company's software from becoming part
of the public domain is difficult. The laws of certain countries do not
protect the Company's proprietary rights to the same extent as do the laws of
the United States or France. Under French law, the rights of the Company in
its software are not patentable but are protected under copyright law and
infringements by third parties can be enjoined. While the Company's
competitive position may be affected by its ability to protect its proprietary
information, the Company believes that factors such as the technical expertise
and innovation skills of its personnel, its name recognition and ongoing
product support and enhancement may be more significant in maintaining the
Company's competitive position.
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<PAGE>
The Company licenses its software products to customers on a non-exclusive,
non-transferable basis. License agreements typically provide that the licensed
product may be used solely for the customer's internal operations and for a
specified number of named or concurrent users. With respect to US customers,
the Company may rely on "shrink-wrap" license agreements for the protection of
its products. A "shrink-wrap" license agreement is a printed license agreement
included within the packaged software that sets forth the terms and conditions
under which the purchaser can use the products. Such licenses take effect upon
the opening of the product package.
The Company also licenses a portion of its technology to third parties.
Specifically SPSS Inc. and Alsoft have licensed the Business Objects query
technology and incorporated it into their products, BusinessQuery for SPSS
from SPSS Inc., and BusinessQuery for GeoConcept from Alsoft.
The Company licenses certain software from third parties for sub-licensing
by the Company to its customers, and also licenses certain software programs
from third parties and incorporates them in the Company's software products.
Generally, such agreements grant the Company non-exclusive, worldwide licenses
with respect to such software. The utilization of such third party software
involves risks additional to software developed in-house. Third party
providers may cease or alter their operations, terminate the relationship, or
be generally unable to fulfill their obligations. Such events may require the
Company to seek alternative technology which may or may not be available on
commercially reasonable terms.
In the future, it may be necessary or desirable to obtain licenses relating
to software programs from third parties, and there can be no assurance that
the Company will be able to obtain the necessary technology or similar
technology on commercially reasonable terms. Also, there can be no assurance
that third parties will not assert infringement claims against the Company in
the future with respect to current or future products or that any such
assertions may not require the Company to enter into royalty arrangements or
result in costly litigation.
The Company has entered into source code escrow agreements with a limited
number of its distributors and end users requiring release of source code.
Such agreements provide that such parties will have a limited, non-exclusive
right to use such code in the event that there is a bankruptcy proceeding by
or against the Company, if the Company ceases to do business or if the Company
fails to meet its contractual obligations. The provision of source code escrow
agreements may increase the likelihood of misappropriation by third parties.
The Company is not aware of any infringement or claims of infringement by
its products on the proprietary rights of third parties. There can be no
assurance, however, that third parties will not claim such infringement by the
Company with respect to current or future products. The Company expects that
software products will increasingly be subject to such claims as the number of
products and competitors in the Company's industry segment grows and the
functionality of products overlap. Any such claim, with or without merit, can
be time consuming and could result in costly litigation and require the
Company to enter into royalty and licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable by
the Company or at all.
Multinational Operations and Currency Exchange Rate Fluctuations. A
significant portion of the Company's business is conducted in currencies other
than the U.S. dollar, the currency in which its financial statements are
stated. The Company has historically recorded a majority of its expenses in
French francs, especially research and development expenses, with the
substantial majority of its revenues denominated in U.S. dollars, French
francs and British pounds sterling. Moreover, fluctuations in the value of the
currencies in which the Company conducts its business relative to the U.S.
dollar have caused and will continue to cause dollar-translated amounts to
change in comparison with previous periods. Due to the number of currencies
involved, the constantly changing currency exposures, and the substantial
volatility of currency exchange rates, the Company cannot predict the effect
of exchange rate fluctuations upon future operating results. To date, the
Company has not undertaken hedging transactions to cover its currency
transaction exposure.
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<PAGE>
Countries in the Asia Pacific region, including Japan, have recently
experienced weaknesses in their currency, banking and equity markets. Although
this region accounted for only 6% of the Company's consolidated revenues
during 1997, these weaknesses could adversely affect demand for the Company's
product, the U.S. dollar value of the Company's foreign currency denominated
sales and ultimately the Company's consolidated results of operations.
In December 1996, the French parliament adopted a law that requires French
companies to pay French social contributions and certain salary-based taxes
for France-based employees on the difference between the exercise price of a
stock option and the fair market value of the underlying shares on the
exercise date if the employee disposes of the shares before the expiration of
a five-year period following the grant of the option. The total of the social
contributions and taxes may be up to 45% of the difference in value. The law
applies to all options, whatever the grant date, exercised after January 1,
1997.
The Company has not recorded a liability for social charges which may be
assessed for options granted as of December 31, 1996 as the liability, being
dependent on future trading values of the Company's shares and the timing of
employees' decisions to exercise options and sell the related shares, cannot
be estimated. The Company also does not consider that the liability is
probable at December 31, 1997 due to the income tax disincentives to employees
of exercising options and selling the shares in less than a five year period.
Options granted to French employees subsequent to December 31, 1996, are
subject to a minimum 5-year holding period on the underlying shares, whereby
France-based optionees will not be allowed to sell or dispose of the shares
before the expiration of a 5-year period from the grant date.
Product Distribution and Support. Although the Company has been increasing
its sales through indirect channels, revenues from such sales represent a
smaller portion of the Company's total revenues than direct sales and there
can be no assurance that the Company will be able to attract indirect channels
that will be able to market and support the Company's software effectively.
There can be no assurance that any VAR, system integrator, consulting partner,
distributor or reseller of the Company's products will continue to represent
the Company's products, and the inability to recruit or retain a significant
number of VARs, system integrators, consulting partners, distributors or
resellers could adversely affect the Company's results of operations.
Additionally, the inability of the Company to expand its sales and marketing
organization, to implement new indirect sales channels to penetrate different
and broader markets than those addressed by its existing direct sales force
and international distributors, and to expand its support organization
commensurate with the base of its installed products could adversely affect
the Company's results of operations and financial performance.
Impact of the Year 2000 Issue. Many installed computers systems and software
products are coded to accept only two digit entries in the date code field.
Beginning in the year 2000, these code fields will need to accept four digit
entries to distinguish 21st century dates from 20th century or earlier dates.
As a result, in less than two years, computer systems and/or software products
used by many companies may need to be upgraded to comply with such year 2000
requirements. The Company is currently expending sufficient resources to
review its products and services, as well as its internal management
information systems in order to identify and modify those products, services
and systems that are not year 2000 compliant. The Company expects such
modifications will be made on a timely basis and does not believe that the
cost of such modifications will have a material effect on the Company's
operating results. There can be no assurance, however, that the Company will
be able to modify timely and successfully such products, services and systems
to comply with year 2000 requirements, which could have a material adverse
effect on the Company's operating results. Based on the Company's assessment
to date, most newly introduced products and services of the Company are year
2000 compliant, however some of the Company's customers are running products
versions that are not year 2000 compliant. The Company has been encouraging
such customers to migrate to current product versions. In addition, the
Company faces risks to the extent that suppliers of products, services and
systems purchased by the Company and others with whom the Company transacts
business on a worldwide basis do not have business systems or products that
comply with the year 2000 requirements. In the event any such third parties
cannot timely provide the Company with products, services or systems that meet
the year 2000 requirements, the Company's operating results could
27
<PAGE>
be materially adversely affected. Furthermore, there can be no assurance that
these or other factors relating to the year 2000 compliance issues, including
litigation, will not have a material adverse effect on the Company's business,
operating results or financial condition.
Management of Growth. To date, the Company's business has grown rapidly.
Continued growth may place a significant strain on the Company's management
and operations. The Company's future operating results will depend on the
ability of its officers and key employees to continue to implement and improve
its operational and financial control systems and to expand, train, retain and
manage its employee base. The Company's inability to manage growth effectively
could have a material adverse effect on the Company's results of operations
and financial performance.
Legal Proceedings. During January 1997, the Company filed a lawsuit in
United States District Court for the Northern District of California against
Brio Technology, Inc. for alleged patent infringement. The lawsuit alleges
that Brio Technology, Inc. infringes the Company's United States Patent No.
5,555,403 by making, using and selling its product known as BrioQuery
Enterprise. The Company's complaint requests that the defendant be enjoined
from further infringing the patent.
In addition, the Company is involved in various legal proceedings arising in
the ordinary course of business.
28
<PAGE>
QUARTERLY INFORMATION
The following tables set forth statements of income data for each of the
eight quarters in the period ended December 31, 1997 and the percentage of the
Company's total revenues represented by each item in the quarter. This
unaudited quarterly information has been prepared on the same basis as the
annual information presented elsewhere herein and, in management's opinion,
includes all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the information for the quarters
presented. The operating results for any quarter are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------
DEC. 31, SEPT. 30, JUNE 30 MARCH 31, DEC. 31, SEPT. 30, JUNE 30 MARCH 31,
1997 1997 1997 1997 1996 1996 1996 1996
-------- --------- ------- --------- -------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
License fees........... $24,265 $19,442 $18,032 $16,739 $19,503 $13,113 $17,230 $14,605
Services............... 11,769 9,060 8,296 6,650 6,323 5,372 4,761 4,230
------- ------- ------- ------- ------- ------- ------- -------
Total revenues......... 36,034 28,502 26,328 23,389 25,826 18,485 21,991 18,835
Cost of revenues:
License fees........... 1,388 826 739 820 1,038 822 733 643
Services............... 4,377 3,505 2,859 2,366 1,994 1,763 1,704 1,319
------- ------- ------- ------- ------- ------- ------- -------
Total cost of revenues. 5,765 4,331 3,598 3,186 3,032 2,585 2,437 1,962
------- ------- ------- ------- ------- ------- ------- -------
Gross margin............ 30,269 24,171 22,730 20,203 22,794 15,900 19,554 16,873
Operating expenses:
Sales and marketing.... 19,744 17,095 17,135 14,141 14,748 11,853 12,664 10,773
Research and
development........... 4,132 3,503 3,279 3,136 2,936 2,712 2,525 2,460
General and
administrative........ 3,456 2,874 2,660 2,086 1,966 2,004 1,950 1,482
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses.............. 27,332 23,472 23,074 19,363 19,650 16,569 17,139 14,715
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............. 2,937 699 (344) 840 3,144 (669) 2,415 2,158
Net interest income and
other.................. 195 178 388 912 263 325 629 632
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
minority interest and
provision for income
taxes.................. 3,132 877 44 1,752 3,407 (344) 3,044 2,790
(Provision) benefit for
income taxes........... (1,713) (716) (19) (736) (1,596) 23 (1,126) (1,038)
Minority interest in
losses ................ 223 35 (2) -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $ 1,642 $ 196 $ 23 $ 1,016 $ 1,811 $ (321) $ 1,918 $ 1,752
======= ======= ======= ======= ======= ======= ======= =======
Net income (loss) per
ADS and per share--
basic(1)............... $ 0.10 $ 0.01 $ 0 $ 0.06 $ 0.11 $ (0.02) $ 0.12 $ 0.11
======= ======= ======= ======= ======= ======= ======= =======
ADS and shares used in
computing net income
(loss) per ADS and
share-- basic(1)....... 16,770 16,689 16,614 16,417 16,361 16,276 16,260 16,143
Net income (loss) per
ADS and per share--
diluted(1)............. $ 0.10 $ 0.01 $ 0 $ 0.06 $ 0.11 $ (0.02) $ 0.11 $ 0.10
======= ======= ======= ======= ======= ======= ======= =======
ADS and shares used in
computing net income
per ADS and share--
diluted(1)............. 17,280 16,798 16,760 16,672 16,665 16,276 17,137 16,870
</TABLE>
- --------
(1) Earnings per ADS and share amounts for 1996 and the first three quarters
of 1997 have been restated to comply with Statement of Financial
Accounting Standards No. 128, "Earnings per Share" (FAS 128). For further
discussion of earnings per ADS and per share and the impact of FAS 128,
see the notes to the consolidated financial statements beginning on page
32.
The growth in revenues and income from operations experienced by the Company
in recent quarters is not necessarily indicative of future results. In view of
the significant growth of the Company's operations in recent years, the
Company believes that period to period comparisons of its financial results
should not be relied upon as an indication of future performance.
29
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Business Objects S.A.
We have audited the accompanying consolidated balance sheets of Business
Objects S.A. as of December 31, 1997 and 1996, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1997. Our audits also included
the financial statement schedule listed in the index at Item 14(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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 misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Business
Objects S.A. at December 31, 1997 and 1996, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Ernst & Young LLP
San Jose, California
January 23, 1998
30
<PAGE>
BUSINESS OBJECTS S.A.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR PER ORDINARY SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $36,508 $21,862
Short-term investments..................................... 2,505 20,309
Accounts receivable, net of allowances of $1,568 and $1,060
at December 31, 1997 and 1996 respectively................ 35,113 24,176
Inventories................................................ 344 510
Deferred tax assets, net................................... 1,185 945
Prepaid and other current assets........................... 4,365 2,255
------- -------
Total current assets..................................... 80,020 70,057
Goodwill, net.............................................. 1,626 --
Property and equipment, net................................ 12,020 10,101
Deposits and other assets.................................. 674 612
------- -------
Total assets............................................. $94,340 $80,770
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 8,089 $ 4,533
Accrued payroll and related expenses....................... 9,944 7,541
Investment grant........................................... 668 764
Income taxes payable....................................... 1,269 --
Deferred revenue........................................... 16,825 10,386
Value added taxes payable.................................. 2,901 2,125
Other current liabilities.................................. 3,829 3,476
Current portion of capital lease obligations............... 16 90
------- -------
Total current liabilities................................ 43,541 28,915
Long term portion of capital lease obligations............... -- 19
Commitments and contingencies
Shareholders' equity
Ordinary shares, FF 1 nominal value ($0.17 U.S.):
Authorized and outstanding--16,778 and 16,385 at December
31, 1997 and 1996 respectively.......................... 3,084 3,017
Additional paid-in capital............................... 34,270 33,036
Retained earnings........................................ 18,107 15,230
Cumulative translation adjustment........................ (4,662) 615
Unearned compensation.................................... -- (62)
------- -------
Total shareholders' equity............................. 50,799 51,836
------- -------
Total liabilities and shareholders' equity........... $94,340 $80,770
======= =======
</TABLE>
See accompanying notes.
31
<PAGE>
BUSINESS OBJECTS S.A.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER ADS AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Revenues:
License fees..................................... $ 78,478 $64,451 $48,782
Services......................................... 35,775 20,686 11,824
-------- ------- -------
Total revenues................................. 114,253 85,137 60,606
Cost of revenues:
License fees..................................... 3,773 3,235 2,107
Services......................................... 13,107 6,780 4,044
-------- ------- -------
Total cost of revenues......................... 16,880 10,015 6,151
-------- ------- -------
Gross margin....................................... 97,373 75,122 54,455
Operating expenses:
Sales and marketing.............................. 68,115 50,038 30,666
Research and development......................... 14,050 10,634 8,071
General and administrative....................... 11,076 7,402 5,706
-------- ------- -------
Total operating expenses....................... 93,241 68,074 44,443
-------- ------- -------
Income from operations............................. 4,132 7,048 10,012
Interest and other income, net..................... 1,088 1,556 2,205
Net foreign currency exchange gain (loss).......... 585 293 (206)
-------- ------- -------
Income before minority interest and provision for
income taxes...................................... 5,805 8,897 12,011
Provision for income taxes......................... (3,184) (3,737) (3,963)
Minority interest in losses........................ 256 -- --
-------- ------- -------
Net income......................................... $ 2,877 $ 5,160 $ 8,048
======== ======= =======
Net income per ADS and share--basic................ $ 0.17 $ 0.32 $ 0.51
======== ======= =======
ADS and shares used in computing net income per ADS
and share--basic.................................. 16,624 16,265 15,843
======== ======= =======
Net income per ADS and share--diluted.............. $ 0.17 $ 0.30 $ 0.49
======== ======= =======
ADS and shares and equivalents used in computing
net income per ADS and share--diluted............. 16,876 16,924 16,497
======== ======= =======
</TABLE>
See accompanying notes.
32
<PAGE>
BUSINESS OBJECTS S.A.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS )
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
----------------- PAID-IN RETAINED TRANSLATION UNEARNED SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT COMPENSATION EQUITY
---------- ------ ---------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994................... 15,677,662 $2,875 $30,414 $ 2,022 $ (158) $(444) $34,709
Issuance of stock
pursuant to employee
stock plans........... 405,090 82 358 -- -- -- 440
Compensation related to
stock options......... -- -- 137 -- -- -- 137
Amortization of
unearned compensation
related to stock
options............... -- -- -- -- -- 146 146
Cancellation of
options............... -- -- (39) -- -- 39 --
Translation adjustment. -- -- -- -- 2,981 -- 2,981
Net income............. -- -- -- 8,048 -- -- 8,048
---------- ------ ------- ------- ------- ----- -------
Balance at December 31,
1995................... 16,082,752 2,957 30,870 10,070 2,823 (259) 46,461
Issuance of stock
pursuant to employee
stock plans........... 211,511 42 1,003 -- -- -- 1,045
Common stock issued.... 90,761 18 1,129 -- -- -- 1,147
Compensation related to
stock options......... -- -- 35 -- -- 71 106
Amortization of
unearned compensation
related to stock
options............... -- -- -- -- -- 125 125
Cancellation of
options............... -- -- (1) -- -- 1 --
Translation adjustment. -- -- -- -- (2,208) -- (2,208)
Net income............. -- -- -- 5,160 -- -- 5,160
---------- ------ ------- ------- ------- ----- -------
Balance at December 31,
1996................... 16,385,024 3,017 33,036 15,230 615 (62) 51,836
Issuance of stock
pursuant to employee
stock plans........... 285,366 49 406 -- -- -- 455
Common stock issued.... 107,273 18 828 -- -- -- 846
Amortization of
unearned compensation
related to stock
options............... -- -- -- -- -- 62 62
Translation adjustment. -- -- -- -- (5,277) -- (5,277)
Net income............. -- -- -- 2,877 -- -- 2,877
---------- ------ ------- ------- ------- ----- -------
Balance at December 31,
1997................... 16,777,663 $3,084 $34,270 $18,107 $(4,662) $ -- $50,799
========== ====== ======= ======= ======= ===== =======
</TABLE>
See accompanying notes.
33
<PAGE>
BUSINESS OBJECTS S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................... $ 2,877 $ 5,160 $ 8,048
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 4,179 2,075 1,310
Amortization of goodwill.................... 598 -- --
Compensation expense........................ 62 197 283
Deferred income taxes....................... (257) 135 (610)
Changes in operating assets and liabilities:
Accounts receivable....................... (12,914) (7,178) (8,365)
Inventories............................... 131 (259) (113)
Prepaid and other current assets.......... (2,326) (653) (290)
Deposits and other assets................. (151) (250) (118)
Accounts payable.......................... 4,017 1,221 1,581
Accrued payroll and related expenses...... 3,089 1,130 3,170
Income taxes payable...................... 1,310 (3,918) 3,905
Deferred revenue.......................... 7,007 4,407 3,255
Value added taxes and other current
liabilities.............................. 1,297 2,028 1,643
-------- --------- ---------
Net cash provided by operating activities...... 8,919 4,095 13,699
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............ (6,332) (8,260) (2,776)
Acquisition of distributors.................... (2,640) -- --
Purchases of short term investments............ (70,374) (175,408) (159,901)
Proceeds from sales of short term investments.. 86,047 185,279 157,933
-------- --------- ---------
Net cash provided by (used for) investing
activities.................................... 6,701 1,611 (4,744)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt........... -- -- (51)
Principal payments on capital lease
obligations................................... (93) (170) (129)
Issuance of shares............................. 1,301 2,195 441
-------- --------- ---------
Net cash provided by financing activities...... 1,208 2,025 261
Effect of foreign exchange rate changes on cash
and cash equivalents.......................... (2,182) (514) 191
-------- --------- ---------
Net increase in cash and cash equivalents...... 14,646 7,217 9,407
Cash and cash equivalents at the beginning of
the year...................................... 21,862 14,645 5,238
-------- --------- ---------
Cash and cash equivalents at end of the year... $ 36,508 $ 21,862 $ 14,645
======== ========= =========
Supplemental disclosures of non cash
activities:
Property and equipment acquired under
capital leases............................. $ -- $ -- $ 217
Supplemental disclosures of cash flow
information:
Cash paid for income taxes.................. $ 1,837 $ 7,510 $ 1,011
</TABLE>
See accompanying notes.
34
<PAGE>
BUSINESS OBJECTS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
Business Objects S.A. (the Company) was organized in 1990 as a societe
anonyme, or limited liability company, under the laws of the Republic of
France. The Company develops, markets and supports enterprise-wide decision
support software tools.
During 1997, the Company acquired 51% of the outstanding shares of its
Italian distributor and all the outstanding shares of its Swiss distributor.
Both transactions were recorded using the purchase method.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned and majority controlled subsidiaries, after
elimination of intercompany transactions and balances.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States, applied on a
consistent basis. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying footnotes. Actual results could differ from those estimates.
Translation of Financial Statements of Foreign Entities
The functional currency of the Company and its subsidiaries is the
applicable local currency in accordance with Statement of Financial Accounting
Standards No. 52 "Foreign Currency Translation", while the Company's reporting
currency is the U.S. dollar. Assets and liabilities of the Company and its
subsidiaries with functional currencies other than the U.S. dollar are
translated into U.S. dollar equivalents at the rate of exchange in effect on
the balance sheet date. Income and expenses are translated at the weighted
average exchange rates for the year. Translation gains or losses are recorded
as a separate component of shareholders' equity, and transaction gains and
losses are reflected in net income.
Due to the number of currencies involved, the constant change in currency
exposures, and the substantial volatility of currency exchange rates, the
effect of exchange rate fluctuations upon future operating results could be
significant. To date, the Company has not undertaken hedging transactions to
cover any currency exposure.
Revenue Recognition
The Company recognizes revenue in accordance with the American Institute of
Certified Public Accountants' Statement of Position 91-1 on Software Revenue
Recognition. Revenue from product licensing is generally recognized on
shipment of the product, provided that no significant vendor or post contract
support obligations remain and that the collection of the resulting receivable
is deemed probable by management. Insignificant vendor and post contract
support obligations are accrued upon shipment. Fees for consulting and
training are recognized at the time the service is performed. Revenue from
software maintenance contracts is deferred and recognized on a straight-line
basis over the period covered by the contract, which is generally one year.
Sales Returns and Warranties
The Company's distributors do not have the right to return merchandise for
credit or refund. Any other potential sales returns are covered by the
Company's allowance for sales returns and doubtful accounts. The Company
provides for the costs of warranty when specific problems are identified. The
Company has not experienced any significant warranty claims to date.
35
<PAGE>
BUSINESS OBJECTS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net Income Per ADS and Per Share
The Company adopted Statement of Financial Accounting Standards No. 128
"Earnings per Share" (FAS 128), beginning with the Company's fourth quarter of
1997. FAS 128 replaced the calculation of primary and fully diluted earnings
per ADS and per share with basic and diluted earnings per ADS and per share.
Unlike primary earnings per ADS and per share, basic earnings per ADS and per
share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per ADS and per share is very similar to the
previously reported fully diluted earnings per ADS and per share. All prior
period earnings per ADS and per share data have been restated to conform to
the provisions of this statement.
Net income per share and per ADS reflect the adjustment in May of 1996 of
the conversion between Ordinary Shares and American Depositary Shares (ADS)
from two-to-one to one-to-one, producing the same results as a two-for-one
stock split.
Cash, Cash Equivalents and Short-Term Investments
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Investments
with maturity dates of greater than three months are considered to be short-
term investments. Cash equivalents and short-term investments include
marketable securities that are principally money market funds, certificates of
deposit, term deposits and commercial paper.
Management classifies investments as held-to-maturity or available-for-sale
at the time of purchase and periodically reevaluates such designation under
the provision of Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" (FAS 115).
Debt securities not classified as held-to-maturity are classified as
available-for-sale and are reported at fair value. Unrecognized gains or
losses on available-for-sale securities are included, net of tax, in equity
until their disposition. Realized gains and losses and declines in value
judged to be other-than-temporary on available-for-sale securities are
included in interest income. The cost of securities sold is based on the
specific identification method.
All the Company's cash equivalents and short-term investments are classified
as available-for-sale at December 31, 1997 and 1996, and are carried at
amortized cost, which approximates estimated fair value based on quoted market
prices.
Inventories
Inventories consist principally of software media and related documentation
stated at the lower of cost (first-in, first-out) or market.
Software Development Costs
The Company capitalizes eligible software development costs upon achievement
of technological feasibility subject to net realizable value considerations.
Based on the Company's development process, technological feasibility is
generally established upon completion of a working model. Research and
development costs prior to the establishment of technological feasibility are
expensed as incurred. Because the period between achievement of technological
feasibility and the general release of the Company's products has been of
relatively short duration, costs qualifying for capitalization were
insignificant during the years ended December 31, 1997 and 1996. There were no
capitalized software development costs at December 31, 1997 and 1996.
Property and Equipment
Property and equipment are stated at cost. Office and computer equipment is
depreciated using the straight-line method over estimated useful lives ranging
from three to five years. Assets under capital leases are amortized
36
<PAGE>
BUSINESS OBJECTS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
over the shorter of the asset life or the lease term. Leasehold improvements
are depreciated over the shorter of the asset life or the remaining lease
term.
American Depositary Shares
On May 10, 1996, the Company amended its Deposit Agreement with the Bank of
New York, changing the ratio at which the Company's Ordinary Shares are
converted into American Depositary Shares (ADSs). Under the original Deposit
Agreement, two Ordinary Shares converted into one ADS. Following the
amendment, one Ordinary Share converts into one ADS. All ADS and per ADS
amounts have been restated to reflect this change.
Concentration of Credit Risk
The Company sells its products to various companies across several
industries throughout the world. The Company performs ongoing credit
evaluations of its customers and maintains reserves for potential credit
losses. Such losses have been within management's expectations. The Company
generally requires no collateral from its customers. All revenues of the
Company are primarily derived from the successive releases of one product and,
as a consequence, any factor adversely affecting any release of this product
would have a material adverse effect on the Company.
Employee Stock Option Plans
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25), and related
interpretations in accounting for its employee stock options because the
alternative fair market value accounting provided for under Statement of
Financial Accounting Standards Statement No. 123, "Accounting for Stock-Based
Compensation" (FAS 123), requires the use of option valuation models that were
not developed for use in valuing employee stock options. The Company generally
grants stock options for a fixed number of shares to employees with an
exercise price equal to the fair market value of the shares at the date of
grant, and no compensation expense is recorded. When the exercise price of the
Company's employee stock options is less than the market price of the
underlying shares of the date of the grant, compensation expense is
recognized.
Fair Value of Financial Instruments
The carrying values of financial instruments reported in the balance sheet
for cash and cash equivalents and short-term investments approximate fair
value. The fair value of short-term investments is based on quoted market
prices.
Advertising costs
The Company expenses advertising expenses as incurred. Advertising expenses
totaled $1,672,000 and $1,492,000 for the years ended December 31, 1997 and
1996, respectively. Advertising expense was less than one percent of revenue
for the year ended December 31, 1995.
Recent Pronouncements
In October 1997, the Financial Accounting Standards Board issued Statement
of Position No. 97-2, "Software Revenue Recognition" (SOP 97-2). The Company
will be required to adopt this standard in its first quarter of fiscal year
1998. The criteria for recognizing revenue under SOP 97-2 are generally more
rigorous than the previous accounting standard and, in some cases,
significantly more rigorous. Due to uncertainties which
37
<PAGE>
BUSINESS OBJECTS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
exist with respect to the appropriate interpretations and manner of
implementation of SOP 97-2, the effect on the Company is uncertain but could
be significant.
In June 1997, the Financial Accounting Standards Board issued Statement
Number 130, Reporting Comprehensive Income. This statement requires that all
items that are to be required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. This
statement is effective for fiscal years beginning after December 15, 1997, and
will be adopted by the Company for the year ended December 31, 1998.
In addition, during June 1997, the Financial Accounting Standards Board
issued Statement Number 131, Disclosures About Segments of an Enterprise and
Related Information. This statement replaces Statement Number 14 and changes
the way public companies report segment information. This statement is
effective for fiscal years beginning after December 15, 1997 and will be
adopted by the Company for the year ended December 31, 1998.
Reclassifications
Certain prior year amounts have been reclassified to conform with current
year presentation.
2. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company's cash and cash equivalents and short-term investments as of
December 31, 1997 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Cash and cash equivalents:
Cash.................................................... $29,739 $ 7,441
Money market funds...................................... 6,769 14,421
------- -------
Total cash and cash equivalents....................... $36,508 $21,862
======= =======
Short-term investments:
Certificates of deposit................................. $ 2,505 $ 3,246
Commercial paper........................................ -- 17,063
------- -------
Total short-term investments.......................... $ 2,505 $20,309
======= =======
</TABLE>
Unrealized holding gains and losses on available-for-sale securities at
December 31, 1997 and 1996 and gross realized gains and losses on sales of
available-for-sale securities during 1997, 1996 and 1995 were insignificant.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1997 are as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Office and computer equipment............................ $16,552 $11,956
Leasehold improvements................................... 2,900 2,527
------- -------
Total property and equipment........................... 19,452 14,483
Accumulated depreciation and amortization................ (7,432) (4,382)
------- -------
Property and equipment, net............................ $12,020 $10,101
======= =======
</TABLE>
38
<PAGE>
BUSINESS OBJECTS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation and amortization expense on property and equipment totaled
$4,179,000, $2,075,000 and $1,310,000 for the years ended December 31, 1997,
1996 and 1995, respectively.
4. INVESTMENT GRANT
In May 1992 the Company was awarded a grant from the French Ministry of the
Economy, Finance and the Budget (the Ministry). The Company received FF
2,500,000 in August 1992 and FF 1,500,000 in December 1993 from this grant.
Using the end of period exchange rate at December 31, 1997, the dollar
equivalent of the grant is $668,000, and it is currently included in current
liabilities in the accompanying consolidated balance sheet. The Company
operated in compliance with the terms of the grant, which were in effect
through May 1997, and is awaiting confirmation from the Ministry before
recognizing the grant as income.
5. CAPITAL LEASE OBLIGATIONS
The Company leases certain of its equipment under capital leases.
Capitalized costs of approximately $491,000 and $561,000 are included in
property and equipment at December 31, 1997 and 1996, respectively.
Accumulated amortization of these leased assets was approximately $402,000 and
$401,000 at December 31, 1997 and 1996, respectively. Future minimum lease
payments under capital lease obligations mature in 1998 and total $16,000.
6. ACQUISITIONS
During April 1997, the Company acquired 51% of the outstanding shares of a
division of Datamat Ingegneria dei Sistemi S.p.A., its Italian distributor, in
exchange for $1,300,000 in cash. The purchase agreement provides for a
call/put option that gives the Company the right to purchase and Datamat
Ingegneria dei Sistemi S.p.A. the right to require the Company to purchase an
additional 29% of the shares of the division in 1998 and the remaining 20% of
the shares in 1999 for an amount determined using a net asset and revenue
based formula. Goodwill of approximately $1,539,000 was recorded as a result
of the initial purchase of shares, and is being amortized over three years.
The additional purchase price will be fully allocated to goodwill, and will be
amortized over a three-year period beginning with the month that the
incremental outstanding shares are purchased.
During May 1997, the Company acquired all the outstanding shares of Delphi
Software A.G., its Swiss distributor, in exchange for approximately $900,000
in cash. Goodwill of approximately $1,058,000 was recorded as a result of the
purchase, and is being amortized over three years.
The Company has accounted for both acquisitions using the purchase method.
The operating results of the acquired companies have been included in the
accompanying consolidated financial statements from their dates of
acquisition. Accumulated amortization of goodwill totaled $598,000 at December
31, 1997.
7. COMMITMENTS AND CONTINGENCIES
The Company leases its facilities and certain equipment under operating
leases that expire through 2002. Future minimum lease payments under operating
leases due for the fiscal years ending December 31 are as follows (in
thousands):
<TABLE>
<S> <C>
1998................................. $ 6,080
1999................................. 5,615
2000................................. 4,629
2001................................. 3,688
2002................................. 1,166
-------
Total.............................. $21,178
=======
</TABLE>
39
<PAGE>
BUSINESS OBJECTS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Rent expense under all operating leases was approximately $5,800,000,
$3,900,000 and $2,300,000 for the years ended December 31, 1997, 1996 and
1995, respectively.
The Company leases certain facilities under operating leases that contain
free rent periods. Rent expense under these leases has been recorded on a
straight-line basis over the lease term. The difference between amounts paid
and rent expense is recorded as deferred rent and is included in other current
liabilities. The deferred rent liability under these leases was $382,000 and
$467,000 at December 31, 1997 and 1996, respectively.
The Company is involved in various legal proceedings arising in the ordinary
course of business. The Company believes that the ultimate resolution of these
matters will not have a material effect on the Company's financial position,
results of operations or cash flows.
8. SHAREHOLDERS' EQUITY
Dividend Rights
Net income in each fiscal year after deduction for legal reserves is
available for distribution to shareholders of the Company as dividends,
subject to the requirements of French law and the Company's "statuts", or
articles of association. Dividends may also be distributed from reserves of
the Company, subject to approval by the shareholders and certain limitations.
Dividend distributions, if any, will be made in French francs. Payment of
dividends is fixed by the ordinary general meeting of shareholders at which
the annual accounts are approved following recommendations of the Board of
Directors. If net income is sufficient, the Board of Directors has the
authority subject to French law and regulation without the approval of
shareholders to distribute interim dividends. The Company has not distributed
any dividends since its inception.
The Company is required to maintain a legal reserve equal to 10% of the
aggregate nominal value of its share capital, funded by a transfer of at least
5% of the Company's net income per year to such legal reserve. The legal
reserve balance requirement was $308,000 and $302,000 as of December 31, 1997
and 1996, respectively. The legal reserve is distributable only upon the
liquidation of the Company. The Company's statuts also provide that
distributable profits, after deduction of any amounts required to be allocated
to the legal reserve, can be allocated to one or more special purpose reserves
or distributed as dividends as may be determined by the general meeting of
shareholders.
Liquidation Rights
In the event that the Company is liquidated, the assets of the Company
remaining after payment of debts, liquidation expenses and all remaining
obligations will be distributed first to repay in full the capital of any
outstanding shares. The surplus, if any, will then be distributed pro rata
among the shareholders in proportion to the nominal value of their share
holdings and subject to special rights granted to holders of priority shares,
if any.
Preemptive Subscription Rights
Shareholders have preemptive rights to subscribe for additional shares
issued by the Company for cash on a pro rata basis. Shareholders may waive
such preemptive subscription rights at an extraordinary general meeting of
shareholders under certain circumstances. Preemptive subscription rights, if
not previously waived, are transferable during the subscription period
relating to a particular offer of shares.
Repurchase of Shares
Pursuant to French company law, the Company may not make open market
repurchases of its shares or otherwise acquire shares except (a) to reduce its
share capital by subscription and cancellation of such shares
40
<PAGE>
BUSINESS OBJECTS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
under certain circumstances with approval of the shareholders at an
extraordinary general meeting, (b) to obtain shares for distribution to
employees under an approved profit-sharing or stock option plan and (c) to
make purchases for the stabilization of quotation on a securities exchange
after obtaining approval from the shareholders at an extraordinary general
meeting. Purchases under (c) may only be effected to increase, or control
excessive fluctuations in the liquidity of the shares. The amounts repurchased
under (b) and (c) may not, in either case, result in the Company holding more
than 10% of the then outstanding shares.
Stock Option Plans
The Company's 1991 and 1993 Stock Option Plans (the Plans) provide for the
grant of stock options to certain employees and executive officers of the
Company. Under these plans, the Board of Directors determines the vesting and
exercise of the option grants. Generally options granted under the plans vest
at a rate of 25% per year subject to one year of continued service with the
Company. The exercise price per share, which was fixed at the date of grant,
was determined by a formula which was based on the share price applicable with
respect to the last subscription of the capital of the Company prior to the
particular grant date of the options granted to the employee. The share price
formula also took into consideration the number of days intervening between
such subscription date and the particular grant date and the revenues
generated by the Company in the four quarters preceding such grant date.
On August 17, 1994, the shareholders of the Company authorized the creation
of a new share option plan (the 1994 Plan) pursuant to which the Board of
Directors was authorized to issue options to subscribe for 1,000,000 shares.
On June 13, 1996, the shareholders of the Company authorized an additional
1,000,000 shares reserved for issuance under the 1994 Plan. On June 19, 1997,
the shareholders of the Company authorized an additional 1,000,000 shares
reserved for issuance under the 1994 Plan. The 1994 Plan was approved by the
Company's shareholders at the 1995 Annual Meeting and is intended to qualify
as an incentive stock option plan within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended. The Board of Directors determines
the vesting and exercise of the option grants. Generally options granted under
the plan vest at a rate of 25% per year subject to one year of continued
service with the Company. The 1994 Plan provides that the exercise price of
options granted will be based on the closing price of the American Depositary
Shares (ADSs) on the Nasdaq National Market, after converting the dollar
closing price into French francs at the Noon Buying Rate on the date prior to
such grant. The options granted under the 1994 Plan are exercisable up to ten
years from the date of grant (other than options granted to employees in the
United Kingdom, which have a term of seven years less one day). The options
granted under the 1994 Plan are exercisable up to ten years from the date of
grant (other than options granted to employees in the United Kingdom, which
will have a term of seven years less one day).
Due to a decline in the market price of the Company's shares, the Board of
Directors implemented an Option Exchange Program in November 1996, under which
optionees were offered the opportunity to exchange their outstanding options
for new options at a lower exercise price. The Program was restricted to
outstanding options with an exercise price above 103 French francs per share
(equivalent to approximately $17 per share based on the exchange rate at
December 31, 1997). Members of the senior management of the Company were not
eligible to participate in the Program. In addition, in consideration for the
new lower exercise price, participating employees were required to relinquish
their rights to 10% of the number of underlying shares. Approximately 144,000
options were canceled and 130,000 options were granted as a result of the 1996
Exchange Program.
The Board of Directors approved a second Option Exchange Program on July 28,
1997. The exchange period ended on September 2, 1997. All employees, including
executive officers and officers, were eligible to participate in the Program,
with the exception however, of the Chief Executive Officer, Chief Operating
Officer and Chief Financial Officer. Under the Program, participating
employees were permitted to exchange one or
41
<PAGE>
BUSINESS OBJECTS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
more of their outstanding options with an exercise price above 50 French
francs per share (equivalent to approximately $8 per share based on the
exchange rate at September 2, 1997) on a one-for-one basis for new options. In
consideration for the new exercise price, the number of shares vested under
the new option for the entire twelve months following the exchange date was
determined to be equal to only 50% of the shares vested under the old option
as of the exchange date. Beginning on September 2, 1998, the new options shall
be exercisable to the same extent as the old option would have been, had no
exchange taken place. Specific exercisability features of new options granted
to French employees were provided in order to eliminate any potential social
security costs arising from the exercise of the new options and disposition of
underlying shares prior to the expiration of a five-year period from the date
of the exchange. Approximately 1,141,000 options were canceled and granted as
a result of the 1997 Exchange Program.
In December 1996, the French parliament adopted a law that requires French
companies to pay French social contributions and certain salary-based taxes of
up to 45% for France-based employees on the difference between the exercise
price of a stock option and the fair market value of the underlying shares on
the exercise date, if the beneficiary disposes of the shares before a five-
year period following the grant of the option. The law applies to all options,
whatever the grant date, exercised after January 1, 1997.
The Company has not recorded a liability for social charges which may be
assessed for options granted as of December 31, 1997 as the liability, being
dependent on future trading values of the Company's shares and the timing of
employees' decisions to exercise options and sell the related shares, cannot
be estimated. In 1997, the related costs were immaterial.
Options granted after the adoption of the new law are subject to a minimum
holding period on the underlying shares, whereby French optionees will not be
allowed to sell or dispose of the shares before the expiration of a 5-year
period from the grant date.
Employee Stock Purchase Plans
The Company has an Employee Stock Purchase Plan intended to qualify under
the provisions of sections 421 and 423 of the 1986 Internal Revenue Code of
the United States under which 150,000 shares have been authorized for
issuance. Under the terms of the Plan, employees may contribute via payroll
deductions up to 10% of their compensation to purchase shares at a price equal
to 85% of the lower of the fair market value as of the beginning or end of the
six month offering period. French employees are not eligible to participate in
this Plan. The Company issued 83,971 shares under this Plan during 1997.
In addition the Company also has an Employee Stock Purchase Plan available
to the Company's French employees as part of the Employee Savings Plan, which
is qualified under the provisions of French tax regulations. 150,000 shares
have been authorized for issuance under this Plan. Stock purchases are limited
under the Plan to 10% of an employee's compensation received during the
offering period. The Company issued 15,802 shares under the Employee Savings
Plan during 1997.
Stock Based Compensation
Pro forma information regarding net income and net income per share is
required by FAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of FAS 123. The
fair value for these options for 1997 and 1996 was estimated at the date of
grant using a Black-Scholes option pricing model assuming no dividends, risk-
free weighted average interest rates of 6% and a weighted average expected
option life of six months and three years for options granted under Employee
Stock Purchase Plans and Stock Options Plans, respectively. The volatility
factor of the expected market price of the Company's ordinary shares was
assumed to be 70% and 60% for 1997 and 1996, respectively.
42
<PAGE>
BUSINESS OBJECTS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are
fully transferable. The Black-Scholes model requires the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because the changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information is as follows (in thousands, except for net
income and pro forma net income per share information):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Net income as reported...................................... $2,877 $5,160
Pro forma net income........................................ $ 291 $ 836
Net income per share as reported--basic..................... $ 0.17 $ 0.32
Pro forma net income per share--basic....................... $ 0.02 $ 0.05
Net income per share as reported--diluted................... $ 0.17 $ 0.30
Pro forma net income per share--diluted..................... $ 0.02 $ 0.05
</TABLE>
During the initial phase-in period, as required by FAS 123, the pro forma
amounts were determined based on stock option grants in 1996 and 1995. Since
pro forma compensation expense is recognized over vesting periods of four
years, the pro forma amounts for compensation cost may not be indicative of
the pro forma effects of application of FAS 123 on net income and net income
per share for future years.
A summary of the Company's stock option activity, and related information
for the years ended December 31 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------
WEIGHTED
OPTIONS NUMBER AVERAGE
AVAILABLE OF SHARES PRICE PER SHARE
---------- ---------- ---------------
(IN FF)
<S> <C> <C> <C>
Balance at December 31, 1994....... 1,338,860 1,165,512 10.42
Granted.......................... (744,200) 744,200 93.92
Canceled......................... 126,491 (126,491) 32.84
Exercised........................ -- (405,090) 5.40
---------- ---------- ------
Balance at December 31, 1995....... 721,151 1,378,131 54.93
Shares reserved.................. 1,000,000 -- --
Granted.......................... (1,097,326) 1,097,326 108.84
Canceled......................... 501,856 (501,856) 129.63
Exercised........................ -- (211,511) 25.12
---------- ---------- ------
Balance at December 31, 1996....... 1,125,681 1,762,090 70.80
Shares reserved.................. 1,000,000 -- --
Granted.......................... (2,176,576) 2,176,576 54.17
Canceled......................... 1,464,038 (1,464,038) 82.54
Exercised........................ -- ( 285,366) 9.20
---------- ---------- ------
Balance at December 31, 1997....... 1,413,143 2,189,262 54.32
========== ========== ======
</TABLE>
Options to purchase approximately 392,000 shares were exercisable at
December 31, 1997.
43
<PAGE>
BUSINESS OBJECTS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes the status of the Company stock options
outstanding and exercisable at December 31, 1997:
<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE
----------------------------------- ---------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER OF CONTRACTUAL LIFE EXERCISE NUMBER OF EXERCISE
EXERCISE PRICES SHARES IN YEARS PRICE SHARES PRICE
--------------- --------- ---------------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
FF 1.78-FF 11.67....... 87,874 5.46 FF 7.68 86,008 FF 7.61
FF 24.56-FF 67.77....... 1,634,718 9.19 FF 48.55 169,476 FF 46.40
FF 72.79-FF 98.59....... 427,525 8.72 FF 80.54 116,711 FF 85.92
FF110.02-FF114.49....... 39,145 7.53 FF113.50 19,800 FF113.50
--------- ------------
All options........... 2,189,262 8.92 FF 54.32 391,995 FF 53.05
========= ============
</TABLE>
For certain options granted, the Company recognized as compensation the
excess of the fair value of the common stock issuable upon exercise of such
options over the aggregate exercise prices of such options. The compensation
expense is amortized ratably over the vesting period of the options. Unearned
compensation at December 31, 1997 and 1996 was $0 and $62,000 respectively.
The exchange rate at December 31, 1997 was approximately 6 French francs per
U.S. dollar.
