-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ubys+WsL2/FzqUpzJr0tcdVJQIk8lxXM1qQyZHZeNratogk7U7u/me5wRNFXeFE7 CC+uqxcGUry944Id40lE7w== 0001045969-99-000299.txt : 19990429 0001045969-99-000299.hdr.sgml : 19990429 ACCESSION NUMBER: 0001045969-99-000299 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 27 FILED AS OF DATE: 19990428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHOWCASE CORP /MN CENTRAL INDEX KEY: 0001060311 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 411628214 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-77223 FILM NUMBER: 99603227 BUSINESS ADDRESS: STREET 1: 4115 HWY 52 NORTH STREET 2: STE 300 CITY: ROCHESTER STATE: MN ZIP: 55901 BUSINESS PHONE: 5072885922 MAIL ADDRESS: STREET 1: 4115 HWY 52 NORTH STREET 2: STE 300 CITY: ROCHESTER STATE: MN ZIP: 55901 S-1 1 REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on April 28, 1999 Registration No. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------- FORM S-1 REGISTRATION STATEMENT under The Securities Act of 1933 ------------------------- SHOWCASE CORPORATION (Exact name of registrant as specified in its charter) Minnesota 7372 41-1628214 (State or other (Primary Standard (I.R.S. Employer jurisdiction Industrial Identification Number) of incorporation or Classification Code organization) Number) 4115 Highway 52 North, Suite 300 Rochester, Minnesota 55901-0144 (507) 288-5922 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Kenneth H. Holec ShowCase Corporation 4115 Highway 52 North, Suite 300 Rochester, Minnesota 55901-0144 (507) 288-5922 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------- Copies to: Kenneth L. Cutler David K. Michaels Thad C. Johnson Robert A. Freedman Philip E. Bauer Cynthia E. Garabedian Dorsey & Whitney LLP Fenwick & West LLP 220 South Sixth Street Two Palo Alto Square Minneapolis, Minnesota 55402-1498 Palo Alto, California 94306 (612) 340-2600 (650) 494-0600 ------------------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. ------------------------- If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earliest effective registration statement for the same offering: [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earliest effective registration statement for the same offering: [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [_] CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Titles of Each Class of Maximum Aggregate Amount of Securities to be Registered Offering Price (1) Registration Fee - ------------------------------------------------------------------------------- Common Stock, par value $.01 per share..... $35,000,000 $9,730
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(o). ------------------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus is not complete and may be changed. We may + +not sell these securities until the registration statement filed with the + +Securities and Exchange Commission is effective. This prospectus is not an + +offer to sell these securities and it is not soliciting an offer to buy these + +securities in any state where the offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subject to Completion Preliminary Prospectus dated , 1999 PROSPECTUS Shares Common Stock ------------- This is ShowCase Corporation's initial public offering of common stock. We expect the public offering price to be between $ and $ per share. Currently, no public market exists for the shares. After pricing of this offering, we expect that the common stock will trade on the Nasdaq National Market under the symbol "SHWC." Investing in the common stock involves risks which are described in the "Risk Factors" section beginning on page of this prospectus. -------------
Per Share Total --------- ----- Public Offering Price........................... $ $ Underwriting Discount........................... $ $ Proceeds, before expenses, to ShowCase.......... $ $
The underwriters may also purchase up to an additional shares at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The shares of common stock will be ready for delivery in New York, New York on or about , 1999. ------------- Merrill Lynch & Co. U.S. Bancorp Piper Jaffray Dain Rauscher Wessels a division of Dain Rauscher Incorporated FAC/Equities ------------- The date of this prospectus is , 1999 [Inside front cover -- graphics to come] TABLE OF CONTENTS
Page ---- Prospectus Summary....................................................... 1 Risk Factors............................................................. 5 Forward-Looking Statements............................................... 15 Trademarks............................................................... 15 Use of Proceeds.......................................................... 16 Dividend Policy.......................................................... 16 Capitalization........................................................... 17 Dilution................................................................. 18 Selected Consolidated Financial Data..................................... 19 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 20 Business................................................................. 29 Management............................................................... 41 Certain Transactions..................................................... 49 Principal Shareholders................................................... 50 Description of Capital Stock............................................. 52 Shares Eligible for Future Sale.......................................... 55 Underwriting............................................................. 57 Legal Matters............................................................ 59 Experts.................................................................. 59 Where You Can Find More Information...................................... 60 Index to Consolidated Financial Statements .............................. F-1
INFORMATION IN PROSPECTUS Unless specifically stated, the information in this prospectus has been adjusted to reflect the automatic conversion of all outstanding shares of our preferred stock into shares of common stock, but does not take into account the possible sale of additional shares of common stock to the underwriters to cover over-allotments. You should rely only on the information contained in this prospectus. We and the underwriters have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We and the underwriters are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date. i PROSPECTUS SUMMARY This summary is not complete and does not contain all of the information that may be important to you. You should read the entire prospectus carefully, including the consolidated financial statements and related notes, before making an investment decision. The terms "ShowCase," "we," "us" and "our" as used in this prospectus refer to "ShowCase Corporation" and its subsidiaries as a combined entity, except where it is made clear that these terms mean only the parent company. ShowCase Corporation We are the leading provider of fully integrated, end-to-end, business intelligence solutions for IBM AS/400 customers. Our ShowCase STRATEGY product suite and related services are designed to enable organizations to rapidly implement business intelligence solutions that create increased value from their operational and customer data. The sophisticated data warehousing and management capabilities of our product suite provide our clients with highly scalable and tightly integrated solutions. Our products enable enterprise-wide distribution of information and allow end-user access and analysis through familiar applications and Internet browsers. Our ShowCase STRATEGY product suite, introduced in 1996, supports ad hoc information access, enterprise reporting and analytics. We have eight years of experience delivering business intelligence solutions to our clients. The rapid growth of the Internet and the emergence of e-business are transforming the way organizations conduct business, communicate and share information. This transformation is driving broad and immediate demand for better intelligence and information dissemination. Companies require business intelligence to interpret and create value from the vast amounts of available data to better tailor products and services, identify business opportunities and improve operational efficiencies. A critical foundation technology for business intelligence solutions is a scalable and reliable server platform. The AS/400 is a leading server platform deployed in the mid-market for enterprise resource applications, e-business and business intelligence and is particularly popular with mid-market companies because of its reliability, scalability, ease of deployment and low cost of operation. Companies are often unable to realize the full potential of business intelligence because of the difficulty of integrating components from multiple vendors, adapting solutions to evolving end-user needs, scaling across the enterprise and extending business intelligence through the Internet. Our ShowCase STRATEGY product suite combines an intuitive user interface and Internet capabilities with powerful functionality that allows end users to easily access, customize and analyze information and reports with minimal IT assistance. It consists of data warehouse generation and management, reporting, relational analysis and multidimensional analysis components. In addition, we also offer Deployment Accelerators, which provide adaptable applications for targeted business functions and allow some of our clients to realize benefits of business intelligence within days of deployment. We sell our products and services in the U.S. and internationally through our direct sales force, software application vendors, distributors and resellers. Our channel partners include Dimension Data Systems, Fiserv, IBM, Infinium Software, Lawson Software, Silverlake, TSG and Walker Interactive. As of March 31, 1999, we had over 2,000 active clients including Abbott Laboratories, Burmah Castrol Trading, Cartier International, Interface, Land O'Lakes, Sara Lee Casualwear, Skytel Communications, Tiffany & Company and Toys "R" Us International. Our principal offices are located at 4115 Highway 52 North, Suite 300, Rochester, Minnesota 55901, and our telephone number is (507) 288-5922. 1 Recent Developments Preliminary estimates of our results of operations for the three months and the year ended March 31, 1999 (unaudited), together with statement of operations data for the three months ended March 31, 1998 (unaudited) and for the year ended March 31, 1998, are summarized below.
Three Months Ended Year Ended March 31, March 31, ---------------- ---------------- 1998 1999 1998 1999 ------- ------- ------- ------- (in thousands) Consolidated Statement of Operations Data: Total revenues.............................. $ 7,006 $10,257 $23,755 $35,519 Operating income (loss)..................... (982) 195 (3,602) (559) Net income (loss)........................... (996) 218 (3,234) (616)
2 The Offering Common stock offered.... shares Common stock outstanding after this offering.... shares. The number of shares that will be outstanding after the offering is based on the actual number outstanding as of March 31, 1999. It excludes options to purchase 1,545,807 shares of common stock outstanding as of March 31, 1999 at a weighted average exercise price of $2.32 per share, and 13,580 shares of common stock issuable upon exercise of an outstanding warrant at an exercise price of $4.00 per share. For more information regarding our equity benefit plans, see "Management--Benefit Plans" and note 9 of notes to consolidated financial statements. Use of proceeds......... We intend to use the net proceeds of this offering for general corporate purposes, including expansion of our direct sales force, product development and working capital. Risk Factors............ See "Risk Factors" for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock. Proposed Nasdaq National Market symbol.......... SHWC
3 Summary Consolidated Financial Data The summary consolidated financial data below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the related notes included elsewhere in this prospectus.
Year Ended March 31, Nine Months Ended -------------------------------------- ------------------------- December 31, December 31, 1994 1995 1996 1997 1998 1997 1998 ------ ------- ------- ------- ------- ------------ ------------ (in thousands, except per share data) Consolidated Statement of Operations Data: Total revenues.......... $6,471 $10,018 $13,278 $18,027 $23,755 $16,751 $25,262 Operating income (loss)................. 490 558 826 36 (3,602) (2,620) (753) Net income (loss)....... 387 397 814 50 (3,234) (2,238) (834) ====== ======= ======= ======= ======= ======= ======= Net income (loss) per share: Basic................. $ 0.10 $ 0.10 $ 0.21 $ 0.01 $ (0.82) $ (0.57) $ (0.19) Diluted............... $ 0.07 $ 0.06 $ 0.13 $ 0.01 $ (0.82) $ (0.57) $ (0.19) Shares used in computing basic net income (loss) per share.............. 3,867 3,908 3,850 3,847 3,928 3,909 4,348 Shares used in computing diluted net income (loss) per share....... 5,907 6,339 6,457 6,445 3,928 3,909 4,348
As of December 31, 1998 -------------------------- Actual As Adjusted ----------- -------------- (in thousands) Consolidated Balance Sheet Data: Cash and marketable securities..................... $ 7,637 $ Working capital.................................... 609 Total assets....................................... 19,546 Long-term debt and capital lease obligations, less current portion................................... 751 Total stockholders' equity......................... 2,118
For an explanation of the determination of the number of shares used in computing basic and diluted net income per share, see note 10 of notes to consolidated financial statements. The consolidated balance sheet data as of December 31, 1998, as adjusted, reflects our sale of shares of common stock offered by this prospectus at an assumed initial public offering price of $ per share, after deducting the estimated underwriting discount and offering expenses that we will pay. See "Use of Proceeds" and "Capitalization." 4 RISK FACTORS Before investing in our common stock, you should be aware that there are various risks, including those described below. As a ShowCase shareholder, you will be subject to risks inherent in our business. The value of your investment may increase or decline and could result in a loss. You should carefully consider the following factors as well as other information contained in this prospectus before deciding to invest in shares of our common stock. We have a history of losses and we may not be able to achieve profitability We incurred operating losses of approximately $3.6 million for the fiscal year ended March 31, 1998 and $753,000 for the nine months ended December 31, 1998. We have also incurred operating losses in each quarter beginning with the quarter ended June 30, 1997 through the quarter ended September 30, 1998. As of December 31, 1998, we had an accumulated deficit of approximately $4.0 million. We expect to continue to incur significant sales and marketing, product development and general and administrative expenses. In particular, we intend to substantially increase our direct field sales force, and accordingly increase our sales and marketing expenses. As a result, we may continue to experience losses and negative cash flows. If we do achieve profitability, we may not sustain or increase profitability on a quarterly or annual basis in the future. Our future operating results may not follow past trends due to many factors The relatively recent introduction of a substantial portion of our current product suite and our history of losses make prediction of future operating results difficult. In the past, our revenues and operating results have varied significantly, and we expect these fluctuations to continue. Although our revenues have grown significantly in recent periods, you should not rely on past performance as any indication of future growth rates or operating results. Future operating results will depend on many factors, including: . demand for the IBM AS/400 platform; . growth of the market for business intelligence solutions; . demand for and acceptance of our products, product enhancements and services; . maintenance and development of our strategic relationships with application vendors, resellers and distributors; . the introduction, timing and competitive pricing of products and services by us and our competitors; . expansion and rate of success of our direct sales force and indirect distribution channels both domestically and internationally; and . attraction and retention of key personnel. Our quarterly operating results fluctuate significantly and are difficult to predict Quarterly operating results. Our operating results have varied and in the future are likely to vary significantly from quarter to quarter for a number of reasons, including: . the size and timing of significant orders; . the length of our sales cycles and the sales cycles of our distribution partners; . the mix of products and services that we sell and the mix between direct and indirect sales of our products; . our ability to control costs; . our ability to introduce new products and enhancements in a timely manner; 5 . the rate of success of our international expansion and the effect of foreign currency exchange rate fluctuations; . the discovery of software defects; and . general economic conditions as well as those specific to our customers and markets. Revenues. We cannot predict our quarterly revenues with any significant degree of accuracy for several reasons. We have historically operated with a low software order backlog because we generally ship our software products shortly after we receive orders. Accordingly, our product license revenues for any quarter depend significantly on orders booked and shipped during that quarter. In recent periods, we have experienced an increase in the average size of our licenses, and we expect this trend to continue. This focus on larger licenses will result in greater sales volatility from quarter to quarter. Moreover, we often recognize a substantial portion of our quarterly product license revenues in the last few weeks of a quarter. As a result, delays in booking client orders could adversely affect our reported revenues for a particular quarter. Finally, a significant percentage of our sales are through indirect channels that are less predictable than sales through our direct sales force. We have often realized a greater percentage of our license revenue and operating income in our third fiscal quarter than in other quarters due to customer purchasing patterns. In addition, due to seasonal factors, our sales often tend to slow during the summer months. We expect these trends to continue. Product license revenues also vary because the market for our products is evolving rapidly and because sales cycles, which may last many months, vary widely from client to client. Sales cycles are affected by many factors, including: . our clients' budgetary constraints; . the timing of our clients' budget cycles; . our clients' decisions as to whether, and on what scale, to adopt business intelligence solutions; . our clients' concerns about the introduction of new products by us or our competitors; and . potential downturns in the economy, which may reduce demand for our products. Maintenance and support fees depend largely on revenues from our existing clients and vary with their maintenance and support needs. Professional service revenues are often unpredictable because they depend in part on the scope of the services we provide and whether our clients utilize those services. Expenses. Because we plan to expand our business, we anticipate substantial increases in operating costs and expenses, including administration, consulting and training, maintenance and technical support, product development and sales and marketing expenses. In general, we base our operating expense budgets on anticipated revenue trends, and we may not be able to reduce these expenses in the short term. Because our expenses are relatively fixed in the near term, any shortfall from anticipated revenues or any delay in recognition of revenues could result in significant variations in our quarterly operating results. For the foregoing reasons, we believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. It is likely that in one or more future quarters, our operating results may not meet the expectations of analysts and investors. In this event, the price of our common stock may fall. The growth of our business depends on the growth of the market for business intelligence software All of our revenues to date have been attributable to the sale of business intelligence software and related maintenance, support, consulting and professional services. We expect such software and services to 6 continue to account for substantially all of our revenues for the foreseeable future. Although demand for business intelligence software has grown in recent years, we cannot assure that the market will continue to grow or that, even if the market does grow, businesses will adopt our products. If such growth does not materialize, our business and operating results would be seriously harmed. We believe that future growth in the market for business intelligence software will depend in large part on growth in e-business--business-to- business, business-to-employee and business-to-customer communications and transactions over corporate intranets and extranets. E-business has only recently emerged, and may not continue to grow. Continued growth in e-business depends on a number of factors, including the Internet's ability to efficiently handle increased activity and to operate as a fast, reliable and secure network. Critical issues concerning the commercial use of the Internet, including data corruption, security, bandwidth availability and quality of service, remain and may negatively affect the growth of e-business, and accordingly, the demand for business intelligence software. Our products currently operate primarily on the IBM AS/400 The server components of our products currently operate only on the IBM AS/400. To date, virtually all of our revenues have been derived from the AS/400 customer base. Therefore, our ability to increase sales of our products will depend on the continued use of the AS/400 and the continued support of the AS/400 by IBM. Instead of using the AS/400, many businesses have implemented client/server computer systems based on UNIX or Windows NT platforms. The current levels of use by customers of the AS/400 and support of the AS/400 by IBM may not continue and the use of the AS/400 may not increase in the future. To develop products that operate on platforms other than the AS/400 would require us to commit a substantial investment of resources, and we may not successfully introduce these products on a timely or cost-effective basis or at all. We may lose existing clients or be unable to attract new clients if we do not develop new products and enhance our current products We compete in markets where technology changes rapidly, competitors make frequent new product introductions and enhancements, products have uncertain life cycles and customer demands change unexpectedly. Our future success depends on our ability to satisfy diverse and evolving customer requirements and achieve market acceptance. It will also depend on our ability to improve and expand our product line to keep pace with our competitors' product introductions and technological developments. We cannot be certain that we will be successful in developing and marketing product enhancements or new products on a timely or cost-effective basis, or that these products, if developed, will achieve market acceptance. As a result of the complexities of business intelligence software, major new products and product enhancements can require long development and testing periods. In addition, customers may delay their purchasing decisions in anticipation of the general availability of new or enhanced versions of the Company's products and products of competitors. We have experienced delays in releasing new products and product enhancements and may experience similar delays in the future. Delays or problems in releasing our new products, or significant problems in the installation or implementation of our products, may cause clients to delay or cancel purchases or to purchase products from our competitors, which would seriously harm our business and operating results. If our relationships with channel partners are not successful and if we cannot recruit additional channel partners we may not be able to expand our sales In addition to our direct sales force, we rely on channel partners including application vendors, resellers and distributors to license and support our products in the United States and internationally. Our ability to expand the sales of our products and our future success will depend in part upon recruiting channel partners and maintaining successful relationships with these partners. Our channel partners may offer products from several different companies, including, in some cases, products that compete with our products. In 7 addition, in the future our channel partners may develop products that compete with our products. Our existing and potential channel partners may be influenced to scale