Warrants
In October 1993, the Board of Directors approved the issuance of warrants to
purchase 30,000 Class B shares to a Director with an exercise price of FF 5.52
per share (equivalent to approximately $1 per share based on the exchange rate
at December 31, 1997), vesting at a rate of 25% per year from January 31,
1993. The warrants were issued in April 1994 after formal shareholder
approval. The difference between the exercise price and the estimated fair
value of such warrants as determined in October 1993 was insignificant. 7,500
warrants were exercised during 1997.
On April 25, 1995, the Board of Directors approved the issuance of warrants
to purchase 12,000 shares to a Director with an exercise price of FF 72.79 per
share (equivalent to approximately $12 per share based on the exchange rate at
December 31, 1997), vesting at a rate of 33.33% per year from June 22, 1995.
The warrants were issued in June 1995 after formal shareholder approval. The
difference between the exercise price and the estimated fair value of such
warrants as determined in April 1995 was immaterial. As of December 31, 1997,
all of such warrants were outstanding.
On April 28, 1997, the Board of Directors approved the issuance of warrants
to purchase 12,000 shares to four Directors, representing 48,000 shares in
total, with an exercise price of FF 55.33 per share (equivalent to
approximately $9 per share based on the exchange rate at December 31, 1997).
These warrants vest monthly over three years commencing January 1, 1997. The
warrants were issued in June 1997 after formal shareholder approval. The
difference between the exercise price and the estimated fair value of such
warrants as determined in April 1997 was immaterial. As of December 31, 1997,
all of such warrants were outstanding.
9. EMPLOYEE SAVINGS PLANS
During 1991, the Company established an Employee Savings Plan that allows
voluntary tax deferred contributions by all full-time employees who are
employed by the Company's French entity and have completed a trial period. In
1995, the Employee Savings Plan was amended to allow these employees to
purchase shares of
44
<PAGE>
BUSINESS OBJECTS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the Company. Eligible employees may contribute up to 25% of pretax earnings to
the Plan, of which a maximum of 10% of pre-tax earnings may be used to
purchase shares of the Company. See Employee Stock Purchase Plans. The Company
does not match employee contributions.
The Company is subject to a Statutory Profit Sharing Plan (Statutory Plan)
for substantially all of the employees of its French entity. Contributions
under the Statutory Plan are based on a formula prescribed by French law. In
addition, employees of the Company's French entity may receive contributions
from a separate profit sharing plan sponsored by the Company (Company Plan).
Contributions under the Company Plan are based on the achievement of certain
goals established by the Board of Directors. Contributions under the Company
Plan are reduced by contributions required to be made under the Statutory
Plan.
The Company's subsidiary in the United States has a defined contribution
401(k) plan covering substantially all of its employees. Participants may
elect to contribute up to 15% of their compensation to this plan up to the
statutory maximum amount. The Company can make discretionary contributions to
the plan determined solely by the Board of Directors. The Company has not made
any contributions to the plan through December 31, 1997.
10. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per ADS and per share (in thousands, except per ADS and per share amounts):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Numerator:
Net income....................................... $ 2,877 $ 5,160 $ 8,048
------- ------- -------
Denominator:
Weighted average ADS and shares outstanding...... 16,624 16,265 15,843
------- ------- -------
Denominator for basic earnings per ADS and per
share............................................. 16,624 16,265 15,843
Incremental common shares attributable to shares
issuable under employee stock plans and warrants . 252 659 654
------- ------- -------
Denominator for diluted earnings per ADS and per
share............................................. 16,876 16,924 16,497
======= ======= =======
Net income per ADS and per share--basic............ $ 0.17 $ 0.32 $ 0.51
======= ======= =======
Net income per ADS and per share--diluted.......... $ 0.17 $ 0.30 $ 0.49
======= ======= =======
</TABLE>
11. INCOME TAXES
Income before provision for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996 1995
------ ------ -------
<S> <C> <C> <C>
France................................................. $2,589 $5,582 $ 9,175
Rest of world.......................................... 3,216 3,315 2,836
------ ------ -------
Total................................................ $5,805 $8,897 $12,011
====== ====== =======
</TABLE>
45
<PAGE>
BUSINESS OBJECTS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Current:
France............................................. $1,288 $1,973 $3,645
Rest of world...................................... 2,300 1,756 1,037
------ ------ ------
Total Current.................................... 3,588 3,729 4,682
Deferred:
France............................................. (254) 292 (729)
Rest of world...................................... (150) (284) 10
------ ------ ------
Total deferred................................... (404) 8 (719)
------ ------ ------
$3,184 $3,737 $3,963
====== ====== ======
</TABLE>
A reconciliation of income taxes computed at the French statutory rate
(36.7% in 1995 and 1996 and 41.7% in 1997) to the provision for income taxes
is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Income tax provision computed at the French
statutory rate..................................... $2,420 $3,261 $4,404
Use of prior loss carryforwards and decrease in
valuation allowance................................ -- (190) (477)
Research credits.................................... -- -- (1,038)
Operating losses and tax credits not utilized....... 779 228 492
Non-deductible provisions........................... 149 340 609
Other individually immaterial items................. (164) 98 (27)
------ ------ ------
$3,184 $3,737 $3,963
====== ====== ======
</TABLE>
Deferred taxes reflect the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred taxes consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------ ------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................... $4,283 $2,863
Deferred revenue........................................... 986 431
Accrued bonuses and compensation........................... 363 266
Allowance for doubtful accounts............................ 415 291
Other reserves and accruals not currently deductible....... 800 517
Other...................................................... 229 244
------ ------
Total deferred tax assets................................ 7,076 4,612
Valuation allowance...................................... (5,649) (3,493)
------ ------
1,427 1,119
Deferred tax liabilities:
Exchange loss in shareholders' equity...................... (62) (55)
Other...................................................... (180) (119)
------ ------
Total deferred tax liabilities........................... (242) (174)
------ ------
Net deferred tax assets.................................. $1,185 $ 945
====== ======
</TABLE>
46
<PAGE>
BUSINESS OBJECTS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Approximately $ 3.5 million of the valuation allowance is attributed to
stock options, the benefit of which will be credited to additional paid-in
capital when realized.
As of December 31, 1997, the Company has U.S. federal and state net
operating loss carryforwards of approximately $7.6 million and $2.9 million
respectively. These net operating loss carryforwards will expire in the years
1998 through 2013, if not utilized. Utilization of the net operating loss
carryforwards may be subject to an annual limitation due to ownership change
limitations provided by the Internal Revenue Code and similar state tax
provisions. The net operating loss carryforwards in the United States are
primarily attributable to deductions for stock options, the benefit of which
will be credited to additional paid-in capital when realized. The Company also
has German, Singapore, Canadian, and Italian net operating loss carryforwards
of approximately $2.5 million, $0.5 million, $0.3 million, and $0.2 million
respectively. Tax losses in Singapore and Germany may be carried forward
indefinitely. Tax losses in Canada and Italy may be carried forward for seven
years and five years respectively. Pursuant to the Singaporian Tax Code, use
of net operating losses may be limited if certain changes in ownership occur.
The utilization of these net operating loss carryforwards is limited to the
future operations of the Company in the tax jurisdictions in which such
carryforwards arose.
The Company received notice from the French tax authorities in 1996
asserting deficiencies in French corporate income taxes for the Company's
taxable years 1993 and 1994. The Company contested the asserted deficiencies
through the administrative appeals process and has received official notice
from the tax authorities that most reassessments are cancelled. The amounts
ultimately assessed and accepted by the Company were insignificant to the
Company's results of operations.
12. BONUS PLAN
The Company's Board of Directors determines the amount of cash bonuses and
establishes the specific goals upon which awards are based.
47
<PAGE>
BUSINESS OBJECTS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
13. INDUSTRY AND GEOGRAPHIC INFORMATION
The Company and its subsidiaries operate in one industry segment, the
development, marketing and support of enterprise-wide decision support tools.
Operations outside of France consist principally of sales, marketing and
customer support. Transfers between geographic areas are accounted for at
amounts that are generally above cost and consistent with the rules and
regulations of governing tax authorities. Such transfers are eliminated in the
consolidated financial statements. Identifiable assets are those assets that
can be directly associated with a particular geographic area. The following is
a summary of operations within geographic area:
<TABLE>
<CAPTION>
REVENUES TRANSFERS
FROM BETWEEN
UNAFFILIATED GEOGRAPHIC TOTAL INCOME (LOSS) IDENTIFIABLE
CUSTOMERS AREAS REVENUES FROM OPERATIONS ASSETS
------------ ---------- -------- --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1997:
France................ $ 27,492 $17,744 $ 45,236 $ 1,288 $63,395
United Kingdom........ 23,394 -- 23,394 2,900 16,728
Rest of Europe........ 21,633 -- 21,633 196 25,093
North America......... 34,905 -- 34,905 (1,028) 24,641
Asia Pacific.......... 6,829 -- 6,829 1,067 5,593
Eliminations.......... -- (17,744) (17,744) (291) (41,110)
-------- ------- -------- ------- -------
$114,253 $ -- $114,253 $ 4,132 $94,340
======== ======= ======== ======= =======
1996:
France................ $ 24,987 $16,098 $ 41,085 $ 3,528 $60,661
United Kingdom........ 17,198 -- 17,198 2,531 12,151
Rest of Europe........ 10,274 -- 10,274 246 7,140
North America......... 28,429 -- 28,429 81 18,450
Asia Pacific.......... 4,249 -- 4,249 667 3,315
Eliminations.......... -- (16,098) (16,098) (5) (20,947)
-------- ------- -------- ------- -------
$ 85,137 $ -- $ 85,137 $ 7,048 $80,770
======== ======= ======== ======= =======
1995:
France................ $ 18,470 $11,435 $ 29,905 $ 5,420 $60,312
United Kingdom........ 10,711 -- 10,711 2,267 7,558
Rest of Europe........ 7,913 -- 7,913 1,236 3,319
North America......... 22,246 -- 22,246 1,385 11,825
Asia Pacific.......... 1,266 -- 1,266 (377) 1,801
Eliminations.......... -- (11,435) (11,435) 81 (13,802)
-------- ------- -------- ------- -------
$ 60,606 $ -- $ 60,606 $10,012 $71,013
======== ======= ======== ======= =======
</TABLE>
The Company does not have any customer representing 10% or more of the
Company's revenues.
14. RELATED PARTY TRANSACTIONS
During June 1997, the Company loaned $200,000 to one of the its executive
officers. The loan is secured by a deed of trust, and bears interest at the
rate of 6.23% per annum. Principal and interest are due on July 1, 1999. The
loan is included in other assets in the consolidated balance sheet at December
31, 1997.
48
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Stockholders to be filed with the Securities and Exchange
Commission within 120 days after the close of the fiscal year ended December
31, 1997.
Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934, as amended, is hereby incorporated herein by reference
from the section entitled "Election of Directors--Section 16(a) Beneficial
Ownership Reporting Compliance" in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Stockholders to be filed with the Securities and Exchange
Commission within 120 days after the close of the fiscal year ended December
31, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Stockholders to be filed with the Securities and Exchange
Commission within 120 days after the close of the fiscal year ended December
31, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Stockholders to be filed with the Securities and Exchange
Commission within 120 days after the close of the fiscal year ended December
31, 1997.
49
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A)1.FINANCIAL STATEMENTS
See Item 8 of this Form 10-K.
2.FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule of the Company for each
of the years ended December 31, 1997, 1996 and 1995 is filed as part
of this Form 10-K and should be read in conjunction with the
Consolidated Financial Statements, and related notes thereto, of the
Company.
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Schedule II-Valuation and Qualifying Accounts................... 54
</TABLE>
Schedules other than those listed above have been omitted since
they are either not required, not applicable, or the information is
otherwise included.
3.EXHIBITS
The exhibits listed in the accompanying index to exhibits are
filed as part of this report.
(B)REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December
31, 1997.
50
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Date: March 31, 1998 Business Objects S.A.
/s/ BERNARD LIAUTAUD
By: _________________________________
Bernard Liataud
Chairman of the Board,
President and Chief Executive
Officer
KNOW ALL PERSON BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Bernard Liautaud and Clifton T. Weatherford,
jointly and severally, his attorneys-in fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to
this Annual Report on Form 10-K, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-
in-fact, or his substitute or substitutes, may do or cause to be done by
virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1934, THIS REPORT HAS
BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Bernard Liautaud Chairman of the Board, March 31, 1998
____________________________________ President and Chief
Bernard Liautaud Executive Officer (Principal
Executive Officer)
/s/ Clifton T. Weatherford Chief Financial Officer and March 31, 1998
____________________________________ Senior Group Vice President
Clifton T. Weatherford (Principal Financial and
Accounting Officer)
/s/ Denis Payre Director March 31, 1998
____________________________________
Denis Payre
/s/ Arnold Silverman Director March 31, 1998
____________________________________
Arnold Silverman
/s/ Philippe Claude Director March 31, 1998
____________________________________
Philippe Claude
/s/ Vincent Worms Director March 31, 1998
____________________________________
Vincent Worms
/s/ Albert Eisenstat Director March 31, 1998
____________________________________
Albert Eisenstat
</TABLE>
51
<PAGE>
BUSINESS OBJECTS S.A.
INDEX TO EXHIBITS
[ITEM 14 (A)]
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.0* Status or Charter of the Company (English translation), is
incorporated herein by reference to Exhibit 3.1 filed with the
Company's Registration Statement on Form S-8 filed with the SEC on
December 11, 1997 (File No. 333-42063).
3.1 Bylaws of the Company, as amended, dated February 10, 1998.
4.0* Form of Deposit Agreement, dated as of May 8, 1996, among Business
Objects S.A., the Bank of New York, as Depositary, and holder from
time to time of American Depositary Shares issued thereunder
(including as an exhibit the form of American Depositary Receipt and
the form of side agreement) is incorporated herein by reference to
Exhibit 4.1(1) filed with the Company's Registration Statement on Form
S-8 (File No. 333-5542).
10.0 Lincoln Park Lease Agreement by and between Metropolitan Life
Insurance Company and the Company dated January 18, 1996, as amended,
and assignment of interest to Speiker Properties, L.P.
10.1 Office Building Lease by and between Nabarro Nathanson, D.J. Downing,
J.M. Jones Properties Limited and the Company dated March 6, 1996.
10.2 Commercial Lease by and between Foncierne Chaptal and the Company
dated June 4, 1996.
10.3* 1991 Stock Option Plan is incorporated herein by reference to Exhibit
10.2 filed with the Company's Registration Statement on Form F-1 filed
with the SEC on September 20, 1994 (File No. 33-83052).
10.4* 1993 Stock Option Plan is incorporated herein by reference to Exhibit
10.3 filed with the Company's Registration Statement on Form F-1 filed
with the SEC on September 20, 1994 (File No. 33-83052).
10.5* 1994 Stock Option Plan is incorporated herein by reference to Exhibit
4.2 filed with the Company's Registration Statement on Form F-1 filed
with the SEC on September 20, 1994 (File No. 33-83052).
10.6 Promissory Note issued by Dave Ellett, Chief Operating Officer of the
Company, to the Company dated June 23, 1997.
10.7* 1995 International Employee Stock Purchase Plan, amended, is
incorporated herein by reference to Exhibit 4.2 filed with the
Company's Registration Statement on Form S-8 filed with the SEC on
December 11, 1997 ( File No. 333-42063).
10.8* French Employee Savings Plan is incorporated herein by reference to
Exhibit 4.3 filed with the Company's filed with the SEC on December
11, 1997 ( File No. 333-42063).
10.9* Summary: in English of 1992 Grant by the French Ministry of the
Economy, Finance and the Budget is incorporated herein by reference to
Exhibit 10.4 filed with the Company's Registration Statement on Form
F-1 filed with the SEC on September 20, 1994 (File No. 33-83052).
10.10* Stock subscription warrant for Albert Eisenstat is incorporated herein
by reference to Exhibit 4.2 filed with the Company's Registration
Statement on Form S-8 filed with the SEC on September 5, 1995 (File
No. 333-96598).
10.11* Stock subscription warrant for Arnold Silverman is incorporated herein
by reference to Exhibit 4.3 filed with the Company's Registration
Statement on Form S-8 filed with the SEC on September 5, 1995 (File
No. 333-96598).
10.12* Stock subscription warrant for Philippe Claude dated June 19, 1997 is
incorporated herein by reference to Exhibit 4.2 filed with the
Company's Registration Statement on Form S-8 filed with the SEC on
December 11, 1997 (File No. 333-42059).
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
10.13* Stock subscription warrant for Albert Eisenstat dated June 19,
1997 is incorporated herein by reference to Exhibit 4.3 filed
with the Company's Registration Statement on Form S-8 filed
with the SEC on December 11, 1995 (File No. 333-42059).
10.14* Stock subscription warrant for Arnold Silverman dated June 19,
1997 is incorporated herein by reference to Exhibit 4.4 filed
with the Company's Registration Statement on Form S-8 filed
with the SEC on December 11, 1995 (File No. 333-42059).
10.15* Stock subscription warrant for Vincent Worms dated June 19,
1997 is incorporated herein by reference to Exhibit 4.5 filed
with the Company's Registration Statement on Form S-8 filed
with the SEC on December 11, 1995 (File No. 333-42059).
10.16+ Value Added Reseller Agreement for Visigenics Products with
Reseller Rights dated March 27, 1997, by and between the
Company.
21.0 List of Subsidiaries of the Company.
23.0 Consent of Ernst & Young, LLP, Independent Auditors.
24.0 Power of Attorney is herein referenced to the Signature page of
this Annual Report on Form 10-K.
27.0 Financial Data Schedule
</TABLE>
- --------
* Previously filed.
+ Certain information in this exhibit has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a confidential
treatment request under 17 C.F.R. (S)(S) 200.80(b)(4), 200.83 and 230.46.
53
<PAGE>
BUSINESS OBJECTS S.A.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE CHARGED CHARGED BALANCE
AT BEGINNING TO COSTS TO OTHER AT END
OF PERIOD AND EXPENSES ACCOUNTS OF PERIOD
------------ ------------ -------- ---------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ending December 31, 1995.... $ 440 $419 -- $ 859
Year ending December 31, 1996.... $ 859 $201 -- $1,060
Year ending December 31, 1997.... $1,060 $508 -- $1,568
</TABLE>
54
<PAGE>
EXHIBIT 3.1
Business Objects S.A.
BYLAWS OF THE COMPANY, AS AMENDED
BUSINESS OBJECTS S.A.
A French societe anonyme
with a share capital of FF. 16,777,663
Registered office : 1 Square Chaptal
92300 Levallois-Perret
Register of Commerce and Companies Nanterre B 379 821 994
________________
UP-DATED BY LAWS
FEBRUARY 10, 1998
<PAGE>
~ I ~
MEMORANDUM AND ARTICLES OF ASSOCIATION
--------------------------------------
TITLE I
-------
FORM - NAME - OBJECTS - REGISTERED OFFICE - DURATION
----------------------------------------------------
ARTICLE 1 - FORM
----------------
There is, between the owners of the shares hereinafter issued and of those
which could be subsequently issued, a corporation (societe anonyme), governed by
the law of July 24, 1966 on commercial companies and by the present Memorandum
and Articles of Association.
ARTICLE 2 - NAME
----------------
The name of the company is :
BUSINESS OBJECTS
In all deeds and documents emanating from the company and addressed to
third parties, this name must always be immediately preceded or followed by the
words "Societe anonyme" or the initials "S.A." and by the mention of the amount
of the capital.
ARTICLE 3 - OBJECTS
-------------------
The objects of the company are, directly and indirectly, in France and
abroad :
- all operations relating to the design and the sale of products and the
rendering of services in the computer industries and in connected industries ;
- and generally, any financial, commercial, industrial, civil, real estate
or chattels operations related directly or indirectly to the above activities
and to any similar or connected activities as well as to any social properties.
Directly and indirectly on its behalf or on behalf of third parties, either
alone, or with third parties, by way of creation of new companies,
contributions, partnership, subscription, purchase of securities or of social
rights, merger, association, or by way of subleasing of any properties or
rights.
<PAGE>
ARTICLE 4 - REGISTERED OFFICE
-----------------------------
The registered office of the company is at :
1 Square Chaptal
92300 Levallois-Perret
It may be transferred to any other place within the same district
(departement) or any adjacent district by decision of the board of directors
subject to the ratification of this decision by the next ordinary general
meeting of the shareholders.
It may be transferred to any other place pursuant to a resolution of the
extraordinary general meeting of the shareholders.
ARTICLE 5 - DURATION
--------------------
The duration of the company shall be of ninety nine (99) years from the
date of registration with the Register of Commerce and Companies, except in the
event of early dissolution or extension decided by the extraordinary meeting of
the shareholders.
*** *** ***
***
<PAGE>
TITLE II
--------
CAPITAL AND SHARES
------------------
Article 6 - CAPITAL
-------------------
The capital of the company is of FF. 16,777,663
It is divided into 16,777,663 shares of FF. 1 each.
Mr. Albert Eisenstat is a recipient of special advantages resulting
from the grant of 12,000 warrants each entitling to the subscription of one
share, by the shareholder meeting held on June 19, 1997. The special advantages
consist in (i) the granting of such warrants without payment as consideration
and (ii) the implementing of a fixed exercise price of FF55.328 per share
corresponding to the estimated value of a share as of April 25, 1997.
Mr. Albert Eisenstat is a recipient of special advantages resulting
from the grant of one warrant entitling to the subscription of 12,000 shares, by
the shareholder meeting held on June 21, 1995. The special advantages consist in
(i) the granting of such warrants without payment as consideration and (ii) the
implementing of a fixed exercise price of FF72.7875 per share corresponding to
the estimated value of a share as of April 25, 1995.
Mr. Vincent Worms is a recipient of special advantages resulting from
the grant of 12,000 warrants each entitling to the subscription of one share, by
the shareholder meeting held on June 19, 1997. The special advantages consist in
(i) the granting of such warrants without payment as consideration and (ii) the
implementing of a fixed exercise price of FF55.328 per share corresponding to
the estimated value of a share as of April 25, 1997.
Mr. Philippe Claude is a recipient of special advantages resulting
from the grant of 12,000 warrants each entitling to the subscription of one
share, by the shareholder meeting held on June 19, 1997. The special advantages
consist in (i) the granting of such warrants without payment as consideration
and (ii) the implementing of a fixed exercise price of FF55.328 per share
corresponding to the estimated value of a share as of April 25, 1997.
Mr. Arnold Silverman is a recipient of special advantages resulting
from the grant of 12,000 warrants each entitling to the subscription of one
share, by the shareholder meeting held on June 19, 1997. The special advantages
consist in (i) the granting of such warrants without payment as consideration
and (ii) the implementing of a fixed exercise price of FF55.328 per share
corresponding to the estimated value of a share as of April 25, 1997.
Mr. Arnold Silverman is a recipient of special advantages resulting
from the grant of 30,000 warrants each entitling to the subscription of one
share, by the shareholder meeting held on April 6, 1994. The special advantages
consist in (i) the granting of such warrants without payment as consideration
and (ii) the implementing of a fixed exercise price of FF5.518 per share
corresponding to the estimated value of a share as of January 31, 1993.
ARTICLE 7 - FORM OF THE SHARES - TRANSFER OF SHARES
---------------------------------------------------
<PAGE>
The shares must be in the registered form. The shares are entered into
accounts according to the provisions provided by law and regulations.
The ownership of the registered shares is evidenced by their registration
in registered accounts.
The shares entered into accounts are freely transferred by transfer from
one account to another.
Prior approval of the transferee is required only for partly paid-up
shares.
All costs resulting from the transfer shall be borne by the transferee.
Shares with payments in arrears are not admitted to transfer.
ARTICLE 8 - RIGHTS AND OBLIGATIONS ATTACHED TO THE SHARES
---------------------------------------------------------
The rights and obligations attached to a share follow the share to any
transferee to whom it may be transferred and the transfer includes all the
payable and unpaid dividends and dividends to be payable, as well as, as the
case may be, the corresponding share in the reserve funds and provisions.
The ownership of the a share shall imply ipso facto the acceptance of the
present Memorandum and Articles of Association and of the decision of the
general meetings.
In addition to the right to vote which is attached by law to the shares,
each share carries a right to a share of corporate assets, of profits, and of
liquidation surplus, proportional to the number and nominal value of the
existing shares.
Each time it shall be necessary to hold a certain number of shares in order
to exercise a right, it will up be to the shareholder(s) missing such number to
take the necessary actions to group a sufficient number of shares.
The heirs, creditors, eligible parties or other representatives of a
shareholder cannot, for any reason whatsoever, request the affixing of the
assets of the company, or ask for their sharing or auction sale, or to interfere
in any manner in the management of the company ; they have, in order to exercise
their rights, to refer themselves to the inventories and to the resolutions of
the shareholders meetings.
The company may require the repurchase, subject to the conditions set forth
in article 269-8 of the law of 24th July 1966, either of all of its shares with
a preferential dividend and no voting right, or of a category of such shares,
each category being determined by the date at which it has been issued.
ARTICLE 9 - PAYING UP OF THE SHARES
-----------------------------------
The amount to be paid in cash for the subscription of the shares issued
with respect to an increase of capital shall be payable according to the terms
stipulated by the extraordinary general meeting of the shareholders.
The initial payment shall not be less than one half of the nominal value of
the shares at the time of the subscription ; it shall include the whole issuing
premium, if any.
The remainder, which shall be paid-up in one or several times within a
period of five years as from the date of completion of such increase of capital,
shall be called upon by the board of directors.
<PAGE>
Each shareholder shall be notified of the amount to be paid and of the date
at which this amount shall fall due fifteen days at least before that date.
The shareholder who will not have paid at due date the amounts due on his
share(s) shall, automatically and without formal notice, owe to the company an
interest calculated day per day commencing on due date at the legal rate in
commercial matters increased by three points, without prejudice to the personal
proceedings that the company may institute against the defaulting shareholder
and to the acts of enforcement provided by law.
*** *** ***
***
<PAGE>
TITLE III
---------
MANAGEMENT OF THE COMPANY
-------------------------
ARTICLE 10 - BOARD OF DIRECTORS
-------------------------------
The company is managed by a board of directors composed of individuals or
legal entities, the number of which is determined by the ordinary general
meeting of the shareholders within the limits of the law.
A legal entity must, at the time of its appointment, designate an
individual who will be its permanent representative on the board of directors.
The term of office of a permanent representative is the same as that of the
director he represents. When a legal entity dismisses its permanent
representative, it must at the same time provide for its replacement. The same
applies in case of death or resignation of the permanent representative.
Each director must own at least one share during his term of office.
If, at the time of his appointment, a director does not own the required
number of shares or if, during his term of office, he ceases to be the owner
thereof, he shall have a period of three months to purchase such number of
shares, in default of which he shall be automatically deemed to have resigned.
The directors are appointed for a term of three years. A year corresponds
to the period of time between two successive annual ordinary general meetings of
shareholders. The duties of a director shall terminate at the close of the
ordinary general meeting of shareholders which acts on the accounts of the
preceding financial year and is held in the year during which the term of office
of said director comes to an end.
The members of the board are renewed in rotation so that the renewal be as
equal as possible and in any case complete for each period of three years.
Renewal takes place according to seniority. However, when required, the ordinary
general meeting may resolve that the order of renewal will be set by a toss
drawn in a board meeting.
The directors may always be re-elected ; they may be revoked at any time by
decision of the general meeting of the shareholders.
In case of death or resignation of one or several directors, the board of
directors may make provisional appointments between two meetings of
shareholders.
The appointment(s) so made have to be ratified by the next general meeting
of shareholders.
Should the meeting of the shareholders not ratify these provisional
appointments, this shall not affect the validity of the prior resolutions and
acts of the board of directors.
When the number of directors falls below the minimum required by law, the
remaining director(s) must immediately convene the ordinary general meeting of
the shareholders, in order to complete the membership of the board of directors.
The director appointed in replacement of another director, whose term of
office has not come to its end shall remain in office only for the remaining
term of office of his predecessor.
A salaried employee of the company may be appointed as a director. His
employment contract shall correspond to a position actually held. In such case,
he shall not lose the benefit of his employment contract.
The number of directors bound to the company by an employment contract may
not exceed one third of the directors in office.
<PAGE>
The number of directors who are more than seventy (70) years old may not
exceed one third of the directors in office. Should such quota be reached during
the director's term of office, the appointment of the oldest director would be
automatically terminated at the close of the nearest general meeting of the
shareholders.
ARTICLE 11 - MEETING OF THE BOARD
---------------------------------
11.1. The board of directors shall meet as often as required for the
interest of the company.
11.2. The meetings of the board of directors are convened by the president.
The convening may be made by any means, in oral or written form.
Moreover directors, representing one third at least of the members of the
board, may convene the board. In such case, they shall indicate the agenda of
the meeting.
When a work-committee (comite d'entreprise) has been formed, the
representatives of such committee, appointed in accordance with the provisions
of the Labor Code, shall be convened to all the meetings of the board of
directors.
The meetings of the board are held at the registered office or at any other
place, in France or abroad.
11.3. The board of directors may not transact business validly unless at
least half of its members are present.
The resolutions of the board of directors shall be carried out at the
majority of the directors, present or represented.
It is specified that any and all decisions to grant options to subscribe or
to buy stock to a director holding an employment contract, to the president or
to the general manager of the Company, if this latter is a director, pursuant to
authority granted by the extraordinary general meeting, pursuant to the
provisions set forth in articles 208-1 and the following of the Law of July 24,
1966 on commercial companies shall be adopted by the affirmative vote of the
majority of the directors present or represented at the Board meeting, the
interested director, and any other director to whom options to subscribe or to
buy stock may be granted, being conclusively refrained from voting.
11.4. Any director may give to another director, by letter, cable or telex,
a proxy to be represented at a meeting of the board. However, each director may
only dispose of one proxy during each meeting.
11.5. The copies or extracts of the minutes of the board of directors are
validly certified by the president of the board of directors, a general manager,
the director temporarily delegated in the duties of president or by a
representative duly authorized for that purpose.
ARTICLE 12 - POWERS OF THE BOARD
--------------------------------
The board of directors is vested with the most extensive powers to act
under all circumstances on behalf of the company, and to make any decisions
relating to all acts of administration and disposition. The board shall exercise
these powers within the limits of the purposes of the company, and of the powers
expressly granted by law to the general meetings of the shareholders.
ARTICLE 13 - GENERAL MANAGEMENT OF THE COMPANY
----------------------------------------------
<PAGE>
The board of directors shall elect a president, who must be an individual,
from among its members. It shall determine his term of office, which cannot
exceed that of his office as director and may dismiss him at any time. The board
sets his remuneration.
The president of the board is responsible for the general management of the
company.
The president is vested with the most extensive powers to act under all
circumstances on behalf of the company within the limits of the goals of the
company, except for those powers expressly granted by law to the meetings of
shareholders and those specially reserved to the board of directors.
The president of the board cannot be more than sixty five (65) years old.
Should the president reach this age limit during his term of office as
president, his office would automatically terminate. Subject to this provision,
the president of the board may always be reelected.
ARTICLE 14 - GENERAL MANAGER (Directeur General)
----------------------------
Upon proposal of the president, the board of directors may appoint one or
several individuals to assist the president as general manager. The general
manager(s) may be revoked at any time by the board of directors upon proposal of
the president.
In agreement with the president, the board of directors shall determine the
scope and the duration of the powers delegated to the general manager. The board
sets his remuneration. When a general manager is a director, his term of office
may not exceed that of his directorship.
As regards third parties, general managers have the same powers as the
president. The general managers are, among others, vested with the powers to
bring a matter to court.
Any general manager cannot be more than sixty-five (65) years old. Should a
general manager reach this age limit during his term of office as general
manager, his duties would automatically terminate. This term may be prolonged
however until the next meeting of the board during which the new general manager
will be appointed.
The board may appoint two general managers should the share capital be of
at least five hundred thousand (500,000) francs. Five general managers may be
appointed should the share capital be of at least ten million (10,000,000)
francs, provided that at least three of them are directors.
ARTICLE 15 - AGREEMENTS SUBJECT TO AUTHORIZATION
------------------------------------------------
15.1. Any sureties, endorsements and guarantees granted by the company must
be authorized by the board of directors as provided by law.
15.2. Any agreement to be entered into between the company and one of its
directors or general manager(s), whether directly or indirectly or through an
intermediary, must be submitted for the prior authorization of the board of
directors.
Such prior authorization is also required for agreements between the
company and another enterprise, should one of the directors or general managers
of the company be owner, partner with unlimited liability, manager, director,
general manager, member of the management committee (directoire) or supervisory
council (conseil de surveillance) of said enterprise.
Such prior authorization shall be sought as provided by law.
<PAGE>
ARTICLE 16 - PROHIBITED AGREEMENTS
----------------------------------
Directors, other than legal entities, are forbidden to contract, in any
form whatsoever, loans from the company, to secure an overdraft from it, as a
current account or otherwise, and to have the company guarantee or secure their
commitments toward third parties.
The same prohibition applies to general managers and to the permanent
representatives of legal entities which are directors. It also applies to
spouses, ascendants and descendants of the persons referred to in this article,
as well as to all interposed persons.
ARTICLE 17 - STATUTORY AUDITORS (Commissaires aux comptes)
------------ ------------------
Audits of the company shall be carried out, as provided by law, by one or
more statutory auditors legally entitled to be elected as such. When the
conditions provided by law are met, the company must appoint at least two
supervisory auditors.
Each statutory auditor shall be appointed by the ordinary general meeting.
One or more deputy statutory auditors, who may be called to replace the
regular statutory auditors in the case of death, disability, resignation or
refusal to act of the latter, shall be appointed by an ordinary general meeting.
Should the general ordinary meeting of the shareholders fail to elect a
statutory auditor, any shareholder can claim in court that one be appointed,
provided that the President of the board of directors be duly informed. The term
of office of the statutory auditor appointed in court will end upon the
appointment of the statutory auditor(s) by the general ordinary meeting of the
shareholders.
*** *** ***
***
<PAGE>
TITLE IV
--------
MEETINGS OF SHAREHOLDERS
------------------------
ARTICLE 18
----------
The general meetings of shareholders shall be convened and held as provided
by law.
The meetings of shareholders are held at the registered office or at any
other place mentioned in the convening notices.
The right to take part in a general meeting of shareholders is subject to
the registration of the shareholder in the books of the company, at least one
business day prior to the date of the meeting.
A shareholder who cannot attend the meeting in person may choose either :
- to give a proxy to another shareholder or to his/her spouse, or
- to vote by mail, or
- to send to the company a proxy without any indication of the name of the
representative;
within the terms and conditions provided by law and these by-laws.
To be taken into account, the proxies and the forms of vote by mail must be
deposited with the company at least one business day prior to the date of the
meeting.
Meetings of shareholders are presided over by the president of the board of
directors or in his absence, by a director specially authorized for that purpose
by the board. If no president has been appointed, the meeting elects its
president.
The two members of the meeting having the greatest number of votes and who
accept that role, are appointed as scrutineers. The officers of the meeting
appoint a secretary, who may be a non-shareholder.
An attendance sheet is drawn up, in accordance with the law.
The ordinary general meeting of the shareholders, upon first convening
notice, may transact business validly only if the shareholders present, or
represented, hold at least one fourth of the voting shares. Upon second
convening notice, the general meeting may transact business validly whatever the
number of shareholders present or represented.
The resolutions of the ordinary general meeting shall be carried out at the
majority vote of the shareholders, present or represented.
The extraordinary general meetings of the shareholders, upon first
convening notice, may transact business validly only if the shareholders
present, or represented by proxy, hold at least one third of the voting shares.
Upon second convening notice, the extraordinary general meeting may transact
business validly only if the shareholders present or represented by proxy hold
at least one fourth of the voting shares.
The resolutions of the extraordinary general meeting shall be carried out
at a two third majority vote of the shareholders, present or represented.
<PAGE>
The copies or extracts of the minutes of the meeting are certified by the
president of the board of directors, by a director acting as general manager, or
by the secretary of the meeting.
The ordinary and extraordinary meetings of shareholders exercise their
respective powers as provided by law.
*** *** ***
***
<PAGE>
TITLE V
-------
RESULTS OF THE COMPANY
----------------------
ARTICLE 19 - FINANCIAL YEAR
---------------------------
Each fiscal year is of one year beginning on January 1 and ending on
December 31.
ARTICLE 20 - PROFITS - LEGAL RESERVE FUNDS
------------------------------------------
Out of the profit of a fiscal year, reduced by prior losses if any, an
amount equal to at least 5 % thereof is first deducted in order to form the
legal reserve fund provided by law. This deduction is no longer required when
the legal reserve fund amounts to one tenth of the capital of the company.
Distributable profit is the profit of a fiscal year, reduced by prior
losses and by the deduction provided for in the preceding paragraph and
increased by the profits carried forward.
ARTICLE 21 - DIVIDENDS
------------ ---------
If there results a distributable profit from the accounts of the fiscal
year, as approved by the general meeting, the general meeting may decide to
allocate it to one or several reserve funds, the appropriation or use of which
it shall determine, or to carry it forward or to distribute it as dividends.
Furthermore, after having established the existence of reserves which it
may dispose of, the general meeting may decide the distribution of amounts paid
out of such reserves. In such case, the payments shall be made. However, the
dividends shall be set off by priority on the distributable profit of the
financial year.
The general meeting shall determine the terms of payment of dividends ;
failing such determination, these terms shall be determined by the board of
directors.
However, the dividends must be declared payable no more than nine months
following the close of the financial year.
The general meeting deciding upon the accounts of a fiscal year will be
entitled to grant to each shareholder, for all or part of the distributed
dividends, an option between payment in cash or in shares.
Similarly, should the ordinary general meeting resolve the distribution of
interim dividends pursuant to article 347 of the law of 24th July 1966, it will
be entitled to grant to each shareholder an interim dividend and, for all or
part of the said interim dividend, an option between payment in cash or in
shares.
The offer of payment in shares, the price and the conditions as to the
issuing of such shares, together with the request for payment in shares and the
conditions of the completion of the capital increase will be governed by the law
and regulations.
When a balance sheet, drawn up during, or at the end of the fiscal year,
and certified by the statutory auditor(s), shows that the company, since the
close of the preceding fiscal year, after having made the necessary
depreciations and provisions and after deduction of the prior losses, if any, as
well as of the amounts which are to be allocated to the reserve fund provided by
law or by the by-laws, has made profits, the board of directors may resolve the
distribution of interim dividends
<PAGE>
prior to the approval of the accounts of the fiscal year, and may determine the
amount thereof and the date of such distribution. The amount of such interim
dividends cannot exceed the amount of the profits as defined in this paragraph.
In this case, the option described in the preceding paragraph shall not be
available.
*** *** ***
***
<PAGE>
TITLE VI
--------
DISSOLUTION - LIQUIDATION
-------------------------
ARTICLE 22 - PREMATURE DISSOLUTION
----------------------------------
The extraordinary general meeting may at any time declare the dissolution
of the company before the expiration of its stated duration under the present
Memorandum and Articles of Association.
ARTICLE 23 - LOSS OF ONE HALF OF THE CAPITAL OF THE COMPANY
-----------------------------------------------------------
If, as a consequence of losses showed by the company's accounts, the net
assets (capitaux propres) of the company are reduced below one half of the
capital of the company, the board of directors must, within four months from the
approval of the accounts showing this loss, convene an extraordinary general
meeting of shareholders in order to decide whether the company ought to be
dissolved before its statutory term.
If the dissolution is not declared, the capital must, at the latest at the
end of the second fiscal year following the fiscal year during which the losses
were established and subject to the legal provisions concerning the minimum
capital of societes anonymes, be reduced by an amount at least equal to the
losses which could not be charged on reserves, if during that period the net
assets have not been restored up to an amount at least equal to one half of the
capital.
In the absence of the meeting of shareholders, or in the case where this
meeting has not been able to validly act, any interested party may institute
legal proceedings to dissolve the company.
ARTICLE 24 - EFFECT OF THE DISSOLUTION OF THE COMPANY
-----------------------------------------------------
The company is in liquidation as soon as it is dissolved for any reason
whatsover. It continues to exist as a legal entity for the needs of this
liquidation until the liquidation is completed.
During the period of the liquidation, the general meeting shall retain the
same powers it exercised during the life of the company.
The shares shall remain transferable until the completion of the
liquidation proceedings.
The dissolution of the company is only valid vis a vis third parties as
from the date at which it is published at the register of commerce.
ARTICLE 25 - APPOINTMENT OF LIQUIDATORS - POWERS
------------------------------------------------
Upon the expiration of the term of existence of the company or in the case
of its premature dissolution, the meeting of the shareholders shall decide the
method of liquidation and appoint one or several liquidators whose powers it
will determine. The liquidators will exercise their duties according to the law.
The appointment of the liquidator(s) terminates the offices of the directors.
ARTICLE 26 - LIQUIDATION - CLOSING
----------------------------------
<PAGE>
After payment of the liabilities, the remaining assets shall be used first
for the payment to the shareholders of the amount paid for their shares and not
amortized.
The balance, if any, shall be divided among all the shareholders.
The shareholders shall be convened at the end of the liquidation in order
to decide on the final accounts, to discharge the liquidator from liability for
his acts of management and the performance of his office, and to take notice of
the closing of the liquidation.
The closing of the liquidation is published as provided by law.
*** *** ***
***
<PAGE>
TITLE VII
---------
NOTIFICATIONS
-------------
ARTICLE 27 - NOTIFICATIONS
--------------------------
All notifications provided for in the present Memorandum and Articles of
Associations shall be made either by registered mail with acknowledgment of
receipt or by process server. Simultaneously a copy of the notification shall be
sent to the recipient by ordinary mail.
*** *** ***
***
<PAGE>
EXHIBIT 10.0
The Galbreath Company
---------------------
OF CALIFORNIA, INC.
2860 Zanker Road, Suite 102, San Jose, CA 95134 TEL 408-434-0484
FAX 408-434-6971
December 13, 1996
Business Object, Inc.
2870 Zanker Road
San Jose, CA 95134
CERTIFIED MAIL
RE: Lease Dated: January 18, 1996 Return Receipt Requested
------------------------
This is to notify you that Metropolitan Life Insurance Company ("Metropolitan")
has sold its interest in Lincoln Park and in connection therewith has assigned
its interest as Landlord under your Lease to Spieker Properties, L.P.
Metropolitan has also transferred to Spieker Properties, L.P. the security
deposit held by Metropolitan under the Lease in the amount of $90,754.05.
Please acknowledge receipt of this letter by signing the enclosed copy where
indicated below and return the signed copy to Metropolitan in the enclosed
envelope. Please direct all future rental and other payments and communications
under your Lease to SPIEKER PROPERTIES, L.P., 2180 SAND HILL ROAD, SUITE 200,
MENLO PARK, CALIFORNIA 94025, ATTENTION: DELAINE QUINTAL.
The Galbreath Company of California, Inc.
as Independent Contractor for
Metropolitan Life Insurance Company ("Seller")
/s/ Leas Santos
Lea Santos, Property Manager
RECEIPT ACKNOWLEDGED:
By:
Date:
<PAGE>
TO THE LEASE AGREEMENT DATED JANUARY 18, 1996 BY AND BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY, AS OWNER
AND
BUSINESS OBJECTS, INC. , AS LESSEE
2870 ZANKER ROAD.,
SAN JOSE, CALIFORNIA 95134
AMENDMENT NO. 1
PAGE 1 OF 1
This Amendment to Lease is entered into this 7th day of August, 1996
between METROPOLITAN LIFE INSURANCE COMPANY, as Owner (hereinafter called
"Lessor"), and BUSINESS OBJECTS, INC., (hereinafter called "Lessee".)
WHEREAS the parties hereto desire to amend that certain Lease made by
the Parties on January 18, 1996, for the Premises located at 2870 Zanker Road,
San Jose, California 95134.
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the parties agree as follows:
1. TERM: The term shall commence June 28,1996 and shall expire on June
30, 2001.
2. RENT: $87,826.50 per month payable on the first day of each month
until December 31, 1998 then to $90,754.05 per month payable on the
first day of each month until June 30, 2001.
Except as set forth in this Amendment, all terms and conditions of the
Lease and its amendments shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment as of the date and year first above written.
LESSOR:
METROPOLITAN LIFE INSURANCE COMPANY
a New York corporation
By: /s/ Dated:
Its: Assistant Vice President
LESSEE:
BUSINESS OBJECTS, INC.
a Delaware corporation
By: /s/ Dated:
Its:
<PAGE>
TENANT'S ESTOPPEL CERTIFICATE
-----------------------------
TO: Spieker Properties, L.P.
2180 Sand Hill Road, Ste. 200
Menlo Park, CA 94025
("Purchaser")
FROM: Met-Montague Park
2860-2890 Zanker Road, San Jose, CA 95134
2833-2841 Junction Avenue, San Jose, CA. 95134
(the "Premises")
The undersigned (the "Tenant") understands that Purchaser is presently
negotiating the purchase of certain real property commonly known as Met Montague
------------
Park (the "Property") of which Tenant is a tenant. Lessee hereby certifies the
- ----
following information with respect to the lease (the "Lease", including any
amendments to or modifications of the same) under which Tenant is a tenant and
agrees that Purchaser may rely upon this Certificate in purchasing the Property:
1. The Lease is in full force and effect and has not been modified or
amended except as specifically set forth in item 6 below.
2. a) Tenant asserts no claim of default or offset or defense against the
payment of rent or other charges payable by the Lessee and asserts no claim
against Landlord under the Lease in regard to the Premises. To the best of
Tenant's knowledge and belief, there is no default by Landlord under the Lease
and no event has occurred that, with the passage of time or the giving of
notice, or both, would constitute a default by Landlord under the Lease. Except
as follows:
None
b) Tenant has no existing dispute against Landlord regarding any
amount owing or to be paid or with respect to any other matter under the Lease,
other than:
None
3. All fixed minimum rental has been paid to the end of the current
calendar month, which is October, 1996 and no rent under the Lease has been paid
more than one month in advance of its due date.
4. Tenant certifies that it is required to pay a pro rata share of real
property taxes and insurance, as well as a pro rata share of the common area
expense above the "Base Year Amount" or "Base Amount" as follows:
Taxes 19.02% of project; 100% of building.
Insurance 19.02% of project; 100% of building.
Common Area Expense 19.02% of project; 100% of building.
5. The Premises comprise 58,551 square feet of space.
6. The date of the original Lease is January 18, 1996. The dates of any
amendments or modifications are as follows: Amendment No. 1 dated January 18,
------------------------------------
1996.
7. Lease term commenced on June 28, 1996 and terminates on June 30, 2001.
------------- ------------
8. The current annual fixed minimum rent is $ 1,053,918.00.
--------------
9. The Lease provides for an option(s) to renew the term as follows: One
---
option to extend for additional five (5) years at rental rate of $1,089,048.86
- ------------------------------------------------------------------------------
annual or "Market Rent" whichever is greater.
- --------------------------------------------
10. The Lease contains no first right of refusal, option to expand, option
to terminate, except as follows: None
11. A security deposit of $ 90,754.05 has been paid to Landlord.
-----------
<PAGE>
12. Tenant is not in default under the Lease nor has any event occurred
which, with the passage of time or the giving of notice, or both, would
constitute a default or breech by Tenant. Tenant is current in the payment of
taxes, utilities, common area maintenance payments, and other charges required
to be paid by Tenant. Except as follows:
None
13. The improvements and space required to be furnished according to the
Lease have been duly delivered by Landlord and accepted by Tenant, except as
follows:
None
14. Tenant is entitled to the non-exclusive use of 234 parking spaces and
---
the exclusive use of 0 parking spaces.
-
None
15. Tenant is not entitled to any concessions, rebates, allowance or free
rent for any period after this certification, except as follows:
None
16. Tenant has not entered into any sublease, assignment or any other
agreement transferring any of its interest in the Lease or the Premises, except
as follows: Sublease dated August 12, 1996, Subtenant: Arbor Software
---------------------------------------------------------
Corporation.
- -----------
17. Tenant has not received notice of any assignment, hypothecation,
mortgage, or pledge of Lessor interest in the Lease or the rents or other
amounts payable thereunder, except as follows:
None
18. Tenant represents that no Hazardous Material has been used, treated,
stored or disposed of on the Premises or, to Tenant's best knowledge, on the
Property, except in compliance with all federal, state, regional and local laws,
statutes, regulations, rules, requirements and orders applicable to Hazardous
Materials and the environment. Tenant represents that it does not have any
permits or identification numbers issued by the United States Environmental
Protection Agency or by any state, county or municipal agencies with respect to
its operations on the Premises, except those listed below. For the purposes
hereof, the term "Hazardous Material" shall mean any substance, chemical, waste
or other material which is listed, defined or otherwise identified as
"hazardous" or "toxic" under any federal, state, local or administrative agency
ordinance or law or any regulations, order, rule or requirement adopted
thereunder, as well as any petroleum, petroleum product or by-product, crude
oil, natural gas, natural gas liquids; liquefied natural gas or synthetic gas
usable as fuel, and "source," "special nuclear" and "by-product" material as
defined in the Atomic Energy Act of 1985, 42 U.S.C. paragraph 3011 et seq.
------
List all permits and identification numbers:
None
19. Tenant recognizes and acknowledges it is making these representations
to Purchaser with the intent that Purchaser may rely hereon and as a material
inducement to purchase the Property.
20. The provisions of this Certificate shall be binding upon and inure to
the benefit of the successors, assigns, personal representatives and heirs of
Tenant and Purchaser.
TENANT:
Business Object, Inc.
a Delaware corporation
Building 2870
By: /s/ Elizabeth M. Berecz
Its: Vice President, Finance &
Administration
Elizabeth M. Berecz
Oct. 17, 1996
<PAGE>
LINCOLN PARK
LEASE AGREEMENT
BASIC LEASE INFORMATION
LEASE DATE: January 18, 1996
LESSOR: METROPOLITAN LIFE INSURANCE COMPANY
LESSEE: BUSINESS OBJECTS, INC. a Delaware corporation
PREMISES: The Premises referred to in this Lease are located at
2870 Zanker Road, San Jose, California 95134
and consist of approximately 58,551 rentable square feet of
space. Lessee's Proportionate Share of Building: 100%
Lessee's Proportionate Share of Park: 19.02%
TERM: The term shall commence on: May 1, 1996
and shall expire on: April 30,2001
RENT: $87,826.50 per month payable on the first day of each month
until October 31, 1998 then to $90,754.05 per month payable on
the first day of each month until April 30, 2001.
USE: Lessee shall use the Premises solely for general office uses.
SECURITY
DEPOSIT: $90,754.05
PARKING: Lessee shall have use of two hundred thirty four (234)
undesignated parking stalls.
BROKER: CB Commercial and Colliers Parrish International, Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PARAGRAPH DESCRIPTION PAGE NUMBER
<C> <S> <C>
1. PREMISES.................................... 3
2. ACCEPTANCE OF PREMISES...................... 3
3. COMMON AREAS................................ 3
4. POSSESSION.................................. 3
5. RENT........................................ 3
6. SECURITY DEPOSIT............................ 4
7. OPERATING EXPENSES.......................... 4
8. PERSONAL PROPERTY TAXES..................... 5
9. SERVICES AND UTILITIES...................... 5
10. USE......................................... 6
11. COMPLIANCE WITH THE LAW..................... 7
12. ALTERATIONS AND ADDITIONS................... 8
13. REPAIRS AND MAINTENANCE..................... 8
14. WASTES...................................... 8
15. LIENS....................................... 8
16. ASSIGNMENTS AND SUBLETTING.................. 9
17. INDEMNITY................................... 10
18. DAMAGE TO PREMISES OR BUILDING.............. 10
19. LIMITATION OF LIABILITY..................... 10
20. LESSEE'S INSURANCE.......................... 10
21. AD VALOREM TAXES............................ 11
22. WAIVER...................................... 11
23. ENTRY BY LESSOR............................. 11
24. CASUALTY DAMAGE............................. 12
25. CONDEMNATION................................ 13
26. LESSEE'S DEFAULT............................ 14
27. REMEDIES FOR LESSEE'S DEFAULT............... 14
28. SURRENDER OF PREMISES....................... 15
29. DEFAULT BY LESSOR........................... 16
30. PARKING..................................... 16
31. ESTOPPEL CERTIFICATE........................ 16
32. SALE OF PREMISES............................ 16
33. SUBORDINATION, ATTORNMENT................... 16
34. AUTHORITY OF PARTIES........................ 17
35. BROKERS..................................... 17
36. HOLDING OVER................................ 17
37. RULES AND REGULATIONS....................... 17
38. INTENTIONALLY DELETED....................... 18
39. OPTION TO EXTEND............................ 18
40. GENERAL PROVISIONS.......................... 19
41. NOTICES..................................... 21
</TABLE>
LIST OF EXHIBITS
A. SITE PLAN AND EXISTING FLOOR PLAN
B. WORK LETTER AND CONSTRUCTION AGREEMENT (ALLOWANCE)
C. RENT SCHEDULE
D. SUMMARY OF COVENANTS, CONDITIONS AND RESTRICTIONS
E. RULES AND REGULATIONS
<PAGE>
LEASE AGREEMENT
This Lease is made and entered into as of the Lease Date defined on page 1.
The Basic Lease Information set forth on page 1 and this Lease are and shall be
construed as a single instrument.
1 . PREMISES: Lessor hereby leases to Lessee and Lessee hereby leases from
Lessor upon the terms and conditions contained herein the Premises in the
Building included in Lincoln Park, which are more particularly described in
Exhibit A attached hereto and made a part hereof (the "Premises") and the tenant
improvements (the "Tenant Improvements") thereon to be constructed in accordance
with Exhibit A attached hereto and made a part hereof. As hereinafter used in
this Lease, the term "Building" shall refer to the entire structure in which the
Premises are located, the term "Lot" shall refer to the Assessor's tax parcel on
which the Building is situated, and the term "Park" shall refer to the Lincoln
Park project as shown on Exhibit A.
2. ACCEPTANCE OF PREMISES: Lessee's taking possession of the Premises
shall constitute Lessee's acknowledgment that the Premises are in good condition
and that the Tenant Improvements are constructed in accordance with the criteria
set forth in Exhibit A.
3. COMMON AREAS: The term "Common Areas" shall refer to all areas and
facilities outside the Premises and within the Park that are provided and
designated by Lessor from time to time for the general nonexclusive use of
Lessor, Lessee, and of other lessees in the Park and their representative
employees, suppliers, shippers, customers, and invitees. Lessor hereby grants
to Lessee, during the term of this Lease, the nonexclusive right to use, in
common with others entitled to such use, the Common Areas as they exist from
time to time, subject to any rules, regulations, and restrictions, governing the
use of the Park. Under no circumstances shall the right granted herein to use
the Common Areas be deemed to include the right at any time to make alterations
in or additions to the Park and to the Common Areas.
4. POSSESSION:
a. Lessor shall deliver possession of the Premises to Lessee on the
later of the term commencement date as set forth in the Basic Lease Information
on page 1 (the "Commencement Date"), or the date when the Premises are
substantially complete. For purposes of the foregoing, the Premises shall be
deemed to be substantially complete on the earlier of (i) the issuance of a
certificate of occupancy by the City of San Jose, or (ii) when Lessee has direct
access to the Premises with building services ready to be furnished to the
Premises and all construction to be provided by Lessor, as set forth in Exhibit
A, has been completed, with the exception of "punchlist" or similar corrective
work. If the Premises are not substantially complete for any reason by the
Commencement Date, or if Lessor is unable to deliver possession because a
previous occupant is holding over, or for any other reason beyond the reasonable
control of Lessor, Lessor shall not be liable for any claims, damages, or
liabilities in connection therewith or by reason thereof. Provided that such
delay has not been caused by an act, failure to act, or any other omission of
Lessee, rent shall be abated during the period between the Commencement Date and
the time when Lessor delivers possession, and the term shall be extended by the
length of time between the Commencement Date and the date Lessor delivers
possession of the Premises, which date shall be confirmed in writing by Lessor
and Lessee. Notwithstanding the foregoing, if Lessee is to construct the Tenant
Improvements, the Lease shall commence and Lessor shall deliver possession of
the Premises on the Commencement Date, regardless of whether or not Lessee has
completed the Tenant Improvements.
b. In the event that Lessor permits Lessee to occupy the Premises
prior to the Commencement Date, such occupancy shall be subject to all the
provisions of this Lease.
5. RENT: Lessee agrees to pay to Lessor as rent for the Premises (the
"Rent"), without prior notice or demand, the amount of Rent set forth in the
Basic Lease Information on page 1 and as shown on the Rent Schedule attached
hereto as Exhibit C and made a pan hereof Rent shall be payable on or before the
first day of each month throughout the term of the Lease, except that the first
month's Rent shall be paid upon the execution of this Lease. Rent for any
period during the term hereof which is for less than one (1) month shall be a
prorated portion of the monthly installment based upon a thirty (30) day
month. Rent shall be paid in full without abatement, deduction, or offset.
3
<PAGE>
Lessee shall pay Rent to Lessor at 101 Lincoln Centre Drive, Foster City,
California 94404, or to such other person or at such other place as Lessor may
from time to time designate in writing. Rent as set forth on page 1 and on
Exhibit C includes Lessee's share of Operating Expenses as specified in
paragraph 7, taxes as specified in paragraph 8, and utilities referred to in
paragraph 9 below, and the term "Rent" whenever used herein refers to all of
these amounts.
The Rent has been established in contemplation that Lessee -will occupy the
Premises for the entire term. In the event of an assignment or sublease of the
Lease, Lessor and Lessee have agreed that Lessor shall have the rights provided
in paragraph 16 of this Lease and Lessee expressly acknowledges and agrees that
such agreement was a material inducement to Lessor in establishing the Rent and
that Lessor has relied on this agreement in executing this Lease.
6. SECURITY DEPOSIT: Upon execution of this Lease, Lessee shall deposit
with Lessor the sum shown in the Basic Lease Information on page 1 as security
for the full and faithful performance by Lessee of the provisions of this Lease
(the "Security Deposit"). If Lessee is in default, Lessor may use the Security
Deposit, or any portion of it, to cure the default or to compensate Lessor for
all damage which Lessor may suffer by reason of Lessee's default. Lessee shall
immediately on demand pay to Lessor a sum equal to the portion of the Security
Deposit expended or applied by Lessor as provided in this paragraph so as to
maintain the Security Deposit in the sum initially deposited with Lessor. At
the expiration or termination of this Lease, Lessor shall return the Security
Deposit to Lessee, less such amounts as are reasonably necessary to remedy
Lessee's defaults in payment of Rent, to repair damages to the Premises caused
by Lessee, or to clean the Premises upon such termination, as soon as
practicable thereafter. Lessor's obligations with respect to the Security
Deposit are those of a debtor and not a trustee. Lessor can maintain the
security deposit separate and apart from Lessor's general funds or can commingle
the Security Deposit with Lessor's general and other funds. Lessor shall not be
required to pay Lessee interest on the Security Deposit.
7. OPERATING EXPENSES: In addition to the Rent, Lessee shall pay
currently Lessee's proportionate share of all increases in the Operating
Expenses above the Base Amount. The Base Amount shall be determined by actual
Operating Expenses for the period from May 1, 1996 to April 30, 1997 per the
total square feet of the park. Lessee's Proportionate Share is that percentage
set forth in the Basic Lease Information on page I as Lessee's Proportionate
Share of the Park and/or Lessee's Proportionate Share of the Building and/or
Lessee's Proportional Share of the Lot. The term "Operating Expenses" means the
total amounts paid or payable by Lessor or others on behalf of Lessor in
connection with the ownership, maintenance, repair, and operation of the
Premises, the Building, and the Park, and includes, but is not limited to, the
amount paid for all hot and cold water; sewer service charges; the amount paid
for lighting; the amount paid for heating and air conditioning; the amount paid
for all labor and/or wages and other payments, including cost to Lessor of
workers' compensation and disability insurance, payroll taxes, welfare, and
fringe benefits made to janitors, employees, budding managers, contractors, and
subcontractors of the Lessor to the extent involved in the operation,
maintenance, repair, and restoration of the Building or the Park; the cost of
maintenance and repair of the roof, landscaping, sidewalks, driveways, parking
lots, fences and other exterior Common Areas; modifications to the Building
occasioned by any rules, regulations, or laws effective subsequent to the
Commencement Date; permits, licenses, and certificates necessary to operate and
manage the Building; managerial fees and managerial, administrative, and
telephone expenses related to the Building; the total charges of any independent
contractors employed in the care and operation, maintenance, leasing, cleaning,
repair, and restoration of the Building and the Park landscaping; the amount
paid for all supplies, tools, equipment, and necessities which are occasioned by
everyday wear and tear; the cost of window and exterior wall cleaning and
painting; the cost of accounting services necessary to compute the Rent and
charges payable by tenants; legal, inspection, and consulting services; the
amount paid for premiums for all insurance required from time to time by Lessor
or Lessor's mortgagees and real property taxes applicable to the Lot,
improvement, fixtures and equipment included within the Lot The term "Taxes"
includes any form of assessment, general, special, ordinary or extraordinary,
commercial rental tax, improvement bond or bonds, license fee, license tax,
rental tax, levy, penalty, or tax other than personal income tax, inheritance or
estate taxes imposed by any authority having the direct or indirect power of
tax, including any city, county, state, or federal government, or any school,
agricultural, lighting, drainage, or other improvement district thereof, as
against any legal or equitable interest of Lessor in the Premises or in the
real property of which the Premises are a part, as against Lessor's right to
Rent or
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other income therefrom, or as against Lessor's business of leasing the Premises
or the occupancy of Lessee, or any other tax, fee, or excise, however described,
including any value added tax, or any tax imposed in substitution, partially or
totally, for any of the foregoing or otherwise. Taxes shall also include
reasonable legal fees and costs incurred in connection with proceedings to
contest, determine, or reduce taxes.
Lessee acknowledges that Lessor shall have no obligation whatsoever to provide
guard service or other security measures for the benefit of the Premises or
Park. Should Lessor elect to provide security protection for the Park, the cost
of guards and other protection services shall be included within the definition
of Operating Expenses.
Operating expenses shall not, however, include interest on debt, capital
retirement of debt, depreciation, expenses properly chargeable to capital
account except for capital expenditures primarily designed to reduce operating
expenses or as required or reasonably requested by governmental authority (which
capital expenditures shall be amortized over such reasonable period not
exceeding five (5) years, as Lessor shall determine), and expenses directly
chargeable by the Lessor to any tenant or Lessor's initial construction cost of
the Project, real estate brokerage and leasing commissions, advertising and
marketing expenses and Lessor's or Lessor's property manager's corporate general
overhead or corporate general administrative expenses. The reference to
"Building" in this paragraph shall include all corridors, lobbies, sidewalks,
loading areas, and parking areas, if any, and driveways and other public areas
in or around the Building. Notwithstanding the provisions of this paragraph 7,
Lessee agrees that any cost or expense which arises from Lessee's particular use
or occupancy of the Building shall be paid in full by Lessee upon demand from
Lessor.
Failure of Lessee to pay any of the foregoing amounts and charges shall
constitute a default under the terms hereof in like manner as failure to pay
Rent when due.
Lessor may estimate such increases as of the beginning of each calendar year and
require Lessee to pay one-twelfth (1/12) of such estimated amount as Additional
Rent hereunder as of the first day of each month. Not later than March 31st of
the following calendar year or as soon thereafter as reasonably possible,
including the year following the year in which this Lease terminates, Lessor
shall endeavor to furnish Lessee with a true and correct accounting of actual
costs with respect to the items set forth above which accounting shall be
binding on Lessee, and within thirty (30) days of Lessor's delivery of such
accounting, Lessee shall pay to Lessor the amount of any underpayment.
Notwithstanding the foregoing, failure by Lessor to give such accounting by such
date shall not constitute a waiver by Lessor of its right to collect Lessee's
share of any underpayment. Lessor shall credit the amount of any overpayment of
Lessee toward the next estimated monthly installment(s) falling due, or where
the term of the Lease has expired, refund the amount of overpayment to Lessee.
Lessor may upon notice to Lessee change from a calendar year period for
estimating Operating Expenses to any other twelve (12) consecutive month period,
and in the event of any such change Lessee's proportionate share of Operating
Expenses shall be equitably adjusted.
Tenant shall have the right to audit the books and records of Landlord provided
that such audit shall be (i) conducted by a regional or national firm of
certified accountants; (ii) any such audit shall be conducted within six (6)
months following the delivery of Landlord's statement for a particular year and
(iii) any claim arising out of such Landlord's Statement or Tenant's audit shall
be asserted within one (1) year after the delivery of Landlord's Statement or
shall be waived.
The above provisions requiring Lessee to pay its proportionate share of
Operating Expenses are intended to pass to Lessee and to reimburse Lessor for
all increases in the costs of operating, repairing and managing the Building,
the Premises and the Park except as otherwise set forth herein.
8. PERSONAL PROPERTY TAXES: Lessee shall pay before delinquent all taxes
assessed against and upon equipment, furniture, fixtures, and other personal
property of Lessee.
9. SERVICES AND UTILITIES: Provided that Lessee is not in default
hereunder, Lessor agrees to furnish to the Premises during the hours set forth
in the Rules and Regulations (attached hereto as Exhibit E) on generally
recognized business days Monday through Friday, to be determined by Lessor at
its sole discretion, and subject to the rules and regulations of the Building of
which the Premises are a part, heat and air conditioning required in Lessor's
judgment for the comfortable use and occupation of the Premises, and
janitorial service. Lessor shall provide
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electricity for normal fighting and fractional office machines and water to the
Premises and shall also maintain and keep lighted the common stairs, common
entries, elevator service, and restroom facilities in the Building of which the
Premises are a part. Lessor shall not be liable for, and Lessee shall not be
entitled to, any reduction of rental by reason of Lessor's failure to furnish
any of the foregoing when such failure is caused by accident, breakage, repairs,
strikes, lockouts or -other labor disturbances or labor disputes of any
character, or by any other cause beyond the reasonable control of the Lessor.
Lessor shall not be liable under any circumstances for loss of or injury to
Premises, however occurring, through or in connection with or incidental to
failure to furnish any of the foregoing. Wherever heat generating machines or
equipment are used in the Premises which affect the temperature otherwise
maintained by the air conditioning system, Lessor reserves the right to install
supplementary air conditioning units in the premises and the cost thereof,
including the cost of installation, and the cost of operation and maintenance
thereof shall be paid by Lessee to Lessor upon demand by Lessor.
Lessee will not, without written consent of Lessor, use any apparatus or device
in the Premises, including, but without limitation thereto, electronic data
processing machines, punch card machines and machines using in excess of 120
volts, which will in any way increase the amount of electricity usually
furnished or supplied for the use of the Premises as general office space; and
will not connect with electric current except through existing electrical
outlets in the Premises, any apparatus or device, for the purpose of using
electric current. If Lessee shall require water or electric current in excess
of that usually furnished or supplied for the use of the Premises as general
office space, Lessee shall first procure the written consent of Lessor, which
Lessor may refuse, for the use thereof and Lessor may cause a water meter or
electrical current meter to be installed in the Premises, so as to measure the
amount of water and electric current consumed for any such use. The cost of any
such meters and the installation, maintenance and repair thereof shall be paid
for by the Lessee and Lessee agrees to pay to Lessor promptly and upon demand
therefor by Lessor for all such water and electric current consumed as shown by
said meters, at the rates charged for such services by local public utility
furnishing the same, plus any additional expense incurred in keeping account of
the water and electric current so consumed. If a separate meter is not
installed, such excess cost for such water and electric current will be
established by an estimate made by a utility company or electrical engineer.
10. USE: Lessee shall use the Premises solely for the uses set forth in
the Basic Lease Information on page I and shall not use the Premises for any
other purpose without obtaining the prior written consent of Lessor.
Lessee acknowledges that the Premises are subject to those certain
covenants, conditions, and restrictions recorded at Page 281, of Book F826, of
the Official Records of Santa Clara County, State of California, on January 2,
1981 (the CC&R's), a summary of which is attached hereto as Exhibit D (the
"Summary") and note a part hereof. A copy of the CC&R's are available at
Lessor's offices for review by Lessee during regular business hours. Lessee
further acknowledges that it has read the Summary and knows the contents thereof
Throughout the term of this Lease and any extensions thereof, Lessee shall
faithfully and timely perform and comply with the CC&R'S and any modification or
amendments thereof Lessee shall hold Lessor harmless and indemnify Lessor
against any loss, expense, damage, attorney's fees, and cost or liability
arising out of the failure of Lessee to so perform or comply with CC&R'S.
In no event will Lessee use, introduce to the Premises, generate,
manufacture, produce, store, release, discharge or dispose of, on, under or
about the Premises or transport to or from the Premises any Hazardous Material
(as defined below) or allow its employees, agents, contractors, invitees or any
other person or entity to do so.
Lessee Warrants that it shall not make any use of the Premises which may
cause contamination of the soil, the subsoil or ground water. Lessee shall not
do, bring, or keep anything in or about the Premises that will cause a
cancellation of any insurance covering the Premises. If the rate of any
insurance carried by Lessor is increased as a result of Lessee's use, Lessee
shall pay to Lessor within thirty (30) days before the date Lessor is obligated
to pay a premium on the insurance, or within ten (10) days after Lessor delivers
to Lessee a certified statement from Lessor's insurance carrier stating that the
rate increase was caused solely by an activity of Lessee on the Premises as
permitted in this
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Lease, whichever date is later, a sum equal to the difference between the
original premium and the increased premium.
Lessee shall keep and maintain the Premises in compliance with, and shall
not cause or permit the Premises to be in violation of any and all federal,
state or local laws, ordinances, rules or regulations pertaining to health,
industrial hygiene or the environmental condition on, under or about the
Premises.
Lessee shall give immediate written notice to Lessor of (i) any action,
preceding or inquiry by any governmental authority or any third party with
respect to the presence of any Hazardous Material on the Premises or the
migration thereof from or to other property or (ii) any spill, release or
discharge of Hazardous Materials that occurs with respect to the Premises or
Lessee's operations.
Lessee shall indemnify and hold harmless Lessor, its directors, officers,
employees, agents, successors and assigns (collectively "Lessor") from and
against any and all claims arising from (i) Lessee's use of the Premises for the
conduct of its business or from any activity, work or other things done or
suffered by the Lessee in or about the Buildings, (ii) breach or default in
performance of any obligation on Lessee's part to be performed under the terms
of this Lease; or (iii) any act or negligence of the Lessee, or any officer,
agent, employee, guest or invitee of Lessee. The indemnity should include all
costs, fines, penalties, judgments, losses, attorneys' fees, expenses and
liabilities incurred in or about any such claim or any action or proceeding
brought thereon including, without limitation, (a) all foreseeable consequential
damages including without limitation loss of rental income and diminution in
property value; and (b) the cost of any investigation, monitoring, removal,
restoration, abatement, repair, cleanup, detoxification or other ameliorative
work of any kind or nature required by any governmental agency having
jurisdiction thereof or Lessor. This indemnity shall survive the expiration or
termination of this Lease. In any action or proceeding brought against Lessor
by reason of any such claim, upon notice from Lessor if Lessor does not elect to
retain separate counsel, Lessee shall defend the same at Lessee's expense by
counsel reasonably satisfactory to Lessor.
The term "Hazardous Material" shall include without limitation:
a. Those substances included within the definitions of "hazardous
substances," "hazardous materials," "toxic substances," or "solid waste" in
CERCLA, RCRA, the Clean Water Act and the Hazardous Materials Transportation
Act, 49 U.S.C. Sections 18.1 et. seq. and in the regulations promulgated
pursuant to said laws;
b. Those substances defined as "hazardous wastes" or "hazardous
substances" in the California Health & Safety Code, or as "hazardous substances"
in Section 25316 of the California Health and Safety Code, or as carcinogens in
the Safety Drinking Water and Toxic Enforcement Act of 1986 and in the
regulations promulgated pursuant to said laws; and
c. Such other substances, materials and wastes which are or become
regulated under applicable local, state or federal law, or the United States
government, or which are classified as hazardous or toxic under federal, state,
or local laws or regulations.
11. COMPLIANCE WITH THE LAW: Lessee shall not use the Premises or permit
anything to be done in or about the Premises which will in any way conflict with
the law, statue, zoning restriction, ordinance or governmental law or rule,
regulation, or requirement of any duly constituted public authorities now in
force or which may hereafter be enacted or promulgated or subject Lessor to any
liability for injury to any person or property by reason of any business
operation being conducted in or about the Premises. Lessee shall not store any
hazardous materials on the Premises without the prior written approval of Lessor
and shall not cause any hazardous materials to be placed in the sewage or any
other drainage system in the Park. Lessee shall, at its sole cost and expense,
promptly comply with all laws, statutes, ordinances, and governmental rules,
regulations, or requirements of any board or fire insurance under-writers or
other similar bodies, now or hereafter constituted, relating to or affecting the
condition, use, or occupancy of the Premises, excluding structural changes not
related to or affected by Lessee's improvements or acts. The judgment of any
court of competent jurisdiction or the admission of Levee in any action
against Lessee, whether Lessor be a party thereto or not, that Lessee has
violated any law, statute, ordinance, or governmental rule, regulation, or
requirement, shall be conclusive of that fact as between Lessor and Lessee.
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12. ALTERATIONS AND ADDITIONS: Lessee shall not make or suffer to be made
any alterations, additions, or improvements of over $7,000 per year to or of the
Premises, or any part thereof, without first obtaining the written consent of
Lessor. Any alterations, additions, or improvements to or of said Premises,
including, but limited to, wall covering, paneling, and built-in cabinet work,
but excepting movable furniture and trade fixtures, shall on the expiration of
the term become a part of the realty and belong to Lessor, and shall be
surrendered with the Premises. Before such consent will be given, Lessee shall
submit detailed specifications, floor plans and necessary permits (if
applicable) to Lessor for review. In no event shall any alterations or
improvements affect the structure of the Building or its facade. As a condition
to its consent, Lessor may request adequate assurance that all contractors who
will perform such work have in force workers' compensation, and such other
employee and public liability insurance as Lessor deems necessary to supplement
the insurance coverage provided for in paragraph 20 below, and where the
alterations, additions, or improvements are material, Lessor may require Lessee
or its contractors to post adequate completion and performance bonds. In the
event Lessor consents to the making of any alteration, additions, or
improvements to the Premises by Lessee, the same shall be made by Lessee at
Lessee's sole cost and expense, completed to the satisfaction of Lessor, and any
contractor or person selected by Lessee to make the same must first be approved
in writing by Lessor.
In the event Lessor is required to make modifications to the Building as
the result of any rules, regulations, or laws promulgated by any governmental
entity after the Commencement Date, such compliance by Lessor and the making of
such alterations shall in no event entitle Lessee to any damages, relieve Lessee
of its obligation to pay Rent, or be construed as a constructive eviction of
Lessee.
13. REPAIRS AND MAINTENANCE: By taking possession of the Premises, Lessee
shall be deemed to have accepted the Premises as being in good, sanitary order,
condition and repair. Except as set forth in the following subparagraphs,
Lessee shall, at Lessee's sole cost and expense, maintain the Premises in good,
clean and safe condition and repair. Except as provided in an addendum to this
Lease, if any, Lessor shall have no obligation whatsoever to alter, remodel,
improve, repair, decorate or paint the Premises and the parties hereto affirm
that Lessor has made no representation to Lessee respecting the condition of the
Premises or the Building except as specifically set forth herein. There shall
be no abatement of Rent and no liability of Lessor by reason of any injury to or
interference with Lessee's business arising from the making of any repair,
alteration or improvement to the Premises, the Building or the Park. Lessee
waives the provisions of SS 1941 and 1942 of the California Civil Code, and any
similar or successor law regarding Lessee's right to make repairs and deduct the
expenses of such repairs from the Rent due under this Lease.
Lessor shall be responsible for all structural repairs to the Building,
including the basic plumbing, air conditioning, heating and electrical systems
installed or furnished by Lessor and shall maintain the roof, sidewalls, and
foundations of the Building in good, clean and safe condition and repair, Lessor
shall also maintain all landscaping, driveways, parking lots, fences, signs,
sidewalks and other exterior Common Areas of the Park. Lessor shall not be
liable for any failure to make any such repairs or to perform any maintenance
unless such failure shall persist for an unreasonable time after written notice
of the need for such repairs or maintenance.
14. WASTES: Lessee shall not use the Premises in any manner that will
constitute waste, nuisance, or unreasonable annoyance to owners or occupants of
adjacent properties or to other tenants of the Building.
15. LIENS: Lessee shall keep the Premises and the property on which the
Premises are situated fee from any liens arising out of any work performed,
materials furnished, or obligations incurred by Lessee. Lessor may require, at
its sole option, that Lessee shall provide to Lessor, at Lessee's sole cost and
expense, labor and materials or a completion bond in any amount equal to one and
one-half (1 - 1/2) times any and all estimated cost of any improvements,
additions, or alterations to the Premises, to insure Lessor against any
liability for mechanic's and materialmen's liens and to insure completion of
work. Lessor may, at its election, and upon ten days notice to Lessee, remove
any hens, in which case Lessee shall pay to Lessor the cost of removing the
lien, including attorney's fees. Lessor shall have the right at all times to
post on the Premises any notices permitted or
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required by law for the protection of Lessor, the Premises, or the Building from
mechanic's and materialmen's liens.
16. ASSIGNMENTS AND SUBLETTING: Lessee shall not, either voluntarily or by
operation of law, assign, transfer, mortgage, pledge, hypothecate, or encumber
this Lease or any interest therein, nor sublet the Premises or any part thereof,
or any right or privilege appurtenant thereto, without the written consent of
the Lessor first had and obtained, which consent shall not be unreasonably
withheld. Any attempted assignment, transfer, mortgage, encumbrance, or
subletting without such consent shall be void and shall constitute a breach of
this Lease without the need for notice to Lessee. Lessee shall give Lessor at
least ninety (90) day's written notice of Lessee's desire to assign or sublet
all or some portion of the Premises and the date on which Lessee wishes to make
such assignment or sublease. The withholding of Lessor's consent to the
assignment or subletting will be deemed to have been reasonable where based
upon: (i) the inability of assignee or sublessee to fulfill the Lease terms;
(ii) the financial irresponsibility of assignee; (iii) the lack of suitability
of assignee's or sublessee's intended use of the Premises; or (iv) the intended
unlawful or undesirable use of the Premises by sublessee or assignee. If
Lessor's consent to the assignment or subletting cannot reasonably be withheld,
Lessor shall then have a period of thirty (30) days following receipt of such
notice within which to notify Lessee in writing that Lessor elects either (i) in
the case of an assignment or a sublease of the entire Premises to terminate this
Lease as of the date so specified by Lessee, in which event Lessee will be
relieved of all future obligations hereunder as to such portions of the
Premises, or (ii) to permit Lessee to make such assignment or sublease subject
to the following:
a. Any such assignment, sublease or the like must be pursuant to a
written agreement in a form acceptable to Lessor and must provide that such
assignee, sublessee, or other transferee agrees to be bound by all the terms and
conditions of this Lease. No sublease or assignment by Lessee shall relieve
Lessee of any liability hereunder. Any sublease must provide that Lessee
(Sublessor) has the right to reenter the Premises upon termination of such
sublease. No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.
b. One-half (1/2) of any sums or other economic consideration received by
Lessee as a result of such subletting, other than the rental or other payments
received which are attributable to the amortization of the cost of nonbuilding
standard leasehold improvements to the sublet portion of the Premises at the
Cost of Lessee, whether denominated rentals under the sublease or otherwise,
which exceed in the aggregate the total sums which Lessee is obligated to pay
Lessor under this Lease (prorated to reflect obligations allocable to that
portion of the premises subject to such sublease), shall be payable to Lessor as
additional rental under this Lease without affecting or reducing any other
obligation of Lessee hereunder.
c. Lessee immediately and irrevocably assigns to Lessor, as security for
Lessee's obligations under this Lease, all Rent from any subletting of all or a
part of the Premises as permitted by this Lease, and Lessor, as assignee and
attorney-in-fact for Lessee, or a receiver for Lessee appointed on Lessor's
application, may collect such Rent and apply it toward Lessee's obligations
under this Lease, except that until the occurrence of an act of default by
Lessee, Lessee shall have the right to collect such Rent.
Any sale or transfer, including transfer by consolidation, merger, or
reorganization, of the majority of the voting stock of Lessee if Lessee is a
corporation, or any sale or other transfer of a majority of the partnership
interests in Lessee if Lessee is a partnership, shall be an assignment for
purposes of this paragraph 16.
Notwithstanding anything to the contrary contained in this paragraph 16,
Lessee may hay the right, without the prior written consent of Lessor and
without any right of recapture, to sublease the Premises, or to assign this
Lease to a parent, an affiliate or a purchaser of substantially all of Lessee's
assets located in the Premises; provided, in case of an assignment described
herein, the net worth of the assignee shall be equal to or greater than the net
worth of Lessee immediately before the assignment.
If Lessee shall assign this Lease as permitted herein, the Assignee shall
expressly assume all of the obligations of Lessee hereunder in a written
instrument satisfactory to Lessor and furnished to Lessor not later than fifteen
(I 5) days prior to the effective date of the assignment. If Lessee shall
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sublease the Premises as permitted herein, Lessee shall, at Lessor's option,
within fifteen (15) days following any request by Lessor, obtain and furnish to
Lessor the written agreement of such sublessee to the effect that the subLessee
will attorn to Lessor and will pay all subrent directly to Lessor .
17. INDEMNITY: Lessee shall indemnify and told Lessor harmless against and
from all claims arising from Lessee's use of the Premises for the conduct of
Lessee's business or from any activity, work, or other thing done, permitted or
suffered by Lessee in or about the Building, and shall further indemnify and
hold Lessor harmless against and from any and all claims directly arising from
any breach or default in the performance of any obligation on Lessee's part to
be performed under the terms of this Lease, or arising from any act or
negligence of the Lessee or any officer, agent, employee, guest, or invitee of
Lessee, and from all and against all costs, attorney's fee, expenses, and
liabilities incurred in or about any such claim or any action or proceeding
brought thereon and in any case, action, or proceeding brought against Lessor by
reason of any such claim. Lessee upon notice from Lessor shall defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor or Lessor may,
at its election, defend the same, in which case Lessee shall reimburse Lessor
for all costs incurred, including attorney's fees. Lessee as a material part of
the consideration to Lessor hereby assumes all risk or damage to property or
injury to persons in, upon or about the Premises, except that Lessee shall not
assume any risk for damage to Lessee resulting from the sole active negligence
of Lessor or its authorized representatives.
18. DAMAGE TO PREMISES OR BUILDING: All injury to the Premises or the
Building caused by moving the property of the Lessee or its employees, agents,
guests, or invitees into, in or out of the Building and all breakage done by
Lessee or the agents, servants, employees, and visitors of Lessee, as well as
any damage to the Premises or the Building due to the negligence of Lessee, or
its agents, servants, employees and visitors shall be repaired as determined by
the Lessor at the expense of the Lessee.
19. LIMITATION OF LIABILITY Lessor shall not be liable to Lessee for any
damage
to Lessee or Lessee's property, nor to any damage or injury to any person from
any cause except that Lessor shall be liable to Lessee for damage resulting from
the active negligence or willful misconduct of Lessor or its authorized
representatives. In no event will Lessor be liable for consequential damages.
20. LESSEE'S INSURANCE: Lessee shall, at all times during the term of this
Lease and at its sole cost and expense, maintain (a) Comprehensive General
Liability Insurance (including protective liability coverage on operations of
independent contractors engaged in construction and, also, blanket contractual
liability insurance) on an "occurrence" basis if available, otherwise on a
"claims made" basis, for the benefit of Lessee and Lessor as named insured
against claims for "personal injury" liability including without limitation
bodily injury, death, or property damage liability with a limit of not less than
Three Million Dollars ($3,000,000) in the event of "personal injury" to any
number of persons or of damages to property arising out of any one "occurrence";
such insurance may be furnished under a "primary" policy and an "umbrella"
policy, provided that it is primary insurance and not excess over or
contributory with any insurance in force for Lessor; and (b) insurance against
loss or damage by fire and such other risks and hazards as are insurable under
present and future standard forms of fire and extended coverage insurance
policies, to the personal property, furniture, furnishings, and fixtures
belonging to Lessor located in the Premises for not less than 100% of the actual
replacement value thereof Such insurance shall provide for a waiver of the
insurer's right of subrogation against Lessor.
All such insurance shall name Lessor as additional insured and shall be
effected under policies issued by insurers, shall be in forms and for amounts
approved by Lessor, and shall provide that Lessor shall receive thirty (30)
day's written notice from the insurer prior to cancellation or change of
coverage. Lessee shall deliver policies of such insurance or certificates
thereof to Lessor on or before the Commencement Date, and thereafter at least
thirty (30) days before the expiration dates of expiring policies; and
in the event Lessee shall fail to procure such insurance or to deliver such
policies or certificates, Lessor may, at its option, procure same for the
account of Lessee, and the cost thereof shall be paid to Lessor within ten (10)
days after the delivery to Lessee of bills therefor. Nothing contained in this
paragraph 20 shall in any way limit the extent of Lessee's liability under any
other provisions of this Lease.
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As long as their respective insurers so permit, Lessor and Lessee hereby
mutually waive their respective rights of recovery against each other from any
loss insured by fire, extended coverage, and other property insurance policies
existing for the benefit of the respective parties. Each party shall obtain any
special endorsements, if required by their insurer to evidence compliance with
the aforementioned waiver. Provided, however, if Lessor's insurer charges an
additional fee for such endorsement, said additional fee shall be paid by
Lessee.
21. AD VALOREM TAXES: Lessee shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon all Lessee's leasehold improvements, equipment,
furniture, fixtures, and personal property located in the Premises, except that
which has been paid for by Lessor and is the standard of the Building. In the
event any or all of the Lessee's leasehold improvements, equipment, furniture,
fixtures, and personal property shall be assessed and taxed with the Building,
Lessee shall pay to Lessor its share of taxes within ten (10) days after
delivery to Lessee by Lessor of a statement in writing setting forth the amount
of such taxes applicable to Lessee's property.
22. WAIVER:
a. No delay or omission in the exercise of any right or remedy of
Lessor on any default by Lessee shall impair such a right or remedy or be
construed as a waiver.
b. The subsequent acceptance of Rent by Lessor after breach by
Lessee of any covenant or term of this Lease shall not be deemed a waiver of
such breach, other than a waiver of timely payment for the particular Rent
payment involved, and shall not prevent Lessor from maintaining an unlawful
detainer or other action based on such breach.
c. No act or conduct of Lessor, including without limitation the
acceptance of the keys to the Premises, shall constitute an acceptance of the
surrender of the Premises by Lessee before the expiration of the term. Only a
written notice from Lessor to Lessee shall constitute acceptance of the
surrender of the Premises and accomplish a termination of the Lease.
d. Lessor's consent to or approval of any act by Lessee requiring
Lessor's consent or approval shall not be deemed to waive or render unnecessary
Lessor's consent to or approval of any subsequent act by Lessee.
e. Any waiver by Lessor of any default must be in writing and shall
not be a waiver of any other default concerning the same or any other provision
of the Lease.
f. The review, approval, or inspection by Lessor of any item to be
reviewed, approved, or inspected by Lessor under the terms of this Lease shall
not constitute the assumption of any responsibility by Lessor for the accuracy
or sufficiency of any such item or the quality or suitability of such item for
its intended use.
23. ENTRY BY LESSOR: Lessor reserves and shall at any and all reasonable
times upon 24 hours notice have the right to enter the Premises, unless an
emergency, inspect the same, supply any service to be provided by Lessor to
Lessee hereunder, to submit the Premises to prospective purchasers or tenants,
to post notices of nonresponsibility, and to maintain and repair the Premises
and any portion of the Building that Lessor may deem necessary or desirable,
without abatement of rent, and may for that purpose erect scaffolding and other
necessary structures where reasonably required by the character of the work to
be performed, always providing that the entrance to the Premises shall not be
blocked thereby and further providing that the business of the Lessee shall not
be interfered with unreasonably. Lessee hereby waives any claim for damages or
for any injury or inconvenience to or interference with Lessee's business, any
loss of occupancy or quiet enjoyment of the Premises, and any other loss
occasioned thereby. For each of the aforesaid purposes, Lessor shall at all
times have and retain a key with which to unlock all of the doors in, upon and
about the Premises, excluding Lessee's vaults, safes and files, and Lessor
shall have the right to use any and all means which Lessor may deem proper to
open said doors in an emergency, in order to obtain entry to the Premises
without liability to Lessor. Any entry to the Premises obtained by Lessor by
any of said means or otherwise shall not under any circumstances be construed
or be deemed to be a forcible or unlawful entry into, or a detainer of the
Premises, or an eviction of Lessee from the Premises or any portion thereof
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24. CASUALTY DAMAGE: If the Premises or any part thereof shall be damaged
by fire or other casualty, Lessee shall give prompt written notice thereof to
Lessor. In case the Building shall be so damaged by fire or other casualty that
substantial alteration or reconstruction of the Building shall, in Lessor's sole
opinion, be required (whether or not the Premises shall have been damaged by
such fire or other casualty), or in the event any mortgagee under a mortgage or
deed of trust covering the Building should require that the insurance proceeds
payable as a result of said fire or other casualty be used to retire the
mortgage debt Lessor shall with reasonable promptness after the occurrence of
such damage, estimate the length of time that will be required to substantially
complete the repair and restoration and shall by notice advise Lessee of such
estimate ("Lessor's Notice"). If Lessor estimates that the amount of time
required to substantially complete such repair and restoration will exceed one
hundred eighty (180) days from the date such damage occurred, the Lessor, or
Lessee if all or a substantial portion of the Premises is rendered untenantable,
shall have the right to terminate this Lease as of the date of such damage upon
giving written notice to the other at any time within sixty (60) days after
delivery of Lessor's Notice, provided that if Lessor so chooses, Lessor's Notice
may also constitute such notice of termination.