back or end their relationships with us by our competitors who may have significantly greater resources and market clout than we do. These channel strategic partners may not devote adequate resources to selling our products. If we are unable to retain our existing channel partners or enter into additional relationships, we may have to devote substantially more resources to the distribution, sale and marketing of our products and services. Sales through channel partners are typically at lower margins for us than those through direct sales. Therefore, if we are successful in increasing the amount of sales through our channel partners our operating margins could decrease. Our relationships with Hyperion Solutions Corporation and IBM are important to our success Maintaining our strategic relationships with Hyperion Solutions Corporation and IBM is important to our continued success, and a deterioration or termination of these relationships could seriously harm our business and operating results. We have a contractual relationship with Hyperion Solutions that grants us the exclusive right to distribute its analytical online processing product, Essbase, as ported by us to the AS/400, subject to limited distribution rights retained by Hyperion Solutions. License fees for this product, Essbase/400, were 39.5% and 39.4% of our total license fees for fiscal 1998 and the nine months ended December 31, 1998, respectively. Hyperion Solutions has retained the right, upon twelve months notice, to terminate the exclusivity of our distribution rights. Further, we must pay Hyperion Solutions minimum royalty payments, which increase over the term of our license agreement, to maintain our distribution rights to Essbase/400. The loss of our right to distribute Essbase/400 would seriously harm our business and operating results. Finally, our Analyzer and Analyzer for the Web products are based on technology licensed from Hyperion Solutions under a 1996 license agreement that expires in January 2001. In order to continue to offer products with the capabilities provided by our Analyzer and Analyzer for the Web products after January 2001, we would need to develop the necessary technology internally, extend or replace our license agreement with Hyperion Solutions or license technology from a third party. If we are unable to do so, the capabilities of our product suite would be significantly reduced, which would seriously harm our business and operating results. For more information regarding our relationship with Hyperion Solutions, see "Business--Strategic Relationships-- Hyperion Solutions." In December 1998, we entered into a new agreement with IBM, which has been a reseller of some of our products for several years. Under this new agreement, our products are marketed and sold as IBM products by IBM's software data management group sales force. This agreement has an initial term of seven years, and expands the scope of our reseller relationship with IBM. Also, we have engaged in joint marketing campaigns and research and development projects with IBM since our inception. We believe our relationship with IBM has been a significant factor in our success to date, and any deterioration or termination of this relationship would seriously harm our business and operating results. For more information regarding our relationship with IBM, see "Business-- Strategic Relationships--IBM." We need to increase the size of our direct sales force to grow our sales We intend to increase sales of our products by growing our direct sales force. Because it has only existed since September 1996, our direct field sales force has had a limited operating history and may be unsuccessful in implementing our strategy of focusing sales efforts on potential clients that will deploy our product suite on a large scale. Typically, our salespeople have taken approximately six months from their hiring date to become productive selling our products. Furthermore, we believe that there is significant competition for direct sales personnel with the advanced sales skills and technical knowledge we need. Our inability to hire competent sales personnel, or our failure to retain them, would seriously harm our business and operating results. 8 Our markets are highly competitive which may lead to lower prices, reduced gross margins and loss of market share The markets for our products are intensely competitive and subject to rapidly changing technology. We compete primarily against providers of decision support software and data warehousing software. Our competitors providing business intelligence solutions for AS/400 customers include Silvon and Infomanager. We also compete with vendors that provide business intelligence products implemented on Unix or Windows NT platforms and then connected to the AS/400. These vendors include Brio Technology, Business Objects, Cognos, Hyperion Solutions, Information Advantage, Microsoft, MicroStrategy, Oracle, PLATINUM Technology, which has entered into an agreement to be acquired by Computer Associates, Sagent Technology and SAS Institute. In addition, enterprise resource planning software vendors including Baan Company, PeopleSoft and SAP are beginning to offer decision support and analytical modules primarily to support the analysis of data from their own operational systems. One or more of these companies may expand their technologies to support greater business intelligence functionality. Finally, in the future, IBM may expand the functionality of the operating system for the AS/400, or of its database products, to provide some of the functions provided by our products. Many of our competitors have longer operating histories, significantly greater financial, technical, marketing or other resources and greater name recognition than we do. In addition, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements. Increased competition may harm our ability to sell additional software and maintenance and support renewals on terms favorable to us and lead to price cuts, reduced gross margins and loss of market share, which may seriously harm our business and operating results. Our competitors may make strategic acquisitions or establish cooperative relationships among themselves or other parties that may increase their abilities to meet the needs of our current and potential clients. The business intelligence software industry has recently experienced consolidation and many industry analysts expect this trend to continue. This consolidation may provide our competitors with expanded sales, distribution and marketing capabilities and broader product offerings. In addition, our current or future channel partners may establish cooperative relationships with our competitors, which may limit our ability to sell our products through various distribution channels. Sales may be delayed or lost due to our lengthy sales cycles Our clients often take an extended period of time evaluating our products before licensing them. The period of time between initial client contact and a purchase order may span from one month to over twelve months. During this period, clients may decide not to purchase or may scale down their orders for our products for various reasons, including: . reductions in demand for business intelligence solutions; . new products introduced or announced by competitors; . price competition; . decisions to use hardware platforms other than the AS/400 for their business intelligence solutions; . changes in our clients' budgets and purchasing priorities; and . diversion of clients' resources and management's attention to other information technology issues, including Year 2000 compliance issues. In addition, we often must provide a significant level of education to our prospective clients regarding the use and benefit of our products, which may cause additional delays during the evaluation and acceptance process. These and other factors make it difficult for us to forecast the timing and recognition of revenues from sales of our products and services. In recent periods, we have experienced an increase in the average size of our licenses, and we expect this trend to continue. This focus on larger licenses will lengthen our average sales cycle. 9 We need to expand our management systems and controls to support our anticipated growth Our operations are growing rapidly and we expect this expansion to continue as we execute our business strategy. Our total number of employees grew from 125 on March 31, 1996 to 240 on March 31, 1999, and we anticipate further increases in the number of employees. Sustaining our growth has placed significant demands on management and our administrative, operational, personnel and financial resources. We may not be able to successfully manage our growth which could lead to customer dissatisfaction. Therefore, the inability to sustain or manage our growth could seriously harm our business and operating results. Difficulties presented by international economic, political, legal and business factors could negatively affect our business in international markets Sales to clients outside North America represented 34.4% of our total revenues for each of fiscal 1997 and 1998 and 37.6% of our total revenues for the nine months ended December 31, 1998. We currently have wholly-owned subsidiaries in Belgium, Germany, France, the Netherlands and the United Kingdom. We plan to expand our existing international operations and enter into additional international markets, which will require significant management attention and financial resources. In order to expand our international operations successfully, we will have to hire additional personnel and recruit additional international resellers and distributors. Our failure to do so in a timely manner may limit the growth of our international operations. We may not be able to maintain or increase international market demand for our products. In addition, our products must be localized-- customized to meet user needs--in order to be sold in particular foreign countries. Our localized products may not be accepted in the targeted countries. Our international operations are subject to other inherent risks, including: . the impact of recessions in economies outside the United States; . greater difficulty in collecting accounts receivable and longer collection periods; . unexpected changes in regulatory requirements, tariffs or other trade barriers; . difficulties in and costs of staffing and managing foreign operations; . weaker intellectual property right protection in some countries; . potentially adverse tax consequences; . political and economic instability; . costs of localizing products for foreign countries; . the effect of foreign currency exchange rate fluctuations; and . the burden of complying with a wide variety of foreign laws. Any of these risks could seriously harm our future international sales and therefore our business. Fluctuations in foreign currency exchange rates may lead to reduced operating margins Our international revenues and expenses are denominated in foreign currencies. The functional currency of each of our foreign subsidiaries is its local currency. We currently do not engage in foreign exchange hedging activities. Therefore, our international revenues and expenses are subject to foreign currency fluctuations. Our foreign currency translation gains and losses have so far been immaterial. However, future fluctuations in exchange rates between the U.S. dollar and foreign currencies may seriously harm our business, particularly our operating margins. 10 Possible consequences of euro conversion On January 1, 1999, eleven of the fifteen member countries of the European Union set fixed conversion rates between their existing sovereign currencies and the euro, the only currency that will be used in European Union countries starting July 1, 2002, and adopted the euro as their legal currency. Currently, we are assessing the impact of these events on our company. In addition to tax and accounting issues, we are considering: . the technical challenges of adapting our systems to accommodate euro-denominated transactions; . the impact on currency exchange costs and currency exchange rate risk; and . the impact on existing contracts. At this early stage, we cannot yet predict the consequences of euro conversion on our business and operating results. Our executive officers and key personnel are critical to our business and these officers and key personnel may not remain with us in the future Our future success depends on our ability to hire, train, assimilate and retain highly qualified employees. Competition for these individuals is intense, and we may not be able to attract, assimilate or retain additional highly qualified personnel in the future. Because our executive offices are located in Rochester, Minnesota, with a population of approximately 80,000, we must frequently recruit qualified employees from outside the vicinity of our headquarters, which may put us at a competitive disadvantage. Our success is highly dependent upon the continued service and skills of key management, technical, sales and marketing personnel, none of whom, except Patrick Dauga and Kenneth H. Holec, are bound by formal employment agreements. If we lose the services of any of these key personnel, it may have a negative impact on our business. Mr. Holec's employment agreement is a year-to-year agreement which either party may elect not to renew by giving the other party notice at least 30 days before the termination of any one-year term. Mr. Dauga may terminate his employment agreement at any time by giving us notice at least three months before this termination. We do not maintain life insurance policies covering any of our employees. We may face increased competition if we are unable to protect our intellectual property rights, and we may be subject to intellectual property infringement claims Our success and ability to compete depend substantially upon our internally developed technology. We attempt to protect our software, documentation and other written materials primarily through a combination of trade secret, trademark and copyright laws, confidentiality procedures and contractual provisions, which afford only limited protection. We have one patent issued and one patent application pending in the United States with respect to aspects of our software. The pending patent application may not be issued, or, if issued, it and our previously issued patent may not survive a legal challenge to their validity or provide us significant protection. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or otherwise obtain and use our products and technology. Policing unauthorized use of our products is difficult, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. Our means of protecting our intellectual property rights may not be adequate or our competitors may independently develop similar technology. We anticipate that software product developers will increasingly be subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps. As a result, we may become involved in these claims from time to time. Any of these claims, with or without merit, could result in costly litigation, divert our management's time, 11 attention and resources, delay our product shipments, or require us to enter into royalty or licensing agreements. A third party may not be willing to enter into a royalty or licensing agreement on acceptable terms or at all. If a claim of product infringement against us is successful and we fail to obtain a license or to develop or license non-infringing technology, our business and operating results could be seriously harmed. If we discover software defects, we may have product-related liabilities and marketing difficulties that may lead to a loss of revenue or delay in market acceptance for our products Our software products are complex and may contain errors, defects or failures, especially when first introduced or when new versions are released. In the past, we have discovered software errors in some of our products after their introduction. Despite extensive testing, we may not be able to detect and correct errors in products or releases before commencing commercial shipments, which may result in harm to our reputation and loss of revenue or delay in market acceptance. Our license agreements with clients typically contain provisions designed to limit our exposure to potential product liability claims. Various domestic and international jurisdictions may not enforce these limitations. Although we have not experienced any product liability claims to date, we may encounter these claims in the future. Product liability claims, whether or not successful, brought against us could have a material adverse effect on our business. Defending a suit, with or without merit, could entail substantial expense and require the time and attention of key management personnel. Our products, systems and sales may be subject to Year 2000 problems Many currently installed computer systems and software products store dates using only the last two digits of the calendar year. As a result, these systems may not be able to distinguish whether "00" means 1900 or 2000, which may cause system failures or erroneous results. We believe our current products are Year 2000 compliant. However, our products operate in complex network environments and directly or indirectly interact with a number of other hardware and software systems. Despite preliminary testing, we cannot predict all the possible Year 2000 issues arising from the interaction of our products with older hardware and software systems. Known or unknown errors associated with this interaction could result in a delay or loss of revenue, interruption of service, cancellation of client contracts, diversion of development resources, damage to our reputation, increased service and warranty costs and litigation. Any of these outcomes could seriously harm our business and operating results. For a further discussion of this issue, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Year 2000." We currently cannot predict the extent to which the Year 2000 problem will affect our clients, strategic partners or suppliers, or the extent to which we would be vulnerable to any failure by our clients, strategic partners or suppliers to remediate any Year 2000 issue on a timely basis. The failure of our major clients, partners or suppliers to convert their systems on a timely basis or to implement a conversion that is compatible with our systems would seriously harm our business. Furthermore, we may lose potential sales of our products as companies divert information technology resources to solve their Year 2000 problems. We are currently reviewing our information technology and other technology systems to assess and remediate any Year 2000 problems. While the amount of remediation work required to address Year 2000 problems is not expected to be extensive, we will be required to modify some of our existing hardware and software for our internal computer systems to function properly in the year 2000 and thereafter. Concentration of ownership of our company may give some shareholders substantial influence and may prevent or delay a change in control We anticipate that our executive officers and directors, together with their affiliates, will, in the aggregate, beneficially own approximately percent of our outstanding common stock following the completion of this offering. These shareholders may be able to exercise substantial influence over all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying or preventing a change in control of ShowCase. 12 Our charter documents and Minnesota law may discourage an acquisition of our company Provisions of our articles of incorporation, bylaws and Minnesota law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our shareholders. For instance, our bylaws provide for a classified board of directors with each class of directors subject to re- election every three years. This will make it more difficult for third parties to insert their representatives on our board of directors and gain control of our company. These provisions could also discourage proxy contests and make it more difficult for shareholders to elect directors and take other corporate actions. See "Description of Capital Stock" for a discussion of these provisions. Management could spend or invest the proceeds of this offering in ways with which the shareholders may not agree Our management can spend or invest the proceeds from this offering in ways with which the shareholders may not agree. The investment of these proceeds may not yield a favorable return. See "Use of Proceeds." No prior public market has existed for our common stock and stock prices could be highly volatile Our common stock has never been sold in a public market. An active trading market for our common stock may not develop or be sustained after completion of this offering. The initial public offering price of our common stock may not be indicative of the prices that will prevail in the public market after the offering, and the market price of our common stock could fall below the initial public offering price. For a further discussion, see "Underwriting." The trading price of our common stock may fluctuate widely as a result of a number of factors, including: . quarterly variations in our operating results; . technological innovations or new products; . market perception and customer acceptance of business intelligence software; . increased competition; . disputes concerning intellectual property rights; . demand for the IBM AS/400 platform; . general conditions in the software industry; and . changes in earnings estimates by analysts. In addition, the stock market has experienced extreme price and volume fluctuations, which have particularly affected the market prices of many computer software companies and which have often been unrelated to the operating performance of these companies. Future sales of our common stock in the public market after the offering could cause our stock price to decline If our shareholders sell substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decline. Upon completion of the offering, we will have shares of common stock outstanding, assuming no exercise of the underwriters' over- allotment option and no exercise of outstanding options or warrants after March 31, 1999. Other than the shares sold in this offering, 22,440 shares will be freely tradeable as of the date of this prospectus, an additional 28,620 shares will be freely tradeable 90 days after the date of this prospectus and the remaining shares will be subject to 180 13 day lockup agreements between our existing shareholders and the underwriters. The remaining outstanding shares will become freely tradeable at varying dates beginning 180 days after the date of this prospectus. For more information, see "Shares Eligible for Future Sale." Some holders of our common stock have registration rights After the offering, the holders of 2,759,226 shares of our common stock, which represent percent of our common stock outstanding after this offering, can require that we register their shares for sale under the Securities Act of 1933. If these holders require that we register a large number of securities to be sold in the public market, these sales could cause the market price for our common stock to decline. In addition, if we are required to include shares held by these holders in a company-initiated registration, these sales may have an adverse effect on our ability to raise needed capital. You will incur immediate and substantial dilution If you purchase shares of our common stock, you will incur immediate and substantial dilution in pro forma net tangible book value. If the holders of outstanding options or warrants exercise those options or warrants, you will experience further dilution. See "Dilution." We do not intend to pay dividends We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings for funding the development and growth of our business and, therefore, do not expect to pay any dividends in the foreseeable future. See "Dividend Policy." 14 FORWARD-LOOKING STATEMENTS This prospectus includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties, and assumptions about us, including: . uncertainty of our future operating results; . our ability to introduce new products; . delays or losses of sales due to long sales and implementation cycles for our products; . the possibility of lower prices, reduced gross margins and loss of market share due to increased competition; and . increased demands on our resources due to anticipated growth. In light of these risks, uncertainties and assumptions, the forward- looking events discussed in this prospectus might not occur. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events. TRADEMARKS Each trademark, trade name or service mark appearing in this prospectus belongs to its respective holder. ShowCase(R) and ShowCase STRATEGY(R) are registered trademarks of ShowCase Corporation. 15 USE OF PROCEEDS We estimate our net proceeds from the sale of the shares of our common stock offered in this offering to be approximately $ million, or approximately $ million if the underwriters' over-allotment option is exercised in full, based on an assumed initial public offering price of $ per share and after deducting the estimated underwriting discount and offering expenses. We intend to use the net proceeds from this offering for general corporate purposes, including expansion of our direct sales force, product development and working capital. In addition, we may acquire businesses, products and technologies that are complementary to ours, and a portion of the net proceeds may be used for these acquisitions. We have no agreements with respect to any material acquisitions as of the date of this prospectus. Pending these uses, we intend to invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. DIVIDEND POLICY We have never declared or paid any cash dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future. We plan to retain any earnings to fund the development and growth of our business. 16 CAPITALIZATION The following table summarizes our capitalization as of December 31, 1998 as follows: . on an actual basis; . on a pro forma basis to give effect to the conversion of all outstanding shares of our preferred stock into common stock; and . on a pro forma, as adjusted basis to reflect the application of the net proceeds from our initial public offering and the conversion of all outstanding shares of our preferred stock into common stock.