Unless this Lease is terminated as provided in the preceding subparagraph,
Lessor shall proceed with reasonable promptness to repair and restore the
Premises to its condition as existed prior to such casualty, subject to
reasonable delays for insurance adjustments and Force Majeure delays, and also
subject to zoning laws and building codes then in effect. Lessor shall have no
liability to Lessee, and Lessee shall not be entitled to terminate this Lease if
such repairs and restoration are not in fact completed within the time period
estimated by Lessor so long as Lessor shall proceed with reasonable diligence to
complete such repairs and restoration.
Lessee acknowledges that Lessor shall be entitled to the full proceeds of
any insurance coverage, whether carried by Lessor or Lessee, for damages to the
Premises, except for those proceeds of Lessee's insurance of its own personal
property and equipment which would be removable by Lessee at the Termination
Date. All such insurance proceeds shall be payable to Lessor whether or not the
Premises are to be repaired and restored.
Notwithstanding anything to the contrary herein set forth: (i) Lessor shall
have no duty pursuant to this Section to repair or restore any portion of any
Tenant Improvements or to expend for any repair or restoration of the Premises
or Building amounts in excess of insurance proceeds paid to Lessor and available
for repair or restoration; and (ii) Lessee shall not have the right to terminate
this Lease pursuant to this Section if any damage or destruction was caused by
the act or neglect of Lessee, its agents, invitees or employees.
Any repairs or restoration of the Premises performed by Lessee shall be in
accordance with the provisions of Paragraph 12 hereof
If the Premises or the Building is damaged by a casualty but neither is
rendered substantially untenantable, then Lessee shall proceed to repair and
restore the Building or the Premises other than Tenant Additions, with
reasonable promptness, unless such damage is to the Premises and occurs during
the last six (6) months of the Term, in which event either Lessee or Lessor
shall have the right to terminate this Lease as of the date of such casualty by
giving written notice thereof to the other within twenty (20) days after the
date of such casualty.
Except for the negligence or willful act of Lessee or its agents,
employees, contractors or invitees, if all or any part of the Premises are
rendered untenantable by fire or other casualty and this Lease is not
terminated, Monthly Base Rent and Rent Adjustments shall abate for that part of
the Premises which is untenantable on a per diem basis from the date of the
casualty until Lessor has substantially completed the repair and restoration
work in the Premises which it is required to perform, provided, that as a result
of such casualty, Lessee does not occupy the portion of the Premises which is
untenantable during such period. Lessee hereby specifically waives any and all
rights it may have under any law, statute, ordinance or regulation to terminate
the Lease by reason of casualty or damage to the Premises or Building, and the
parties hereto specifically agree that the Lease shall not automatically
terminate by law upon destruction of the Premises.
Lessee shall not be entitled to any compensation or damages from Lessor for
loss of the use of the whole or any part of the Premises, the Building, Lessee's
personal property, or any
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inconvenience or annoyance occasioned by such damage, repair, reconstruction or
restoration. If fire or other casualty results from acts, omissions, or neglect
of Lessee or its agents, employees, invitees, or visitors, there shall be no
abatement of rent as otherwise provided herein.
Except as otherwise provided in this paragraph 24, Lessee hereby waives the
provisions of Sections 1932(2), 1933(4), 1941, and 1942 of the California Civil
Code.
25. CONDEMNATION:
a. If the whole, or in the sole opinion of Lessor substantially the
whole, of the Premises should be condemned, or if any mortgagee under any deed
of trust or mortgage covering the Building shall determine to apply condemnation
proceeds to retire mortgage debt, then Lessor shall have the right to terminate
this Lease as of the date when physical possession of the Building or the
Premises is taken by the condemning authority, If less than the whole, or in the
sole opinion of Lessor substantially the whole, of the Building or the Premises
is thus taken or sold, Lessor (whether or not the Premises are affected thereby)
may terminate this Lease by giving written notice thereof to Lessee within sixty
(60) days after the right of election accrues, in which event this Lease shall
terminate as of the date when physical possession of such portion of the
Building or Premises is taken by the condemning authority. If upon any such
condemnation of less than the whole or substantially the whole of the Building
or the Premises and this Lease shall not be thus terminated, the Rent payable
hereunder shall be diminished by an amount representing that part of the Rent as
shall properly be allocable to the portion of the Premises which was so
condemned, and Lessor shall, at Lessor's sole expense, restore and reconstruct
the Building and the Premises to substantially their former condition to the
extent that the same, in Lessor's judgement, may be feasible, but such work
shall not exceed the scope of the work done in originally constructing the
Building, nor shall Lessor in any event be required to spend for such work an
amount in excess of the amount received by Lessor as compensation awarded upon a
taking of any part or all of the Building or the Premises. Subject to the
rights of any mortgagee under a mortgage or deed or trust covering the Building,
Lessor shall be entitled to and shall receive the total amount of any award made
with respect to condemnation of the Premises or Building, regardless of whether
the award is based on a single award or a separate award as between the
respective parties, and to the extent that any such award or awards shall be
made to Lessee or to any person claiming through or under Lessee, Lessee hereby
irrevocably assigns to Lessor all of its rights, title and interest in and to
any such awards. No portion of any such awards shall be allocated to or paid to
Lessee for any so-called bonus or excess value of this Lease by reason of the
relationship between the rental payable under this Lease and what may at the
time be a fair market rental for the Premises, nor for Lessee's unamortized
costs of leasehold improvements. The foregoing notwithstanding, and if Lessee
be not in default for any reason, Lessor shall turn over to Lessee, promptly
after receipt thereof by Lessor, that portion of any such award received by
Lessor hereunder which is attributable to Lessee's fixtures and equipment which
are condemned as part of the property taken but which Lessee would otherwise be
entitled to remove, and the appraisal of the condemning authority with respect
to the amount of any such award allocable to such items shall be conclusive.
Lessee hereby specifically waives any and all rights it may have under any law,
statute, ordinance or regulation to terminate or petition to terminate this
Lease upon partial condemnation of the Premises or Building, and the parties
hereto specifically agree that this Lease shall not automatically terminate upon
condemnation.
b. Lessor may, without any obligation or liability to Lessee and
without affecting the validity and existence of this Lease other than as
hereafter expressly provided, agree to sell and/or convey to the condemnor,
without first requiring that any action or proceeding be instituted, or if such
action or proceeding shall have been instituted, without first requiring any
trial or hearing thereof (and Lessor is expressly empowered to stipulate to
judgment therein), the Premises or portion hereof, sought by the condemnor free
from this Lease and the fights of Lessee hereunder.
c. If all or any portion of the Premises is condemned or otherwise
taken for a limited period of time, this Lease shall remain in full force and
effect and Lessee shall continue to perform all terms and covenants of this
Lease provided, however, Rent shall abate during such limited period in
proportion to the portion of the Premises that is rendered unusable as a result
of such condemnation or other taking.
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d. The words "condemnation" or "condemned" as used herein shall mean
the taking for any public or quasi-public use under any governmental law,
ordinance, or regulation, or the exercise of, or the intent to exercise, the
power of eminent domain, expressed in writing, as well as the filing of any
action or proceeding for such purpose, by any person, entity, body, agency, or
authority having the right or power of eminent domain, and shall include a
voluntary sale by Lessor to any such person, entity, body agency, or authority,
either under threat of condemnation expressed in writing or while condemnation
proceedings are pending, and shall occur in point of time upon the actual
physical taking of possession pursuant to the exercise of said power of eminent
domain.
26. LESSEE'S DEFAULT: The occurrence of any one or more of the following
events shall constitute a default and breach of this Lease by Lessee:
a. The vacation or abandonment of the Premises by Lessee.
b. The failure by Lessee to make any payment of Rent or any other
payment required to be made by Lessee hereunder as and when due, where such
failure shall continue for a period of five (5) days after due date.
c. Lessee's failure to observe or perform any of the covenants,
conditions, or provisions of this Lease to be observed or performed by Lessee,
other than as described in subparagraph b. above, where such failure shall
continue for a period of ten (1O) days after written notice thereof by Lessor to
Lessee; provided, however, that if the nature of Lessee's default is such that
more than ten (1O) days are reasonably required for its cure, then Lessee shall
not be deemed to be in default if Lessee commences such a cure within said ten
(1O) day period and thereafter diligently prosecutes such cure to completion.
d. The making of Lessee of any general assignment or general
arrangement for the benefit of creditors, or the appointment of a trustee or
receiver to take possession of substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease, where possession is not
restored to Lessee within thirty (30) days, or the attachment, execution, or
other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not
discharged in thirty (30) days.
e. The filing of any voluntary petition in bankruptcy by Lessee, or
the filing of any involuntary petition by Lessee's creditors, which involuntary
petition remains undischarged for period of thirty (30) days. In the event
that under applicable law the trustee in bankruptcy or Lessee has the right to
affirm this Lease and perform the obligations of Lessee hereunder, such trustee
or Lessee shall, in such time period as may be permitted by the bankruptcy court
having jurisdiction, cure all defaults of Lessee hereunder outstanding as of the
date of the affirmance of this Lease, and provide to Lessor such adequate
assurances as may be necessary to ensure Lessor of the continued performance of
Lessee's obligation under this Lease.
27. REMEDIES FOR LESSEE'S DEFAULT: In the event of Lessee's default:
a. Lessor may terminate Lessee's right to possession of the Premises
by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such event,
Lessor shall be entitled to recover from Lessee:
(1) the worth at the time of the award of any unpaid rent which
had been earned at the time of such termination; plus
(2) the worth at the time of the award of the amount by which
the unpaid rent which would have been earned after termination until the time
of award exceeds the amount of such rental loss which Lessee proves could have
been reasonably avoided; plus
(3) the worth at the time of the award of the amount by which
the unpaid rent for the balance of the term after the time of award exceeds
the amount of such rental loss which Lessee proves could be reasonably
avoided; plus
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(4) any other amount necessary to compensate Lessor for all the
detriment proximately caused by Lessee's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom (including, without limitation, the cost of recovering
possession of the Premises, expenses of reletting including necessary
renovation and alteration of the Premises, reasonable attorney's fees, and
real estate commissions actually paid and that portion of the leasing
commission paid by Lessor and applicable to the unexpired portion of this
Lease); plus
(5) such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable California law.
As used in subsections (1) and (2) above, the "worth at the time of award"
shall be computed by allowing interest at the greater of 1O percent (1O%) per
annum, or 5 percent (5%) per annum plus the rate as established by the Federal
Reserve Bank of San Francisco, on advances to member banks under 13 and 13a of
the Federal Reserve Act prevailing on the twenty-fifth (25th) day of the month
preceding the date of Lessee's default.
As used in subsection (3) above, the "worth at the time of award" shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).
In the event Lessee shall have abandoned the Premises, Lessor shall have
the option of taking possession of the Premises and recovering from Lessee the
amount specified in this subparagraph or proceeding under the provisions of
subparagraph b. below.
b. Lessor may continue this Lease in full force and effect, and the
Lease shall continued in effect, as long as Lessor does not terminate Lessee's
right to possession, and Lessor shall have the right to collect rent when due.
During the period Lessee is in default, Lessor can enter the Premises and relet
them, or any part of them, to third parties for Lessee's account. Lessee shall
be liable immediately to Lessor for all costs Lessor incurs in reletting the
Premises, including, without limitation, booker's commissions, expenses of
remodeling the premises required by the reletting, and like costs. Reletting
can be for a period shorter or longer than the remaining term of this Lease.
Lessee shall pay to Lessor the rent due under this Lease on the dates the rent
is due, less the rent Lessor receives from any reletting. No act by Lessor
allowed by this paragraph shall terminate this Lease unless Lessor notifies
Lessee that Lessor elects to terminate this Lease. After Lessee's default and
for as long as Lessor does not terminate Lessee's right to possession of the
Premises, if Lessee obtains Lessor's consent, Lessee shall have the right to
assign or sublet its interest in this Lease, but Lessee shall not be released
from liability. Lessor's consent to a proposed assignment or subletting shall
not be unreasonably withheld.
c. The foregoing remedies are not exclusive; they are cumulative in
addition to any remedies now or later allowed by law, to any equitable remedies
Lessor may have, and to any remedies Lessor may have under bankruptcy laws or
laws affecting coeditors' rights generally.
28. SURRENDER OF PREMISES: On expiration of this Lease or within five (5)
days after the earlier termination of the terms, Lessee shall surrender to
Lessor the Premises in good condition (except for ordinary wear and tear
occurring after the last necessary maintenance made by Lessee and destruction
to the Premises covered by paragraph 23). Lessee shall remove all its personal
property within the above-stated time. Lessee shall perform all restoration
made necessary by the removal of any alterations or Lessee's personal property
within the time periods stated in this paragraph
Lessor can elect to retain or dispose of in any manner any alterations or
any of Lessee's personal property that Lessee does not remove from the Premises
on expiration or termination of the term as allowed or required by this Lease by
giving at least ten (1O)days' notice to Lessee. Title to any such alterations
or any of Lessee's personal property that Lessor elects to retain or dispose of
on expiration of the ten (1O) day period shall vest in Lessor. Lessee waives
all claims against Lessor for any damage to Lessee resulting from Lessor's
retention or disposition of any such alterations or any of Lessee's personal
property. Lessee shall be liable to Lessor for Lessor's costs for storing,
removing, and disposing of any alterations or any of Lessee's personal property.
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If Lessee fails to surrender the Premises to Lessor on expiration or five
(5) days after terminate of the term as required by this paragraph, Lessee shall
hold Lessor harmless from all damages resulting from Lessee's failure to
surrender the Premises, including, without limitation, claims made by a
succeeding tenant resulting from Lessee's failure to surrender the Premises.
29 DEFAULT BY LESSOR:
a. Lessor shall not be deemed to be in default in the performance of
any obligation required to be performed by it hereunder unless and until it has
failed to perform such obligations within thirty (30) days after written notice
by Lessee to Lessor specifying wherein Lessor has failed to perform such
obligation, provided, however, that if the nature of Lessor's obligation is such
that more than thirty (30) days are required for its performance, then Lessor
shall not be deemed to be in default if it shall commence such performance
within such thirty (30) day period and thereafter diligently prosecute the same
to completion. In no event shall Lessor be liable to Lessee for loss of
profits, business interruption, or consequential damages if Lessor performs its
obligations within the time periods specified in this paragraph.
b. Lessee agrees to give any mortgage and/or trust deed holders, by
Registered Mail, a copy of any Notice Of Default served upon the Lessor,
provided that prior to such notice Lessee has been notified in writing (by way
of Notice Of Assignment Of Rents And Leases, or otherwise) of the address of
such mortgage and/or trust deed holder. Lessee further agrees that if Lessor
shall have failed to cure such default within the time provided for in this
Lease, then the mortgagees and/or trust deed holders shall have an additional
thirty (30) days within which to cure such default, or if such default cannot be
cured within that time, then such additional time as may be necessary to cure
such default (including, but not limited to, commencement of foreclosure
proceedings, if necessary to effect such cure), in which event this Lease shall
not be terminated while such remedies are being so diligently pursued.
30. PARKING: Lessee shall have the use of the undesignated parking spaces
set forth above in the Basic Lease Information on page 1. Lessor shall use all
reasonable efforts to insure that such space is available for Lessee's use, but
shall not be required to tow parked cars, provide sanctions against improper
parking, or otherwise take steps to free occupied parking spaces for Lessee's
use. Lessee shall not use any parking spaces for truck parking or loading
except for spaces specifically designated for such use by Lessor.
31. ESTOPPEL CERTIFICATE: Lessee shall at any time and from time to time
upon not less than three (3) day's prior written notice from Lessor execute,
acknowledge, and deliver to Lessor a statement in writing (a) certifying that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification and certifying that this Lease as modified is in
full force and effect) and the date to which the Rental and other charges are
paid in advance, if any; (b) certifying that the Premises have been accepted by
Lessee; (c) confirming the Commencement Date and the expiration date of the
Lease; and (d) acknowledging that there are not, to Lessee's knowledge, any
incurred defaults on the part of the Lessor hereunder, or specifying such
defaults, if any are claimed. Any such statement may be relied upon by a
prospective purchaser or encumbrancer of all or any portion of the real property
of which the premises are a part.
32. SALE OF THE PREMISES: In the event of any sale of the Building, Lessor
shall be and hereby is entirely freed and relieved of all liability under any
and all of its covenants and obligations contained in or derived from this Lease
and the purchaser, at such sale or any subsequent sale of the Premises shall be
deemed, without any further agreement between the parties or their successors in
interest or between the parties and any such purchaser, to have assumed and
agreed to carry out any and all of the covenants and obligations of Lessor under
this Lease.
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a. This Lease is and shall be subordinate to any encumbrance now of
record or recorded after the date of this Lease affecting the Building, other
improvements, and land of which the Premises are a part. Such subordination is
effective without any further act of Lessee. If any mortgagee, trustee, or
ground lessor shall elect to have this Lease and any options granted hereby
prior to the hen of its mortgage, deed of trust, or ground lease, and shall give
written notice thereof to Lessee, this Lease and such options shall be deemed
prior to such mortgage, deed of trust, or ground lease, whether this Lease or
such options are deeded prior or subsequent to the date of said mortgage, deed
of trust, or ground lease, or the date of recording thereof
b. In the event any proceedings are brought for foreclosure, or in
the event of a sale or exchange of the real property on which the Building is
located, or in the event of the exercise of the power of sale under any mortgage
or deed of trust made by Lessor covering the Premises, at Purchaser's election
Lessee shall attorn to the purchaser upon any such foreclosure or sales and
recognize such purchaser as the Lessor under this Lease.
c. Lessee agrees to execute any documents required to effectuate an
attornment or to make this Lease or any options granted herein prior to the lien
of any mortgage, deed of trust, or ground lease, as the case may be. If Lessee
fails to execute and deliver any such documents or instruments Lessee
irrevocably constitutes and appoints Lessor as Lessee's special attorney-in-fact
to execute and deliver any such documents or instruments.
34. AUTHORITY OF PARTIES:
a. Lessee's Authority: If Lessee is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation, in accordance with a duly adopted resolution of the board of
directors of said corporation or in accordance with the bylaws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms. If Lessee is a partnership, each individual executing this
Lease on behalf of said partnership represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of said partnership under
the terms of the partnership agreement of said partnership.
b. Lessor's Authority: CB Commercial, as leasing agent for the
owner, represents and warrants that it is duly authorized to deliver this Lease
on behalf of said owner, and that this Lease is binding upon said owner in
accordance with its term.
35. BROKERS: Lessor and Lessee each warrants that it has had no dealings
with any real estate broker or agents in connection with the negotiation of this
Lease except for the broker or brokers listed in the Basic Lease Information on
page 1 of this Lease, and it knows of no other real estate broker or agent who
is entitled to a commission in connection with the Lease. Lessor agrees to pay
any commission to which the foregoing agents are entitled in connection with
this Lease. Lessee agrees to indemnify and defend Lessor and hold Lessor
harmless from any claims for brokerage commissions arising out of any discussion
allegedly had by Lessee with any broker.
36. HOLDING OVER: Notwithstanding anything in California Civil Code SS
1945 to the contrary, upon termination of the Lease or expiration of the term
hereof, if Lessee retains possession of the Premises without Lessor's written
consent first had and obtained, then Lessee's possession shall be deemed a
tenancy at sufferance, and Lessor may bring an action for possession or detainer
at any time thereafter. In addition, Lessee shall be liable for the value of
its use and occupation of the Premises prorated at 150% of the Rent which is due
on the last month of the term, and Lessor's acceptance of payment of the same
shall not constitute a renewal of the Lease, shall not be deemed to waive
Lessor's right of reentry, and shall not create a month-to-month or any other
periodic tenancy.
37. RULES AND REGULATIONS: Lessee shall faithfully observe and comply with
the reasonable rules and regulations that Lessor shall from time to time
promulgate. Lessor reserves the right from time to time to make all reasonable
modifications to said rules. The additions and
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modifications to those rules shall be binding upon Lessee upon delivery of a
copy of them to Lessee. (A copy of the present rules and regulations is attached
hereto as Exhibit E.) Lessor shall not be responsible to Lessee for the
nonperformance of any said rules by any other tenants or occupants.
38. Intentionally deleted.
39. OPTION TO EXTEND: Landlord hereby grants Tenant one (1) option to
----------------
extend the initial term of the Lease (the "Initial Term"), for an additional
period of five (5) years (the "Option Term"), as to all (but not part) of the
Premises as such may then exist, upon and subject to the terms and conditions
set forth in this Section 39 (the "Option To Extend").
The Option Term shall commence immediately after the expiration of the
Initial Term. Tenant's hiring of the Premises during the Option Term shall be
upon and subject to the same terms and conditions contained in the Lease except
that (a) the Base Annual Rent shall be equal to the "Option Term Base Rent",
defined and determined in the manner set forth below, (b) Tenant shall accept
the Premises, Building and Park in an "As Is" condition without any obligation
-----
of Landlord to repaint, remodel, improve or alter the Premises, Building or
Park or to provide Tenant any allowance for any of the foregoing and (c) there
shall be no further option or right to extend the Term of the Lease. If Tenant
timely and properly exercises an Option To Extend, references in the Lease to
the Term shall be deemed to mean the applicable Option Term unless the context
clearly requires otherwise.
Tenant's election to exercise the Option To Extend must be given to
Landlord in writing no later than ninety (90) days prior to the expiration of
the Initial Term.
Notwithstanding anything to the contrary contained herein, all rights of
Tenant pursuant to the Option To Extend shall automatically terminate without
notice and shall be of no further force and effect, whether or not Tenant has
timely exercised the option granted herein, if (a) at the time of exercise of
the Option To Extend or at the time of commencement of the Option Term, there
exists a default, or any act or omission on the part of Tenant which, with the
passage of time or the giving of notice, or both, would constitute a default, or
(b) Landlord has given Tenant three (3) or more notices of the existence of a
default, during the Initial Term, whether or not such default is subsequently
cured, or (c) a late charge has become payable three (3) or more times during
any calendar year, or (d) Tenant does not occupy all of the Premises at the time
of exercise of an Option To Extend or at the time of commencement of the Option
Term. In the event Tenant terminated for any of the reasons set forth in this
paragraph, Tenant shall reimburse Landlord for all cost and expense Landlord
incurs in connection with Tenant's exercise of the Option To Extend, including,
without limitation, with respect to any brokerage commissions.
The Option Term Rent for the Premises for the Option Term shall mean the
greater of (a) Base Annual Rent equal to One Million Eighty Nine Thousand Forty
Eight Dollars and Eighty Six Cents ($1,089,048.86) (the Preceding Base Rent");
or (b) the "Market Rent", which as used herein shall mean the amount of Base
Annual Rent that Landlord could obtain from a third party desiring to lease the
Premises under a lease containing terms and conditions substantially identical
to those of this Lease, including without limitation additional rent payable by
Tenant with respect to Building Costs, Park Costs, Taxes and Additional Taxes
pursuant to Section 7, 8 and 9 of the Lease, for the applicable Option Term
under market leasing conditions then existing, and taking into account the
following: the length of term; the size, location, configuration and floor
levels of the Premises; the type and quality of improvements in or amenities
available to the Premises, Building and Park; age and location of the Building
and Park; services to be provided by Landlord or by Tenant; the rent, all other
monetary payments and escalations then obtainable for new leases of space
comparable to the Premises in the locality of the Park; and other factors that
would be relevant to a prospective lease by a third party of the Premises for
the relevant Option Term in determining what such party would be willing to pay
therefor; but in each instance disregarding "Tenant Concessions", if any, then
being offered to prospective new tenants of comparable space in the Park and in
the locality of the Park. For purposes of the preceding sentence, the term
"Tenant Concessions" shall include, without limitation, so-called free rent,
tenant improvement allowances, moving allowances and lease takeovers. The
determination of Market Base Rent based upon the foregoing criteria, shall be
made by Landlord, in Landlord's sole discretion.
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Within thirty (30) days after Tenant's exercise of the applicable Option To
Extend, Landlord shall notify Tenant of Landlord's determination of the Option
Term Base Rent for the Premises. If Landlord's determination of Option Term
Base Rent is greater than the Preceding Base Rent for the applicable Option
Term, and if Tenant, in Tenant's sole discretion, disagrees with the amount of
Option Term Base Rent determined by Landlord, Tenant may elect to revoke and
rescind the exercise of the Option To Extend by giving written notice thereof to
Landlord within ten (10) days after notice of Landlord's determination of Option
Term Base Rent.
The Option To Extend is personal to Business Objects, Inc. , a Delaware
corporation and shall not be transferrable or assignable, by operation of law or
otherwise, either in connection with an assignment of the Lease, or a sublease
of all or part of the Premises, or otherwise. Any purported assignment of the
Option To Extend shall be void and a material breach of this Lease, and shall
constitute a default under this Lease.
40. GENERAL PROVISIONS:
a. Plats and Rider: Clauses, plats and riders, if any, signed by the
Lessor and Lessee and endorsed on or affixed to this Lease are a part hereof.
b. Joint Obligation: If there be more than one Lessee, the
obligations hereunder imposed upon Lessee shall be joint and several.
c. Marginal Headings: The marginal headings and titles to the
paragraphs of this Lease are not a part of this Lease and shall have no effect
upon the construction or interpretation of any part hereof.
d. Time: Time is of the essence in this Lease and with respect to
each and all of its provisions in which performance is a factor.
e. Recordation: Lessee shall not record this Lease or a short form
memorandum hereof without the prior written consent of Lessor.
f. Quiet Possession: Upon Lessee paying the rent reserved hereunder,
and observing and performing all of the covenants, conditions, and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof, subject to all of the
provisions of this Lease.
g. Prior Agreements: This Lease contains all of the agreements of
the parties hereto wit respect to any matter covered or mentioned in this Lease,
an no prior agreements or understanding pertaining to any such matters shall be
effective for any purpose. No provision of this Lease may be amended or added
to except by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.
h. Inability to Perform: This Lease and the obligations of Lessee
hereunder shall not be affected or impaired because the Lessor is unable to
fulfill any of its obligations or furnish services and utilities hereunder or is
delayed in doing so, if such inability or delay is caused by reason of acts of
God, strikes, lockouts, labor troubles, inability to procure materials,
governmental laws or regulations, governmental request for the general public
welfare, or other causes beyond the reasonable control of Lessor.
Notwithstanding the foregoing, if, as a result of any such
inability on the part of Lessor not caused by any act or omission of Lessor or
action or failure to act by Lessee, possession of the Premises by Lessee is
delayed, or Lessee's quiet enjoyment of the Premises is substantially
impaired, for a consecutive period of not less than one hundred and twenty
(120) days, Lessee may terminate this Lease by written notice to Lessor.
i. Jury Trial: The parties hereto shall, and they hereby do, waive
trial by jury in any action, proceeding, or counterclaim brought by either of
the parties hereto against the other on any matters whatsoever arising out of or
in any way connected with this Lease, the relationship of
19
<PAGE>
Lessor and Lessee, Lessee's use or occupancy of the Premises and/or any claim of
injury or damage. In the event Lessor commences any proceedings for nonpayment
of rent, Lessee will not interpose any counterclaim of whatever nature or
description in any such proceedings. This shall not, however, be construed as a
waiver of the Lessee's right to assert such claims in any separate action or
actions brought by the Lessee.
j. Lessor's Personal Liability: The liability of Management (which,
for purposes of this Lease, shall include the owner of the Building if other
than Lessor) to Lessee for any default by Lessor under the terms of this Lease
shall be limited to the interest of Lessor and its present or future partners in
the Building, and Lessee agrees to look solely to Lessor's or Lessor's present
or future partners' interest in the Building for the recovery of any judgment
from Management, it being intended that Management shall not be personally
liable for any judgment or deficiency.
k. Separability: Any provisions of this Lease which shall prove to
be invalid, void, and illegal shall in no way affect, impair, or invalidate any
other provisions hereof, and such other provisions shall remain in full force
and effect, unless Lessor in its sole discretion determines that the invalid or
illegal provision affects a material benefit or obligation hereunder.
1. Choice Of Law: This Lease shall be governed by the laws of the
State in which the Premises are located.
m. Signs: Lessee shall not place any sign upon the Premises without
Lessor's prior written consent.
n. Late Rent Payment: Rent is due on or before the 1st day of each
month of the term. If rent is not received by the fifth (5th) of the month, rent
is then delinquent and subject to late penalties.
o. Late Charges: Lessee acknowledges that late payment by Lessee to
Lessor of Rent will cause Lessor to incur costs not contemplated by this Lease,
the exact amount of such costs being extremely difficult and impracticable to
fix. Such costs include, without limitation, processing charges, accounting
charges, and late charges that may be imposed on Lessor by the terms of any
encumbrance and note secured by any encumbrance covering the Premises.
Therefore, if any installment of Rent or other sums due from Lessee is not
received by Lessor on the date same are due, Lessee shall pay to Lessor upon
receipt of written notice an additional sum equal to ten percent (10%) of such
overdue amount as a late charge. The parties agree that this late charge
represents a fair and reasonable estimate of the administrative and other costs
that Lessor will incur by reason of late payment by Lessee. Acceptance of any
late charge shall not constitute a waiver of Lessee's default with respect to
the overdue Lessor from exercising any of the other rights and remedies
available to Lessor.
Initials: LESSOR (Unreadable) LESSEE: DMC
p. Interest: Notwithstanding any other provisions of this Lease,
including paragraph 40n., any installment of Rent of other amounts due under
this Lease not paid to Lessor when due shall bear interest from the date due or
from the date of expenditure by Lessor for the account of Lessee, until the same
have been fully paid, at a rate per annum which is the lesser of the prime rate
of Bank of America or the highest rate allowed by law. The payment of such
interest shall not constitute a waiver of any default by Lessee hereunder.
q. Attorneys Fees: In the event any legal action is brought to
enforce or interpret the provisions of this Lease, the prevailing party therein
shall be entitled to recover all costs and expenses including reasonable
attorneys' fees.
r. Modifications: This Lease contains the entire agreement between
the parties relating to the rights herein granted and the obligations herein
assumed. Any oral representations or modifications concerning this Lease shall
be of no force or effect, excepting a subsequent modification in writing signed
by the party to be charged.
20
<PAGE>
s. Execution: Submission of this instrument for examination or
signature by Lessee does not constitute a reservation of or an option for lease,
and it is not effective as a lease or otherwise until execution and delivery by
both Lessor and Lessee.
t. Addenda: To the extent the provisions of any addendum hereto are
inconsistent with the provisions hereto, the provisions of the addendum shall
control.
41. NOTICES: All notices and demands required to be sent to the Lessor or
Lessee under the terms of this Lease shall be personally delivered or sent by
certified or registered mail to the addresses indicated above, or to such other
addresses as the parties may from time to time designate by notice. Notices
shall be considered given when served or two (2) days after deposit in the U.S.
mails.
IN WITNESS WHEREOF, this Lease Agreement is executed on the date and year
first above written.
LESSOR:
METROPOLITAN LIFE INSURANCE COMPANY
a New York corporation
By: /s/ Dated: 3/4/96
Its: Assistant Vice President
LESSEE:
BUSINESS OBJECTS. INC.
a Delaware corporation
By: /s/ Dennis McCann Dated: 2/29/96
Dennis McCann
Its: President
21
<PAGE>
To the Lease Agreement Dated January 18, 1996 By and Between METROPOLITAN LIFE
INSURANCE COMPANY, as Lessor and BUSINESS, OBJECTS, INC, as Lessee
EXHIBIT A
Page 1 of 2
SITE PLAN
[IMAGE NOT SHOWN]
<PAGE>
To the Lease Agreement Dated January 18, 1996 By and Between METROPOLITAN LIFE
INSURANCE COMPANY, as Lessor and BUSINESS OBJECTS, INC., as Lessee
EXHIBIT A
Page 2 of 2
EXISTING FLOOR PLAN
2870 ZANKER ROAD
[IMAGE NOT SHOWN]
<PAGE>
To the Lease Agreement Dated January 18, 1996 By and Between METROPOLITAN LIFE
INSURANCE COMPANY, as Lessor and BUSINESS OBJECTS, INC., as Lessee
EXHIBIT B
PAGE 1 OF 5
WORK LETTER AND CONSTRUCTION AGREEMENT
(ALLOWANCE)
This agreement (the "Work Letter" supplements the Lease dated January 18,
1996 executed concurrently herewith by METROPOLITAN LIFE INSURANCE COMPANY, a
New York corporation, as Landlord, and BUSINESS OBJECTS, INC., a Delaware
corporation, as Tenant (the "Lease").
1. Design Matters.
--------------
1.1. Landlord, through its architects and/or space planners ("Landlord's
Architect"), shall prepare the Design Documents (defined below) and the
Construction Drawings (defined below), as they may be modified as provided
herein, in accordance with the design specified by Tenant and reasonably
approved by Landlord.
1.2. Tenant shall be responsible for the suitability for the Tenant's needs
and business of the design and function of all Tenant Improvements (defined
below). Tenant, at its own expense, shall devote such time and provide such
instructions as may be necessary to enable Landlord to complete the matters
described below and to obtain:
(a) By March 15, 1996, Tenant's written approval of the Design
Documents approved in writing by Tenant;
(b) By March 15, 1996, Tenant's written approval of a nonbinding
preliminary estimate ("Landlord's Preliminary Estimate") provided by Landlord of
the cost of the Tenant Improvements shown on the Construction Drawings; and
(c) By March 15, 1996, Tenant's written approval of the Construction
Drawings approved in writing by Tenant.
1.3. Certain Definitions. The following definitions shall apply for
-------------------
purposes of this Work Letter:
(a) "Design Documents" shall mean layout plans and specifications for
the real property improvements to be constructed by Landlord in the Premises
which are the final product of the preliminary space planning and which
include, among other things, the location of all partitions, doors, HVAC
(heating, ventilating and air conditioning systems) distribution, ceiling
systems, light fixtures, plumbing installations, electrical installations and
outlets, telephone outlets and other installations required by Tenant, as well
as wall finished and floor coverings, in sufficient detail for Landlord to
commence preparation of the Construction Drawings (defined below);
(b) "Construction Drawings" shall mean the final architectural and
engineering plans and specifications for the real property improvements to be
constructed by Landlord in the Premises in sufficient detail to be submitted for
governmental approvals and building permits and to serve as the detailed
construction drawings and specifications for the contractor, and shall include
among other things, the location of all partitions, doors, HVAC (heating,
ventilating and
<PAGE>
To the Lease Agreement Dated January 18, 1996 By and Between METROPOLITAN LIFE
INSURANCE COMPANY, as Lessor and BUSYNESS OBJECTS, INC., as Lessee
EXHIBIT B
PAGE 2 OF 5
WORK LETTER AND CONSTRUCTION AGREEMENT
(ALLOWANCE)
air conditioning systems) distribution, ceiling systems, light fixtures,
plumbing installations, electrical installations and outlets, telephone outlets
and other installations required by Tenant, as well as wall finishes and floor
coverings; and
(c) All real property improvements, to be constructed by Landlord as
shown on the Construction Drawings, as they may be modified as provided herein,
shall be defined as "Tenant Improvements", and the construction and installation
of such Tenant Improvements is sometimes referred to herein or in the Lease as
"Landlord's Work".
2. Construction; Landlord's Contribution; Tenant Improvement Costs.
---------------------------------------------------------------
2.1. Construction; Landlord's Contribution. Landlord shall complete the
-------------------------------------
construction of the Tenant Improvements in a good and workmanlike manner, up to
a maximum cost to Landlord as follows:
(a) of Two Hundred Sixty Eight Thousand Forty Dollars and No Cents
($268,040.00) ("Landlord's Maximum Contribution").
2.2. Tenant Improvement Costs. The cost of the Tenant Improvements
("Tenant
------------------------
Improvement Costs") to be paid by Landlord from, but not in excess of,
Landlord's Maximum
Contribution shall include:
(a) The costs of Landlord's Architect and any other consultants
retained by Landlord in connection with the preparation of Design
Documents and Construction Drawings and engineering costs
associated with completion of the State of California energy
utilization calculations under Title 24 legislation;
(b) All costs of obtaining from the City of San Jose and any other
governmental authority building and occupancy permit, if any;
(c) All costs of interior design and finish schedule plans and
specifications including as-built drawings;
(d) All direct and indirect costs of procuring, installing and
constructing the Tenant Improvements, including, without
limitation: (i) the construction fee for overhead and profit and
the cost of all on-site supervisory and administrative staff,
office, equipment and temporary services rendered or provided by
Landlord's contractor in connection with construction of the
Tenant Improvements and (ii) the cost of any services or
utilities made available by Landlord and a construction
supervision fee payable to Landlord; and
(e) All fees payable to Landlord's architectural and engineering firm
it if is required by Tenant to redesign any portion of the Tenant
Improvements following Tenant's approval of the Construction
Drawings.
<PAGE>
To the Lease Agreement Dated January 18, 1996 By and Between METROPOLITAN LIFE
INSURANCE COMPANY, as Lessor and BUSINESS OBJECTS, INC., as Lessee
EXHIBIT B
PAGE 3 OF 5
WORK LETTER AND CONSTRUCTION AGREEMENT
(ALLOWANCE)
In no event shall the Tenant Improvement Costs include (i) any costs of
procuring or installing in the Premises any trade fixtures, equipment,
furniture, furnishings, telephone equipment or other personal property
("Personal Property") to be used in the Premises by Tenant, and the cost of such
Personal Property shall be paid by Tenant, or (ii) any costs or expenses of any
consultants retained by Tenant with respect to design, procurement, installation
or construction of improvements or installations, whether real or personal
property, for the Premises.
2.3. Limitations of Landlord's Obligations. Upon Substantial Completion of
-------------------------------------
the Tenant Improvements, Landlord shall have no further obligation to
construct improvements or construct modifications to or changes in the Tenant
Improvements or, except as provided in Section 2 of the Lease, to complete or
repair the Tenant Improvements. If Landlord's Maximum Contribution exceeds
Tenant Improvement Costs, then Landlord shall retain such excess and shall
have no obligation or liability to Tenant with respect to such excess.
3. Costs of Tenant Improvements in Excess of Landlord's Maximum
------------------------------------------------------------
Contribution. As soon as reasonably available after completion of the
- ------------
Construction Drawings, Landlord shall notify Tenant in writing of the cost of
the Tenant Improvements in excess of the Landlord's Maximum Contribution (such
notification shall be referred to as "Landlord's Cost Statement"). Within five
(5) days after receipt of Landlord's Cost Statement, Tenant shall, in writing,
give Landlord authorization to complete the Tenant Improvements in accordance
with the Construction Drawings, and to the extent that there remain any costs
of the Tenant Improvements in excess of the costs that Tenant requests be paid
out of Landlord's Maximum Contribution, Tenant shall accompany said
authorization with a good check made payable to the order of Landlord in the
amount of the excess cost authorized by Tenant of the Tenant Improvements over
Landlord's Maximum Contribution. In such authorization, Tenant may, pursuant
to Section 4, request a Change Order (defined below) to the approved
Construction Drawings to reduce or delete all or part of such excess costs,
but any delay in completion of the Premises resulting from such request for a
Change Order or from the changes so made or necessitated shall be chargeable
as Tenant Delay as provided in Section 5. If such written authorization and
check (if applicable) are not received by Landlord, Landlord shall not be
obligated to commence work on the Premises and any resulting delay in the
completion of the Premises shall be chargeable against Tenant as Tenant Delay
as provided in Section 5 of this Work Letter.
4. Changes. If Tenant shall request any chance, addition or alteration
-------
in the approved Construction Drawings, Landlord shall promptly give Tenant a
written estimate of (a) the cost of engineering and design services and the
construction contractor services to prepare a change order (the "Change
Order") in accordance with such request, (b) the cost of work to be performed
pursuant to such Change Order, and (c) the time delay expected because of such
requested Change Order. Within three (3) business days following Tenant's
receipt of the foregoing written estimate, Tenant shall notify Landlord in
writing whether it approves such written estimate. If Tenant approves such
written estimate and if such cost is in excess of Landlord's Maximum
Contribution, Tenant upon receipt of Landlord's Statement, shall accompany
such approval with a good check made payable to the order of Landlord in the
amount of the estimated cost of preparing the Change Order and performing the
work thereto, and the foregoing shall constitute Landlord's authorization to
proceed. If such written authorization, and check if required, are not
received by Landlord within such three (3) business day period, Landlord shall
not be obligated
<PAGE>
To the Lease Agreement Dated January 18, 1996 By and Between METROPOLITAN LIFE
INSURANCE COMPANY, as Lessor and BUSINESS OBJECTS, INC., as Lessee
EXHIBIT B
PAGE 4 OF 5
WORK LETTER AND CONSTRUCTION AGREEMENT
(ALLOWANCE)
to prepare the Change Order or perform any work in connection therewith. Upon
completion of the work of the Change Order and submission of the final cost
thereof by Landlord to Tenant, Tenant shall promptly pay to Landlord any such
additional amounts in excess of Landlord's Maximum Contribution.
5. Tenant Delay. If the completion of the Tenant Improvements in the
------------
Premises is delayed (i) at the request of Tenant, (ii) by Tenant's failure to
timely comply with the provisions of this Work Letter, (iii) by Tenant's
failure to timely approve, pursuant to Section 1.2, Construction Drawings
which are consistent with the Design Documents or by Tenant's request for
change, addition or alteration in the Construction Drawings which is not
consistent with the Design Documents, (iv) by all changes or alterations in
the work ordered by Tenant or by extra work ordered by Tenant, or (v) because
Tenant chooses to have additional work performed by Landlord, then Tenant
shall be responsible for all costs and any expenses occasioned by such delay
including, without limitation, any costs and expenses attributable to
increases in labor or materials; and each such event shall be a "Tenant Delay"
and as provided in Section 2 of the Lease, for purposes of establishing the
commencement of Tenant's obligations under the Lease which have not commenced
prior to Substantial Completion, including, without limitation, the
commencement of Tenant's obligation to pay Rent, the date on which such
obligations commence shall be advanced one day for each day of Tenant Delay.
6. Entry By Tenant. Tenant may, with Landlord's written consent, enter
---------------
the Premises prior to the Commencement Date solely for the purpose of
installing Tenant's Personal Property as long as such entry will not interfere
with the orderly construction and completion of the Premises. Tenant shall
notify Landlord of its desired time(s) of entry and shall submit for
Landlord's approval the scope of the work to be performed and the name(s) of
the contractor(s) who will perform such work. Tenant hereby indemnities and
agrees to protect, defend and hold Landlord, any mortgagee, ground lessor or
beneficiary of a mortgage, ground lease or deed of trust related to the
Premises, the Building or the Project harmless from and against any and all
suits, claims, actions, losses, costs or expenses (including claims for
worker's compensation) of any nature whatsoever, together with reasonable
attorneys' fees for counsel of Landlord's choice, arising out of or in
connection with the installation of Tenant's Personal Property (including but
not limited to claims for breach of warranty, personal injury or property
damage). Landlord shall have the right, in Landlord's sole and exclusive
discretion, to settle, compromise, or otherwise dispose of any and all suits,
claims, and actions related to the installation of Tenant's Personal Property
or equipment, to the extent such claims are made against Landlord. Any defense
made by Tenant under this Section 6 shall be made only with counsel (i)
previously approved in writing by Landlord, and (ii) willing to cooperate with
counsel of Landlord's choice in connection with such defense. The obligations
of Tenant under this Section 6 of this Work Letter shall survive the
expiration or earlier termination of the Lease and the performance of
Landlord's Work and the installation of Tenant's Personal Property under this
Work Letter.
7. Defined Terms. Capitalized terms used in this Work Letter and not
-------------
otherwise defined, other than the terms capitalized in the ordinary course of
punctuation, shall, unless otherwise specified herein, have the same meanings
and definitions set forth in the Lease.
<PAGE>
To the Lease Agreement Dated January 18, 1996 By and Between METROPOLITAN LIFE
INSURANCE COMPANY, as Lessor and BUSINESS OBJECTS, INC., as Lessee
EXHIBIT B
PAGE 5 OF 5
WORK LETTER AND CONSTRUCTION AGREEMENT
(ALLOWANCE)
8. Force and Effect. The terms and conditions of this Work Letter
----------------
supplement the Lease and shall be construed to be a part of the Lease and
shall be deemed incorporated in the Lease by this reference. Should any
inconsistency arise between this Work Letter and the Lease as to the specific
matters which are the subject of this Work Letter, the terms and conditions of
this Work Letter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Work Letter as of
the date first set forth in the Lease.
TENANT: LANDLORD:
- ------- ---------
BUSINESS OBJECTS, INC. METROPOLITAN LIFE INSURANCE COMPANY,
A Delaware corporation a New York corporation
By: /s/ Dennis McCann By: /s/
Dennis McCAnn
Print Name Print Name
Its: President Its: Assistant Vice President
By:
Print Name
Its:
<PAGE>
To the Lease Agreement Dated January 18, 1996 By and Between METROPOLITAN LIFE
INSURANCE COMPANY, as Lessor and BUSINESS OBJECTS, INC., as Lessee
EXHIBIT C
PAGE 1 OF 1
RENT
Lessee hereby agrees to pay rent on the first day of each month as set forth
herein below:
Monthly Rent Period
------------ ------
May 1, 1996 to and
including October 31, 1998 $ 87,826.50
November 1, 1998 to and $ 90,754.05
including April 30, 2001
<PAGE>
To the Lease Agreement Dated January 18, 1996 By and Between METROPOLITAN LIFE
INSURANCE COMPANY, as Lessor and BUSINESS OBJECTS, INC., as Lessee
EXHIBIT D
PAGE 1 OF 3
SUMMARY OF COVENANTS, CONDITIONS AND RESTRICTIONS
This summarizes those restrictions affecting Lessees of Lincoln Park pursuant to
the documents entitled Declaration of Covenants, Conditions, and Restrictions of
Montague Park, Recorded December 23, 1980, and Declaration of Covenants,
Conditions, and Restrictions of Montague Park including First Landscape Criteria
and First Sign Criteria, recorded January 2, 1981 (hereafter the "Restriction").
The Restrictions are as follows:
1. Should Lessee desire to (a) construct or erect structures or other
improvements on the lot, (b) modify or alter the exterior surface of the then-
existing structures, or (c) otherwise make changes of any type whatsoever to any
landscaping or paved area on the lot, Lessee must obtain, through coordination
with Lessor, prior to written approval for the Approving Agent, as defined in
paragraph 1.5 of The Restrictions.
2. No parking permitted within a frontage set back area adjacent to any street
unless such parking is screened from view from the street by a screen wall,
shrubbery, or berms at least forty-two (42) inches high.
3. All free-standing or roof-mounted electrical, mechanical, processing, air-
conditioning, or any other equipment or devices must be screened from view in
such a manner that these devices are not visible from adjacent property.
4. The following are the only uses permitted in the Park:
a. Manufacture (including storage of raw materials and finished products
therefrom) of the following:
(1) Pharmaceutical and cosmetic products;
(2) Optical, electronic, timing and measuring instruments for use in research,
development, business, and professional facilities; and
(3) Industrial, communication, transportation, and utility equipment;
b. Wholesaling, warehousing, and distribution establishments and public
utility facilities (excluding storing and warehousing of acids, chemicals,
cement, plaster, petroleum products, or explosive materials);
c. Research, experimental, and engineering laboratories;
d. Catalog sales and mail order establishments;
e. Establishments for the repair, cleaning, and servicing of commercial or
industrial equipment or products;
f Construction firms but only such construction firms whose activities are
carried on entirely within and enclosed building and have no construction yard
on said lot;
g. So long as there is an Approving Agent, any commercial use not specifically
prohibited which is first approved in writing by the Approving Agent;
h. So long as there is an Approving Agent, any industrial, manufacturing use
not specifically prohibited which is first approved in writing by the Approving
Agent.
<PAGE>
To the Lease Agreement Dated January 18, 1996 By and Between METROPOLITAN LIFE
INSURANCE COMPANY, as Lessor and BUSINESS OBJECTS, INC, as Lessee
EXHIBIT D
PAGE 2 OF 3
SUMMARY OF COVENANTS, CONDITIONS AND RESTRICTIONS
i. If there is no Approving Agent, any industrial, manufacturing or commercial
use permitted by the then-existing zoning or other applicable land-use
regulations as promulgated by requisite governmental authorities, except those
uses specifically prohibited.
5. All permitted uses shall be performed or carried out entirely within a
building that is so designed and constructed. All permitted uses which cannot
be carried on within a building may be permitted upon obtaining prior approval
from Approving Agent through coordination with Lessor.
6. The following operations and uses shall not be permitted on any property
subject to the Restrictions:
a. Residential of any type;
b. Trailer courts, mobile home parks, recreation vehicle camp grounds;
C. Junk yards for recycling facilities;
d. Drilling for and/or the removal of oil, gas, or other hydrocarbon
substances (except that this provision shall not be deemed to prohibit the entry
of the property below a depth of five hundred (500) feet for such a purpose);
e. Commercial excavation except in the course of approved construction;
f. Distillation of bones;
g. Dumping, disposal, incineration, or reduction of garbage, sewage, offal,
dead animals, or refuse;
h. Fat rendering;
i. Stockyard or slaughter of animals;
j. Cemeteries;
k. Refining of petroleum or of its products;
1. Smelting of iron, tin, zinc, or other ores;
m. Jail or honor farms;
o. Truck or bus terminals;
P. Petroleum storage yards;
q. Auto wrecking, auto repair or auto parking establishments.
7. No use is permitted which emits dust, sweepings, fumes, radiation, or other
harmful matter into the atmosphere or any body of water which may have adverse
effects. No use permitted which produces intense glare or heat, creates sound
pressure level in violation of any regulation of any public body having
jurisdiction, or creates a perceptible ground vibration.
<PAGE>
To the Lease Agreement Dated January 18, 1996 By and Between METROPOLITAN LIFE
INSURANCE COMPANY, as Lessor and BUSINESS OBJECTS, INC., as Lessee
EXHIBIT D
PAGE 3 OF 3
SUMMARY OF COVENANTS, CONDITIONS AND RESTRICTIONS
8. No sign may be installed or replaced upon any lot(s) in the Park unless the
sign plan is approved in coordination with the Lessor by the Approving Agent.
The only signs permitted are those signs identifying the business name,
business, and products of the person or firm occupying the lot(s) and those
offering lots for sale or lease and, if desired, the logo of the entity
occupying said lot(s). Any sign so permitted must be located in the forty (40)
foot frontage setback area and be less than six (6) feet in height. Only one
sign is permitted in each frontage setback area abutting a public street. All
portions of any permitted sign must be stationary and non-illuminating.
9. Any landscaping affecting any property located in the Park must first be
approved, in coordination with the Lessor, by the Approving Agent in writing.
10. Materials, supplies, or equipment, including, but not limited to, company-
owned or operated trucks or motor vehicles, are not permitted to be stored in
any area on a lot except inside a closed building or behind a visual barrier
screening such areas from neighboring properties or streets. All outdoor refuse
collection areas must be visually screened. No storage areas or refuse
collection areas are permitted to be maintained between a street and the front
of the structure nearest such street.
11. No excavation shall be made on, and no sand, gravel, soil, or other
material shall be removed from any lot, except in connection with construction
of structures which are approved in conjunction with Lessor by Approving Agent.
<PAGE>
To the Lease Agreement Dated January 18, 1996 By and Between METROPOLITAN LIFE
INSURANCE COMPANY, as Lessor and BUSINESS OBJECTS, INC., as Lessee
EXHIBIT E
PAGE 1 OF 2
RULES AND REGULATIONS
1. No advertisement, picture of sign of any sort shall be displayed on or
outside the Premises without the prior written consent of the Lessor. Lessor
shall have the right to remove any such unapproved item without notice and at
Lessee's expense.
2. Except in the normal conduct of its business, Lessee shall not regularly
park motor vehicles in designated parking areas after the conclusion of normal
daily business activity.
3. Lessee shall not use any method of heating or air conditioning other than
that supplied by Lessor without the consent of Lessor.
4. All window coverings installed by Lessee and visible from the outside of
the building require the prior written approval of the Lessor.
5. Lessee shall not use, keep or permit to be used or kept any foul or
obnoxious gas or substance or any inflammable or combustible materials on or
around the Premises.
6. With respect to any locks for which Lessor has not been given a key, Lessee
shall provide Lessor a list of individuals who possess such keys and their
telephone numbers.
7. Lessee agrees not to make any duplicate keys without the prior consent of
Lessor.
8. Lessee shall park motor vehicles in those general parking areas as
designated by Lessor except for loading and unloading. During those periods of
loading and unloading, Lessee shall not unreasonably interfere with traffic flow
within the Project and loading and unloading areas of other Lessees.
9. Lessee shall not disturb, solicit or canvas any occupant of the Building or
Project and shall cooperate to prevent same.
10. No person shall go on the roof without Lessor's permission.
11. Business machines and mechanical equipment belonging to the Lessee which
cause noise or vibration that may be transmitted to the structure of the
Building, to such a degree as to be objectionable to Lessor or other Lessees,
shall be placed and maintained by Lessee, at Lessee's expense, on vibration
eliminators or other devices sufficient to eliminate noise vibration.
12. All goods, including material used to store goods, delivered to the
Premises of the Lessee shall be immediately moved into the Premises and shall
not be left in parking or receiving areas overnight.
13. Tractor trailers which must be unhooked or parked with dolly wheels beyond
the concrete loading areas must use steel plates or wood blocks under the dolly
wheels to prevent damage to the asphalt paving surfaces. No parking or storing
of such trailers will be permitted in the auto parking areas of the Project or
on streets adjacent thereto.
14. Forklifts which operate on asphalt paving areas shall not have solid rubber
tires and shall only use tires that do not damage the asphalt.
15. Lessee shall not store or permit the storage or placement of goods or
merchandise in or around the common areas surrounding the Premises. No displays
or sales of merchandise shall be allowed in the parking lots or other common
areas.
<PAGE>
To the Lease Agreement Dated January 18, 1996 By and Between METROPOLITAN LIFE
INSURANCE COMPANY, as Lessor and BUSINESS OBJECTS, INC, as Lessee
EXHIBIT E
PAGE 2 OF 2
RULES AND REGULATIONS
16. Operating Hours for the Building in which the Premises are located shall be
from 7 a.m. to 6 p.m. on generally recognized business days.
17. Tenants are required to use chair pads under all desk chairs in carpeted
areas.
18. Smoking is prohibited in all enclosed Common Areas of the building,
including, but not limited to, the main lobbies, hallways, stairwells,
elevators, elevator lobbies, locker/shower rooms, restrooms, and conference
room. The foregoing shall not be deemed to prohibit smoking within demised
Premises. When smoking outside the building, ash receptacles must be used by
the smoker. Smokers must not leave any smoking material or debris in the area
where they have been smoking.
<PAGE>
EXHIBIT 10.1
[COMPANY LOGO]
NABARRO NATHANSON
DATED 6 March 1996
D.J. DOWNING
- and -
J.M. JONES PROPERTIES LIMITED
(in Administrative Receivership)
- and -
BUSINESS OBJECTS (U.K.) LIMITED
- and -
BUSINESS OBJECTS SA
LEASE
Sun Court. Moorbridge Road, Maidenhead, Berkshire
Nabarro Nathanson
50 Stratton Street
London WIX 6NX
Tel: 0171 493 9933
<PAGE>
ACCESS FLOORING NOT SHOWN
<PAGE>
PARTICULARS
DATE OF THIS DEED : 6TH March 1996
LEASE : Lease
RECEIVER : DAVID JOHN DOWNING of 235 The Ridgeway. St.
Albans, Hertfordshire, AL4 9XG
LANDLORD : J.M. JONES PROPERTIES LIMITED
(in Administrative Receivership)
Address : Shelley House. 3 Noble Street. London. EC2V 7DP
Company
Registration No. : 2255954
acting by the Receiver
TENANT : BUSINESS OBJECTS (U.K.) LIMITED
Registered office : Pickfords Wharf Clink Street London SE 1 9DG
Company
Registration No. : 2636952
GUARANTOR : BUSINESS OBJECTS SA
Address : Tour Chantecoq 5 rue Chantecoq 92808 Puteaux
Cedex France
PREMISES : The premises known as Sun Court, Maidenhead
being more particularly described in Schedule 1
CONTRACTUAL TERM : Twenty-five years
CONTRACTUAL TERM
COMMENCEMENT DATE : 1996
<PAGE>
YEARLY RENT : FOR THE 1ST YEAR OF THE TERM pound 250.000
FOR THE 2ND YEAR OF THE TERM pound 360.000
FOR THE 3RD YEAR OF THE TERM pound 400.000
FOR THE 4TH YEAR OF THE TERM pound 400.000
FOR THE 5TH YEAR OF THE TERM pound 400.000
and thereafter subject to the upwards only rent
as provided in review this Lease.
YEARLY RENT
COMMENCEMENT DATE : 1st November 1996
RENT REVIEW DATES : The 6th day of 2001 and every
fifth anniversary of that date
PERMITTED USE : Use as offices within Class B1 of the Town and
Country Planning (Use Classes) Order 1987
<PAGE>
CONTENTS
CLAUSES SUBJECT
1. DEFINITIONS
2. INTERPRETATION
3. DEMISE AND RENT
4. TENANT'S COVENANTS
4.1 To Pay Rents
4.2 To Pay Rates and Outgoings
4.3 To Pay Interest
4.4 To Pay Costs
4.5 To Pay Value Added Tax
4.6 Common Matters
4.7 Insurance
4.8 Repair
4.9 External Redecoration
4.10 Internal Redecoration
4.11 To Maintain Landlord's Fixtures
4.12 Notice and Making Good on Tenant's Default
4.13 Alterations and Signs
4.14 To comply with Legislative Requirements
4.15 Use Consents
4.16 No Undesirable Activities
4.17 Use & Regulations
4.18 Not to obstruct
4.19 Alienation
4.20 Registration of Dealings
4.21 Information
4.22 Notice of Re-letting or Sale
4.23 Exceptions and Reservations
4.24 Not to Permit Acquisition of Easements
4.25 Tenant's Surveys
4.26 To Notify Landlord
4.27 Indemnity
4.28 New Guarantor
(ii)
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4.29 Pledging Chattels as Security
4.30 To Observe and Perform Covenants etc
4.31 Raised Floor
4.32 To Yield Up
5. RENT REVIEW
6. LANDLORD'S COVENANTS
6.1 Quiet Enjoyment
6.2 Insurance
6.3 Works
7. MISCELLANEOUS
7.1 Re-entry
7.2 Rent Abatement
7.3 Exclusion of-Liability
7.4 Notices
7.5 Statutory Compensation
7.6 Superior Leases
7.7 Landlord as Tenant's Agent
7.8 Adjoining Property
7.9 Distress
7.10 Set Offs
7.11 Exclusion of Rights not Granted
7.12 No Warranty as to Permitted Use
7.13 Return of Instalment of Yearly Rent
7.14 English Law
7.15 Tenant's option to determine
7.16 Certificate as to Agreement for Lease
8. LPA Receiver
9. Guarantor
SCHEDULES
Schedule 1 The Premises
Schedule 2 Rights Granted
Schedule 3 Exceptions and Reservations
Schedule 4 Matters to which the Premises are subject
Schedule 5 Guarantor's Obligation
Schedule 6 Landlord's Fixtures and Fittings
<PAGE>
THIS LEASE is made on the date and between the Parties stated in the Particulars
THIS DEED WITNESSES:
1. DEFINITIONS
In this Lease the following expressions have the meanings indicated:
"Building" the building erected on the Premises:
"Conduits" all aerials vents chimneys ducts shafts cisterns
tanks radiators pipes wires optic fibres cables
gutters watercourses channels sewers drains and
equipment for the provision of Utilities laid now
or in the future in under or over the Premises
or serving them;
"Environmental Consent" a consent licence registration exemption approval
permission authorisation or filing requirement
relating to the environment (as defined in Section
1 of the Environmental Protection Act 1990) or
to the control or regulation of pollution of the
environment (as also defined in that Section):
"Full Reinstatement the cost of rebuilding or reinstating the land
Cost" and/or buildings which are the subject of the
insurance policy including where the Landlord
in its reasonable discretion so determines value
added tax inflation extraordinary expenses
professional fees and incidental expenses
(including but not limited to the costs of shoring
up demolition and site clearance);
"Guarantor" shall include if it is an individual his personal
representatives and includes any person who at
<PAGE>
any time undertakes guarantor obligations pursuant
to any provision of this Lease:
"Insured Risks" fire (including subterranean fires), earthquakes.
explosion (including explosion of boilers and
other heating apparatus). lightning, thunderbolt.
storm, tempest, flood. burst or overflowing of
pipes and tanks, impact by any road vehicle. and
(in peacetime) aircraft and articles dropped
therefrom and accidental damage to underground
pipes and cables. riot , civil commotion and
malicious damage and such other risks against
which the Landlord shall from time to time in the
Landlord's reasonable discretion determine to
insure:
"Interest" interest at the rate of four per cent per annum
above the Base Lending Rate from time to time of
National Westminster Bank PLC (or if such rate
shall cease to be published such other reasonable
or comparable rate as the Landlord shall from time
to time designate) compounded with monthly rests
on the first day of each month:
"Landlord" shall include the person for the time being
entitled to the reversion immediately expectant on
the Term:
"Landlord's Surveyor" any person engaged by the Landlord for any purpose
under this Lease including an employee of the
Landlord or a company which is a member of the
same group of companies (as defined in Section 42
of the Landlord and Tenant Act 1954) as the
Landlord:
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"Particulars" the Particulars appearing at the front of this
Lease:
"Parties" the Landlord and the Tenant and the Surety (if
any) and "Party" means any one of them:
"Permitted Part" the whole of Unit 1 or the whole of Unit 2 or the
whole of a complete floor of Unit 1 or the whole
of a complete floor of Unit 2 together with the
right to use the number of car parking spaces
within the Premises as specified below:
Unit 1 - 30 car parking spaces
Unit 2 - 20 car parking spaces
Complete Floor, Unit 1 - 15 car parking spaces
Complete Floor, Unit 2 - 10 car parking spaces:
"Planning Acts" the Town and Country Planning Act 1990 the
Planning (Listed Buildings and Conservation Areas)
Act 1990 the Planning (Hazardous Substances) Act
1990 the Planning (Consequential Provisions) Act
1990 the Planning and Compensation Act 1991 and
any other legislation relating to the use
development or occupation of land or buildings:
"Planning Permission" any permission consent or approval given or deemed
to be given under the Planning Acts relating to or
affecting the Premises or the use of them:
"President" the President for the time being of the Royal
Institution of Chartered Surveyors:
"Referred to Arbitration" reference to a single Arbitrator to be appointed
in default of agreement between the Landlord and
3
<PAGE>
the Tenant on the application of either the
Landlord or the Tenant by the President and any
such reference shall be a submission to
arbitration within the Arbitration Act 1950 and
1979 If the Arbitrator shall die be or become
unwilling to act or incapable of acting for any
other reason either the Landlord or the Tenant may
apply to the President for a substitute to be
appointed in his place which procedure may be
repeated as often as necessary:
"Superior Landlord"
any person having an interest in the Premises in
reversion (whether mediate or immediate to that of
the Landlord) and includes any mortgagee of the
landlord;
"Tenant" shall include its successors in title and if it is
an individual his personal representatives:
"Term" the Contractual Term starting on the Contractual
Term Commencement Date together with the period of
any continuation or extension of the tenancy
granted by this Lease (subject to any provisions
of this Lease permitting earlier determination);
"Unit 1" that part of tile Building (known as Unit 1) shown
for identification only edged blue on the Plan
numbered 2 attached:
"Unit 2" that part of the Building (known as Unit 2) shown
for identification only edged green on the Plan
numbered 2 attached:
"Use Consent" Planning Permission or Environmental Consent;
4
<PAGE>
"Utilities" foul and surface water drainage signals impulses
electric current gas water telecommunication data
communication heating ventilation air conditioning
the passage of smoke and fumes and all other
utilities services and facilities.
2. INTERPRETATION
2.1 In this Lease words importing the singular include the plural and vice
versa.
2.2 Words in this Lease importing one gender include both other genders.
2.3 References in this Lease to any legislation include any other legislation
replacing amending or supplementing it and any orders regulations bye-laws
notices permissions approvals or consents under it.
2.4 Where of assistance there shall be incorporated a perpetuity period of
eighty (80) years from the date of this Lease which shall be the applicable
perpetuity period.
2.5 My obligation in this Lease prohibiting the Tenant from doing something
shall include an obligation not to cause or permit the doing of that thing
by others and (without prejudice to any other obligation or liability of
the Tenant) to take all necessary steps To prevent that thing being done by
its employees agents contractors invitees and licensees.
2.6 Where any rights of entry or rights To do anything are excepted and
reserved in this Lease to the Landlord and/or any other person then (except
where the terms of this Lease shall otherwise expressly provide) no claim
shall be made or compensation claimed by the Tenant (or by any other person
claiming through under or in trust for the Tenant) except for the making
good of damage caused to the Premises by the person exercising such rights.
5
<PAGE>
2.7 Compliance with obligations on the part of the Tenant undertaken in this
Lease is at its own cost unless otherwise expressly specified.
2.8 If any Party to this Lease comprises more than one person obligations on
the part of that Party in this Lease are undertaken by all such persons
jointly and also by each of them individually.
2.9 Unless otherwise stated references in this Lease to the Premises include
each and every part of the Premises.
2.10 The details expressions and descriptions appearing in the Particulars shall
be included in and form part of this Lease.
2.11 References to Schedules are to Schedules in this Lease.
2.12 References in this Lease to any adjoining property of the Landlord shall be
taken to include any adjoining or neighbouring property from time to time
owned leased or occupied by the Landlord.
2.13 The headings and Contents pages in this Lease are for information only and
shall not be taken to affect its construction.
2.14 Anything shown on the Plans[s] attached to this Lease is shown for the
purpose of identification only.
3. DEMISE AND RENT
In consideration of the rents and covenants on the part of the Tenant
reserved and contained in this Lease the Landlord demises the Premises to
the Tenant at the request of the Guarantor TOGETHER WITH the rights
mentioned in Schedule 2 EXCEPT AND RESERVING the rights mentioned in
Schedule 3 AND SUBJECT as mentioned in Schedule 4 TO HOLD for the
Contractual Term starting on the Contractual Term Commencement Date
(determinable nevertheless as provided in this Lease) YIELDING AND PAYING
during the Term:
6
<PAGE>
3.1 for the period from the Contractual Term Commencement Date until the Yearly
Rent Commencement Date the rent of a peppercorn and thereafter the Yearly
Rent specified in the Particulars together with all increases in Yearly
Rent which shall become payable pursuant to the provisions for the review
of Yearly Rent contained in this Lease such Yearly Rent to be paid without
any deductions and proportionately for any part of a year by equal
quarterly payments in advance on the four usual quarter days in each year
the first (proportionate) payment of the Yearly Rent to be made on the
Yearly Rent Commencement Date in respect of the period from the Yearly Rent
Commencement Date until the next usual quarter day after the Yearly Rent
Commencement Date: and
3.2 within 14 days of a demand thereof by way of further or additional rent
from the Contractual Term Commencement Date a sum or sums of money equal To
the gross amount which the Landlord From Lime to time incurs or expends:
3.2.1 in or in respect of effecting or maintaining insurance of:
3.2.1.1 the Premises in the Landlord's estimate of their Full
Reinstatement Cost for the time being against the Insured
Risks: and
3.2.1.2 the Landlord's third party liability in relation to the
Premises and their use and occupation including but not
limited to liability under the Defective Premises Act 1972,
(together in each case with value added tax if the Landlord so determines
in its absolute discretion) and where the Premises are insured with other
property the Landlord shall attribute a fair and reasonable proportion of
the premiums to the Premises and save for manifest error the Landlord's
decision shall be final and binding on the Parties;
3.2.2 in or in respect of effecting or maintaining insurance against loss
of Yearly Rent for a period of three years or such longer
7
<PAGE>
period as the Landlord may from time to time reasonably determine
including anticipated loss of Yearly Rent following a Yearly Rent
review (and if such insurance is effected prior to the agreement or
determination of the Yearly Rent upon review the amount of such
Yearly Rent for the purpose of insurance only shall be estimated by
the Landlords Surveyor whose decision shall be final and binding on
the Parties save in case of manifest error): and
3.2.3 in respect of valuations of the Premises for insurance purposes if
required by the Landlord: and
3.3 on demand by way of further or additional rent Interest where payable under
the terms of this Lease. and
3.4 within 14 days of a demand therefor by way of further or additional rent
the sums payable from time to time under Clause 4.6
4. TENANT'S COVENANTS
The Tenant covenants with the Landlord throughout the Term:
4.1 TO PAY RENTS
to pay the reserved rents at the times and in the manner specified in this
Lease (and if and for so long as required by the Landlord to pay the Yearly
Rent by Banker's standing order or direct debit to such bank account in
England as the Landlord shall reasonably from time to time direct):
4.2 TO PAY RATES AND OTHER OUTGOINGS
4.2.1 to pay and discharge all existing and future rates taxes charges
duties assessments impositions and outgoings of any kind whether
parliamentary parochial local or of any other description now or in
the future imposed or charged upon or payable in respect of the
Premises or the supply of Utilities to
8
<PAGE>
the Premises whether or not of a capital or non-recurring nature and
whether payable by the landlord owner or occupier or tenant in
respect of the Premises (except in respect of any income or
corporation tax assessed upon the Landlord's ownership of rental
income from or dealings with its reversionary interest in the
Premises) and not without the Landlord's prior consent in writing to
claim any relief against payment of any such liabilities:
4.2.2 to pay to the Landlord on demand a fair proportion (to be determined
by the Landlord's Surveyor whose decision shall (save in case of a
manifest error) be final and binding on the Parties of any rates
taxes charges duties assessments impositions and outgoings of any
kind as described above which may at any time be imposed or charged
upon or payable in respect of the Premises together with other land
and property (save only as previously specified):
4.3 TO PAY INTEREST
to pay Interest on any sums due and payable under this Lease (whether by
way of Yearly Rent or otherwise) (as well after as before judgment) from
the date on which any such sum is due and payable (unless any other date is
specified in this Lease) until the date of payment or (if acceptance of any
such unpaid sum shall be declined by the Landlord because of any breach of
covenant) to the date upon which payment is accepted by the Landlord and
Interest shall accrue on a daily basis and shall be payable on demand;
4.4 TO PAY COSTS
to pay to the Landlord on a full indemnity basis all costs expenses and
charges (including but not by way of limitation professional advisers'
costs and disbursements) incurred by the Landlord or any Superior Landlord
and whenever requited by the Landlord to give security for them:
9
<PAGE>
4.4.1 in respect of any application for consent required by this Lease
(including any application for the consent of any Superior Landlord)
whether or not such consent is granted:
4.4.2 in the preparation and service of all schedules of dilapidations
whether during or following the expiry or sooner determination of
the Term:
4.4.3 in or in contemplation of any proceedings under Sections 146 or 147
of the Law of Property Act 1925 (including but not by way of
limitation the preparation and service of all notices under Section
146) even if forfeiture is avoided otherwise than by relief granted
by the Court;
4.4.4 in respect of the recovery of any arrears of rent or any other
breach of covenant (including but not by way of limitation any costs
of levying distress or execution); and
4.4.5 in respect of any inspection or survey carried out by or on behalf
of the Landlord which reveals a breach of any of the Tenant's
obligations in this Lease:
4.5 TO PAY VALUE ADDED TAX AND STAMP DUTY
Upon production of a proper and Valid Value Added Tax invoice to pay:
4.5.1 to the Landlord any value added tax chargeable upon any supply made
by the Landlord to the Tenant by or pursuant to or in connection
with this Lease so that all consideration for any such supply is
exclusive of value added tax:
4.5.2 and to indemnify the Landlord against any value added tax chargeable
upon any supply (whether made to the Landlord or to a third person)
where pursuant to this Lease the Tenant is required to pay To the
Landlord any sum in respect of any
10
<PAGE>
costs fees expenses or other expenditure or liability (of whatever
nature) in connection with that supply:
4.5.3 all such value added tax at the same time that the relevant sum of
money or consideration is payable to or receivable by the Landlord or
(if earlier and in relation to supplies made by the Landlord to the
Tenant) at the time that the supply is treated as taking place for
the purposes of the charge to value added tax: and
the Landlord retaining reasonable discretion (so far as permitted by law)
as to whether any supply made by the Landlord to the Tenant or is to be an
exempt supply or a taxable supply for the purposes of value added tax:
4.6 COMMON MATTERS
to pay within 14 days of a demand therefor the whole or a fair proportion
(to be determined by the Landlord's Surveyor whose decision shall save in
case of a manifest error be final and binding on the Parties) of the
expenses payable in respect of constructing repairing renewing rebuilding
cleansing re-surfacing maintaining and lighting all party walls fences
boundary structures Conduits roads pathways pavements car parks roofs
apparatus and other areas and things (whether or not of a like nature) the
use of which is common to the Premises and any other property together with
a reasonable management charge (if demanded):
4.7 INSURANCE
4.7.1 to comply with all recommendations arid requirements of the insurers
and fire authorities as to fire precautions and fire fighting
equipment relating to the Premises and to comply with all such
reasonable regulations in this regard as the Landlord may from time
to time notify to the Tenant:
11
<PAGE>
4.7.2 in the event of the Premises being destroyed or damaged by any of
the Insured Risks to give notice in writing to the Landlord as soon
as possible:
4.7.3 not to leave the Premises vacant or unoccupied without first giving
the Landlord at least 28 days notice in writing of the intention so
to do and without first paying any additional or increased premium
required by the insurers and without first providing such security as
the Landlord shall require in respect of any exclusions excesses
limitations conditions or qualifications which the insurers may
impose upon the Insured Risks or the policy;
4.7.4 not to do or omit to do anything or bring on to the Premises any
explosive inflammable or toxic or otherwise harmful chemicals or
materials or any other matter or thing of any kind if any such act or
omission would or might cause the policy for the insurance of the
Premises or any adjoining or neighbouring property to become void or
voidable or any premium payable to be increased above the ordinary or
common rate:
4.7.5 if the Premises are destroyed or damaged by any of the Insured Risks
to pay to the Landlord on demand:
4.7.5.1 an amount equivalent to any insurance money irrecoverable by
reason solely or in part of any act default or omission by
the Tenant or by any underlessee licensee or visitor: and
4.7.5.2 the amount of any excess required by the insurers or by the
Landlord under any policy of insurance for the Premises:
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<PAGE>
4.7.6 in relation to plate glass:
4.7.6.1 to insure and at all times keep insured any plate glass in
the Premises against breakage and damage in its full
reinstatement cost and as often as any such plate glass
shall be broken or damaged to reinstate the same as soon as
possible (the Tenant making good from its own resources any
deficiency in the insurance money):
4.7.6.2 to effect such insurance in an insurance office approved by
the Landlord in the names of the Landlord and Tenant and of
any Superior Landlord and upon every request by the Landlord
immediately to produce particulars of the policy of
insurance and the receipt for every premium payable for the
then current year: and
4.7.6.3 if and whenever default shall be made in effecting and
keeping on foot such insurance or in producing such
particulars or receipt the Landlord may effect and maintain
such insurance and the Tenant shall repay to the Landlord
upon demand all money paid by the Landlord for that purpose
and such money if not so paid shall be recoverable as rent
in arrear:
4.7.7 except as provided above not to effect any insurances in respect of
the Premises:
4.8 REPAIR
4.8.1 to put and throughout the Term To keep the Premises in good and
substantial repair condition and decoration (with tile exception of
damage by any Insured Risk save where any insurance money shall be
wholly or partly irrecoverable by
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reason solely or in part of any act default or omission by the Tenant
or by any underlessee licensee or visitor and with the exception of
the dilapidations to the Premises as at the date of this lease which
the parties agree are recorded in the schedule of dilapidations
attached to this lease save to the extent that such dilapidations are
made good by or at the expense of the Landlord to the reasonable
satisfaction of the Tenant);
4.8.2 to keep any outside parts of the Premises in a clean neat and tidy
state and condition free from litter weeds and rubbish and to keep
the same property maintained and cultivated and to replace all
damaged dead or diseased trees shrubs and plants as necessary;
4.8.3 to clean all windows of the Premises as often as may be necessary
and at least once in every three months:
4.9 EXTERNAL REDECORATION
in the last six months of the fifth year of the Term and thereafter in
every third year of the Term and also in the last six months of the Term in
a proper and workmanlike manner using good quality materials and following
any manufacturer's instructions or recommendations (and in the last six
months of the Term in accordance with the colours and materials of the
original specifications or as otherwise may be approved by the Landlord In
writing):
4.9.1 to paint varnish treat or preserve to a high standard all the
outside wood metal brickwork walls fences gates or other parts
belonging To the Premises previously painted varnished treated or
preserved (as the case may be) but excluding all external doors.
window frames and woodwork which have been powder-coated: and
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4.9.2 to repoint clean and (where appropriate) replace all seals and
mastics and otherwise treat as appropriate those exterior parts of
the Premises which ought to be so treated:
Provided always that:-
(i) if the Tenant shall give notice under clause 7.15 such decoration
shall be undertaken in the last three months of the fifth year of the
Term
(ii) if no such notice shall be given the Tenant shall not be obliged to
decorate in the 23rd year of the Term.
4.10 INTERNAL REDECORATION
in the last three months of the fifth year of the Term and thereafter in
every fifth year of the Term and also in the last three months of the Term
in a proper and workmanlike manner using good quality materials and
following any manufacturer's instructions or recommendations (and in the
last three months of the Term in tints colours patterns and materials to be
approved by the Landlord in writing):
4.10.1 to paint varnish treat or preserve to a high standard all the
inside wood metal plaster and other parts of the Premises previously
painted varnished treated or preserved (as the case may be); and
4.10.2 to clean and otherwise treat as appropriate those interior parts of
the Premises which ought to be so treated;
Provided always that:-
(i) if the Tenant shall give notice under clause 7.15 such decoration
shall be undertaken in the last three months of the fifth year of the
Term
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(ii) such decoration shall in any event be undertaken in the last three
months of the Term
4.11 TO MAINTAIN LANDLORD'S FIXTURES
4.11.1 to maintain in good and serviceable condition the Landlord's
fixtures and fittings in or upon the Premises and replace such of
them as may become worn out lost or unfit for use by substituting
others of a like nature (but of no lesser quality):
4.11.2 in addition to replace all carpets and floor coverings in the
Premises as often as reasonably necessary and in any event in the
last month of the Term on each occasion in colours and materials to
be first approved by the Landlord (such approval not to be
unreasonably withheld);
4.11.3 to enter into contracts with parties approved by the Landlord for
the maintenance and repair of plant and machinery in the Premises if
the Landlord so reasonably requires and to produce such contracts
and all reports and invoices connected with them whenever so
requested;
4.12 NOTICE AND MAKING GOOD ON TENANT'S DEFAULT
4.12.1 within the space of sixty days (or such shorter period as the
Landlord shall reasonably require) to comply with any notice in
writing served by the Landlord specifying any breach by the Tenant
of any of its obligations under this Lease (including but not
limited to the repair condition and decoration of the Premises or
the execution of any other works);
4.12.2 if the Tenant shall at any time be in breach of any such
obligation:
4.12.2.1 to permit the Landlord (without the Landlord being obliged
to do so and without prejudice to
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the Landlord's right of re-entry contained in this Lease or
any other rights of the Landlord with regard to such
default) during the Term or after the expiry or sooner
determination of the Term (without being liable to the
Tenant or to any person claiming through under or in trust
for the Tenant for any damage so caused) at the expense of
the Tenant to remedy any breach of all or any of those
obligations of the Tenant and to permit the Landlord to
enter the Premises for that purpose: and
4.12.2.2 to pay to the Landlord on demand all costs and expenses so
incurred by the Landlord (and all such costs and expenses if
not so paid shall be recoverable by the Landlord as a debt):
4.13 ALTERATIONS AND SIGNS
4.13.1 not to erect any new building or structure of any kind on the
Premises:
4.13.2 not to cut remove alter or damage the Premises nor to make any
structural alteration addition or improvement in or to the
Premises either internally or externally nor to make any change in
the design appearance or style of the exterior of the Premises:
4.13.3 not to make internal non-structural alterations to the Premises
without the previous approval in writing of the Landlord and in
accordance with plans and specifications previously approved in
writing by the Landlord (each such approval not to be unreasonably
withheld) provided always that:
4.13.3.1 during the period of six months immediately preceding
the expiry or sooner determination of
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the Term the Tenant shall reinstate the Premises (unless
and to the extent requested not to do so by the Landlord)
as they were prior to the execution of such internal non-
structural alterations and make good all consequential
damage to the satisfaction of the Landlord and any
Superior Landlord; and
4.13.3.2 the Landlord may as a condition of giving such consent
require the Tenant to enter into such covenants with the
Landlord as the Landlord may require for the execution
and supervision of such works and such other covenants as
the Landlord may reasonably require;
4.13.4 not to place affix or exhibit at the windows or upon the exterior
of the Premises any showcase aerial pole mast flag inscription
signboard bill plate board placard poster advertisement or other
notification of any kind save that the Tenant may with the prior
approval in writing of the Landlord of its size design and location
(such approval not to be unreasonably withheld) erect a plate or
sign displaying the name and business of the Tenant or any other
authorised occupant of any part of the Premises which conform with
all statutory and other regulations the Tenant removing the same on
the expiry or sooner determination of the Term and making good all
resulting damage);
4.14 TO COMPLY WITH LEGISLATIVE REQUIREMENTS
4.14.1 to comply with all present and future legislation from time to time
in force upon or in respect of the Premises or their use or
occupation whether compliance is required by the owner landlord
tenant or occupier and at all times to keep the Landlord indemnified
against all actions proceedings losses
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liabilities costs damages expenses claims and demands arising out of
or resulting from them;
4.14.2 within seven days of receipt to give full written particulars to
the Landlord of any notice order or assessment or any proposal for
any of them made given or issued to the Tenant by any government
department local or public authority under or by virtue of any
statutory powers and to produce to the Landlord such notice order or
assessment or such proposal and also without delay to take all
reasonable or necessary steps to comply with any such notice or
order and also at the request and under the direction of the
Landlord but at the cost of the Tenant To make or join with the
Landlord in making such objection representation or appeal against
or in respect of any notice order or assessment or such proposal as
the Landlord shall deem expedient;
4.15 USE CONSENTS
in addition to and not by way of limitation or contradiction of any other
provision contained in this Lease to be observed or performed by the
Tenant:
4.15.1 at all times during the Term to comply in all respects with the
provisions and requirements of the Planning Acts and of all Use
Consents so far as they relate to or affect the Premises or any
development (as defined in the Planning Acts) already or to be
carried out executed done or omitted on the Premises or their use
for any purpose:
4.15.2 not to make any application for any Use Consent without the
previous written consent of the Landlord (such consent not to be
unreasonably delayed or withheld);
4.15.3 during the Term as often as occasion shall require at the expense
in all respects of the Tenant to obtain all Use Consents
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and serve all such notices as may be required for the carrying out
of any such development on the Premises or the institution or
continuance on the Premises of any use of the Premises or the
carrying out of any activity or process at the Premises in respect
of which any Use Consent may be required subject only to any
legislative direction to the contrary to pay and satisfy any charge
or levy that may now or in the future be imposed under any
legislation in respect of the carrying out or retention of any such
development or the institution or continuance of an such use;
4.15.4 not to carry out or make any alteration or addition to the Premises
or any change in their use before all necessary Use Consents have
been produced to the Landlord:
4.15.5 not to implement any Use Consent which is granted until the
Landlord has approved it nor before do Tenant has provided such
security for the compliance with its terms as the Landlord shall
require:
4.15.6 at the request and under the direction of the Landlord but at the
Tenant's cost to appeal against any refusal of or condition
contained in any Use Consent:
4.15.7 where any Use Consent is implemented then unless the Landlord shall
otherwise direct to carry out and complete before the expiry or
sooner determination of the Term:
4.15.7.1 any works stipulated to be carried out to the Premises by
a date subsequent to the expiry or sooner determination
of the Term as a condition of any Use Consent granted
before such expiry or determination: and
4.15.7.2 any development begun upon the Premises in respect of
which the Landlord shall or may be or
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become liable for any charge or levy under any
legislation:
4.15.8 if and when called upon to do so to produce to the Landlord or the
Landlord's Surveyor all such plans documents and other evidence as
the Landlord may reasonably require in order to satisfy the Landlord
that the provisions of this sub-clause have been complied with in
all respects:
4.15.9 if the Tenant shall receive any compensation in respect of the
Tenant's interest under this Lease because of any restriction placed
upon the user of the Premises under or by virtue of any legislation
then on the expiry or sooner determination of the Term immediately
to make such provision as is just and equitable for the Landlord to
receive the Landlord's due benefit from such compensation:
4.16 NO UNDESIRABLE ACTIVITIES
4.16.1 not to use or occupy the Premises for or in connection with any
illegal or immoral purpose or any purpose which may cause any other
property not to comply with any applicable law;
4.16.2 not to commit or carry out on or from the Premises any noisy
noxious dangerous or offensive act activity or purpose nor any
activity or purpose which shall cause any inconvenience nuisance
damage or disturbance to the Landlord or the owners tenants or
occupiers of any adjoiningor neighbouring property:
4.16.3 not to permit empty containers waste or rubbish of any description
to accumulate on the Premises:
4.16.4 not to hold any sale by auction on the Premises:
4.16.5 not to sleep on or reside in the Premises:
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4.16.6 not to install any heavy or vibrating machinery in the Premises nor
cause any undue stress or strain on the floors or structure of or
any lift installed in the Premises:
4.16.7 not to do anything which may cause or result in:
4.16.7.1 any damage to or overloading obstruction or pollution of
Conduits; or
4.16.7.1 any pollution of water (including but not limited to
ground water) land or any buildings or structures whether
or not attached to land:
4.17 USE & REGULATIONS
4.17.1 not to use the Premises otherwise than for the Permitted Use:
4.17.2 to observe and perform any reasonable regulations made by the
Landlord from time to time in relation to the Premises whether alone
or together with any adjoining property:
4.18 NOT TO OBSTRUCT
4.18.1 not to do anything whereby any road forecourt path or passage near
to or serving the Premises may be damaged or obstructed or their use
by others may be impeded or hindered in any way:
4.18.2 not to park unload or load vehicles or containers in the adjoining
or neighbouring roads and accessways:
4.18.3 not to exhibit or place any articles of any kind outside nor to
attach them to the exterior of or projecting from the Premises or
any building on the Premises:
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4.19 ALIENATION
4.19.1 not to assign or charge part only of the Premises;
14.19.2 Not to assign the whole of the Premises without the prior written
consent of the Landlord (such consent not to be unreasonably
withheld subject to the agreements contained in the remainder of
this clause 4.19.2)
4.19.2.1 it is agreed that the Landlord shall not be regarded as
unreasonably withholding its consent to any proposed
assignment of the whole of the Premises if it withholds
it on the ground (and it is the case) that any one or
more of the below mentioned circumstances exist (whether
or not such withholding is solely on such ground or on
that ground together with other grounds) (a) that the
proposed assignee is unable to demonstrate that for each
of the three consecutive financial periods being in
aggregate not less than three years (the last such period
to have ended within the year immediately prior to the
date of the application to assign) its accounts indicate
that the proposed assignee has achieved net profits
before tax (meaning the net trading profits before tax
for a period of twelve months or in the case of any other
period the annualised rate of net profit before tax of
such person or body arising from its ordinary trading
activities but excluding any profits from the sale of
fixed assets businesses or investments or other
exceptional and/or extraordinary items or items which
would have been classified as extraordinary and/or
exceptional items before the introduction of Accounting
Standard FRS3 after deduction (on an annualised basis) of
depreciation, interest charges. and all
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other expenses or charges as disclosed by the accounts of
such person or body for the financial periods in
question) equal to or exceeding the aggregate of the
total amount likely. in the reasonable opinion of the
Landlord, to be payable during the period of three years
from the date which in the reasonable opinion of the
Landlord is the likely date upon which the assignment (if
authorised) will take place by way of rents. insurance
and service charges and all other taxes and outgoings
payable by the Tenant under this lease (b) that the
proposed assignee is an associate (as defined in Section
52(3) of the Companies Act 1989) of either the Tenant or
the Guarantor and:-
(i) for the purposes of clauses 4.19.2.1 and also
clause 4.19.2.2 "accounts" shall be the audited
profit and loss accounts drawn up for the relevant
periods in accordance with the Companies Act 1985
(as amended) (or any statutory amendment or re-
enactment of it for the time being in force) and
the relevant Statements of Standard Accounting
Practice applicable to the United Kingdom (or in a
case other than that of a company incorporated in
the United Kingdom accounts prepared or restated
in similar form)
(ii) clause 4.19.2.1 shall operate without prejudice to
the right of the Landlord to withhold consent on
any other ground or grounds where such withholding
of consent would be reasonable
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(iii) in the event that any circumstances or conditions
specified in clause 4.19.2.1 above are framed by
reference to any matter falling to be determined
by the Landlord (or by any other person) ([save
where the power to determine such matter is
required to be exercised reasonably]) if the
Tenant disputes such determination then either the
Landlord of the Tenant shall be entitled to
require the matter or matters in question to be
referred to an independent expert who in the
absence of agreement between the parties shall be
appointed on the application of either party to
the President or next most senior available
officer of the Royal Institution of Chartered
Surveyors and the determination of such
independent expert shall be conclusive as to the
matter or matters in question and shall be final
and binding on the parties and his costs shall be
met by the parties hi such proportions as the
independent expert shall determine
4.19.2.2 it is agreed that any consent to an assignment of the
whole of the Premises shall not be regarded as being
given subject to unreasonable conditions if it is given
subject to any one or more of the following conditions:
(a) in the event that the proposed assignee is unable to
demonstrate that for each of the three consecutive financial
periods (as determined in accordance with clause 4.19.2.1)
its accounts indicate that the proposed assignee has
achieved net profits (defiled as in clause 4.19.2.1) equal
to or exceeding the net profits of the assignor
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during any of such financial periods a requirement that the
assignor execute and deliver prior to the assignment an
Authorised Guarantee Agreement (as defined in and for the
purposes of Section 16 of the Landlord & Tenant (Covenants)
Act 1995) in the form of the draft agreement annexed to this
lease under which the assignor will agree with the
Landlord:-
(i) that he/it is liable as sole or principal debtor
in respect of all obligations to be owed by the
assignee under the Tenant Covenants (as defined in
Section 28 of that Act) in this Lease: and
(ii) to be liable as guarantor in respect of the
assignee's performance of the Tenant Covenants (as
above defined) in this Lease (provided that such
liability shall be no more onerous than the
liability to which the assignor would be subject
in the event of its/his being liable as sole or
principal debtor in respect of the obligations
owed by the assignee under the said Tenant
Covenants):and
(iii) in the event of this lease being disclaimed. to
enter into a new lease of the Premises the term of
which shall expire simultaneously with the date
upon which (but for any such disclaimer) this
Lease would have expired by effuxion of time (and
not by any other means) and the Tenant Covenants
in which shall be identical to (mutatis mutandis
but in any event no more onerous than) the Tenant
Covenants in this Lease
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(iv) provisions incidental or supplementary to any of
clauses 4.19.2(a)(i)-(iii)
(b) a requirement that the assignee covenants to the Landlord in
the Licence to Assign to pay the rent for the time being and
from time to time reserved by this Lease and to observe and
perform the Tenant Covenants and conditions contained in
this Lease for the period that this Lease is vested in him
and upon the next assignment to enter into an Authorised
Guarantee Agreement as specified above PROVIDED ALWAYS that
clause 4.19.2.2 shall operate without prejudice to the right
of the Landlord to impose any further conditions upon a
grant of consent where such imposition is reasonable
4.19.3 Not to underlet the whole or any part of the Premises without the
Landlord's prior written consent obtained not more than three months
previously which consent shall not be unreasonably withheld for the
underletting of the whole or the underletting of a Permitted Part so
long as there are no more than three underlettings of Permitted
Parts and in the case of underletting of Permitted Parts the Tenant
remains in occupation of at least one Permitted Part.