As of December 31, 1998 ----------------------------- Pro Forma Actual Pro Forma As Adjusted ------ --------- ----------- (in thousands) Long-term debt and capital lease obligations, less current portion........................ $ 751 $ 751 $ ------ ------ Stockholders equity: Preferred stock, $0.01 par value, 5,000,000 shares authorized, 1,348,757 shares outstanding, actual; no shares outstanding, pro forma and pro forma as adjusted........ 14 -- Common stock, $0.01 par value, 10,000,000 shares authorized, 4,486,327 shares outstanding, actual; 50,000,000 shares authorized, 7,245,553 shares outstanding, pro forma; 50,000,000 shares authorized, shares outstanding, pro forma as adjusted (1)..... 45 72 Additional paid-in capital.................. 6,313 6,300 Accumulated deficit......................... (4,001) (4,001) Unrealized holding gain (loss) on securities................................. (147) (147) Deferred compensation....................... (197) (197) Foreign currency translation adjustment..... 91 91 ------ ------ ---------- Total stockholders' equity................. 2,118 2,118 ------ ------ ---------- Total capitalization..................... $2,869 $2,869 $ ====== ====== ==========
- -------- (1) The number of shares outstanding is based on the actual number of shares outstanding as of December 31, 1998. It excludes: . options to purchase 1,545,807 shares outstanding as of March 31, 1999 at a weighted average exercise price of $2.32 per share; and . 13,580 shares of common stock issuable upon exercise of an outstanding warrant at an exercise price of $4.00 per share. For more information regarding our equity benefit plans, see "Management--Benefit Plans" and note 9 of notes to consolidated financial statements. 17 DILUTION If you invest in our common stock, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after this offering. Pro forma net tangible book value dilution per share represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma net tangible book value per share of common stock immediately after completion of this offering. Our pro forma net tangible book value as of March 31, 1999, after giving effect to the conversion of our outstanding preferred stock into common stock in connection with this offering, was $ or $ per share of common stock. Pro forma net tangible book value per share is equal to our total tangible assets less total liabilities, divided by the number of outstanding shares of common stock after giving effect to the conversion of our outstanding preferred stock into common stock in connection with this offering. After giving effect to our sale of the shares of common stock offered by this prospectus at an assumed initial public offering price of $ per share and after deducting the estimated underwriting discount and offering expenses, our as adjusted pro forma net tangible book value as of March 31, 1999 would have been $ or $ per share of common stock. This represents an immediate increase in net tangible book value to existing shareholders of $ per share and an immediate dilution to new investors of $ per share. The following table illustrates the per share dilution to new investors: Assumed initial public offering price per share $ Pro forma net tangible book value per share as of March 31, 1999 $ Increase per share attributable to this offering Pro forma net tangible book value per share after the offering ---------- Dilution per share to new investors in this offering $ ==========
The following table sets forth, on a pro forma basis as of March 31, 1999, after giving effect to the conversion of all outstanding shares of our preferred stock into shares of our common stock in connection with this offering, the difference between the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by existing shareholders and new investors:
Total Shares Purchased Consideration ----------------- ------------------ Average Price Number Percent Amount Percent Per Share --------- ------- ---------- ------- ------------- Existing shareholders 7,262,093 % $6,187,176 % $0.85 New public investors --------- ---- ---------- ---- ----- Total ========= ==== ========== ==== =====
If the underwriters' over-allotment option is exercised in full, the number of shares held by new investors will increase to , or %, of the total shares of common stock outstanding after this offering. The foregoing discussion and tables assume no exercise of any stock options outstanding as of March 31, 1999. They exclude: . options to purchase 1,545,807 shares outstanding as of March 31, 1999 at a weighted average exercise price of $2.32 per share; and . 13,580 shares of common stock issuable upon exercise of an outstanding warrant at an exercise price of $4.00 per share. To the extent that any of these shares are issued, there will be further dilution to new investors. For more information regarding our equity benefit plans, see "Management--Benefit Plans" and note 9 of notes to consolidated financial statements. 18 SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated statement of operations data shown below for the years ended March 31, 1996, 1997 and 1998 and the consolidated balance sheet data as of March 31, 1997 and 1998 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statement of operations data shown below for the years ended March 31, 1994 and 1995 and the consolidated balance sheet data as of March 31, 1994, 1995 and 1996 are derived from audited financial statements not included elsewhere in this prospectus. The selected consolidated financial data for the nine months ended December 31, 1997 and 1998 and as of December 31, 1998 were derived from our unaudited financial statements which, in the opinion of management, include all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the financial information shown in these statements. Please read the consolidated financial statements and related notes included elsewhere in this prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Historical results are not necessarily indicative of future results.
Year Ended March 31, Nine Months Ended ------------------------------------- ------------------------- December 31, December 31, 1994 1995 1996 1997 1998 1997 1998 ------ ------ ------ ------- ------- ------------ ------------ Consolidated Statement of Operations Data: (in thousands, except per share data) Revenues: License fees............ $5,491 $8,131 $9,451 $11,639 $14,279 $10,077 $15,077 Maintenance and support................ 608 1,469 2,707 4,888 6,651 4,765 7,302 Professional service fees................... 372 418 1,120 1,500 2,825 1,909 2,883 ------ ------ ------ ------- ------- ------- ------- Total revenues......... 6,471 10,018 13,278 18,027 23,755 16,751 25,262 ------ ------ ------ ------- ------- ------- ------- Cost of revenues: License fees............ 536 1,145 1,145 1,365 2,645 1,709 2,894 Maintenance and support................ 224 511 520 990 1,572 1,122 1,828 Professional service fees................... 274 602 676 1,172 2,005 1,343 1,995 ------ ------ ------ ------- ------- ------- ------- Total cost of revenues.............. 1,034 2,258 2,341 3,527 6,222 4,174 6,717 ------ ------ ------ ------- ------- ------- ------- Gross margin............. 5,437 7,760 10,937 14,500 17,533 12,577 18,545 Operating expenses: Sales and marketing..... 2,676 4,152 6,661 9,940 15,494 11,153 13,723 Product development..... 1,052 1,821 2,070 2,553 3,051 2,204 3,236 General and administrative......... 1,219 1,229 1,380 1,971 2,590 1,840 2,339 ------ ------ ------ ------- ------- ------- ------- Total operating expenses.............. 4,947 7,202 10,111 14,464 21,135 15,197 19,298 ------ ------ ------ ------- ------- ------- ------- Operating income (loss).. 490 558 826 36 (3,602) (2,620) (753) Other income (expense), net..................... (3) 9 138 14 543 507 54 ------ ------ ------ ------- ------- ------- ------- Net income (loss) before income taxes............ 487 567 964 50 (3,059) (2,113) (699) Income taxes............. 100 170 150 -- 175 125 135 ------ ------ ------ ------- ------- ------- ------- Net income (loss)........ $ 387 $ 397 $ 814 $ 50 $(3,234) $(2,238) $ (834) ====== ====== ====== ======= ======= ======= ======= Net income (loss) per share Basic................... $ 0.10 $ 0.10 $ 0.21 $ 0.01 $ (0.82) $ (0.57) $ (0.19) Diluted................. $ 0.07 $ 0.06 $ 0.13 $ 0.01 $ (0.82) $ (0.57) $ (0.19) Shares used in computing basic net income (loss) per share(1)............ 3,867 3,908 3,850 3,847 3,928 3,909 4,348 Shares used in computing diluted net income (loss) per share........ 5,907 6,339 6,457 6,445 3,928 3,909 4,348
As of March 31, ---------------------------------- As of December 31, 1994 1995 1996 1997 1998 1998 ------ ------ ------ ------ ------ ------------ Consolidated Balance Sheet Data: (in thousands) Cash and marketable securities................... $1,404 $1,326 $2,587 $2,989 $5,847 $7,637 Working capital............... 966 1,106 1,165 1,060 1,579 609 Total assets.................. 3,355 5,344 6,666 11,400 16,315 19,546 Long-term debt and capital lease obligations, less current portion.............. 122 570 446 682 1,157 751 Total stockholders' equity.... 1,329 1,725 2,519 2,602 3,105 2,118
- -------- (1) For an explanation of the determination of the number of shares used in computing net income per share, see note 10 of notes to consolidated financial statements. 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ substantially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under "Risk Factors" and elsewhere in this prospectus. The following discussion should be read together with our consolidated financial statements and related notes thereto included elsewhere in this prospectus. Overview We are the leading provider of fully integrated, end-to-end, business intelligence solutions for IBM AS/400 customers. Our ShowCase STRATEGY product suite and related services are designed to enable organizations to rapidly implement business intelligence solutions that create increased value from their operational and customer data. The sophisticated data warehousing and management capabilities of our product suite provide our clients with highly scalable and tightly integrated solutions. Our products enable enterprise-wide distribution of information and allow end-user access and analysis through familiar applications and Internet browsers. Our ShowCase STRATEGY product suite, introduced in 1996, supports ad hoc information access, enterprise reporting and analytics. We have eight years of experience delivering business intelligence solutions to our clients. We were incorporated in 1988, and in 1991, we introduced the first Windows-based query tool for the IBM AS/400, ShowCase VISTA. During the next four years, we continued to broaden our family of data access products, expand our comprehensive service and support programs, grow our telesales and indirect sales channels and invest in marketing and administrative functions. In 1996, we introduced ShowCase STRATEGY, our fully integrated, end-to-end business intelligence solution for the AS/400. To support our introduction of ShowCase STRATEGY, we created a direct field sales force and increased our global distribution presence, which resulted in a significant increase in our operating expenses. Our headcount increased from 20 employees at April 1, 1991 to 240 employees at March 31, 1999. Our revenues increased from $18.0 million in fiscal 1997 to $23.8 million in fiscal 1998, and were $25.3 million for the nine months ended December 31, 1998. Although our revenues have increased significantly during these periods, this growth may not continue. We had a net income of approximately $50,000 in fiscal 1997, a net loss of $3.2 million in fiscal 1998 and a net loss of approximately $834,000 for the nine months ended December 31, 1998 as a result of increased cost of sales and operating expenses. We intend to continue to invest significant resources in the development of our product suite, sales and marketing and general and administrative functions. See "Risk Factors--We have a history of losses and we may not be able to achieve profitability." Our revenues come from three principal sources: license fees, maintenance and support and professional service fees. We adopted the provisions of Statement of Position ("SOP") No. 97-2, Software Revenue Recognition, as amended by SOP No. 98-4, Deferral of the Effective Date of Certain Provisions of SOP No. 97-2, effective April 1, 1998. Under SOP No. 97-2, we recognize license revenue when the software product has been delivered, if a signed contract exists, the fee is fixed and determinable, collection of resulting receivables is probable and product returns are reasonably estimable. License fee revenues that are contingent upon sale to an end user by distributors and other channel partners are recognized upon receipt of a report of delivery. Maintenance and support fees committed as part of new product license sales and maintenance resulting from renewed maintenance contracts are deferred and recognized ratably over the contract period. Professional service revenue is recognized when services are performed. The adoption of SOP No. 97-2 did not have a material effect on our operating results. We sell our products through our direct sales force and through our channel partners. Direct sales are made by our telesales organization and direct field sales force in North America and by our wholly-owned subsidiaries in Germany, France, the United Kingdom and Belgium, including its branch office in the Netherlands. Our channel partners include IBM, software application vendors, resellers and distributors located 20 in the United States, Italy, Switzerland, Mexico, Japan, Australia, Singapore, Hong Kong, Thailand and South Korea. Sales through our channel partners accounted for approximately 40% of license fee revenues for fiscal 1997, 20% for fiscal 1998 and 20% for the nine months ended December 31, 1998. If our channel sales increase, our profit margins could decrease. In particular, expansion of sales through IBM under our recent agreement with IBM could result in decreased profit margins. Revenues from clients outside North America represented 34.4% of our total revenue for each of fiscal 1997 and 1998 and 37.6% of our total revenue for the nine months ended December 31, 1998. A majority of these sales was derived from European sales. We intend to continue to expand our international operations and have committed, and will continue to commit, significant management time and financial resources to developing our direct and indirect international sales channels. Results of Operations The following table indicates the percentage of total revenues represented by items reflected in our consolidated statements of operations.