4.19.4 not to part with or share possession or occupation of or grant any
other person rights over or in respect of the Premises nor to hold
or occupy the Premises as nominee trustee or agent or otherwise for
the benefit of any other person otherwise than by either:
4.19.4.1 an assignment or underletting permitted by this Lease: or
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4.19.4.2 sharing occupation of the Premises with any company which
is a member of a group of companies (as defined in
Section 42 of the Landlord and Tenant Act 1954) of which
the Tenant is itself a member provided first that no
exclusive possession is given secondly that only a
licence terminable on not more than twenty working days
notice is created thirdly that such sharing of occupation
shall immediately cease if the Tenant and the company
sharing occupation shall cease for any reason to be
members of the same group of companies fourthly that the
Tenant provides to the Landlord such information and
details concerning the occupation and the fulfilment of
these conditions as we Landlord may reasonably request
4.19.5 on any assignment or underlease to procure (if reasonably so
required by the Landlord) that a guarantor or guarantors acceptable
to the Landlord shall enter into surety covenants direct with the
Landlord in the terms set out in the Fifth Schedule with such
variations as the Landlord shall reasonably require to suit the
circumstances of each case;
4.19.6 prior to the grant of any underlease to procure that the
underlessee covenants direct with the Landlord to observe and
perform all the terms and conditions and the covenants on the part
of the Tenant contained in this Lease (other than as to payment of
rent) throughout the term demised by such underlease (and any
continuation or extension of it whether by statute or common law);
4.19.7 prior to the grant of any underlease to produce to the Landlord a
certified copy of an Order of the Court under Section 38(4) of the
Landlord and Tenant Act 1954 (as amended) authorising
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the exclusion of Sections 24 to 28 (inclusive) of that Act in
relation to such proposed underlease;
4.19.8 to procure that any underlease shall contain covenants by the
underlessee with the Tenant and(separately)with the Landlord that
the underlessee will not:
4.19.8.1 assign underlet charge or part with or share possession
or occupation of part only of the premises underlet:
4.19.8.2 charge underlet or (save by way of an assignment of the
whole) part with or share possession or occupation of the
whole of the premises underlet: or
4.19.8.3 assign the whole of the premises underlet without the
prior written consent of the Tenant and the Landlord:
4.19.9 on the grant of any underlease:
4.19.9.1 not to reserve or charge any fine or premium;
4.19.9.2 to charge a yearly rent (payable not less frequently than
quarterly in advance) which shall be the higher of the
Yearly Rent payable under this Lease (or the appropriate
proportion of the Yearly Rent in the case of a Permitted
Part) and the Open Market Rent of the premises underlet
(as assessed under this Lease assuming for such purpose
that the date of such underlease shall be the relevant
Review Date) at the date of such underlease:
4.19.9.3 to include provisions for upwards only review of the
yearly rent corresponding both as to terms and
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dates with the provisions for review of Yearly Rent
contained in this Lease:
4.19.9.4 to include a proviso for re-entry on breach of any
covenant on the part of the underlease: and
4.19.9.5 to include such covenants on the part of the underlessee
as shall secure the due performance and observance of the
terms and conditions and the covenants on the Tenant's
part contained in this Lease (save for payment of rent)
in relation to the premises underlet;
4.19.10 duly and punctually to exercise all rights to review the yearly
rent reserved by any underlease but not to agree any reviewed
yearly rent with the underlessee without the Landlord's prior
written consent (such consent not to be unreasonably withheld) and
to procure that if the yearly rent under any underlease is to be
determined by an independent person not to determine whether that
person shall act as an expert or as an arbitrator without tile
Landlord's prior written consent and to procure that the Landlord's
representations as to the reviewed yearly rent to be payable under
it are made to that independent person to the Landlord's reasonable
satisfaction;
4.19.11 not to vary the terms or accept a surrender of any underlease (or
agree to do so) without the Landlord's prior written consent:
4.19.12 to enforce the covenants on the part of the underlessee and the
terms and conditions contained in the underlease;
4.20 REGISTRATION OF DEALINGS
within twenty-one days after any charge assignment or underletting of the
Premises or any other disposition or transmission or devolution of the
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Premises to give notice to the Landlord in writing and to produce all
relevant documents together with a certified copy of each of them for
retention by the Landlord and to pay the Landlord or the Landlord's
solicitors a reasonable fee (in any event not less than Twenty Five Pounds)
for registration of the notice:
4.21 INFORMATION
within one month of being requested to do so to notify the Landlord in
writing of the name address and relationship to the Tenant of any occupier
of the Premises;
4.22 NOTICE OF RE-LETTING OR SALE
to permit the Landlord or persons authorised by the Landlord to enter upon
the Premises for the purpose of erecting a notice board in a position first
approved in writing by the Tenant at any time during the last six calendar
months prior to the expiry or sooner determination of the Term stating that
the Premises are to let and at any time during the Term stating that the
Premises are for sale and not to remove interfere with or obscure the
notice board and to permit all persons by order in writing of tile Landlord
or the Landlord's agents to view the Premises at all reasonable hours in
the daytime without interruption;
4.23 EXCEPTIONS AND RESERVATIONS
to permit the Landlord and persons authorised by the Landlord from time to
time and with or without workmen to exercise the rights excepted and
reserved in Schedule 3:
4.24 NOT TO PERMIT ACQUISITION OF EASEMENTS
not to obstruct any windows lights access or Conduits belonging to or
serving the Premises nor to permit any new window light access Conduits or
other encroachment or easement to be made into against upon or over the
Premises and in case any person attempts to make any encroachment
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or acquire any easement on each occasion to give notice in writing to the
Landlord immediately the Tenant becomes aware of it and at the cost of the
Tenant to do everything that may be necessary or desirable to prevent any
new encroachment or easement being made or acquired:
4.25 TO NOTIFY LANDLORD
to give notice in writing immediately to the Landlord of any:
4.25.1 defect or default of which the Tenant becomes aware which might
give rise to a duty or liability on the part of the Landlord to
third parties or to the Tenant: and
4.25.2 notice received from any local or other competent authority or any
other person relating to the Premises the Landlord's estate or
interest in or the Tenant's occupation of the Premises:
4.26 INDEMNITY
at all times to keep the Landlord indemnified against all actions
proceedings losses liabilities costs damages expenses claims and demands
arising out of or resulting from:
4.26.1 any breach or non-observance of the Tenant's covenants contained in
this Lease:
4.26.2 the existence state of repair condition or use of the Premises:
4.26.3 works of repair construction or alteration to the Premises: and
4.26.4 any act omission or default of the Tenant or the Tenant's
underlessees or their respective agents employees invitees or
licensees;
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4.27 NEW GUARANTOR
if at any time during the Term the Guarantor (if any) or (where the
Guarantor comprises more than one person) any one or more of those persons
either dies becomes bankrupt or has a receiving order made against him or
being a company enters into liquidation whether compulsory or voluntary or
an application is made for a Receiver or Administrator or Administrative
Receiver to be appointed of all or any part of its assets to give notice in
writing to the Landlord immediately with full details and within fourteen
days of being so requested by the Landlord (which it may do or not at its
absolute discretion) to procure at the expense of the Tenant in all
respects that some other person or persons acceptable to the Landlord shall
enter into guarantor obligations with the Landlord in the terms set out in
Schedule 5 with such variations as the Landlord shall reasonably require to
suit the circumstances of each case:
4.28 PLEDGING CHATTELS AS SECURITY
not to give any bill of sale or offer preferential security on the Tenant's
stock in trade or personal chattels from time to time in or upon the
Premises:
4.29 TO OBSERVE AND PERFORM COVENANTS ETC
to observe and perform all and any covenants stipulations and other matters
of any kind contained or referred to in Schedule 4 affecting the Premises
(save only insofar as the Landlord covenants expressly in this Lease to
observe and perform them);
4.30 ACCOUNTS INFORMATION
on request from the Landlord but not more after than once in every year to
provide to it a copy of the latest available audited accounts for the
Tenant the Guarantor and any company which is the holding company and/or
which is the ultimate parent company of the Tenant if that is a company
other than the Guarantor and in respect of which the information
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contained in paragraph 12 of part I of Schedule 5 of the Companies Act 1985
is required to be stated in that Tenant's audited accounts
4.31 RAISED FLOOR
to instal a raised floor throughout the Premises in accordance with the
specification annexed to this lease and to the reasonable satisfaction of
the Landlord within three months from the date of this Lease:
4.32 TO YIELD UP
on the expiry or sooner determination of the Term:
4.32.1 to remove all signs and Tenant's fixtures and fittings furniture
and effects making good all damage so caused: and
4.32.2 to yield up the Premises to the Landlord consistent with the full
and due compliance by the Tenant with the covenants contained in
this Lease.
5. RENT REVIEW
5.1 DEFINITIONS
In this clause the following expressions shall have the following meanings:
"Assumptions" the assumptions (if not facts) that:
1. the Premises are in good and
substantial repair and are fit for
immediate full beneficial
occupation and use and that the
Landlord and the Tenant have
compiled with all their respective
obligations under this Lease:
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2. if the Premises or any access or
amenity have been damaged or
destroyed they have or it has been
fully reinstated;
3. the Premises are available to be
let with vacant possession:
4. the willing tenant would commence
paying rent immediately on and
from the relevant Review Date and
that such rent would not be
discounted in any way to reflect
the absence of any rent concession
or other benefit then being
offered by landlords to tenants on
the grant of leases in the open
market of premises comparable with
the Premises;
5. no work has been carried out
either on the Premises by the
Tenant or on any adjoining or
neighbouring property during the
Term which has diminished tile
rental value of the Premises: and
6. all requisite Use Consents and all
other approvals and permissions
have been given unconditionally to
permit the Premises to be used for
any purpose within Class B1 of the
Town and Country Planning (Use
Classes) Order 1987 (and that
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no capital expenditure is required to
be made on the Premises to enable them
to be so used):
7. that the Landlord has fully met
the cost of complying with the
covenant on the part of the Tenant
in clause 4.31 of this Lease:
"Disregarded Matters" the following matters so far as they
may have any effect or any effect on
rental value:
1. the fact that the Tenant has been
in occupation of the Premises.
2. any goodwill attaching to the
Premises by reason of the Tenant
carrying on any business at the
Premises:
3. any improvements carried out with
the Landlord's prior written
consent by the Tenant during the
Term at the expense of the Tenant
otherwise than in pursuance of an
obligation to the Landlord or its
predecessors in title
4. any law for die time being in
force which imposes a restraint
upon receiving an increase in the
Yearly Rent: and
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5. the fact that the Landlord may
have insured against loss of
Yearly Rent in any particular sum
whether equal to or in excess of
the Yearly Rent payable prior to
the relevant Review Date:
"Excess" the amount by which the New Rent
exceeds the Yearly Rent previously
payable; either:
"New Rent"
1. the rent agreed by the Landlord
and the Tenant To be payable from
the relevant Review Date: or (If
such rent is not agreed)
2. the higher of:
2.1 the Yearly Rent payable
immediately before the
relevant Review Date
(disregarding any suspension
of payment of the whole or
any part of the Yearly Rent
as provided in this Lease);
and
2.2 the Open Market Rent of the
Premises on the relevant
Review Date as determined by
the Surveyor;
"Open Market Rent" the yearly rent without any deduction
whatever at which the Premises could
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reasonably be expected to be let in the
open market at the relevant Review Date
without a fine or premium by a willing
landlord to a willing tenant under a
Lease for a term equal in length to the
whole of the Contractual Term
commencing on the relevant Review Date
and with rent review dates at each
fifth anniversary of the relevant
Review Date on oil the same terms and
conditions in all other respects as
this present Lease other than the
amount of Yearly Rent but including
these provisions for review and on the
Assumptions but taking no account of
the Disregarded Matters:
"Review Date" the date or dates referred to in the
Particulars as the Rent Review Dates:
"Surveyor" an independent Surveyor appointed to
determine the amount of the New Rent.
5.2 NEW RENT
The New Rent shall be payable from, and including the relevant Review Date.
5.3 DETERMINATION OF NEW RENT
5.3.1 Tile Landlord and the Tenant may at any time agree the New Rent and
such agreement may include agreement that the New Rent is formulated
in terms which provide for different amount to be paid for different
specified periods between the relevant Review Date and the next
Review Date or (if none) the expiry of the Lease.
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5.3.2 If no agreement as to the amount of the New Rent payable from the
relevant Review Date shall have been reached between the Landlord
and the Tenant three months prior to the relevant Review Date then
either the Landlord or the Tenant may by notice to the other require
the determination of the amount of the New Rent at the relevant
Review Date by a Surveyor.
5.3.3 The Surveyor and whether he is to act as arbitrator or an expert
valuer may be agreed upon by the Landlord and the Tenant or if they
do not agree the Surveyor shall be appointed by or on behalf of the
President on the application of either the Landlord or the Tenant in
accordance with the provisions of this clause.
5.3.4 The Tenant shall give to the Landlord at least fifteen working days'
prior notice in writing of its intention to make an application to
the President for appointment of the Surveyor (and in the absence of
such notice any application made by the Tenant shall be of no
effect).
5.3.5 The Surveyor (if appointed by or on behalf of the President) shall
act as an arbitrator in accordance with the Arbitration Acts 1950
and 1979:
5.3.6 The Surveyor shall give notice to the Landlord and to the Tenant of
his appointment.
5.3.7 If the Surveyor is acting as an expert the Landlord and the Tenant
shall each be entitled to make representations and counter
representations in writing to the Surveyor a copy of which shall
simultaneously be supplied to the other of them.
5.3.8 If the Surveyor shall fail to determine the New Rent and give notice
to the Landlord and the Tenant of his determination within three
months of his appointment or if he shall die or become unwilling to
act or incapable of acting for any other
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reason the Landlord may apply to the President for a substitute to
be appointed in his place which procedure may be repeated as often
as necessary.
5.3.9 The fees of the Surveyor shall be in his award but otherwise shall
be shared equally between the Landlord and the Tenant (and if the
Tenant shall fail to pay on demand any part of those fees which the
Tenant is due to pay they may be paid by the Landlord and shall be
recoverable by the Landlord as rent in arrear).
5.4 LATE DETERMINATION
If upon any review of Yearly Rent the amount of the New Rent shall not be
agreed or determined prior to the relevant Review Date the Tenant shall
continue to pay Yearly Rent at the rate payable immediately prior to that
Review Date until the quarter day next following the agreement or
determination of the New Rent whereupon any Excess shall be due as a debt
payable by the Tenant to the Landlord apportioned on a daily basis from the
relevant Review Date together with interest at two percentage points below
Interest on the Excess from the relevant Review Date until the date of
payment of the Excess.
5.5 MEMORANDUM
If upon any such review it shall be agreed or determined that the New Rent
shall be different from the Yearly Rent previously payable under this Lease
the Landlord and the Tenant shall immediately complete and sign a written
memorandum at the expense of the Tenant recording the New Rent.
5.6 FINAL DETERMINATION
If the Surveyor is acting as an expert valuer his determination of the New
Rent shall be final and binding on the Parties save in case of a manifest
error.
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5.7 LEGISLATIVE RESTRICTIONS
If on any Review Date there shall be in force any statute which shall
restrict interfere with or affect the Landlord's right to review the Yearly
Rent in accordance with the terms of this Lease or receive any increase in
Yearly Rent following such review the Landlord shall be entitled when
permitted by or following the repeal or modification of that statute to
require a review of the Yearly Rent in accordance with the terms of this
Lease as though the date of the repeal or modification of that statute had
been specified in this Lease as an additional Review Date.
5.8 TIME NOT OF ESSENCE
Time shall not be of the essence in relation to the review of the Yearly
Rent or he service of notices in connection with such review unless
expressly stated otherwise.
5.9 GUARANTOR
No Guarantor or any predecessor in title of the Tenant shall have any right
to take part in the agreement or determination of the Yearly Rent upon
review.
6. LANDLORD'S COVENANTS
The Landlord covenants with the Tenant (but not so as to bind or impose any
liability upon the Landlord after the Landlord has parted with the
reversion immediately expectant on the Term):
6.1 QUIET ENJOYMENT
that the Tenant paying the rents and other sums payable under this Lease
and performing and observing the covenants conditions and agreements
contained in this Lease and on the Tenant's part to be performed and
observed shall and may peaceably and quietly hold and enjoy the Premises
during the Term without any interruption or disturbance from or by the
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Landlord or any person or persons lawfully claiming through under or in
trust for the Landlord:
6.2 INSURANCE
subject to the Tenant paying the whole or the appropriate proportion of the
premium as provided in this Lease:
6.2.1 to insure the Premises against loss or damage by the Insured Risks
in an insurance office or with underwriters of repute in their Full
Reinstatement Cost (subject to such exclusions excesses limitations
conditions and qualifications as the insurers may require) and for
three years (or such longer period as the Landlord may from time to
time reasonably require) loss of Yearly Rent together in each case
with value added tax if the Landlord so determines in its absolute
discretion; and
6.2.2 in case of destruction or damage by any Insured Risk (save where any
insurance money shall be wholly or partly irrecoverable by reason
solely or in part of any act default or omission by the Tenant or
any underlessee licensee or visitor to apply all policy money
received under or by virtue of any such insurance (other than for
loss of Yearly Rent) in rebuilding or reinstating the Premises to
provide accommodation reasonably comparable to that afforded by the
Premises prior to such destruction or damage (although the Landlord
shall not be obliged to rebuild or reinstate the Premises in
accordance with the previous sections elevations and specifications)
and all the terms of this Lease shall apply to such accommodation
(the Parties making such variations to the terms of this Lease as
the Landlord shall reasonably require to give effect To this
provision) provided that:
6.2.2.1 if any national or local or public or other authority shall
refuse permission or otherwise prevent such
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rebuilding or reinstatement all insurance money shall be the absolute
property of the Landlord without the Landlord being required or obliged to
appeal against any such refusal of permission or the purported exercise of
any power to prevent any such rebuilding or reinstatement; and
6.2.2.2 if the Premises are destroyed or so seriously damaged by
any Insured Risk as to require (in the opinion of the
Landlord's Surveyor whose decision shall be final and
binding upon the Parties) substantial reconstruction then
the Landlord may at any time within six months after such
damage or destruction give to the Tenant six months'
notice in writing to determine this Lease and immediately
upon the expiry of that notice this demise shall
determine but without prejudice to the rights and
remedies of any Party against any other in respect of any
antecedent claim or breach of covenant and all insurance
money shall be the absolute property of the Landlord.
6.3 To complete at its own cost to the reasonable satisfaction of the
Tenant and as soon as shall be practicable after the date of this
Lease the works described in the Schedule of Works attached to this
Lease and in the course of doing so to cause the minimum amount of
interference with the fitting out of the Premises by the Tenant.
7. MISCELLANEOUS
The following conditions shall apply:
7.1 RE-ENTRY
the Landlord and any persons authorised by the Landlord may re-enter into
and upon the Premises in the event that:
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7.1.1 the rents reserved or any other sums made payable by the Tenant
under this Lease or any part of such rents or other sums shall
respectively be in arrear for fourteen days after the same shall
become due (whether legally demanded or not): or
7.1.2 there is any breach or non-observance of any of the obligations on
the part of the Tenant contained in this Lease or in any licence
approval or consent given by the Landlord to the Tenant in relation
to the Premises or in any deed supplemental to this Lease or by
which this Lease may varied: or
7.1.3 any execution or distress is levied upon any asset of the Tenant and
is not discharged within fourteen days: or
7.1.4 the Tenant or any Guarantor or (where the Tenant or any Guarantor
comprises more than one person) any one or more of them (being a
corporation) shall enter into liquidation whether compulsory or
voluntary (not being merely a voluntary liquidation whilst solvent
for the purpose of reconstruction) or have a Receiver or
Administrator Administrative Receiver appointed of all or any assets
(or any application for such appointment Is made); or
7.1.5 the Tenant or any Guarantor or (where the Tenant or any Guarantor
comprises more than one person) any one or more of them( being an
individual or individuals) shall enter into any composition with the
Tenant's creditors or commit any act of bankruptcy or be adjudicated
bankrupt: or
7.1.6 the Premises shall be unoccupied or vacant for a period of three
consecutive months,
7.1.7 whereupon this demise shall immediately determine but without
prejudice to any rights or remedies which may then have accrued to
the Landlord in
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respect of the nonpayment of the rents reserved or other sums made payable
by this Lease or any breach or non-observant or non-performance of any of
the covenants conditions and agreements contained in this Lease:
7.2 RENT ABATEMENT
if at any time during the Term the Premises or any part of the Premises
shall be damaged or destroyed by any Insured Risk so as to be unfit for
occupation and use then so long as the policy of insurance for the time
being in force shall not have been vitiated or payment of the policy money
withheld or refused in whole or in part by reason of any act default or
omission of the Tenant or any underlessee licensee or visitor the Yearly
Rent or a fair proportion according to the nature and extent of the damage
sustained shall be suspended until the Premises shall again be rendered fit
for occupation and use or until the money received by the Landlord in
respect of loss of rent insurance shall have been exhausted whichever
period shall be the shorter and any dispute between the Landlord and the
Tenant concerning this provision shall be Referred to Arbitration:
7.3 EXCLUSION OF LIABILITY
7.3.1 the Landlord shall not be liable to the Tenant or the Tenant's
underlessees agents servants invitees licensees or others for any
injury accident loss damage or inconvenience which may at any time
during the Term be done occasioned or suffered to or by any such
person or to the Premises or any property on the Premises by reason
of or in consequence of any interruption in the provision of
Utilities or any defect in or the defective working stoppage or
breakage of any apparatus or Conduits in the Premises or in any
adjoining property of the Landlord or the defective state and
condition of the Premises or any adjoining property of the Landlord:
7.3.2 the Landlord shall not be liable to the Tenant in respect of any
failure by the Landlord to perform any of the Landlord's obligations
to the Tenant in this Lease (with the exception
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only of the Landlord's covenant to insure) unless and until the
Tenant has notified the Landlord in writing of the facts giving rise
to such failure and the Landlord has failed within a reasonable
period to remedy the same nor shall the Landlord be liable to
compensate the Tenant for any loss or damage sustained by the Tenant
before such reasonable period has elapsed:
7.3.3 the Landlord shall not be liable to the Tenant in respect of any act
or omission of any kind except as expressly provided in this Lease:
7.4 NOTICES
7.4.1 any notice or demand to be served on the Tenant or any Guarantor
under this Lease shall be validly served if sent by registered or
recorded delivery post to the registered office or the last known
address of such person or to the Premises or if delivered by hand to
the Premises:
7.4.2 any notice to be served on the Landlord under this Lease shall be
validly served if sent by registered or recorded delivery post to
the registered office of the Landlord (or where the Landlord is an
individual his last known address):
7.5 STATUTORY COMPENSATION
any statutory right of the Tenant to claim compensation from the Landlord
whether on vacating the Premises or otherwise is excluded to the extent
permitted by law;,
7.6 SUPERIOR LEASES
7.6.1 the powers rights matters and discretions granted and reserved to
the Landlord under this Lease shall also be granted and reserved to
or exercisable by any Superior Landlord its
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servants agents and workmen to the extent required by any superior
lease or mortgage;
7.6.2 the Landlord shall be entitled to withhold its approval or consent
under this Lease in an instance where any Superior Landlord's
consent is required and where such approval or consent is applied
for and is not given:
7.7 LANDLORD AS TENANT'S AGENT
the Tenant irrevocably appoints the Landlord to be the Tenant's agent to
store and/or dispose of any of the Tenant's fixtures and fittings furniture
and effects left by the Tenant on the Premises for more than seven days
after the expiry or sooner determination of the Term on any terms which the
Landlord thinks fit without the Landlord being liable to the Tenant save to
account for the net proceeds of sale less the cost of storage (if any) and
any other expenses reasonably incurred by the Landlord;
7.8 ADJOINING PROPERTY
nothing contained in this Lease shall confer on the Tenant any right to the
benefit of or to enforce any covenant or agreement contained in any lease
or other instrument relating to any adjoining property of the Landlord or
which would limit or affect the right of the Landlord to deal with Such
property at any time in any manner which may be thought Pit:
7.9 DISTRESS
all sums due and payable under this Lease shall be recoverable if the
Landlord so wishes by distress as if the same formed part of the rents
reserved under this Lease:
7.10 SET OFFS
the Tenant waives any and all existing and future counterclaims and set-
offs against any payments due to the Landlord under this Lease and agrees
to against any payments due to the Landlord under this Lease and agrees to
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make all such payments in full irrespective of any equity or set-off or
counterclaim of the Tenant of any nature:
7.11 EXCLUSION OF RIGHTS NOT GRANTED
nothing contained or referred to in this Lease shall operate either
expressly or impliedly to grant to or confer upon the Tenant the benefit of
any easement right or privilege save only as expressly granted to or
conferred upon the Tenant in Schedule 2:
7.12 NO WARRANTY AS TO PERMITTED USE
the Landlord does not warrant that the Premises may lawfully be used for
the Permitted Use or for any other purpose:
7.13 RETURN OF INSTALLMENT OF YEARLY RENT
the return to the Tenant of any installment of Yearly Rent paid by Bankers
standing order or direct debit as soon as reasonably practicable after its
receipt shall be treated as a refusal by the Landlord to accept that
payment of Yearly Rent and the receipt of any such installment of Yearly
Rent so returned shall not give rise to a presumption that the Landlord has
waived its rights of forfeiture under this Lease;
7.14 ENGLISH LAW
7.14.1 this Lease shall be governed by and construed in all respects in
accordance with English law and the Parties submit themselves to the
jurisdiction of the English Courts:
7.14.2 nothing contained in this Lease shall limit the right of any Party
to take proceedings against any other Party in any other court of
competent jurisdiction nor shall the taking of proceedings in one
jurisdiction preclude the taking of proceedings in any other
jurisdiction whether concurrently or not.
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7.15 TENANT'S OPTION TO DETERMINE
7.15.1 if the Tenant shall wish to determine the Term on the 6th day of
March 2001 and shall have given to the Landlord not less than 366
days previous written notice to that effect and shall up to the time
of such determination pay the rents reserved by and substantially
perform and observe the covenants contained in this Lease and then
immediately upon the 6 day of March 2001 the Term shall determine
but without prejudice to any rights or remedies which may then have
accrued to the Landlord in respect of the non-payment of the rents
reserved or other sums made payable by this Lease or any breach or
non-observance or non-performance of any of the covenants conditions
and agreements contained in this Lease.
7.15.3 the Parties hereby agree that on any application by the Tenant to
the Court for a new tenancy pursuant to the provisions of the
Landlord and Tenant Act 1954 the Tenant will not seek and will not
accept the inclusion of a Clause in the same terms or similar To
this Clause 7.15 in any new tenancy of the Premises.
7.16 CERTIFICATE AS TO AGREEMENT FOR LEASE
The Parties certify that there is no Agreement for Lease To which this
Lease gives effect.
8. RECEIVER
8.1 The Receiver was appointed Law of Property Act 1925 Receiver of the
Landlord's interest in the freehold land and buildings registered at H. M.
Land Registry under title number BK 255580 on 4 May 1994 by Hill Samuel
Bank Limited (the "Bank") pursuant to a legal mortgage dated 28th July 1992
and made between (1) the Landlord and (2) the Bank ("The Security").
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8.2 The Tenant acknowledges that it has been supplied with a copy of The
Security and the appointment of the Receiver and shall raise no requisition
enquiry or objection in relation thereto.
8.3 After taking such advice as it considers necessary the Tenant:
8.3.1 releases the Receiver from any personal liability which might arise
by virtue of Section 37(l) of The Insolvency Act 1986 or might
otherwise arise directly or indirectly under this Lease or under any
deed or other document executed pursuant to this Lease or in or
under any associated or contractual agreement or arrangement:
8.3.2 agrees and acknowledges that the foregoing provisions of this Clause
8 and of any other provision of this Lease are fair and reasonable
in the present circumstances and accord with normal practice with
regard to companies which are or are likely to become unable to pay
their debts.
9. GUARANTOR'S COVENANTS
9.1 The Guarantor covenants with the Landlord in the terms set out in Schedule
5
9.2 The obligations of the Guarantor pursuant to Muse 9.1 and Schedule 5 shall
cease when there is produced to the Landlord certified true copies of
audited accounts for Business Objects (U.K.) Limited showing that in each
of the three consecutive accounting periods of that Company none of which
periods shall be for longer than for one year (the third such period ending
no more than six months before the production of such certified copy
audited accounts) the net profits before tax for each such accounting
period constitute a sum which is at least three times the Yearly Rent
IN WITNESS of which this deed has been executed and is delivered on the date
appearing as the date of this deed.
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SCHEDULE 1
THE PREMISES
Sun Court, Moorbridge Road. Maidenhead, Berkshire shown for the purposes of
identification only edged in red on the Plan numbered 1 attached which shall
include where they exist and where the context so admits for the purpose of
obligation as well as grant:
1. all additions alterations and improvements to the Premises made at any
time.
2. all landlord's fixtures and fittings and plant equipment and machinery
including.
SCHEDULE 2
RIGHTS GRANTED
1. The right during the Term (so far as the Landlord has power to grant the
same and subject to the Landlord's reasonable regulations from time to
time) for the Tenant in common with the Landlord those authorised by the
Landlord and all others having the like right from time to time to the free
running of Utilities through the Conduits designed for that purpose passing
in through or under any adjoining property of the Landlord provided that
the Landlord may at any time stop up remove alter or make connections to
the Conduits if the Landlord makes available to the Tenant where
appropriate suitable alternative Conduits.
2. The right to change the name of the Building subject to the consent of the
Landlord which shall not be unreasonably withheld or delayed and subject
further to the consent of any competent public authority which may be
necessary.
SCHEDULE 3
EXCEPTIONS AND RESERVATIONS
1. ADJOINING PROPERTY
The right for the Landlord and all persons authorised by the Landlord from
time to time to rebuild alter or develop any adjoining property of the
Landlord in such manner as the Landlord may think fit despite any resulting
interference to the access of light or air to the Premises and the right to
use any adjoining property
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of the Landlord for any purpose to the intent that nothing contained in
this Lease shall by implication of law or otherwise operate to confer upon
the Tenant any easement right or privilege over any adjoining property of
the Landlord which might restrict or prejudicially affect its future
rebuilding alteration or development nor shall the Tenant be entitled to
compensation for any damage or disturbance caused by or suffered through
any such use rebuilding alteration or development.
2. ENTRY BY THE LANDLORD
The right for the Landlord and all persons authorised by the Landlord from
time to time with or without workmen at any time during the Term and upon
giving not less than 48 hours prior written notice (except in case of
emergency when no advance notice shall be required) to enter upon the
Premises for the purpose Of;
2.1 developing repairing altering inspecting or maintaining adjoining or
neighbouring property or any party walls services Conduits or other things
relating to such property;
2.2 carrying out inspections or surveys of the Premises (and taking samples and
making trial bores) including for the purposes of monitoring compliance by
the Tenant with its obligations in this Lease:
2.3 carrying out works or services which the Landlord must or may carry out
under the terms of this Lease: and
2.4 exercising any other rights granted or reserved to the Landlord by this
Lease.
the Landlord or workman making good all and any damage done to the Premises
3. UTILITIES
The free passage and running of Utilities through Conduits to and from
adjoining or neighbouring property and the right to connect into them
together with the right on not less than 48 hours prior written notice
(except in case of emergency when no advance notice shall be required) to
enter upon the Premises to lay
52
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maintain repair and renew Conduits and lay or install new Conduits and
making good all damage done to the Premises.
4. SUPPORT
The support and protection from the Premises enjoyed by adjoining or
neighbouring property.
5. BOUNDARY WALLS
The right for the Landlord and all persons authorised by the Landlord from
time to time to build onto or into any boundary or perimeter wall or fence
of the Premises.
6. SCAFFHOLDING
The right to erect scaffolding on over or around the Premises in the
exercise of any of the rights excepted and reserved to the Landlord in this
Schedule.
SCHEDULE 4
MATTERS TO WHICH THE PREMISES ARE SUBJECT
1. SUBSTITUTING RIGHTS
All subsisting rights easements and privileges belong to or enjoyed by
adjoining or neighbouring property.
2. RELEVANT DOCUMENTS
The covenants stipulations and other matters specified or referred to in
Title Number BK255580 and in a licence dated 27th April 1989 (1) Abbott
Laboratories Limited and (2) Queensgate Land (Moorbridge) Limited so far as
the same affect the Premises and are subsisting and capable of being
enforced.
SCHEDULE 5
GUARANTOR'S OBLIGATIONS
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1. PRIMARY OBLIGATIONS
The Guarantor covenants with the Landlord as a primary obligation:
1.1 that the Tenant or the Guarantor shall at all times during the Term duly
perform and observe all the covenants conditions and other provisions on
the part of the Tenant to be observed and performed in this Lease
(including the payment of the Yearly Rent and all other sums from time to
time payable under this Lease) in the manner and at the times specified and
shall indemnify the Landlord against all actions proceedings losses
liabilities cost damages expenses claims and demands sustained by tile
Landlord in any way directly or indirectly arising out of or resulting from
any default by the Tenant in the performance and observance of any such
covenants conditions and other provisions:
1.2 not to claim in any liquidation bankruptcy administration receivership
composition or arrangement of the Tenant in competition with the Landlord
and to remit to the Landlord the proceeds of all judgments and all
distributions it may receive from any liquidator trustee in bankruptcy
administrator administrative receiver receiver or supervisor of the Tenant
and to hold for the sole benefit of the Landlord all security and rights
the Guarantor may have over assets of the Tenant while any liabilities of
the Tenant or the Guarantor to the Landlord remain outstanding:
1.3 that if a liquidator trustee in bankruptcy or other competent person shall
disclaim or surrender this Lease or this Lease shall be forfeited or the
Tenant shall die or cease to exist (the date on which any such event occurs
being referred to in this Schedule as "the Relevant Date") then the
Guarantor shall (if the Landlord so requires by notice in writing given to
the Guarantor within six months after the Relevant Date) accept from and
execute and deliver to the Landlord a counterpart of a new lease of the
Premises for a term commencing on the Relevant Date and continuing for the
remainder of the Term such new lease to be at the cost of the Guarantor and
to be at the same rents and subject to the same covenants conditions and
provisions as are contained in this Lease: and
1.4 that if the Landlord shall not require the Guarantor To take a new lease
the guarantor shall nevertheless upon demand pay to the Landlord a sum
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equal to the Yearly Rent and all other sums that would have been payable
under this Lease in respect of the period from and including the Relevant
Date until the expiry of twelve months after the Relevant Date or until the
Landlord shall have granted a lease of the Premises to a third party
(whichever shall first occur) in addition and without prejudice to the
Guarantor's other obligations under this Lease.
2. GUARANTOR'S LIABILITY
The Guarantor is jointly and severally liable with the Tenant (whether
before or after any disclaimer by a liquidator or trustee in bankruptcy)
for the fulfilment of all the Tenant's covenants conditions and other
provisions contained in this Lease and the Landlord in the enforcement of
its rights may proceed against the Guarantor as if the Guarantor was named
as the Tenant in this Lease.
3. WAIVER OF RIGHTS
The Guarantor waives any right to require the Landlord to proceed against
the Tenant or to pursue any other remedy of any kind which may be available
to the Landlord before proceeding against the Guarantor.
4. MATTERS NOT AFFECTING LIABILITY
None of the following (or any combination of them) shall release determine
discharge or in any way lessen or affect the liability of the Guarantor as
principal debtor under this Lease or otherwise prejudice or affect tile
liability of tile Guarantor to accept a new lease in accordance with the
provisions of this Schedule:
4.1 any neglect delay or indulgence or extension of time given by the Landlord
in enforcing payment of the Yearly Rent or any other sums due under this
Lease or in enforcing the performance or observance of any of the Tenant's
covenants conditions or other provisions contained in this Lease:
4.2 any refusal by the Landlord to accept Yearly Rent tendered by or on behalf
of the Tenant following a breach of covenant by the Tenant:
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4.3 the expiry or sooner determination of the Term:
4.4 any variation of the terms of this Lease (including any reviews of the
Yearly Rent payable under this Lease) or the transfer of the Landlord's
reversion or the assignment of this Lease;
4.5 any change in the constitution structure or powers of either the Tenant the
Guarantor or the Landlord or the liquidation administration receivership or
bankruptcy (as the case may be) of either the Tenant or the Guarantor or
the death or dissolution of the Tenant:
4.6 any legal limitation or any immunity disability or incapacity of the Tenant
(whether or not known to the Landlord) or the fact that any dealings with
the Landlord by the Tenant may be outside or in excess of the powers of the
Tenant: or
4.7 any other act omission matter or thing of any kind by virtue of which (but
for this provision) the Guarantor would be exonerated either wholly or in
part (other than a release under seal given by the Landlord).
5. SUCCESSORS
This guarantee shall subsist for the benefit of the successors and assigns
of the Landlord under this Lease without the necessity for any assignment
of it.
( SIGNED by DAVID JOHN DOWNING
( in the name of J. M. JONES
( PROPERTIES LIMITED (in
( Administrative Receivership)
( without personal liability and
( its attorney pursuant to powers
( granted to him by statute and
( legal mortgage dated 28th July
( 1992 made between (1) J. M. Jones
( Properties Limited (in
( Administrative Receivership) and
( (2) Hill Samuel Bank Limited in
( the presence of:
[ILLEGIBLE] /s/ PD Sheehan
[ILLEGIBLE] PD Sheehan
[ILLEGIBLE] 23 Scholars Way
[ILLEGIBLE] Hatfield Herts
[ILLEGIBLE] Director
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[COMPANY LOGO]
NABARRO NATHANSON
DATED 6 March 1996
D.J. DOWNING
- and -
J.M. JONES PROPERTIES LIMITED
(in Administrative Receivership)
- and -
BUSINESS OBJECTS (U.K.) LIMITED
- and -
BUSINESS OBJECTS SA
LEASE
Sun Court. Moorbridge Road, Maidenhead, Berkshire
Nabarro Nathanson
50 Stratton Street
London WIX 6NX
Tel: 0171 493 9933
<PAGE>
H.M. LAND REGISTRY
[NOT SHOWN]
<PAGE>
PLAN 2
[NOT SHOWN]
<PAGE>
SUN COURT - MAIDENHEAD
SCHEDULE OF LANDLORDS WORKS
22/02/96
MAIDSCH5.WPS
MANAGING AGENT
The flat roof area over the main stairs of Block I are to be cleaned of moss
growth.
All H&V plant is to be run to check operational status.
Repair damaged car park gate operating mechanism.
Any blown lamps or tubes are to be replaced in luminaires.
Clean raised pond/fountain area in courtyard.
Clear all loose rubbish from all service cupboards and service shafts between
toilet blocks. Remove rubbish from gardener's room under rear stair to Block 1.
Provide chlorination certificate for water storage systems.
<PAGE>
22/02/96
MAIDSCH5.WPS
ENVIRONMENTAL ENGINEERING SERVICES
Repair or replace severely damaged pipework insulation in both plant rooms for
heating and chilled water pipework.
Fit missing grille to staircase smoke vent outlet at head of main stairs in
Block 1,
Replace seven lower sections of rainwater down pipes on the north and east
elevations, including a pipe located by entrance drive outside the sliding gate.
Check that all condensate drains serving F.C.U.s in the ground floor of both
blocks, drains away from all units.
Check that vapour proof lagging to chilled water pipework in ground floor
ceiling voids of both Blocks is intact,
Divert the small warning pipes serving both roof cold water storage tanks
discharges to a nuisance point. i.e. where a discharge can be seen from ground
level.
Fit non return air valves to any open SVP's located within roof space above
toilet core areas.
MARCOE ELECTRICAL
Replace missing cable trunking covers in service shafts.
Fit circuit schedules adjacent to each distribution board.
<PAGE>
22/02/96
MAIDSCH5.WPS
LOOSE MATERIALS
Supply a box of toilet ceiling tiles
Supply a box of office area ceiling tiles
Supply a box of corridor area ceiling tiles
Supply 2 rolls of 50 x 1.2m rolls of vinyl wall covering as existing pattern
(ordered).
J BULLMAN & SONS
Refix carpet risers in main stairs in Block 1.
<PAGE>
22/02/96
MAIDSCH5.WPS
M J BLACK
Replace cracked 'Cox' dome on roof access hatch on Block 1.
Fill all holes in external brickwork which are greater than screw fixing using
ground brick and cement as filler so as to match existing colour.
Repair small area of brick pointing on west elevation of Block 1, by Solicitor's
office.
Rub down and repaint air grilles in external wall at north end of both Blocks.
Rub down and paint with black bitumastic paint the SVP adjacent to a column in
the undercroft parking area (north end under link)
Make good holes through 1st floor slab where pipework was removed from wall
mounted F.C.U.s using dry sand/cement mix or dense rockwool.
Refix loose section of vinyl wall covering at lst floor level in the secondary
staircase of Block 2.
Refix loose laminate trim to vanity unit in female w.c. 1st floor Block 2.
Fit overhead door closer, intumescent strips to frame and ease door fit to fire
exit to secondary stair Block 2, ground floor.
Door from ground floor office to secondary stair in Block I to be fitted with
overhead door closer and intumescent strips to frame.
Fit missing top leaf lock to door at 1st floor Block I leading to annex.
Within chiller room in each roof plant room clean off two air handling units
currently painted and touch-in any defective paint areas using black bitumastic
paint. For the two remaining unpainted air-handling units rub down internal and
external rust spots and treat with Galavafroid paint.
Within chiller room in each plant room paint boarding covering wall plate (below
louvre opening) with 2 coats wood preservative paint, such as Crown
'Timberguard' or similar.
Take down 9 metre section of north boundary wall to base level and rebuild using
existing bricks. Allow for quantity of new bricks to replace any existing which
are unusable. Form 12mm expansion gap at each end where section joins existing.