Year Ended March 31, Nine Months Ended ------------------- ------------------------- December 31, December 31, 1996 1997 1998 1997 1998 ----- ----- ----- ------------ ------------ As a Percentage of Total Revenues: Revenues: License fees................ 71.2% 64.6% 60.1% 60.2% 59.7% Maintenance and support..... 20.4 27.1 28.0 28.4 28.9 Professional service fees... 8.4 8.3 11.9 11.4 11.4 ----- ----- ----- ----- ----- Total revenues............ 100.0 100.0 100.0 100.0 100.0 Cost of revenues: License fees................ 8.6 7.6 11.1 10.2 11.5 Maintenance and support..... 3.9 5.5 6.6 6.7 7.2 Professional service fees... 5.1 6.5 8.4 8.0 7.9 ----- ----- ----- ----- ----- Total cost of revenues.... 17.6 19.6 26.2 24.9 26.6 ----- ----- ----- ----- ----- Gross margin.................. 82.4 80.4 73.8 75.1 73.4 Operating expenses: Sales and marketing......... 50.2 55.1 65.2 66.6 54.3 Product development......... 15.6 14.2 12.8 13.2 12.8 General and administrative.. 10.4 10.9 10.9 11.0 9.3 ----- ----- ----- ----- ----- Total operating expenses.. 76.1 80.2 89.0 90.7 76.4 ----- ----- ----- ----- ----- Operating income (loss)....... 6.2 0.2 (15.2) (15.6) (3.0) Other income (expense), net... 1.0 0.1 2.3 3.0 0.2 ----- ----- ----- ----- ----- Net income (loss) before income taxes................. 7.3 0.3 (12.9) (12.6) (2.8) Income taxes.................. 1.1 -- 0.7 0.7 0.5 ----- ----- ----- ----- ----- Net income (loss)............. 6.1% 0.3% (13.6)% (13.4)% (3.3)% ===== ===== ===== ===== =====
Revenues Total revenues. Revenues increased from $13.3 million in fiscal 1996 to $18.0 million in fiscal 1997 and to $23.8 million in fiscal 1998, representing increases of 35.8% in fiscal 1997 and 31.8% in fiscal 1998. Revenues increased from $16.8 million for the nine months ended December 31, 1997 to $25.3 million for the nine months ended December 31, 1998, representing an increase of 50.8%. License fees. License fee revenues increased from $9.5 million in fiscal 1996 to $11.6 million in fiscal 1997 and to $14.3 million in fiscal 1998, representing increases of 23.2% in fiscal 1997 and 22.7% in fiscal 21 1998. License fee revenues increased from $10.1 million for the nine months ended December 31, 1997 to $15.1 million for the nine months ended December 31, 1998, representing an increase of 49.6%. License fee revenues as a percentage of total revenues were 71.2% for fiscal 1996, 64.6% for fiscal 1997, 60.1% for fiscal 1998 and 59.7% for the nine months ended December 31, 1998. These increases in total license fee revenues are largely attributable to increases in the number of licenses sold, reflecting the results of an expanded direct field sales force and the introduction of new products and product enhancements, as well as increases in average transaction size. Beginning in fiscal 1997, revenues from Essbase/400 licenses became a significant percentage of total license fee revenues. Maintenance and support. Maintenance and support revenues increased from $2.7 million in fiscal 1996 to $4.9 million in fiscal 1997 and to $6.7 million in fiscal 1998, representing increases of 80.6% in fiscal 1997 and 36.1% in fiscal 1998. Maintenance and support revenues increased from $4.8 million for the nine months ended December 31, 1997 to $7.3 million for the nine months ended December 31, 1998, representing an increase of 53.2%. Maintenance and support revenues as a percentage of total revenues were 20.4% for fiscal 1996, 27.1% for fiscal 1997, 28.0% for fiscal 1998 and 28.9% for the nine months ended December 31, 1998. These increases in maintenance and support revenues were largely a result of the renewal of maintenance and support contracts as our installed base continued to grow, as well as new maintenance and support contracts associated with new product licenses. Professional service fees. Professional service fee revenues increased from $1.1 million in fiscal 1996 to $1.5 million in fiscal 1997 and to $2.8 million in fiscal 1998, representing increases of 33.9% in fiscal 1997 and 88.3% in fiscal 1998. Professional service fee revenues increased from $1.9 million for the nine months ended December 31, 1997 to $2.9 million for the nine months ended December 31, 1998, representing an increase of 51.0%. Professional service fee revenues as a percentage of total revenues were 8.4% for fiscal 1996, 8.3% for fiscal 1997, 11.9% for fiscal 1998 and 11.4% for the nine months ended December 31, 1998. These increases in professional service fee revenues were largely a result of the service revenues associated with the sale of new product licenses. Costs of Revenues Cost of license fees. Cost of license fees consists primarily of the costs of product manuals, media, packaging, shipping and royalties paid to third parties. Cost of license fees increased from $1.1 million in fiscal 1996 to $1.4 million in fiscal 1997 and to $2.6 million in fiscal 1998, representing 12.1% of license fee revenues in fiscal 1996, 11.7% in fiscal 1997 and 18.5% in fiscal 1998. Cost of license fees increased from $1.7 million for the nine months ended December 31, 1997 to $2.9 million for the nine months ended December 31, 1998, representing 17.0% and 19.2% of license fee revenues for these periods. The increase in cost of license fees was primarily attributable to the increase in the percentage of our revenues from our Essbase/400 product, which requires us to pay royalties. We anticipate that cost of license fees will increase in dollar amount in future periods as license fee revenues increase. Cost of license fees as a percentage of license fee revenues may increase if we license additional technologies or products or if sales of Essbase/400 or other products which carry a royalty obligation increase as a percentage of license fee revenues. Cost of maintenance and support. Cost of maintenance and support consists primarily of personnel costs associated with providing maintenance and support services and payments to third parties to provide maintenance and support, primarily with respect to our Essbase/400 product. Cost of maintenance and support increased from $0.5 million in fiscal 1996 to $1.0 million in fiscal 1997 and to $1.6 million in fiscal 1998, representing 19.2% of total maintenance and support revenues in fiscal 1996, 20.3% in fiscal 1997 and 23.6% in fiscal 1998. Cost of maintenance and support increased from $1.1 million for the nine months ended December 31, 1997 to $1.8 million for the nine months ended December 31, 1998, representing 23.5% and 25.0% of total license fee revenues for these periods. The increase in cost of maintenance and support was primarily due to the hiring of additional personnel and the implementation of a new client management system. We anticipate that cost of maintenance and support will increase in dollar amount in future periods as maintenance and support revenues increase. 22 Cost of professional service fees. Cost of professional service fees consists primarily of the costs of providing training and consulting services. Cost of professional service fees increased from $0.7 million in fiscal 1996 to $1.2 million in fiscal 1997 and to $2.0 million in fiscal 1998, representing 60.4% of professional service fee revenues in fiscal 1996, 78.1% in fiscal 1997 and 71.0% in fiscal 1998. Cost of professional service fees increased from $1.3 million for the nine months ended December 31, 1997 to $2.0 million for the nine months ended December 31, 1998, representing 70.4% and 69.2% of professional service fee revenues for these periods. The dollar increase in cost of professional service fees was primarily due to the expansion of our professional services staff. Cost of professional service fees as a percentage of professional service fee revenues has decreased from 1997 to 1998 as a result of increased efficiency from increases in scale and utilization of our staff. We anticipate that cost of professional service fees will increase in dollar amount in future periods as professional service fee revenues increase. Operating Expenses Sales and marketing. Sales and marketing expenses consist primarily of salaries, benefits, bonuses, commissions and travel and promotional expenses. Sales and marketing expenses have increased from $6.7 million in fiscal 1996 to $9.9 million in fiscal 1997 and to $15.5 million in fiscal 1998, representing 50.2% of total revenues in fiscal 1996, 55.1% in fiscal 1997 and 65.2% in fiscal 1998. Sales and marketing expenses increased from $11.2 million for the nine months ended December 31, 1997 to $13.7 million for the nine months ended December 31, 1998, representing 66.6% and 54.3% of total revenues for these periods. This increase in both dollar amount and as a percentage of total revenues from fiscal 1996 through fiscal 1998 reflected the establishment of a direct field sales force, the hiring of additional sales and marketing personnel and the expansion of promotional activities. We anticipate that sales and marketing expenses will increase in dollar amount in future periods. Product development. Product development expenses consist primarily of development personnel compensation and related costs associated with the development of new products, the enhancement of existing products, quality assurance and testing. Product development expenses increased from $2.1 million in fiscal 1996 to $2.6 million in fiscal 1997 and to $3.1 million in fiscal 1998, representing 15.6% of total revenues in fiscal 1996, 14.2% in fiscal 1997 and 12.8% in fiscal 1998. Product development expenses increased from $2.2 million for the nine months ended December 31, 1997 to $3.2 million for the nine months ended December 31, 1998, representing 13.2% and 12.8% of total revenues for these periods. This increase in dollar amount is due to expenses associated with the development of new products and the hiring of additional personnel. Product development expenses decreased as a percentage of total revenues in fiscal 1997 and fiscal 1998 and for the nine months ended December 31, 1998 primarily due to faster revenue growth. We anticipate that we will continue to devote significant resources to our product development efforts and that product development expenses will increase in dollar amount in future periods. To date, all product development costs have been expensed as incurred. General and administrative. General and administrative expenses consist primarily of salaries of executive, financial, human resource and information services personnel as well as outside professional fees. General and administrative expenses increased from $1.4 million in fiscal 1996 to $2.0 million in fiscal 1997 and to $2.6 million in fiscal 1998, representing 10.4% of total revenues in fiscal 1996 and 10.9% in each of fiscal 1997 and 1998. General and administrative expenses increased from $1.8 million for the nine months ended December 31, 1997 to $2.3 million for the nine months ended December 31, 1998 representing 11.0% and 9.3% of total revenues for these periods. These increases in dollar amounts were primarily due to increased staffing and related expenses necessary to manage and support the expansion of our operations. General and administrative expenses decreased as a percentage of total revenues primarily due to faster revenue growth. We anticipate that our general and administrative expenses will increase in dollar amount in the future as a result of increased personnel and infrastructure costs necessary to support the expansion of our operations as well as the additional expenses associated with being a public company. 23 Other Income Other income consists primarily of earnings from investments and sales of securities, equity in net income of unconsolidated affiliates and gains or losses from disposal of fixed assets, net of any interest expense. Other income decreased from $137,000 in fiscal 1996 to $14,000 in fiscal 1997 and increased to $543,000 in fiscal 1998. Other income decreased from $507,000 for the nine months ended December 31, 1997 to $54,000 for the nine months ended December 31, 1998. The increase in other income in fiscal 1998 can be attributed primarily to earnings on investment of the proceeds from our sale of preferred stock. The decrease in other income for the nine months ended December 31, 1998 from the nine months ended December 31, 1997 can be attributed to the gain on the sale of a security of a third party during the nine months ended December 31, 1997. Provision (Benefit) for Income Taxes Income taxes decreased from $150,000 in fiscal 1996 to no income taxes in fiscal 1997 due to lower income from operations in fiscal 1997. Income taxes were $175,000 in fiscal 1998 and $135,000 for the nine months ended December 31, 1998, primarily due to foreign income taxes paid which could not be realized as tax credits in the United States due to our consolidated losses from operations. We have recorded deferred tax assets for temporary differences of $1,055,000 as of March 31, 1997 and $1,840,000 as of March 31, 1998, primarily related to deferred revenue on which taxes have been paid. See note 7 to the consolidated financial statements. We periodically evaluate the need for a valuation allowance against these deferred tax assets. Due to uncertainty regarding future taxable income in 1997, and our operating losses in fiscal 1998, we have determined that it is more likely than not that only a portion of the deferred tax assets will be realized and accordingly, there is a corresponding valuation allowance of $415,000 as of March 31, 1997 and $1,500,000 as of March 31, 1998. The amount recognized approximates the amount of cash refundable that could be generated if we were to continue our operating loss position. 24 Selected Quarterly Operating Results The following table shows unaudited consolidated financial information for each of the four quarters in our fiscal year ended March 31, 1998 and for the first three quarters in our fiscal year ended March 31, 1999. In management's opinion, this unaudited quarterly information has been prepared on the same basis as the audited consolidated financial statements and related notes and includes all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the information for the quarters presented in accordance with generally accepted accounting principles.
Three Months Ended -------------------------------------------------------------- June 30, Sept 30, Dec 31, Mar 31, June 30, Sept 30, Dec 31, 1997 1997 1997 1998 1998 1998 1998 -------- -------- ------- ------- -------- -------- ------- Consolidated Statements of Operations Data: (in thousands) Revenues: License fees............ $2,346 $3,301 $4,429 $4,203 $4,224 $5,019 $5,834 Maintenance and support................. 1,398 1,692 1,675 1,886 2,161 2,365 2,776 Professional service fees.................... 621 575 712 917 913 1,037 933 ------- ------ ------ ------ ------ ------ ------ Total revenues........ 4,365 5,568 6,816 7,006 7,298 8,421 9,543 Cost of revenues: License fees............ 389 475 844 937 817 1,000 1,077 Maintenance and support................. 367 373 382 450 565 605 658 Professional service fees.................... 437 411 494 663 613 577 805 ------- ------ ------ ------ ------ ------ ------ Total cost of revenues............. 1,193 1,259 1,720 2,050 1,995 2,182 2,540 ------- ------ ------ ------ ------ ------ ------ Gross margin.............. 3,172 4,309 5,096 4,956 5,303 6,239 7,003 Operating expenses: Sales and marketing..... 3,418 3,412 4,322 4,342 4,387 4,378 4,958 Product development..... 686 742 776 847 979 1,219 1,038 General and administrative.......... 559 614 668 749 736 748 855 Total operating expenses............. 4,663 4,768 5,766 5,938 6,102 6,345 6,851 ------- ------ ------ ------ ------ ------ ------ Operating income (loss)... (1,491) (459) (670) (982) (799) (106) 152 Other income (expense), net...................... (3) 2 508 36 6 25 23 ------- ------ ------ ------ ------ ------ ------ Net income (loss) before income taxes............. (1,494) (457) (162) (946) (793) (81) 175 Income taxes.............. 50 25 50 50 40 45 50 ------- ------ ------ ------ ------ ------ ------ Net income (loss)......... $(1,544) $ (482) $ (212) $ (996) $ (833) $ (126) $ 125 ======= ====== ====== ====== ====== ====== ======
Three Months Ended ----------------------------------------------------------------- June 30, Sept 30, Dec 31, Mar 31, June 30, Sept 30, Dec 31, 1997 1997 1997 1998 1998 1998 1998 Percent of Total Revenues: -------- -------- ------- ------- -------- -------- ------- Revenues: License fees............ 53.7% 59.3% 65.0% 60.0% 57.9% 59.6% 61.1% Maintenance and support................. 32.0 30.4 24.6 26.9 29.6 28.1 29.1 Professional service fees.................... 14.2 10.3 10.4 13.1 12.5 12.3 9.8 ----- ----- ----- ----- ----- ----- ----- Total revenues........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Cost of revenues: License fees............ 8.9 8.5 12.4 13.4 11.2 11.9 11.3 Maintenance and support................. 8.4 6.7 5.6 6.4 7.7 7.2 6.9 Professional service fees.................... 10.0 7.4 7.2 9.5 8.4 6.9 8.4 ----- ----- ----- ----- ----- ----- ----- Total cost of revenues............. 27.3 22.6 25.2 29.3 27.3 25.9 26.6 ----- ----- ----- ----- ----- ----- ----- Gross margin.............. 72.7 77.4 74.8 70.7 72.7 74.1 73.4 Operating expenses: Sales and marketing..... 78.3 61.3 63.4 62.0 60.1 52.0 52.0 Product development..... 15.7 13.3 11.4 12.1 13.4 14.5 10.9 General and administrative.......... 12.8 11.0 9.8 10.7 10.1 8.9 9.0 Total operating expenses............. 106.8 85.6 84.6 84.8 83.6 75.3 71.8 ----- ----- ----- ----- ----- ----- ----- Operating income (loss)... (34.2) (8.2) (9.8) (14.0) (10.9) (1.3) 1.6 Other income (expense), net...................... (0.1) -- 7.5 0.5 0.1 0.3 0.2 ----- ----- ----- ----- ----- ----- ----- Net income (loss) before income taxes............. (34.2) (8.2) (2.4) (13.5) (10.9) (1.0) 1.8 Income taxes.............. 1.1 0.4 0.7 0.7 0.5 0.5 0.5 ----- ----- ----- ----- ----- ----- ----- Net income (loss)......... (35.4)% (8.7)% (3.1)% (14.2)% (11.4)% (1.5)% 1.3% ===== ===== ===== ===== ===== ===== =====
25 Our operating results have varied and may in the future vary significantly from quarter to quarter. These fluctuations may result in volatility in the price of our common stock. We believe that quarter-to-quarter comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of future performance. In general, we base our operating expense budgets on anticipated revenue trends, and we may not be able to reduce these expenses in the short-term. Because our expenses are relatively fixed in the near term, any shortfall from anticipated revenues or any delay in recognition of revenues could result in significant variations in our quarterly operating results. In the future, our operating results may fluctuate for this reason or as a result of a number of other factors, including increased expenses, timing of product releases, increased competition, variations in the mix of sales, announcements of new products by our competitors and capital spending patterns of our clients. Because we have experienced and may continue to experience seasonality, we may not be able to maintain profitability on a quarterly basis. We have often realized a greater percentage of our license revenue and operating income in our third fiscal quarter than in other quarters due to customer purchasing patterns. In addition, due to seasonal factors, our sales often tend to slow during the summer months. We expect these trends to continue. See "Risk Factors--Our quarterly operating results may fluctuate significantly and are difficult to predict." Liquidity and Capital Resources Historically, we have funded operations primarily through cash provided by operations, the sale of equity securities and bank borrowings. Our operating activities provided cash of $2.2 million in fiscal 1996 and $1.2 million in fiscal 1997, and used cash of $833,000 in fiscal 1998. Our operating activities used cash of $2.0 million for the nine months ended December 31, 1997 and provided cash of $2.6 million for the nine months ended December 31, 1998. The decrease in cash from operations for fiscal 1998 was due primarily to our net loss in that year, offset in part by $2.7 million increase in deferred revenue and a $1.4 million increase in accrued liabilities. The increase in cash from operations for the nine months ended December 31, 1998 compared to the nine months ended December 31, 1997 was due primarily to improved results of operations and increased deferred revenue, offset in part by an increase in accounts receivable. In each period, the increase in deferred revenue consisted primarily of prepayment of clients' maintenance fees. Our investing activities used cash of approximately $646,000 in fiscal 1996, $1.1 million in fiscal 1997 and $566,000 in fiscal 1998. Our investing activities used cash of approximately $302,000 and $247,000 for the nine months ended December 31, 1997 and December 31, 1998, respectively. In all of these periods, the principal use of cash in investing activities was for capital expenditures related to the expansion of our operations. Our financing activities used cash of approximately $323,000 in fiscal 1996 and provided cash of approximately $290,000 in fiscal 1997 and $3.8 million in fiscal 1998. Our financing activities used cash of approximately $6,000 in the nine months ended December 31, 1997 and used cash of approximately $290,000 in the nine months ended December 31, 1998. For fiscal 1997, financing activities provided cash primarily from issuance of long-term debt, offset in part by long-term debt repayment and payments under capital lease obligations. For fiscal 1998, financing activities provided cash primarily from proceeds received from the issuance of preferred stock, offset in part by long-term debt repayment and payments under capital lease obligations. For the nine months ended December 31, 1998, cash used by financing activities consisted primarily of long-term debt repayment and payments under capital lease obligations. Our sources of liquidity as of December 31, 1998 consisted principally of cash and marketable securities of $7.6 million. We believe that cash generated from operations, existing cash and marketable securities, and cash generated from this offering will be sufficient to fund operations for at least the next twelve months. Thereafter, we may need to raise additional funds through public or private financing. Additional funds may not be available or, if available, we may not be able to obtain them on terms favorable to us and our shareholders. 