On eastern wall of main car park disc cut existing mid-point expansion joint in
new section to form 12mm wide joint for full height. Where new section joins to
old section form similar 12mm expansion joint for full height. Allow to rebed
approx 24 loose coping bricks.
Provide strips of lay-in prismatic sheet to 1st floor female w.c. Block 2 and
1st floor female Block 2. (Liaise with Marcoe Electrical for material supply)
<PAGE>
Apply fire casing to exposed metal beams in all electrical riser cupboards.
Rub-down, prime bare wood, apply undercoat and two coats of gloss paint to gas
meter cupboard outside Block 1
Hack-off loose plaster -to Block 1 staircase wall. Treat surface, replaster and
redecorate.
Reapply adhesive to small loose sections of wallpaper.
NOTE: Door furniture to be as supplied by Messrs Comyn & Ching, to match
existing.
<PAGE>
DATED
- and -
______________________________
AUTHORISED GUARANTEE AGREEMENT
- relating to -
to a Lease made between
(1) D.J. Downing
(2) Business Objects (U.K.) Limited
(3) Business Objects SA
relating to premises known as
Sun Court Moorbridge Road Maidenhead Berkshire
Nabarro Nathanson
50 Stratton Street
London WIX 6NX
Tel: 0 171 493 9933
<PAGE>
DEED dated 1996
BETWEEN
(1) [ ]OF[ ]
(the "landlord")
(2) [ ](company registration number[
[)whose registered office is at[ ]
(the guarantor")
WITNESSES as follows:-
1. Definitions and Interpretation
------------------------------
1.1 In this Deed, unless the context other-wise requires, the following words
and phrases have the following meanings:-
1.1.1 "Act"
---
means the Landlord and Tenant (Covenants) Act 1995.
1.1.2 "Assignee"
---------
means ](company registration number
[ [)whose registered office is at [
].
1.1.3 "Lease"
-----
means a lease of the Premises dated 1996 and made
between (1) D.J. Downing (2) Business Objects (U.K.) Limited and
(3) Business Objects SA and includes any deeds or documents
supplemental to it whether or not expressed to be so.
1
<PAGE>
1.1.4 "Premises"
--------
means the Premises briefly known as Sun Court Moorbridge Road
Maidenhead Berkshire and more particularly described in the
Lease.
1.2 The Clause headings in this Deed (except for the definitions) are for
ease of reference and are not to be used for the purposes of construing
this Deed
1.3 References in this Deed to Clause numbers mean the Clauses of this Deed.
1.4 Obligations undertaken by more than one person are joint and several
obligations.
1.5 Words importing persons include firms companies and corporations
and vice versa.
1.6 Words importing one gender will be construed as importing any other
gender.
1.7 Words importing the singular will be construed as importing the plural
and vice versa.
1.8 Words and phrases defined in the Lease have the same meanings in this
Deed.
1.9 Unless the context otherwise requires, references to any statute include
all regulations and orders made under the relevant statute and any
statute, regulations or orders amending, consolidating or replacing it or
them in force from time to time.
1.10 In this Deed, the expression "tenant covenants" is to be construed
consistently with the Act.
<PAGE>
2. Recitals
--------
2.1 By the Lease the Premises were demised to Business Objects (U.K.) Limited
[the Guarantor] for a term of twenty five years from
1996 subject to the payment of the rent reserved by and observance and
performance of the covenants and conditions contained in the Lease.
2.2 The reversion immediately expectant on the term of years granted by the
Lease [remains] [is now] vested in the Landlord and the unexpired residue
of the term of years granted by the Lease [remains] [is now] vested in the
Guarantor.
2.3 The Guarantor wishes to assign the Lease to the Assignee and, under the
Lease, the consent of tile Landlord is required to such assignment.
2.4 By a licence to assign dated [with the same date as this deed] entered into
by the Landlord (1) the Guarantor (2) and the Assignee (3) the Landlord has
granted consent to the assignment on condition that the Guarantor enters
into this Deed to guarantee the performance by the Assignee of the tenant
covenants of the Lease.
2.5 The Guarantor has agreed to enter into this Deed pursuant to that
condition.
3. Guarantor's Covenants
---------------------
3.1 The Guarantor COVENANTS with the Landlord as principal obligor as follows:-
3.1.1 That the Assignee will pay the rents reserved by and observe and perform
the tenant covenants of the Lease and that if the Assignee defaults in the
payment of any of the rents reserved by the Lease on the due dates or in
observing or performing any of the tenant covenants of the Lease the
Guarantor will pay the rents or observe or perform the tenant covenants in
respect of which the Assignee has defaulted and the Guarantor will make
good to tile Landlord on
3
<PAGE>
demand all losses costs damages and expenses resulting from any such
default.
3.1.2 That if a liquidator or trustee in bankruptcy of the Assignee disclaims
the Lease the Guarantor will at the request of the Landlord made within
three months after such disclaimer take from the Landlord a lease of the
Premises for a term equal to the residue of the [Term] which would have
remained had there been no disclaimer at the same rents and subject to
the tenant covenants of the Lease such lease to take effect from the
date of such disclaimer and in such case the Guarantor will pay the
costs of such new lease and execute and deliver a counterpart of it to
the Landlord.
3.2 The Guarantor's obligations under Clause 3.1 commence on the date on which
the leasehold interest under the Lease is assigned to the Assignee and do
not bind the Guarantor in relation to any time after either
3.2.1 the Assignee is relased from the tenant covenants of the Lease in
accordance with the Act (but without prejudice to any liability of the
Guarantor incurred before the time of such release) or
3.2.2 the Assignee is able to demonstrate by production of accounts to the
Landlord that for each, of three consecutive financial periods being in
aggregate not less than three years and at least one of which
consecutive financial periods shall be after the date of this Deed its
accounts indicate that it has achieved net profits before tax (meaning
the net trading profits before tax for a period of 12 months or in the
case of any other period the annualised rate of net profit before tax of
the Assignee arising from its ordinary trading activities but excluding
any profit from the sale of fixed assets businesses or investments or
other exceptional and/or extraordinary items or items which would have
been classified as extraordinary and/or exceptional items before the
introduction of Accounting Standard FRS3 after deduction (on an
annualised basis) of deprecation interest charges and Al other expenses
or charges as disclosed by the accounts of the Assignee for the
financial periods in question which equal to or
4
<PAGE>
exceed the aggregate of the total amount likely in the reasonable opinion
of the Landlord to be payable during the period of three years from the
date of production of accounts to the Landlord by way of rents insurance
and service charges and all other taxes and outgoings payable by the Tenant
under the Lease and for the purposes of this clause "accounts" all be
audited profit and loss accounts drawn up for the relevant periods in
accordance with the Companies Act 1985 (as amended) or any statutory
amendment or re-enactment of it for the time being in force) and to the
relevant Statements of Standard Accounting Practice applicable to the
United Kingdom. (or in a case other than that of a company incorporated in
the United Kingdom accounts prepared or re-stated in similar form).
3.3 None of the following shall release, discharge or affect the liability of
the Guarantor as principal obligor or otherwise prejudice or affect the
liability of the Guarantor to accept a new lease pursuant to Clause 3.1.2:
3.3.1 any neglect delay or indulgence or extension of time given by the
Landlord in enforcing payments of the rents or the performance or
observance of the tenant covenants of the Lease-,
3.3.2 any variation of the terms of the Lease;
3.3.3 any change in the constitution structure or powers of the Assignee or the
Guarantor, the liquidation administration receivership or bankruptcy (as
the case may be) of either tile Assignee or the Guarantor or the Assignee
ceasing to exist;
3.3.4 any legal limitation or immunity disability or incapacity of the Assignee
(whether or not known to the Landlord) or the fact that any dealings with
the Landlord by the Assignee may be outside or in excess of the powers of
the Assignee: or
3.3.5 any other act omission matter or thing of any kind by virtue of which
(but for this provision) the Guarantor would be discharged in whole or in
part.
5
<PAGE>
4. Scope of this Guarantee
-----------------------
4.1 The intention of the parties to this Deed is that it should be an
authorised guarantee agreement within the meaning of the Act.
4.2 If any provision, or any part of any provision, has the effect of causing
this Deed not to be such an authorised guarantee agreement, that provision
or that part is to be treated or all purposes as having been modified
(including, if necessary, by its omission) to such extent as will avoid
this effect.
IN WITNESS of which the parties have executed this Deed which is intended to
be and is delivered the day and year first written above but not before.
Original
--------
( SIGNED by DAVID JOHN DOWNING
( in the name of J. M. JONES
( PROPERTIES LIMITED (in
( Administrative Receivership)
( without personal liability and
( its attorney pursuant to powers
( granted to him by statute and
( legal mortgage dated 28th July
( 1992 made between (1) J. M. Jones
( Properties Limited (in
( Administrative Receivership) and
( (2) Hill Samuel Bank Limited in
( the presence of:
6
<PAGE>
23/02/96
SCHDCON3.WPS
SUN COURT, MAIDENHEAD
EXTERNAL WALLS
Chipped corners on brickwork at north end of Bldg I where timber bollards have
been installed.
Uneven brickwork is noted adjacent to main entrance which may have been laid
after main wall was built.
An area of rebuilt brickwork is noted adjacent to window openings at north end
of Bldg 1.
Partial spoiling noted at Moorbridge Road escape door threshold Slight chipped
brickwork noted adjacent to escape door openings.
DOORS
Scratches to paintwork on Main entrance doors noted.
WINDOWS
Window sill at ground floor on east side of Block 2 is noted as dented.
Window repairs are noted where mastic is applied to framing joints.
ROOF SPACE OVER BLOCK 2
Sand and cement fillet to door threshold between boiler room and chiller area
noted as untidy.
Ponding noted in asphalted area within chiller room.
ESCAPE STAIRCASE, BLOCK I
Decorations are noted as scuffed,
Wall plaster at first floor level is noted as having uneven finish.
Cupboard below staircase area is noted as unfinished condition.
SITE
Minor ponding noted to Tarmacadam finish to car park.
BOUNDARY WALLS
Brickwork to side wall of building, by entrance drive, has surface damaged to
brickwork which is noted.
<PAGE>
[COMPANY LOGO]
ASB/CEW,
4th March 1996.
Warner Cranston Solicitors,
Pickfords Wharf,
Clink Street,
LONDON, SEL. 9DG.
For the attention of Mr. A. Safer.
[STAMPED NOT SHOWN]
Dear Sirs,
RE: QUOTATION NO. 3059/2877,
SUN COURT - MAIDENHEAD.
We have pleasure in submitting our specification for the new raised floor, as
follows:
To supply and Ex:
- ----------------
Floor System: Eurodek full access floor system to withstand a uniformly
distributed load of 5 kn/m2.
Panels: 600 x 600 x 300mm nominal panels to BS5669.
Panel The floor will be left ready to receive carpet tiles by
Floorcovering: others.
Pedestals: l6mm diameter heavy duty pedestal with adjustment of 26mm.
Pedestal head type P35 LM24 diecast aluminium to restrain
panels from lateral movement.
Pedestal Fixings: 100 x 100mm galvanised pedestal base plates will be fixed to
a suitable structural slab with adhesive.
Floor Void Height: 90mm from the highest point of structural slab (void height
varies considerably, see note 3 below).
Panel Lifters: We will supply 2.No. single cup suction pads.
Schedule of Quantities and Rates:
- --------------------------------
Flooring to Ground & First Floor areas
<PAGE>
[COMPANY LOGO]
ASB/CEW,
4th March 1996.
WARNER CRANSTON SOLICITORS
- --------------------------
1. Shown on our Drawing No. 0397 and 0398- 1. Approx. qty
1664m2.
2. To factory form cut outs for electrical outlet boxes. A
sample box is required to use as a template.
150.No.
3. Sub floor levels: We have surveyed the existing structural
slab levels and proposal allows for manufacture of varying
length pedestals to allow for all the variations in levels
of the structural dab.
If you have any questions concerning the above, please do not hesitate to call.
Yours sincerely,
for and on behalf of
THE INTERIORS GROUP
/s/ Andrew Black
ANDREW BLACK,
Director.
<PAGE>
EXHIBIT 10.2
COMMERCIAL LEASE
BETWEEN THE UNDERSIGNED:
- -----------------------
- - The company named "FONCIERE CHAPTAL," a corporation with capital of 73,932,000
FF, with head office in LEVALLOIS-PERRET (Hauts-de-Seine), 1, Square Chaptal,
registered in the Commercial and Company Registry of Nanterre under number 8 612
187 433 (91803747).
Represented by Mr. Yves JACQUET, in his capacity of president of the board of
directors of said company.
Hereinafter the Lessor
PARTY OF THE FIRST PART
- -----------------------
AND
- ---
- - "BUSINESS OBJECTS", a corporation with capital of 16,126,788 FF, with head
office in PUTEAUX (Hauts-de-Seine), Tour Chantecoq, 5, rue Chantecoq, is
registered in the Commercial and Company Registry of Nanterre under number 8 379
821 994 (90805036).
Represented by Mr. Bernard Henri Dominique LIAUTAUD, in his capacity of
president of the board of directors of said company.
Hereinafter the Lessee.
PARTY OF THE OTHER PART
- -----------------------
THE FOLLOWING IS AGREED:
- ------------------------
The Lessor hereby leases for commercial purposes to the Lessee, which accepts,
the premises as defined in the special conditions below.
The present lease is governed by decree No. 53-960 of September 30, 1953, and
the texts by which this decree was modified and supplemented, as well as the
general conditions (Title I) and special conditions (Title II) below.
<PAGE>
TITLE I - GENERAL CONDITIONS
TERM
- ----
This lease is executed for a term for 9 years, full and consecutive, of which 6
years are mandatory, starting July 1, 1996.
The Lessee shall be entitled to terminate this lease at the end of the second 3-
year period, provided that it gives notice to the Lessor 6 months in advance by
bailiff's writ.
The Lessee may, under the same conditions of notification, terminate the lease
after a period of 5 years, but in this case, the Lessee must pay to the Lessor a
compensation equal to 6 months rent, not including taxes and charges. The
payment of this compensation must be made to the Lessor at the same time as the
restitution of the keys, without which the notice of termination shall be
considered null and void, and the lease shall continue in all its clauses,
charges, and conditions.
RENT AND INCIDENTAL CHARGES
- ---------------------------
This lease is executed in consideration of an annual rent, not including taxes,
specified in the special conditions.
This rent is payable in advance, according to the methods determined in the
special conditions.
This rent is understood not to include value added tax (VAT): consequently, the
Lessee agrees to pay to the Lessor, in addition to said rent, the amount of the
VAT or any other new, additional or substituted tax, at the current legal rate,
on the day that each rent payment is due.
In addition, at the same time as the rent, a deposit for charges must be paid
which shall be settled annually.
Failure to pay on the due date one rent and incidental amounts (charges,
additional guaranteed deposits . . .) shall cause by rights and without prior
notice interest calculated at a monetary market rate day after day, published by
Bank de France, plus two points, whereby each portion of a month shall be owed
as a full month; such interest may be considered as an incidental charge to the
rent and shall be subject to value added tax.
The amount of the rent shall also be increased by rights and without formalities
by any legal costs and non-recoverable fees, whereby all additional fees and
taxes shall be borne by the Lessee, which pledges to pay them.
<PAGE>
INDEXATION
- ----------
By common agreement, the parties establish that the rent shall be indexed and
shall vary automatically by rights and without notification or prior warning.
This indexation shall occur each year on the anniversary of the effective date
of the lease, or on the date of availability, if it occurs later, depending on
the variation of the construction cost index published quarterly by INSEE
[National Institute of Statistics and Economic Studies]. This index is
acknowledged by the parties as being directly related to the subject of the
present agreement.
The definition of the base index is established on the signing day of the lease;
its characteristics are indicated in the special conditions.
The revision index shall be the last index published on the anniversary date of
the lease.
The first indexation shall occur on the date indicated in the special
conditions.
It is also specified that this rent indexation clause constitutes an essential
and decisive reason for the execution of this lease, without which the Lessor
would not have contracted.
Consequently, the partial or total non-compliance with this clause shall justify
filing of an action for annulment of this lease by the Lessor.
SECURITY DEPOSIT (see special conditions)
- ----------------
On the signing day hereof, the Lessee shall deliver to the Lessor, as security
deposit, a bond issued by Banque Paribas, corresponding to six months' rent, not
including taxes and charges, as specified in the special conditions below, which
the Lessee expressly accepts.
On the other hand, such deposits shall be increased or reduced whenever the
terms of the rent are modified as a result of the application of the indexation
clause.
This deposit shall be refunded when the tenant leaves. It may be executed for
payment or all amounts liable to be owed for rent, charges, reimbursable tax,
repairs or any other reasons liable to be covered by the security deposit.
It is specified that this bond shall be both to the benefit of SNC FONCIERE
CHAPTAL LEVALLOIS, and its assigns or beneficiaries which shall have the
capacity of LESSOR.
<PAGE>
STATEMENT ON THE CONDITION OF THE PREMISES
- ------------------------------------------
A statement on the condition of the premises shall be drawn up in the presence
of both parties whenever the premises are made available and when the keys are
returned, or, in the absence of agreement, by court bailiff, at the initiative
of the most diligent party, at the expense of the tenant.
In the absence of statement on the condition of the premises, the presumption
established in Article 1731 of the Civil Code may be invoked by the Lessor.
CHARGES AND CONDITIONS
- ----------------------
This lease is executed with the regular and legal charges and conditions, and
especially those listed below, which the Lessee pledges to execute exactly, and
without right to request any compensation or reduction of the established rent,
and under penalty of paying all expenses and even under penalty of cancellation
hereof, if the Lessor so wishes.
The Lessee makes the following commitments:
1 - MAINTENANCE AND REPAIRS
-----------------------
To accept the leased premises as is, without demanding any repair when
taking possession, nor during the entire term of the lease, and to
ensure, independently of these, all the necessary repairs to said
premises during the term of the lease, with the exception of those
provided for in Article 606 of the Civil Code.
To maintain the leased premises in a consistent manner and to return them
at the end on the possession in a good state of maintenance and repair.
If such works are not done, the Lessor may act as a substitute for the
Lessee and have them done by a company of its choice, at the exclusive
cost of the Lessee.
To allow or allow to be done, without the right to any compensation or
decrease in rent, the work of any nature, particularly of major
maintenance, or improvement, that the Lessor does in the building, even
if the duration thereof exceeds 40 days, but does not exceed 90 days
without the express agreement of the Lessee.
The same terms apply whenever the disruption is caused by the law or
other administrative authority.
To notify the Lessor, without delay and in writing, under penalty of
personal responsibility, of any damage to the property and of all wear
and tear and deterioration occurring in the leased premises which require
repairs that are the responsibility of the Lessor.
<PAGE>
To make no modification, change any distribution or any improvement
whatsoever, no construction of any type, without the prior express and
written consent of the Lessor, and without obtaining unless the necessary
administrative authorizations and the appropriate insurance.
These works shall be executed entirely at the expense of the Lessee under the
supervision of the Architect of the Lessor whose fees shall be the
responsibility of the Lessee.
All the amenities, fixtures, and improvements that the Lessee adds to the
premises are to the benefit of the Lessor, without compensation at the
end of the lease.
2 - AUTHORIZED ACTIVITIES
---------------------
To use the premises designated above for the exclusive use, determined under the
special conditions, to the exclusion of all industrial or craftsman production
or residential occupancy; the Lessee shall take upon itself all administrative
or other necessary authorizations without which would hinder the application of
the present contract, and shall be responsible for all charges, taxes and
royalties, present or future, which shall result from this activity, should such
activity be subject thereto.
3 - USAGE OF THE PREMISES
---------------------
Not to cause any violation or any complaint or claim from any person whatsoever
and particularly from the other tenants or neighbors; the Lessee shall,
consequently, take upon itself all grievances lodged with the Lessor about it,
so as the Lessor shall never be troubled and shall be held harmless of all
consequences that may result.
The Lessee shall refrain, in particular, from:
- - Bringing onto the leased premises flammable, explosives, or any other
materials posing a danger to the safety of the building;
- - Keeping in the leased premises any noisy, dangerous or disagreeable equipment;
- - Any excessive load on the floor greater than those specified in the special
conditions;
- - Placing anything or allow anything to stay in the common areas of the building
which must always remain free to access or passage.
In case of the use of instruments or equipment that can produce electronic
parasitic signals or other annoyances for the neighbors with regard to radio and
television reception, etc. the Lessee must immediately provide a remedy so that
the Lessor is not disturbed in this regard.
<PAGE>
4 - FURNISHINGS
-----------
To keep the premises constantly furnished with furniture, property, to be able
to cover, at all times, for the primary rent and its incidentals as well as the
entire execution of charges and conditions of the lease and to constantly keep
the premises in active commercial operation.
5 - ASSIGNMENT
----------
To not assign its right to the present lease. Nevertheless, it may freely assign
its rights to this lease to the buyer of its goodwill or company, with the
obligation of informing the Lessor in advance.
Any assignment must take place by notarized document or private instrument, with
the participation of the Lessor. The assignees must be jointly obligated with
the Lessee for payment of rent and implementation of the conditions of the lease
during the remaining term of the present lease. As for the Lessee, it remains
jointly liable with its successor for the payment of rent and the implementation
of the conditions of the lease.
An executed copy of the act of assignment or a recorded original must be
submitted to the Lessor, at no charge to the Lessor, whereby the Lessee is
required to follow the provisions of Article 1690 of the Civil Code.
In addition, all those who shall become subsequently assignees of the lease
shall be liable with regard to the Lessor, jointly and severally among them and
with the Lessee, for the payment of rent and the implementation of the
conditions of the lease during the term of the lease even when they no longer
occupy the premises and even when they have assigned their rights.
6 - SUBLEASING (see Special conditions)
----------
<PAGE>
7 - TENANTS CHARGES
---------------
To pay directly or to reimburse the Lessor for all charges relating to the
leased premises, whereby the Lessor is responsible only for major repairs
defined in Article 606 of the Civil Code.
If the premises leased by the Lessee are only a portion of the building, the
portion of the applicable charges are specified in "Special conditions."
The payment of charges shall occur at the same time as the rent and the
adjustment shall be made each year on the date determined in the special
conditions.
8 - LEVIES AND TAXES
----------------
To pay its personal taxes, personal property taxes, professional taxes, renters
taxes, and other taxes of any kind concerning in particular or relating to its
business or to its activity to which the renters are or may be subject; to pay
the tax for garbage removal, the tax for street sweeping, all new contributions,
municipal or other taxes and increases in taxes affecting the building, of any
kind and for any reason, and to reimburse the Lessor at his request for his
portion of the sums advanced by it for this purpose. It shall reimburse the
Lessor for half the property tax and annual office taxes in Ile de France
[Parisian region], under the conditions determined in the "Tenants charges"
section of the special conditions.
The Lessee must provide proof of the payment of all levies and taxes, and any
other taxes payable by it under this lease and for its activity, eight days
before its departure from the leased premises for any reason whatsoever.
<PAGE>
9 - INSURANCE
---------
- To be insured, starting when the keys are received even if this occurs
before July 1, 1996, with a Company known to be solvent, the personal and
real property, and merchandise of its profession against FIRE,
EXPLOSIONS, and ASSOCIATED RISKS, as well as WATER DAMAGE, BURGLARY
(including building deteriorations due to theft or attempted theft),
BROKEN GLASS and CLAIMS BY NEIGHBORS AND THIRD PARTIES.
The Lessee must maintain and renew its insurance during the entire term
of the lease, and pay regularly the premiums and dues, and to prove to
the Lessor, at the first request of the latter, and for the first time in
the month following the execution hereof.
Every year, during the reevaluation of the rent, it must provide new
proof of insurance. Any failure to insure the leased premises shall cause
the termination of the lease by rights.
The Lessee must install portable fire extinguishers or maintain them in
good condition, in accordance with the regulations of the plenary
assembly of Fire Insurance Companies.
The Lessee must also have a "civil liability" policy guaranteeing the
monetary consequences of said liability that it may incur due to
personal, material and intangible caused to third parties.
If the activity exercised by the Lessee results in additional insurance
premiums, either for the owner or for the neighbors or other renters, the
Lessee must reimburse the amount of the additional insurance premiums to
all the interested parties.
The Lessee and the Lessor reciprocally waives all remedies and actions
whatsoever as a result of the total or partial destruction of any
property, furniture, any valuables whatsoever and merchandise either
because of their deterioration, or because of deprivation or disturbance
of the enjoyment of the premises, and even in the case of total or
partial loss of goodwill including the intangible element associated with
said goodwill.
In addition, if the leased premises are destroyed, either partially or
totally, by an event, whether or not the Lessor is responsible for it,
the Lessee may not, by express agreement, claim any compensation other
than that given to the Lessor by its insurance company for the damage
caused to the Lessee.
- To reimburse the Lessor all the insurance premiums contracted in
accordance with the usage by the Lessor, particularly insurance covering
the building for its replacement value against fire and explosion, with
waiver of all claims in case of loss against the Lessee.
10 - VISITATION RIGHTS
-----------------
- To allow the Lessor, its representative or its architect and all other
service providers and workers to enter the leased premises and to visit
to ascertain their condition, whenever it seems useful, provided it
notifies the Lessee, by any means whatsoever, 24 hours in advance, except
in case of force majeure. The Lessee must also allow any necessary work
to be done and to allow workers to enter who shall be carrying out work
judged to be necessary by the owner or the neighboring owners.
<PAGE>
- To allow to visit the premises:
- By the Lessor or potential renters in the case of termination of the
lease, during a period of 6 months prior to the effective departure date
of the Lessee, provided the Lessee is notified by any means 24 hours in
advance.
- By the Lessor or potential buyers in the case of sale, as of the date
the leased premises are put up for sale, provided the Lessee is notified
by any means 24 hours in advance.
- To allow the placement of signs or posters to be affixed to such places
acceptable to the Lessor and the Lessee during the same period.
11 - MISCELLANEOUS OBLIGATIONS
-------------------------
- To not invoke the responsibility of the Lessor in the following cases:
- In case of theft, burglary or other criminal event, actions and acts of
employees assigned to the building, even those resulting from severe
fault and in general, disturbances resulting from the actions of third
parties or other occupants in the leased premises or appurtenances of the
building;
- In case of interruption in the service of the installations of the
building;
- In case of accident occurring due to the installation of said services in
the leased premises;
- In the case that the leased premises are flooded or inundated by rain
or other water, water leaks, water entering through pipes or glass panes,
etc.
The Lessee must take upon itself the above cases and, in general, all other
acts of God foreseen or otherwise, with reservation of its rights against the
applicable persons, except for the Lessor.
For more security, the Lessee must have all the necessary insurance so that
the Lessor is fully relieved of all responsibility.
- To contract directly with distributing companies with regard to
telephone usage (and electricity, if it is the only lessee);
- To not claim any reduction of rent or any compensation in case of
temporary interruption or reduction in utilities such as water,
electricity, telephone, heating, etc.
- To notify by registered letter to the Lessor, in case of modification
of bylaws of the lesee company (conversion, name change, or business name
change, change in location of the head office, change of management) and
in the month of the modification, the change that occurred, under penalty
of termination of the present lease, if the Lessor so chooses.
<PAGE>
SALE OF THE PREMISES BY THE LESSOR
- ----------------------------------
The lessor may freely sell all or part of the building where the premises
hereunder are located.
The Lessor pledges to cause the buyer or buyers to take over its obligations
toward the Lessee, so that the buyers are substituted in the Lessor's
obligations towards the Lessee.
CANCELLATION CLAUSE
- -------------------
When a payment is not made by its exact due date for a term or a fraction of a
term of rent and/or for any of its incidentals or if the Lessee fails to take
insurance, and one month after a simple request for payment or a notice to pay
remain all or in part without effect during this period, and containing the
declaration by the Lessor of its intention to invoke this clause, even in the
case of payment or deposit of the amounts after the expiration of the lease.
If Lessee fails to comply with any of the conditions hereof, this lease shall be
terminated by rights and without formalities if the Lessor so chooses, eight
days after the notice to pay by registered letter with return receipt requested
which remains all or partially without effect during this term and containing
the declaration of the Lessor of its intention invoke this clause, even in the
case of execution after the expiration of said period.
If the Lessee refuses to vacate the premises, it shall suffice, to force to it
to do so immediately, to obtain a simple order by referral issued by the
competent court, executory by deposit and without bond, in spite of opposition
or appeal.
In this case, and regardless of the cause of the termination, the security
deposit shall be kept by the Lessor, as first damages, without prejudice to any
other rights.
EXPENSES
- --------
All expenses, dues, taxes and professional fees of the present lease, as well as
those resulting from it, shall be borne and paid by the Lessee, which expressly
pledges to do so.
ELECTION OF DOMICILE
- --------------------
For the implementation of the present lease, the Lessor elects domicile at its
company head office and the Lessee, in the leased premises.
<PAGE>
TITLE II - SPECIAL CONDITIONS
1. DESCRIPTION
-----------
Building
.....................
1, Square Chaptal - 92300 - LEVALLOIS
Main premises: Offices
.....................
Position: Ground floor in R-2
Total area: 6,636 m2 usable
Secondary premises
.....................
R.I.E.: 514 m2 usable on the ground floor
------
Archives: 289 m2 usable in R-2
--------
Parking spaces:
--------------
Position: 138 spaces in the R-1 and R-2
2. REFERENCE DATES
---------------
- Date the lease takes effect: the day the present lease is signed
- Date the premises are available:
June 17, 1996:
-------------
Offices: ground floor rue Jacques Ibert wing in part (see appended map),
-------
all of R+1 to R+3 in all, R+4 partial (rue Jacques Ibert wing or
3,325.00 m2 usable and 104 m2 of shared or common areas (see premises
shaded yellow on the appended map).
R.I.E.: Share of 264.50 m2
------
Archives and maintenance room: 95 m2 in R-2
-----------------------------
Parking spaces: 69 spaces in R-2
--------------
[handwritten:] If the date of June 13, 1996 is not respected concerning the
availability of the premises listed above, the Lessor shall incur a
penalty of 30,000 F per calendar day of delay.
September 15, 1997:
------------------
Entire building
If the date of September 15, 1997 is not respected concerning the
availability of the entire building, the Lessor shall incur a penalty
of 10,000 F per calendar day of delay.
- Starting date for payment of rent: October 1, 1996
3. AUTHORIZED ACTIVITIES
---------------------
The leased areas shall be used for commercial offices.
The building is not classified in the E.R.P. category.
<PAGE>
The parking spaces are associated with the main activity.
4. BASE RENT
---------
4.1. UNIT ANNUAL RENT NOT INCLUDING TAXES AND [ILLEGIBLE] CHARGES:
-------------------------------------------------------------
$ Offices .......................... 1,800 FF/m2 usable
$ Archives ......................... 900 FF/m2 usable
$ Share of R.I.E. .................. 1,600 FF/m2 usable
$ Parking spaces ................... 6,500 FF/space
Although the entire building shall be available to the Lessee starting September
15, 1997, the parties agree to designate the areas used to determine the rents,
as follows:
- from June 17, 1996 to December 31, 1997:
$ Offices .......................... 3,429 m2
$ Archives ....................... 95 m2
$ Share of R.I.E. .................... 265 m2
$ Parking spaces ..................... 69 spaces
- from January 1, 1997 to March 31, 1998:
$ Offices .......................... 4,500 m2
$ Archives ....................... 195 m2
$ Share of R.I.E. .................... 347 m2
$ Parking spaces ..................... 93 spaces
- from April 1, 1998 to December 31, 1998:
$ Offices .......................... 5,200 m2
$ Archives............................ 225 m2
$ Share of R.I.E. ............. 400 m2
$ Parking spaces...................... 108 spaces
- starting January 1, 1999:
$ Offices............................. 6,656 m2
$ Archives ....................... 289 m2
$ R.I.E. ........................... 514 m2
$ Parking spaces ............. 138 spaces
<PAGE>
Consequently, the annual rents shall be as indicated below:
4.2. ANNUAL RENTS FROM JUNE 17, 1996 TO DECEMBER 31, 1997
----------------------------------------------------
ANNUAL RENT I.E. PER QUARTER
----------- ----------------
Rent not including taxes 7,130,200.00 FF 1,782,550.00 FF
VAT 20.6% 1,468,821.20 FF 367,205.30 FF
--------------- ---------------
Rent including taxes 8,699,021.20 FF 2,149,755.30 FF
Given an allowance of 3 months and 14 days provided at the beginning of the
lease, the first payment shall be 2,149,755.30 FF including all taxes for the
period from October 1 to December 31, 1996.
4.3. ANNUAL RENTS APPLICABLE FROM JANUARY 1, 1998 TO MARCH 31, 1998
--------------------------------------------------------------
ANNUAL RENT I.E. PER QUARTER
----------- ----------------
Rent not including taxes 9,435,200.00 FF 2,358,800.00 FF
VAT 20.6% 1,943,651.20 FF 485,912.80 FF
---------------- ---------------
Rent including taxes 11,378,851.20 FF 2,840,712.80 FF
4.4. ANNUAL RENTS APPLICABLE FROM APRIL 1, 1998 TO DECEMBER 31, 1998
ANNUAL RENT I.E. PER QUARTER
----------- ----------------
Rent not including taxes 10,904,500.00 FF 2,726,125.00 FF
VAT 20.6% 2,246,327.20 FF 561,581.75 FF
---------------- ---------------
Rent including taxes 13,150,827.20 FF 3,287,706.75 FF
4.5. ANNUAL RENTS APPLICABLE FROM JANUARY 1, 1999 TO JUNE 30, 2002
-------------------------------------------------------------
ANNUAL RENT I.E. PER QUARTER
----------- ----------------
Rent not including taxes 13,960,300.00 FF 3,490,075.00 FF
VAT 20.6% 2,875,821.80 FF 818,955.45 FF
---------------- ---------------
Rent including taxes 16,836,121.80 FF 4,209,030.45 FF
An allowance equal to one-half month's rent, or 582,000 FF not including taxes,
shall be applied to the rents for the first quarters of 1999, 2000, 2001 and
2002.
<PAGE>
5. RENT PAYMENT
------------
The rent is payable quarterly in advance.
The amount shall be paid by check or bank transfer.
6. INDEXATION OF THE RENT
----------------------
Reference index - INSEE Construction quarterly
----------------------------------------------
- Base index - 4th quarter 1995 - value: 1013 (latest published on
the date of the present
contract)
- Date of the first indexation: July 1, 1998, and July 1 of each
year thereafter
7. TENANTS CHARGES
---------------
Deposit for charges:
Amount per quarter:
- from July 1, 1996 to September 15, 1997:
---------------------------------------
284,963 FF not including taxes, or 343,665.37 FF including all taxes
representing a participation in the tenants charges
proportional to the offices leased: 3,429 m2 usable of
the 6,656 m2 usable of the superstructure, or 51%.
<PAGE>
-starting September 15, 1997, the date on which the entire building shall
---------------------------
be available to the Lessee, the Lessor pledges to consult, for
information, the Lessee, which shall pay all charges concerning the
general management of the building.
The Lessor shall obtain the agreement of the Lessee for the payments
for the purpose of maintenance of the building, and pledges to
submit for the Lessee's information a copy of the maintenance
contracts related to the maintenance and security of the premises so
that the Lessee may indicate its priorities appropriate for its
method of operation.
The adjustment shall occur during the 1st quarter of the subsequent
year.
The first adjustment shall be settled on December 31, 1997.
The Lessee shall reimburse the Lessor within a period of 15 days
from the date of the request, half of the property tax and all of
the tax on offices imputable to areas used in determining rents,
such as listed in Article 4 above.
8. SECURITY DEPOSIT
----------------
- Corresponding to 6 months rent not including taxes and charges, or until
September 14, 1997:
3,565,100 FF
-------------
- And starting September 15, 1997, the date of occupancy of the entire
premises, 6 months of rent calculated on the entire area of the
building:
6,980,150 FF
------------
- Method of payment: by guarantee deposit by Banque PARIBAS.
9. TECHNICAL DETAILS
-----------------
AUTHORIZED LOAD ON THE FLOORS
- 350Kg/m2 on each floor's floor, including walls
- 250Kg/m2 on the floor of the archives
- 250Kg/m2 on the parking level
<PAGE>
10. INSURANCE
---------
The building is covered by "Multi-risk Building" policy No. 6 781 932 with
the U.A.P. by intermediary of:
A.F.C.M. - 14 rue Rocher - 75008 PARIS - Tel. 40.08.19.00
11. SUBLEASE
--------
Not to sublease the premises partially or totally, except to the companies in
its group and under the following conditions:
a) the sublease must always terminate no later than the end of the lease.
b) the sublease must be to a sublessee exclusively for the exercise of an
office activity in accordance with the standing of the building.
c) for the collection of the rent, the Lessee shall be the only party know
to the Lessor and guarantor of the rent of any sublessee or occupant
brought by it.
d) the Lessee must impose on the sublessee the obligations resulting from
the present lease. The Lessee shall be the guarantor vis-a-vis the Lessor
for all the charges and obligations of the lease.
e) the sublessee may never invoke, at the end of this lease or of its
renewals, or following any notice given by the Lessor, a right to direct
renewal of its contract.
It is specified that the entire premises now leased shall be considered,
in the common intention of the parties, having an indivisible character
in such a way that despite the exceptional and personal power of
subleasing that is accorded to the Lessee, it alone has the right to
invoke the benefits of the commercial property with regard to the Lessor
and to pursue the renewal of its lease in its entirety.
f) the sublessee cannot sublease the premises it occupies.
g) in the case that the rights of the Lessee are terminated by the Lessor,
either judicially or amicably, and if the sublessee of the Lessee has not
vacated the premises on the date of the departure of the Lessee, or if the
latter did not vacate the premises on the date determined by the court
decision or by any agreement reached between the parties, the Lessee shall
owe the Lessor a daily penalty corresponding to 3 times the daily rent
without prejudice to all additional damages accruing to the Lessor.
In addition, the Lessee pledges to assure vis-a-vis its sublessee payment
of any possible compensation of any nature whatsoever, in particular that
possibly owed pursuant to the aforementioned decree governing commercial
property.
h) the Lessee pledges to provide to the Lessor a true certified copy of the
subleasing agreement prior to the occupancy of the sublessee.
<PAGE>
12. SPECIAL PROVISIONS
------------------
12.1 ANTICIPATED AVAILABILITY OF THE ENTIRE 4TH FLOOR:
------------------------------------------------
The Lessor shall make efforts to make available to the Lessee, without
taking a firm commitment on this point, the entire 4th floor, starting
June 1, 1997.
In this event, the rent applicable shall be increased, per calendar
day of occupancy, and until September 15, 1997, by a sum equal to:
Additional usable surface area:
968.30 m2 - 351.80 m2 = 616.50 m2
Share of the additional common areas:
201.76 m2 x 616.50 m2 = 19.26 m2
--------------------- --------
6,954.70 m2
or a usable contractual area of 635.76 m2
635.76 m2 x 1800 m2 = 3,135.25 FF not including
------------------- V.A.T.
385
or .........................................3,781.11 FF
including all taxes
12.2 WORKS
-----
The Lessor shall participate in maintenance work defined by Lessee for a
maximum fixed amount of 4,000,000 FF not including taxes, under the following
conditions:
- the works are defined by the Lessee and its consultants,
- the contractors' bids shall be obtained by the Lessor's Contracting
Department, in consultation with the Lessee and its consultants.
- the choice of companies and services, as well as their performance,
shall be the responsibility of the Lessee and its consultants.
- the Lessor shall execute the contracts and pay directly the
companies for the work ordered by it, up to:
- 3 MF not including taxes, as a maximum, for work performed in 1996,
- the balance up to the total amount of 4 MF not including taxes,
for work performed in 1997.
Finally, the PABX OPUS 4000 installed in the building shall by left in
place in operating condition, and shall become property of the Lessee, which
shall assure its direct maintenance as of September 15, 1997.
<PAGE>
12.3 PROVISIONS RELATED TO THE OCCUPANCY OF THE BUILDING BY THE
----------------------------------------------------------
LESSEE AND BY COGEDIM UNTIL SEPTEMBER 15, 1997:
-----------------------------------------------
The cohabitation of the Lessee and COGEDIM in the building, until September
15, 1997, shall be governed by the following provisions:
- - RECEPTION AND ACCESS TO THE OFFICES:
-----------------------------------
- Separation of the reception area into 2 zones, by means of a device which
shall be installed by the Lessor, after coordination with the Lessee.
- Operation of the elevators; the 2 elevators on the Ibert wing are
reserved for the Lessee for the ground floor and floors 1-4, while the
2 elevators on the Chaptal wing are reserved for COGEDIM for the ground
floor and floors 4-7. The service elevators, located in the Ibert wing,
are to be used for transporting heavy equipment (for example, a
photocopier) or for moving. The service elevators can be used only in
the presence o a member of IDEX, responsible for the maintenance of the
building.
- Planning of access control and its extension to the doors of emergency
exits.
- Installation of appropriate signage in the hall of the building and the
parking garage, by the Lessor, in cooperation with the Lessee, and on
the exterior of the building, by the Lessee, with the agreement of the
Lessor.
<PAGE>
- TELEPHONE:
---------
- The Lessee shall have a switchboard installed at its expense, which shall
be connected to the PABX OPUS 4000 of the building.
- MIXING ROOM ON THE 4TH FLOOR:
----------------------------
- The mixing room on the 4th floor, located in the Ibert wing, leased to
the Lessee, shall be used by the entire floor, and shall be
occasionally accessible to COGEDIM.
- REHABILITATION AFTER THE DEPARTURE OF COGEDIM:
---------------------------------------------
- Starting September 15, 1997, the Lessor shall remove the devices for the
separation of the reception area and the 4th floor as well as the
signage and signs installed by COGEDIM. The Lessor shall resume the
service of the four elevators.
12.4 ALLOWANCES APPLICABLE TO THE THIRD TRIENNIAL PERIOD:
---------------------------------------------------
- An allowance equal to one month's rent, or 1,163,358 FF not including
taxes, is granted to the Lessee at the beginning of the 7th and 8th
years of this lease.
Issued in Levallois in two originals
June 4, 1996
Read and approved
[signature] [signature]
BUSINESS OBJECTS SNC FONCIERE CHAPTAL
Words crossed out:
Lines crossed out:
Words added: 40
(*) Before the signature, handwrite "READ AND APPROVED"
<PAGE>
EXHIBIT 10.6
PROMISSORY NOTE
---------------
$200,000 June 23, 1997
FOR VALUE RECEIVED, the undersigned, David R. Ellett and wife, Leslie
K. Ellett, jointly and severally (collectively, "Borrower"), hereby promise to
pay to the order of Business Objects Americas, a Delaware corporation (the
"Company"), the principal sum of Two Hundred Thousand Dollars ($200,000), with
interest thereon at the rate of 6.23% per annum, at the principal offices of
the Company, upon the following terms and conditions:
The principal amount of this Note and all accrued but unpaid interest
from the date hereof shall be due on July 1, 1999. Notwithstanding the
foregoing, interest will accrue and be payable at a rate per annum equal to
the lesser of 9.5% per annum or the maximum interest rate allowed by law, on
all past-due principal and, to the extent permitted by applicable law, on all
past-due interest (whether past-due by maturity, acceleration or otherwise)
from the due dates thereof until the obligations of Borrower with respect to
the payment hereof shall have been discharged in full. All payments made
pursuant hereto, regardless of when made, shall be applied first to reduce
accrued and unpaid interest on the outstanding principal hereof and any
remaining portion of such payments shall then be applied to reduce the
principal hereof. All payments shall be made in the lawful money of the United
States of America.
In the event that (a) Borrower defaults in the payment when due of the
principal hereof or interest hereon or Borrower shall fail to pay when due any
other amount owing from time to time to the holder hereof, (b) David R.
Ellett ceases to be an employee of the Company for any reason, (c) a default
occurs under the Deed of Trust (defined below), or any other deed of trust or
other agreement (including any amendment, modification or extension thereof)
which may hereafter be executed by Borrower for the purpose of securing this
Note, or (d) Borrower sells, conveys or alienates the Property (defined
below), or any part thereof, or any interest therein, or is divested of its
title or any interest therein in any manner or way, whether voluntarily or
involuntarily, without the prior written consent of the holder of this Note,
in its sole and absolute discretion, then, in any such event and at the option
of the holder of this Note, the entire principal amount then outstanding
hereunder and all accrued and unpaid interest thereon through the date of such
default or other event shall become immediately due and payable.
Borrower shall have the right to prepay at any time, and from time to
time, without premium or penalty all or any portion of the principal and
accrued interest hereunder. The holder of this Note shall have full recourse
against Borrower.
Borrower hereby waives presentment, protest, demand for payment,
notice of dishonor and all other notices or demands in connection with the
delivery, acceptance, performance, default or endorsement of this Note. No
waiver by the holder hereof of any default shall be effective unless in
writing nor shall it operate as a waiver of any other default or of the same
default on a future occasion. This Note shall be binding upon Borrower and its
successors and assigns. Borrower agrees to pay all costs of collection of this
Note, including without limitation reasonable attorneys' fees and costs, in
the event it is not paid when due.
This Note is secured by a deed of trust (the "Deed of Trust") of even
date herewith made by Borrower, as trustor, in favor of Chicago Title
Insurance Company, as trustee, for the Company, as beneficiary, which shall be
recorded in the official records of the County of Collin, State of Texas,
encumbering certain real property commonly known as 4605 Courtyard Trail,
Plano, Texas (the
<PAGE>
"Property"), described more particularly on Exhibit A attached hereto. The
Deed of Trust contains, among others, the following provision:
If all or an part of the Property or any interest in it is
sold or transferred (or if a beneficial interest in Borrower is sold or
transferred and Borrower is not a natural person) without Lender's prior
written consent,Lender may, at its option, require immediate payment in full
of all sums secured by this Security Instrument.
Anything in this Note to the contrary notwithstanding, it is expressly
stipulated and agreed that the intent of Borrower and the holder hereof is to
comply at all times with all usury and other laws relating to this Note. If
applicable laws would now or hereafter render usurious, or are revised,
repealed or judicially interpreted so as to render usurious, any amount called
for under this Note, or contracted for, charged or received with respect to
the loan evidenced by this Note, or if any prepayment by Borrower results in
Borrower's having paid any interest in excess of that permitted by law, then
it is the express intent of Borrower and the holder hereof that all excess
amounts theretofore collected be credited to the principal balance of this
Note (or, if this Note has been paid in full, refunded to Borrower), and the
provisions of this Note immediately be deemed reformed and the amounts
therefor collectible hereunder reduced, without the necessity of execution of
any new document, so as to comply with the then applicable law, but so as to
permit the recovery of the fullest amount otherwise called for hereunder.
Borrower shall take any and all further actions that may from time to
time be required to ensure that the Deed of Trust creates a valid lien on the
Property. If it should be hereafter determined that there are defects against
title or matters which could result in defects against title to the Property,
or that the consent of another person or entity is required to grant or
perfect the Deed of Trust, Borrower shall promptly take all action necessary
to remove such defects and to obtain such consent.
Borrower understands that nothing in this Note modifies David R.
Ellett's at-will status with the Company. Either the Company or Borrower can
terminate the employment relationship at any time, with or without cause.
Time is of the essence of this Note. This Note may not be modified
orally, but only by a writing executed by Borrower and the holder hereof. This
Note has been made and delivered in the State of Texas and shall be construed
in accordance with, and all actions arising hereunder shall be governed by,
the laws of the State of Texas.
/s/ David R. Ellett
--------------------------------------
David R. Ellett
/s/ Leslie K. Ellett
--------------------------------------
Leslie K. Ellett
NOTE: THIS PROMISSORY NOTE REQUIRES A BALLOON PAYMENT OF PRINCIPAL.
FOR FURTHER INFORMATION, SEE THE SECOND PARAGRAPH OF THIS NOTE.
<PAGE>
EXHIBIT A
---------
Legal Descriptions
All that certain tract, place or parcel of land lying and situated in
the County of Collin, Texas, to wit:
LOT 3, BLOCK F, DEERFIELD ADDITION, PHASE ONE, an Addition to
the City of Plano, Collin County, Texas, according to the
Revised Map thereof recorded in Cabinet F, Page 422, Map
Records, Collin County, Texas.
3
<PAGE>
EXHIBIT B
---------
The following provisions are hereby agreed to and made a part of the
Deed of Trust dated June 23, 1997, by David R. Ellett and Leslie K. Ellett, as
Trustor, in favor of Chicago Title Insurance Company, as Trustee, for the
benefit of Business Objects Americas, a Delaware corporation, as Beneficiary
(the "Deed of Trust") as if fully set forth therein. Capitalized terms used
herein shall have the same meanings ascribed to them in the Deed of Trust.
A. Other Mortgages. Trustor shall fully perform and satisfy all
---------------
covenants, conditions and obligations of Trustor under any and all mortgages
and deeds of trust now or hereafter encumbering any portion of the Property
("Mortgages"). The occurrence of any default or event of defalut under any
Mortgages shall automatically constitute an immediate, material default
under the Deed of Trust and shall entitle Beneficiary to exercise any and all
rights and remedies under the Deed of Trust without first having given Trustor
any notice of, or opportunity to cure, such default.
B. Note and Other Agreements. Trustor shall fully perform and
satisfy all covenants, conditions and obligations of Trustor under that
certain Promissory Note dated June 23, 1997 by Trustor in favor of Beneficiary
(the "Promissory Note"). The occurrence of any default or event of default
under the Promissory Note shall automatically constitute an immediate,
material default under the Deed of Trust and shall entitle Beneficiary to
exercise any and all rights and remedies under the Deed of Trust without first
having given Trustor any notice of, or opportunity to cure, such default. The
Promissory Note provides that the amounts evidenced thereby shall be due on
the July 1, 1999. The Promissory Note also provides that, at the option of
Beneficiary, the amounts evidenced thereby shall be due and payable if (i)
David R. Ellett ceases to be an employee of Beneficiary for any reason, (ii)
Trustor fails to make full payment of any installment of principal or interest
due under the Promissory Note when due, (iii) a default occurs under the Deed
of Trust, or any other deed of trust or other agreement (including any
amendment, modification or extension thereof) which may hereafter be executed
by Trustor for the purpose of securing the Promissory Note, or (iv) Trustor
sells, conveys or alienates the Property, or any part thereof, or any interest
therein, or is divested of its title or any interest therein in any manner or
way, whether volun XXXXX?????
<PAGE>
EXHIBIT 10.16
VALUE ADDED RESELLER AGREEMENT
------------------------------
FOR VISIGENIC PRODUCTS
----------------------
WITH MANUFACTURING RIGHTS
-------------------------
This Value Added Reseller Agreement ("Agreement") is entered into as of the
EFFECTIVE DATE (identified below), between VISIGENIC SOFTWARE, INC.,
("VISIGENIC"), and BUSINESS OBJECTS S.A. ("VAR"). VAR desires to license
VISIGENIC's PRODUCTS from VISIGENIC under the terms of this Agreement, for the
purpose of packaging the VISIGENIC DISTRIBUTION PRODUCTS in combination with
certain of VAR's software products as an application bundle and to sublicense
that application bundle to end users for their internal use. Therefore, the
parties agreed as follows:
1. DEFINITIONS
-----------
(A) "VISIGENIC PRODUCTS" means the English language version of VISIGENIC's
proprietary software products known as the VISIGENIC DISTRIBUTION PRODUCTS,
the VISIGENIC DEVELOPMENT PRODUCTS and any other software provided to VAR by
VISIGENIC under this Agreement.
(B) "VISIGENIC DISTRIBUTION PRODUCT(S)" means the deployment copies of the
object code of the English language version of VISIGENIC's proprietary software
products or software products in which VISIGENIC has all necessary rights, power
and authority to enter into this Agreement, as selected hereunder and as is more
fully set forth in Exhibit A.
(C) "VISIGENIC DEVELOPMENT PRODUCTS" means the development copies of the
object code of the English language version of VISIGENIC's proprietary software
products or software products in which VISIGENIC has all necessary rights, power
and authority to enter into this Agreement, as selected hereunder and as is more
fully set forth in Exhibit A.
(D) "VAR PRODUCTS" means VAR's software product(s) specified in Exhibit
A.
(E) "APPLICATION BUNDLE" means the VISIGENIC DISTRIBUTION PRODUCT(S)
packaged in combination with one or more VAR PRODUCTS.
(F) DISTRIBUTOR" means a third party appointed by VAR to distribute
APPLICATION BUNDLEs directly to RESELLERs, VARs, SYSTEMS INTEGRATORs or END
USERs, subject to the terms and conditions imposed by this Agreement.
(G) "RESELLER" means a third party appointed by VAR or a DISTRIBUTOR to
distribute APPLICATION BUNDLEs directly to END USERs, subject to the terms and
conditions imposed by this Agreement.
(H) "END USER" means a third party sublicensed by VAR, a DISTRIBUTOR, or a
RESELLER to use an APPLICATION BUNDLE for the END USER's customary internal
business purposes, and not for redistribution.
(I) "TERRITORY" will be worldwide.
2. LICENSE GRANTS AND LIMITATIONS
------------------------------
(A) GRANT. Subject to the terms and conditions of this Agreement VISIGENIC
-----
grants to VAR and its majority owned subsidiaries, a nonexclusive, non-
transferable, non-assignable (except as provided under Section 10d), license
fee bearing, as set forth in this Agreement, limited (except for the unlimited
VISIGENIC DISTRIBUTION PRODUCTS provided in this Agreement) license throughout
the TERRITORY (i) to copy and use the VISIGENIC PRODUCTS in VAR's internal
development, support and testing process; (ii) to copy the VISIGENIC
DISTRIBUTION PRODUCT(S) and package it in combination with one or more VAR
PRODUCTS as an APPLICATION BUNDLE, (iii) to market and distribute the
VISIGENIC DISTRIBUTION PRODUCT(S) as contained in such APPLICATION BUNDLE to
END USERs, and (iv) to copy and use internally an unlimited number of copies
of the VISIGENIC DISTRIBUTION PRODUCT(S) as contained in the APPLICATION
BUNDLE(S)
(B) APPOINTMENT OF DISTRIBUTORS AND RESELLERS. VISIGENIC grants to VAR the
-----------------------------------------
right to appoint DISTRIBUTORs and RESELLERs to market and distribute APPLICATION
BUNDLEs to END USERs. DISTRIBUTORs will have the additional right to appoint
RESELLERs. Each DISTRIBUTOR or RESELLER appointed by VAR, and each RESELLER
appointed by a DISTRIBUTOR, must enter into a written license agreement with VAR
or the appointing DISTRIBUTOR that provides substantially similar protection of
VISIGENIC's title, rights and defenses as this Agreement. VAR will use its
reasonable efforts, but in no case less than VAR's efforts to enforce its own
agreements, to ensure that DISTRIBUTORs, RESELLERs and END USERs comply with the
terms of their respective agreements, and will notify VISIGENIC of any
violation.
(C) LIMITATIONS. All rights not expressly granted herein are reserved by
-----------
VISIGENIC and/or its suppliers. Without limiting the generality of the
preceding sentence, VAR receives no rights and agrees: (i) not to modify, port,
translate, localize, or create derivative works (in the case of derivative
works, exclusive of the APPLICATION BUNDLES as herein defined) of the VISIGENIC
PRODUCTS, (ii) not to decompile, disassemble or otherwise reverse engineer,
except as permitted under applicable EEOC law, the VISIGENIC PRODUCTS, (iii) not
to distribute an APPLICATION BUNDLE except under a valid sublicense agreement
that contains substantially the same terms set forth in this Agreement, but in
no event less than the same terms as VAR distributes VAR's Products, and (iv)
not to copy, market or distribute the VISIGENIC PRODUCTS except as part of an
APPLICATION BUNDLE, (v) not to copy or sublicense the VISIGENIC PRODUCTS on a
stand-alone basis or for use with any software other than the VAR PRODUCTS.
Each DISTRIBUTOR and RESELLER must agree to substantially similar terms and
conditions as are contained in this Agreement for the copying, marketing and
distribution of the APPLICATION BUNDLE.
3. PAYMENT AND OTHER OBLIGATIONS
-----------------------------
(A) LICENSE FEE(S). VAR agrees to pay to VISIGENIC LICENSE FEES as set
--------------
forth in Exhibit A. All LICENSE FEE(s) are non-refundable and non-cancelable
except as specifically set forth in Exhibit A, regardless of the number of
copies of the VISIGENIC PRODUCTS, if any, that are used or distributed by VAR
or its DISTRIBUTORs.
(B) VISIGENIC ANNUAL MAINTENANCE AND SUPPORT FEE. VAR will pay a VISIGENIC
--------------------------------------------
ANNUAL MAINTENANCE AND SUPPORT FEE, as set forth in Exhibit A, on the EFFECTIVE
DATE, or within 30 days of the date of the VISIGENIC invoice, whichever is later
and on each anniversary of the EFFECTIVE DATE, or within 30 days of the date of
the VISIGENIC invoice, whichever is later
(C) MONTHLY REPORTS. [*]
----------------
(D) ROYALTY. [*]
-------
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
1
<PAGE>
(E) VOLUME SUPPORT FEE. [*]
------------------
(F) TAXES. VAR will pay or reimburse all federal, state and local taxes
-----
(exclusive of taxes on VISIGENIC's net income), duties and assessments arising
on or measured by amounts payable to VISIGENIC under this Agreement, or furnish
VISIGENIC with evidence acceptable to the taxing authority to sustain an
exemption therefrom.
(G) RECORDS; AUDITS. VAR agrees to keep all usual and proper records and
---------------
books of account and all usual and proper entries relating to each transaction
involving any APPLICATION BUNDLE. Upon showing reasonable cause, VISIGENIC may
cause an audit and/or inspection to be made of the applicable VAR records and
facilities in order to verify statements issued by VAR and VAR's compliance
with the terms of this Agreement. Any such audit will be conducted by an
independent certified public accountant selected by VISIGENIC (other than on a
contingent fee basis). Any audit and/or inspection will be conducted during
regular business hours at VAR's facilities, with five (5) days notice no more
often than once per year VAR agrees to provide VISIGENIC's designated audit or
inspection team access to the relevant VAR records and facilities. Any such
audit will be paid for by VISIGENIC. VAR will impose a similar audit
requirement upon each DISTRIBUTOR or RESELLER, and upon the reasonable request
by VISIGENIC, VAR will cause an audit to be conducted by VAR, at VISIGENIC's
reasonable expense, in order to verify statements issued by such DISTRIBUTOR
or RESELLER and DISTRIBUTOR'S and RESELLER's compliance with the terms of
their agreement with VAR as it effects VISIGENIC PRODUCTS licensed to VAR
hereunder. In the event that a VISIGENIC supplier's rights are affected,
VISIGENIC may disclose the results of any audit conducted under this section
to its suppliers solely as it relates to those suppliers
(H) MARKETING EFFORTS. All fees charged by VAR for the APPLICATION BUNDLE
-----------------
will be at its sole discretion. VAR grants to VISIGENIC the right to use VAR's
logo(s) and include VAR information on the VISIGENIC partner web site and in
the VISIGENIC partner program marketing materials and collateral, subject to
VAR's prior written approval which shall not be unreasonably withheld. In
addition the parties agree that the parties may mutually agree to issue a
joint press release upon execution of this Agreement.
(I) SUPPORT OBLIGATIONS. VAR will be responsible for providing adequate
-------------------
support and maintenance of the APPLICATION BUNDLE to its DISTRIBUTORs and
RESELLERs, and VAR and its DISTRIBUTORs and RESELLERs will be responsible for
providing adequate support and maintenance of the APPLICATION BUNDLEs to END
USERs. VISIGENIC will provide VAR with Premium Support, as described in
Exhibit C, in consideration of VAR's maintenance payments under Section 3(b).
VISIGENIC will not be required to provide support or maintenance directly to
VAR's DISTRIBUTORs, RESELLERs or END USERs, unless they contract for such
support directly to VISIGENIC.
(J) [*]
4. PROPRIETARY RIGHTS
------------------
Except as expressly provided for in Section 2 of this Agreement, VISIGENIC
and/or its suppliers retain any and all right, title and interest in and to the
VISIGENIC PRODUCTS. This Agreement grants no additional express or implied
license, right or interest in any copyright, patent, trade secret, trademark,
invention or other intellectual property right of VISIGENIC. VAR receives no
rights to and will not sell, assign, lease, market, transfer, encumber or
suffer to exist any lien or security interest on any VISIGENIC PRODUCT, nor
will VAR take any action that would cause any VISIGENIC PRODUCT to be placed
in the public domain. VAR will not remove, or allow to be removed, any
VISIGENIC copyright, trade secret or other proprietary tights notice from any
VISIGENIC PRODUCT. VAR will not make any warranties with respect to any
VISIGENIC PRODUCT beyond those made to VAR by VISIGENIC under this Agreement.
Any patents already issued to VISIGENIC or patents issued to VISIGENIC in the
future will not limit any rights granted to VAR hereunder.
5. CONFIDENTIAL INFORMATION
------------------------
(A) DEFINITION. Confidential information will include all confidential and
----------
proprietary information of either party or any third party disclosed by one
party to the other, which in the case of written information is marked
"confidential" or "proprietary", and which in the case or information disclosed
orally, is identified at the time of the disclosure as confidential or
proprietary ("CONFIDENTIAL INFORMATION"). All oral disclosures of CONFIDENTIAL
INFORMATION will be summarized and confirmed as confidential or proprietary by
the disclosing party in writing within ten (10) business days of the disclosure.
VAR is hereby notified that the VISIGENIC PRODUCTS source code supplied under
this Agreement, if any, is CONFIDENTIAL INFORMATION.
(B) GENERAL NONDISCLOSURE OBLIGATIONS. Each party must hold the other
---------------------------------
party's CONFIDENTIAL INFORMATION in confidence, and use the same degree of
care (but not less than reasonable care) to safeguard such CONFIDENTIAL
INFORMATION as the party uses to protect its own CONFIDENTIAL INFORMATION.
Each party agrees that it has obtained or will obtain a written agreement with
each employee or contractor having access to any such CONFIDENTIAL
INFORMATION, under which the employee or contractor acknowledges the
importance of protecting the CONFIDENTIAL INFORMATION to which such individual
may have access and agrees to protect and not disclose the CONFIDENTIAL
INFORMATION. CONFIDENTIAL INFORMATION may only be used for exercising rights
and fulfilling obligations under this Agreement.
(C) EXCEPTIONS TO NONDISCLOSURE OBLIGATIONS. The obligations of this
---------------------------------------
Section 5 do not apply to information which was in the recipient's rightful
possession without an obligation of confidentiality before receipt from the
disclosing party, or is or becomes a matter of public knowledge through no
fault of the recipient, or is rightfully received by the recipient from a
third party without a duty of confidentiality, or is independently developed
by the recipient without reliance on the CONFIDENTIAL INFORMATION, or is
disclosed under operation of law, or is disclosed by the disclosing party to
third parties habitually without restriction on subsequent disclosure. Either
party may disclose the name of the other party and the existence of this
Agreement, but not its terms, without the consent of
6. INDEMNIFICATION
--------------
(A) VISIGENIC'S OBLIGATIONS. VISIGENIC will defend, indemnify and hold
---------------------
harmless VAR against any third party claim, lawsuits, or damages, including
attorney's fees, that the use of the VISIGENIC PRODUCTS under the terms of
this Agreement infringes any copyright, patent, trademark or other similar
intellectual property right of any third party in any country that VAR
distributes the APPLICATION BUNDLE. VISIGENIC will have no obligation
hereunder for any claim of infringement based on (i) the use of a superseded
or altered release of the VISIGENIC PRODUCTS if such infringement would have
been avoided by the use of a current, unaltered release of the VISIGENIC
PRODUCTS, so long as the current release is substantially compatible with the
immediately preceding released version of the VISIGENIC PRODUCTS, (ii) the
combination or use of the VISIGENIC PRODUCTS with software, hardware or other
materials not furnished by VISIGENIC if such infringement would have been
avoided by the use of VISIGENIC PRODUCTS alone, or (iii) the use of the
VISIGENIC PRODUCTS other than as permitted under this Agreement. In the event
that the VISIGENIC PRODUCTS are held or are believed by VISIGENIC to infringe
VISIGENIC shall have the option, at its expense, to: (i) modify the VISIGENIC
PRODUCTS to be noninfringing; (ii) obtain for VAR a license to continue using
the VISIGENIC PRODUCTS, or (iii) terminate this
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
2
<PAGE>
Agreement as to the infringing VISIGENIC PRODUCTS and refund to VAR the fees
paid under this Agreement for such infringing VISIGENIC PRODUCTS. The foregoing
states VISIGENIC's entire liability and VAR's exclusive remedies for
infringement of intellectual property rights of any kind.
(B) VAR'S OBLIGATIONS. VAR agrees to indemnify and defend VISIGENIC from
-----------------
any and all third party claims, lawsuits or damages, including attorney's
fees, that VISIGENIC may suffer as a result of the failure of VAR to abide by
the material terms of this Agreement.
(C) CONDITIONS OF INDEMNITY. The foregoing indemnities are conditioned on
-----------------------
prompt written notice of any claim, action or demand for which indemnity is
claimed; complete control of the defense and settlement thereof by the
indemnifying party, and cooperation of the other party in such defense. The
non-indemnifying party may choose to be represented by legal counsel during
any such action, at their expense, which in no event shall dilute the rights
and obligations of the preceding sentence.
7. WARRANTY
--------
(A) IN GENERAL. For 90 days from the date of shipment, Visigenic warrants
----------
that the media on which any VISIGENIC PRODUCT is contained will be free from
defects in materials and workmanship and that the VISIGENIC PRODUCT as
received from Visigenic will substantially conform to its most-current end
user documentation, To obtain warranty service during the 90 day period, VAR
may return the VISIGENIC PRODUCT to VISIGENIC,
- --------------------------------------------------------------------------------
postage prepaid, with a description of the problem. The defective media on
which the
- --------------------------------------------------------------------------------
VISIGENIC PRODUCT is contained will be replaced at no additional charge to VAR.
- ------------------------------------------------------------------------------
(B) NO OTHER WARRANTIES. EXCEPT AS SET FORTH IN 7(a) ABOVE, THE VISIGENIC
-------------------
PRODUCTS AND THE ACCOMPANYING WRITTEN MATERIALS ARE PROVIDED "AS IS" WITHOUT
EXPRESS OR IMPLIED WARRANTY OF ANY KIND. VISIGENIC FURTHER DISCLAIMS ALL
IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. VISIGENIC DOES NOT WARRANT
THAT THE VISIGENIC PRODUCTS WILL BE ERROR FREE OR WILL OPERATE WITHOUT
INTERRUPTION. THE ENTIRE RISK ARISING OUT OF THE USE OR PERFORMANCE OF THE
VISIGENIC PRODUCTS AND ACCOMPANYING WRITTEN MATERIALS REMAINS WITH VAR AND ITS
LICENSEES.
The VISIGENIC PRODUCTS are not designed for use in hazardous environments
requiring fail-safe controls, including without limitation operation of nuclear
facilities, aircraft navigation or communication systems, air traffic control,
and life support or weapons systems. Without limiting the generality of the
foregoing, VISIGENIC specifically disclaims any express or implied warranty of
fitness for such purposes.
VISIGENIC shall use reasonable efforts to test the VISIGENIC PRODUCTS for
any virus(s) or time bomb(s), and will not knowingly deliver any VISIGENIC
PRODUCT to VAR that contains any such virus(s) or time bomb(s)
(C) RIGHTS, POWER AND AUTHORITY. Each party warrants to the other party
---------------------------
that it has all necessary rights, power and authority to enter into this
Agreement and to grant the rights granted by such party under this Agreement
8. LIMITATION OF LIABILITY
-----------------------
EXCEPT FOR VAR'S WILLFUL VIOLATION OF VISIGENIC'S INTELLECTUAL PROPERTY RIGHTS
IN AND TO VISIGENIC PRODUCTS, IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY
INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR EXEMPLARY DAMAGES ARISING OUT OF
THIS AGREEMENT,, BASED UPON PRINCIPLES OF CONTRACT, WARRANTY, NEGLIGENCE, STRICT
LIABILITY OR OTHER TORT, BREACH OF ANY STATUTORY DUTY, PRINCIPLES OF INDEMNITY
OR CONTRIBUTION, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
9. TERM AND TERMINATION
--------------------
(A) TERM. The term of this Agreement will begin on the EFFECTIVE DATE and
----
will end five (5) years following such EFFECTIVE DATE, unless terminated
earlier in accordance with the provisions hereof. [*] It may thereafter be
renewed for successive terms under terms to be negotiated, subject to mutual
written agreement by the parties.
(B) TERMINATION FOR BREACH. Either party may terminate this Agreement by
----------------------
written notice to the other party if the other party fails to perform or
observe any of its obligations under this Agreement and such failure is not
cured within thirty (30) days after written notice thereof from the
terminating party.
(C) BANKRUPTCY. Either party may terminate this Agreement immediately by
----------
written notice to the other party if there occurs any assignment of the other
party's assets for the benefit of creditors, any dissolution of the other
party, any voluntary act of bankruptcy by the other party, or any involuntary
filing under any bankruptcy law against the other party which is not dismissed
within thirty (30) days of filing.
(D) EFFECT. Upon expiration or termination of this Agreement for any
------
reason:
(i) All licenses and other rights granted to VAR under this Agreement will
become null and void, except: (a) for the END USER licenses for any APPLICATION
BUNDLE previously distributed by VAR, or (b) for the limited license to VAR to
use the VISIGENIC PRODUCTS for the sole purpose of fulfilling any pre-existing
contractual obligations for maintenance and support services of the APPLICATION
BUNDLE to its END USERs.
(ii) VAR and its DISTRIBUTORs and RESELLERs will surrender all copies of
the VISIGENIC PRODUCTS in their possession or control, or, at VISIGENIC's
option, they will destroy and provide VISIGENIC with a certificate signed by an
executive officer attesting to the destruction of all copies of the VISIGENIC
PRODUCTS remaining in their possession or control.
(iii) Upon termination of this Agreement, all outstanding obligations or
commitments of either party to pay amounts to the other party through the
termination date of this Agreement, if any, will become immediately due and
payable.
(iv) Upon termination of this Agreement, neither party will have any right
to receive any compensation, reimbursement or other amounts from the other party
solely as a result of such termination, and neither party will have any right
whatsoever in or to the other party's software or any copyrighted materials,
patents, trade secrets, or other proprietary rights relating to the other
party's software, other than as Provided for in this Section 9.
(v) Upon termination of this Agreement, either party can pursue it remedies
under this Agreement, whether at law or in equity, including without limitation
suing for damages and injunctive relief, and all other remedies available under
copyright, patent, trademark, trade secret, and other applicable laws and
administrative regulations.
(vi) Notwithstanding the foregoing, in the event of expiration or
termination except in the case of an uncured material breach by VAR of Section 3
(PAYMENT AND OTHER OBLIGATIONS), Section 4 (PROPRIETARY RIGHTS), or Section 5
(CONFIDENTIAL INFORMATION), VISIGENIC agrees to permit VAR a period of three (3)
months ("REMOVAL PERIOD") from the date of termination to re-engineer its
products to remove the VISIGENIC DISTRIBUTION PRODUCT(S) from
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
3
<PAGE>
such products. Until the earlier of (i) the expiration of the REMOVAL PERIOD or
(ii) the date VAR has removed the VISIGENIC DISTRIBUTION PRODUCT(S) from its
products, all licenses granted under this Agreement will remain in effect,
subject to payment under Section 3.
10. GENERAL
(A) GOVERNING LAW, COMPLETE AGREEMENT; MODIFICATIONS. This Agreement is
------------------------------------------------
governed by the laws of the State of California and VAR further consents to
jurisdiction by the state and federal courts sitting in the State of
California. This Agreement and the accompanying exhibits and attachment(s) is
the complete agreement between VISIGENIC and VAR regarding the VISIGENIC
PRODUCTS and supersedes any prior agreements between VISIGENIC and VAR
relating to the subject matter hereof. This Agreement will not be modified
except by a properly executed written agreement. Any terms and conditions of
any purchase order or other instrument issued by VAR in connection with this
Agreement which are in addition to, inconsistent with or different from the
terms and conditions of this Agreement will be of no force or effect.
(B) ATTORNEYS' FEES. If either VISIGENIC or VAR employs attorneys to
--------------
enforce any rights arising out of or relating to this Agreement, the
prevailing party will be entitled to recover reasonable attorneys' fees.
(C) SURVIVAL. All provisions, except for Section 2, will survive
-------
termination of this Agreement for any reason.
(D) ASSIGNMENT AND BINDING EFFECT. This Agreement, and any rights or
-----------------------------
obligations hereunder will not be assignable by contract or by operation of
law without the prior written consent, not to be unreasonably withheld, of the
non-assigning party, except that VAR may assign this Agreement to the buying
party, if VAR sells, at a minimum, 50% of its assets attributable to the VAR
PRODUCT technology. However, either party may assign this Agreement upon
thirty (30) days' prior written notice in connection with a merger,
consolidation, reorganization or sale of substantially all of the assigning
party's assets. This Agreement will be binding upon and inure to the benefit
of the parties, their successors and permitted assignees.
(E) NOTICES. Any notice required to be sent to a party under this Agreement
-------
will be in writing, effective on receipt by that party, and will be sent by fax,
first-class mail or personal delivery to the Address for Notice given for that
party below. Either party may change its notice address by giving written
notice to the other party at the other party's notice address.
(F) WAIVER AND SEVERABILITY. The waiver of one breach or default under
-----------------------
this Agreement will not constitute the waiver of any subsequent breach or
default. Any provision of this Agreement held to be illegal or unenforceable
will be deemed amended to conform to applicable laws or regulations, or if it
cannot be so amended without materially altering the intention of the parties,
it will be stricken and the remainder of this Agreement will continue in full
force and effect.
(G) INDEPENDENT CONTRACTORS. The parties will at all times be independent
-----------------------
contractors and will so represent themselves to all third parties. Neither
party has granted to the other the right to bind it in any manner whatsoever and
nothing herein will be deemed to constitute either party the agent or legal
representative of the other nor to constitute the parties as joint venturers.
(H) EXCUSABLE DELAYS. Neither party will be responsible for failure of
----------------
performance due to causes beyond its control. Such causes include (without
limitation) accidents, acts of God, labor disputes, actions of any government
agency and shortage of materials.
(I) EXPORT. VAR may not export or re-export the VISIGENIC PRODUCTS in
------
violation of the then current United States export laws. VISIGENIC shall provide
VAR with reasonable assistance in classifying and otherwise describing the
VISIGENIC PRODUCT for purposes of meeting such U.S. Government requirements and
obtaining such U.S. Government approvals.
(J) GOVERNMENT USE. The VISIGENIC PRODUCTS provided under this Agreement
--------------
are commercial computer software developed exclusively at private expense, and
in all respects are proprietary data belonging to VISIGENIC or its suppliers.
(a) Department of Defense End Users. (i) if the VISIGENIC PRODUCTS are
acquired by or on behalf of agencies or units of the Department of Defense
(DoD), then, pursuant to DoD FAR Supplement Section 227.7202 and its
successors (48 C.F.R. 227.7202) the Government's right to use, reproduce or
disclose the VISIGENIC PRODUCTS acquired under this Agreement is subject to
the restrictions of this Agreement. (b) Civilian Agency End Users. (i) If the
VISIGENIC PRODUCTS are acquired by or on behalf of civilian agencies of the
U.S Government, then, pursuant to FAR Section 12.212 and its successors (48
C.F.R. 12.212), the Government's right to use, reproduce or disclose the
VISIGENIC PRODUCTS acquired under this Agreement is subject to the
restrictions of this Agreement.
(K) ESCROW. Upon request, VAR may become a beneficiary of VISIGENIC's
------
existing source code escrow by entering into an agreement with VISIGENIC and the
independent escrow agent under which the relevant VISIGENIC PRODUCT will be
released to VAR under certain conditions in the event that VISIGENIC is unable
or unwilling to support or maintain such VISIGENIC PRODUCT in breach of this
Agreement. Any source code released to VAR will be CONFIDENTIAL INFORMATION
under this Agreement. Such source code may only be used by VAR for support and
maintenance of its customers within the scope of this Agreement, and may not be
used to create additional functionality or versions of the VISIGENIC PRODUCTS
VAR will promptly deliver to VISIGENIC copies of all modifications made to the
source code by VAR, and VISIGENIC will own such modifications, subject to a
license under this Agreement to VAR of the same scope as that for the VISIGENIC
PRODUCTS. In the event that VISIGENIC offers support to VAR, pursuant to the
terms and conditions of this Agreement, and VAR accepts the offer of support
subsequent to VAR becoming a beneficiary of VISIGENIC's source code escrow, if
ever, VISIGENIC will offer support to VAR at no charge for a period of time
equal to the amount of time VAR has been without support, in consideration of
VAR's delivery to VISIGENIC of any and all modifications made to the source code
by VAR. Attached hereto is Exhibit D, is the SourceFlex Software Source Code
Escrow Agreement, between VISIGENIC and SourceFile, and Exhibit B, the
SourceFile Form of Acknowledgment by Beneficiary. VISIGENIC will update the
VISIGENIC PRODUCTS source code in escrow no less frequently than semi-annually.
(L) INJUNCTIVE RELIEF. In the event of a breach of this Agreement, money
-----------------
or damages will not be an adequate remedy, and therefore, in addition to any
other legal or equitable remedies, either party will be entitled to seek an
injunction or other equitable relief against such breach. Notwithstanding the
foregoing, in the event a RESELLER, DISTRIBUTOR or END USER is in violation of
their agreement with VAR, as it relates to this Agreement, VISIGENIC will not
seek injunctive relief against VAR so long a VAR is not in violation of this
Agreement.
IN WITNESS WHEREOF, VISIGENIC and VAR have caused this Agreement to he
entered into by their duly authorized representatives as of the EFFECTIVE DATE
written below:
4
<PAGE>
EFFECTIVE DATE OF THIS AGREEMENT 3-27-97.
VAR
BUSINESS OBJECTS. VISIGENIC SOFTWARE, INC.
/s/ Bernard Liautaud /s/ J. Scott Chalmers
By By
Bernard Liautaud J. Scott Chalmers
Name(Print) Name (Print)
President and CEO VP-Worldwide Sales
Title Title
Address for Notice
Business Objects Americas Visigenic Software, Inc.
U.S. Headquarters 951 Mariner's Island Blvd., Suite 120
Attn.: Lawrence Lieberman San Mateo, CA 94404
2870 Zanker Road Phone: 415-286-1900
San Jose, CA 95134 Fax: 415-860464
Phone: 408-953-6000 Fax: 408-894-1509
5
<PAGE>
EXHIBIT A
ADDITIONAL AND/OR MODIFIED TERMS AND CONDITIONS1. VISIGENIC PRODUCT selection
and definition:
A. VISIGENIC DISTRIBUTION PRODUCT(S): Check the box if the VISIGENIC
DISTRIBUTION PRODUCT is to be licensed pursuant to this Agreement.
[*]
B. VISIGENIC DEVELOPMENT PRODUCTS:
[*]
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
6
<PAGE>
[*]
C. VISIGENIC PRODUCT LICENSE TYPES:
VISIGENIC PRODUCT are licensed according to one of the four license types
as set forth below:
[*]
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
7
<PAGE>
2. VAR PRODUCT(s) permitted to be packaged in combination with the VISIGENIC
DISTRIBUTION PRODUCT(S), selected above, as an APPLICATION BUNDLE:
Business Objects products, either owned or licensed for sale or resale by VAR,
except that in the case of an assignment pursuant to 10(d) of this Agreement,
VAR PRODUCTS shall be limited to those VAR PRODUCTS in existence (Business
Objects products only, does not include the assignees products) at the time of
the assignment.
3. LICENSE FEE(S):
A. VAR will pay to VISIGENIC an ANNUAL LICENSE FEE which is due on or before
the EFFECTIVE DATE and on each anniversary of the EFFECTIVE DATE, in
consideration for which VAR will be entitled to:
* Copy, market and distribute, packaged in combination with one or more VAR
PRODUCTS as an APPLICATION BUNDLE, and unlimited number of' copies of the
VISIGENIC DISTRIBUTION PRODUCT(s), however, VAR shall not be required to
monitor or report the hardware systems on a machine by machine basis as is
indicate in Exhibit A.I.C.4, herein.
* Copy and use internally up to the combined maximum number of VISIBROKER for
C++ and VISIBROKER for JAVA VISIGENIC DEVELOPMENT PRODUCTS as is set forth
below:
[*]
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
8
<PAGE>
5. ADDITIONAL AND/OR MODIFIED TERMS AND CONDITIONS:
[*]
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
9
<PAGE>
EXHIBIT C
PREMIUM LEVEL
TECHNICAL SUPPORT SERVICES AGREEMENT
1.0 General Terms and Conditions:
1. I Scope of Technical Support Agreement: Visigenic Software, Inc. (VSI)
shall maintain an organization and be prepared with suitably qualified and
competent personnel during normal business hours to provide knowledgeable and
timely maintenance and support service in accordance with this Standard
Technical Support Services Agreement. This Support Agreement covers the
Visigenic software for which the customer has purchased a Technical Support
Agreement. This coverage outlined in this Agreement does not include any
adaptations or modifications made by the Customer to the Software unless special
prior agreement has been entered into regarding such modifications or additions.
1.2 Definition of Technical Support Services: Under the Standard Technical
Support Services Agreement, customers will be provided with the following
technical support services:
* Telephone Support: Visigenic will provide telephone access to the Customer
on an Active Support Agreement during Normal Business Hours. Normal
Business Hours are between 6 a.m. to 6 p.m. (PST), Monday through Friday,
excluding holidays. Telephone support is provided by Technical Support
Engineers (TSE). It is the responsibility of the TSE to coordinate the
resolution of problems, including the verification of any reported error,
communicating with the Customer for additional information, telephone or
email resolution or workaround, as applicable, and for supplying the error
correction and/or update as necessary.
* Email Support: Customer may log request for support via email by directing
their query to: [email protected].
* Fax Support: Customer may log request for support via fax by sending a full
problem description to the published technical support fax number.
* On-Line Services: Visigenic provides access to a World Wide Web page which
allows access to a knowledgebase designed to provide Customers with general
information about the use and operations of Visigenic products and the
ability to submit Technical Support Cases via the WWW page.
* Notice of New Product Releases: Customers will be notified when major and
minor releases become available.
* Two (2) Authorized Contacts: Two (2) authorized contacts from the
Customer's organization may be named at any one time. These contacts may
be changed by written notice to VISIGENIC. Additional contacts may be
added for an additional charge.
* Semiannual technical reviews with members of the VISIGENIC employees.
2.0 REPORTING OF CASES TO VISIGENIC'S TECHNICAL SUPPORT DEPARTMENT
2.1 All inquires to technical support must be made by one of the Customer's
authorized contacts. Technical
Support Cases will generally fall into three categories:
* Technical Assistance: Questions about product usage and installations which
do not result in registration of a Product Defect or Enhancement Request.
* Product Defect: The Customer encounters a problem which is determined to be
a Product Defect.
10
<PAGE>
* Feature Enhancement Requests: Request by the Customer for a tool or feature
that is not included in the current set of Visigenic products or features.
Visigenic will review Customers requests for feature enhancement during normal
product update cycles, however, Visigenic is under no obligation to incorporate
any modifications or new features requested by Customer into any Visigenic
product.
Visigenic cannot provide extended consulting services through the Technical
Support organization as part of the Technical Support Agreement. Visigenic does
have a consulting organization to assist Customer in project planning and
programming. Visigenic reserves the right to advise Customers to use the
consulting organization for additional assistance in resolving issues that fall
outside the scope of Technical Support. These services would be subject to the
then current Consulting fees. Customers should contact their Visigenic Sales
Representative regarding availability and purchase of such services.
All case reports to Visigenic's Technical Support Department shall include the
following:
* The name and version of the Visigenic product and version number being
used.
* Platform on which the Visigenic product is running.
* A general description of the operating environment.
* A list of all hardware components in the environment.
* List of operating system versions of all hardware components.
* A reproducible test case demonstrating the problem, which is a small
code sample, usually less than a hundred (100) lines, that
demonstrates the specific syntax that causes the behavior being
reported.
* All applicable error, trace and system files.
* Exact wording of all error messages.
* A full description of the problem and expected results.
* Any special circumstances surrounding the discovery of the error.
3.0 DEFINITIONS OF TECHNICAL SUPPORT CASE PRIORITIES:
3.1 Priority Definitions:
Visigenic will work with the Customer to assign the appropriate priority to all
reported Technical Support Cases based on the following criteria:
[*]
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
11
<PAGE>
[*]
3.2 Visigenic's Undertaking:
For each Technical Support Case reported by the Customer, VISIGENIC undertakes
to: [*]
ACKNOWLEDGMENT TIME is the amount of time between when the Customer reports the
case to VISIGENIC via phone, voicemail, email, WWW or fax, and the time that the
Customer is given an identifying case number. RESPONSE TIME is the elapsed time
until a technical support engineer (TSE) is assigned and actively working on the
case.
3.3 Customer's Undertaking:
Before opening a Technical Support Case, the Customer undertakes to:
* Use best efforts to verify that the error is reproducible on the approved
platform(s) for the Visigenic product being used.
* Appoint two Authorized Contacts from the Customer's organization for all
matters relating to the Technical Support Case.
* Obtain all information necessary in accordance with the necessary
information outlined above.
* Include the identifying case number in all communications with Visigenic
with regard to the technical support case.
4.0 CLOSURE OF TECHNICAL SUPPORT CASES
Open Technical Support Cases will be considered to be resolved and will be
closed when:
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
12
<PAGE>
PRIORITY CONDITIONS
[*]
Technical support cases may be reopened at the customers request if the problem
reoccurs.
5.0 FAILURE SEVERITY LEVELS AND CORRECTION GOALS
Should a failure in the Visigenic product be discovered as the result of a
technical support Case, a failure identification number will be generated and
the failure will be escalated to Visigenic's Engineering staff. Failures are
assigned a severity level (Level 1 through 4). Each severity has associated
temporary correction (workaround) and permanent fix response time goals. The
severity levels for failures are defined as follows:
[*]
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
13
<PAGE>
[*]
In order for a failure to be escalated to engineering, the customer must provide
a complete test case that will allow technical support to reproduce the failure.
After technical support has reproduced the failure, a failure identification
number will be assigned and the severity will be determined based on the
conditions outlined above. The response time goals above do not apply in
situations where it is verified that the source of the failure is a third party
product.
6.0 Case and Failure Escalation Procedure
The severity level for a reported failure will be determined jointly by
technical support and the customer. In the case of Severity 1 failures, regular
status updates will be provided to the customer and the case will be escalated
by the responsible Technical Support Engineer to the Visigenic Technical Support
manager.
7.0 MAINTENANCE RELEASES
Customers who are covered by an active support contract at the time of a
maintenance release will be notified when major or minor maintenance releases
become available. Maintenance releases fall into three types:
[*]
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
14
<PAGE>
[*]
Product releases are identified by way of a three part version number of the
following form:
xx.yy.[zzzz], where
XX - major release number, may be one or two digits each
YY = minor release number, may be one or two digits each
ZZZZ = incremental release number and is optionally used, may be zero to four
digits
In general usage, such as in product documentation, only the major and minor
fields are typically used.
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
15
<PAGE>
ATTACHMENT 2
EXPANDED DESCRIPTION OF THE VISIBROKER DEVELOPER'S KIT
FOLLOWING IS A DESCRIPTION OF THE COMPONENTS OF THE VISIBROKER DEVELOPER'S KIT
FOR BOTH JAVA AND C+V
[*]
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
16
<PAGE>
ATTACHMENT 3
EXPANDED DESCRIPTION OF THE VISIBROKER EVENT SERVICE DEVELOPER'S KIT
FOLLOWING IS A DESCRIPTION OF THE COMPONENTS OF THE VISIBROKER EVENT SERVICE
DEVELOPER KIT:
[*]
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
17
<PAGE>
ATTACHMENT 4
EXPANDED DESCRIPTION OF THE VISIBROKER NAMING SERVICE DEVELOPER'S KIT
[*]
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.
18
<PAGE>
EXHIBIT 21.0
Business Objects S.A.
SUBSIDIARIES OF THE COMPANY
NAME JURISDICTION OF INCORPORATION
- ---- -----------------------------
Business Objects Australia Pty Ltd Australia
Business Objects BeLux S.A./N.V. Belgium
Business Objects Canada Inc. Canada
Business Objects Deutschland GmbH Germany
Business Objects Italia S.p.A. Italy
Business Objects Nihon B.V. Netherlands
Business Objects Nederland B.V. Netherlands
Business Objects Asia Pacific Pte Ltd Singapore
Business Objects Espana S.L. Spain
Business Objects Nordic AB Sweden
Business Objects Switzerland SA/AG Switzerland
Business Objects (U.K.), Ltd United Kingdom
Business Objects of Americas Delaware, United States
Business Objects Holding BV Netherlands
<PAGE>
Exhibit 23.0
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 333-42059, 333-42061 and 333-42063) pertaining to
Stock Subscription Warrants, 1994 Stock Option Plan, 1995 International
Employee Stock Purchase Plan and French Employee Savings Plan of Business
Objects, S.A. of our report dated January 23, 1998 with respect to the
consolidated financial statements and schedule of Business Objects, S.A.
included in the Annual Report (Form 10-K) for the year ended December 31,
1997.
San Jose, California
March 26, 1998
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