26 Quantitative and Qualitative Disclosure About Market Risks We have no derivative financial instruments in our cash and cash equivalents and investments. We invest our cash and cash equivalents in investment grade, highly liquid investments, consisting of money market instruments, bank certificates of deposit and overnight investments in commercial paper. We anticipate investing our net proceeds from this offering in similar investment grade and highly liquid investments pending their use as described in this prospectus. See "Use of Proceeds." We are exposed to market risk from fluctuations in foreign currency exchange rates. We manage exposure to variability in foreign currency exchange rates primarily through the use of natural hedges, whereby funding obligations and assets are both managed in the local currency. However, different durations in our funding obligations and assets may expose us to the risk of foreign exchange rate fluctuations. We have not entered into any derivative transactions to manage this risk. Based on our overall foreign currency rate exposure at December 31, 1998, we believe that movements in foreign currency rates would not materially adversely affect our financial position. Year 2000 Many currently installed computer systems and software products store dates using two digits of the calendar year. These date code fields will need to accept four-digit entries to distinguish 21st century dates from 20th century dates. This problem could result in system failures or miscalculations causing disruptions of business operations, including a temporary inability to process transactions, send invoices or engage in other similar business activities. As a result, many companies' computer systems and software will need to be upgraded or replaced in order to comply with Year 2000 requirements. The potential global impact of the Year 2000 problem is not known. If Year 2000 problems are not corrected in a timely manner, they could affect us and the U.S. and world economy generally. Even though our current products are Year 2000 compliant, we may lose potential sales because companies may be diverting resources to assess and fix their internal systems that may not be Year 2000 compliant. We have formed a project team to address internal Year 2000 issues. Our internal financial and other computer systems are being reviewed to assess and remediate Year 2000 problems. Our assessment of internal systems includes our information technology, or IT, systems as well as other systems which include embedded technology in equipment containing microprocessors or other similar circuitry. Our Year 2000 compliance program includes the following phases: . identifying systems that need to be modified or replaced; . carrying out remediation work to modify existing systems or convert to new systems; and . conducting validation testing of systems and applications to ensure compliance. The amount of remediation work required to address internal Year 2000 problems is not expected to be extensive. We have replaced some of our operational systems and most of our personal computers in the last several years. We believe that new equipment and software, including new accounting software to be installed in 1999, substantially addresses Year 2000 issues. However, we will be required to modify some of our existing hardware and software in order for our computer systems to function properly in the year 2000 and thereafter. We estimate that we will complete our Year 2000 compliance program for all of our significant internal systems no later than September 30, 1999, at an estimated cost of $50,000. There can be no assurance that the estimates are correct or that actual costs will not be materially greater than anticipated. In addition, we plan to survey our major suppliers and evaluate their plans to address potential Year 2000 issues. However, it is impossible to fully assess the potential consequences in the event interruptions from 27 suppliers occur or in the event that there are disruptions in infrastructure areas as utilities, communications, transportation, banking or government. Based on our assessments to date, we believe we will not experience any material disruptions as a result of Year 2000 problems in internal processes, information processing, interfaces with major clients or with processing orders and billing. However, our ability to timely ship products to our clients would be disrupted if suppliers or other third-party providers, such as those providing electricity, water or telephone services, experience difficulties in providing products or services to us. Such a result could seriously harm our business and results of operations. We have not yet developed a contingency plan to address these potential issues, but we will assess the need to develop such a plan based on the outcome of our Year 2000 review. Assuming no major disruption in service from suppliers or other third-parties, we believe that we will be able to manage our total Year 2000 transition without any substantial effect on business and operating results. New Accounting Pronouncements The American Institute of Certified Public Accountants ("AICPA") issued SOP No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use in March 1998, and SOP No. 98-5, Reporting on the Costs of Start-Up Activities in April 1998. SOP No. 98-1 requires that entities capitalize certain costs related to internal-use software once certain criteria have been met. SOP No. 98-5 requires that all start-up costs related to new operations must be expensed as incurred. In addition, all start-up costs that were capitalized in the past must be written off when SOP No. 98-5 is adopted. Although we will be required to adopt SOP Nos. 98-1 and 98-5 for the fiscal year ending March 31, 2000, we do not expect them to have a material impact on our financial position, results of operations or cash flows. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 established methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. SFAS No. 133 will be effective for us in April 2001. We are currently reviewing the potential impact of this accounting standard. In December 1998, the AICPA issued SOP No. 98-9, Modification of SOP 97- 2, Software Revenue Recognition, with Respect to Certain Transactions. SOP No. 98-9 requires recognition of revenue using the "residual method" in a multiple- element software arrangement when fair value does not exist for one or more of the delivered elements in the arrangement. Under the "residual method," the total fair value of the undelivered elements is deferred and recognized in accordance with SOP No. 97-2. We will be required to implement SOP No. 98-9 for the fiscal year ending March 31, 2000. SOP No. 98-9 also extends the deferral of the application of SOP No. 97-2 to certain other multiple element software arrangements until SOP 98-9 becomes effective. We do not expect a material change in our accounting for revenues as a result of the provisions of SOP 98- 9. 28 BUSINESS Overview We are the leading provider of fully integrated, end-to-end, business intelligence solutions for IBM AS/400 customers. Our ShowCase STRATEGY product suite and related services are designed to enable organizations to rapidly implement business intelligence solutions that create increased value from their operational and customer data. The sophisticated data warehousing and management capabilities of our product suite provide our clients with highly scalable and tightly integrated solutions. Our products enable enterprise-wide distribution of information and allow end-user access and analysis through familiar applications and Internet browsers. Our ShowCase STRATEGY product suite, introduced in 1996, supports ad hoc information access, enterprise reporting and analytics. We have eight years of experience delivering business intelligence solutions to our clients. Industry Background The rapid growth of the Internet and the emergence of e-business are transforming the way organizations conduct business, communicate and share information. This transformation is driving broad and immediate demand for better intelligence and information dissemination. In recent years, the deployment of enterprise resource planning applications, the integration of supply chains and the emergence of e-business have increased the amount of data available to companies. Nevertheless, many companies have failed to organize, manage and disseminate this data in an accessible, intuitive manner. Companies require business intelligence to interpret and create value from the vast amounts of available data by better tailoring products and services, identifying business opportunities and improving operational efficiencies. In addition, as organizations have become more closely linked with suppliers and customers, there is an increasing need to extend business intelligence beyond organizational boundaries. Business Intelligence. Employees, customers and suppliers require business intelligence to make faster, smarter business decisions. Business intelligence software enables organizations to transform data from disparate sources into accessible, understandable and useful information. It is also the foundation of an enterprise information portal, a centralized location where users can access necessary corporate information. Business intelligence solutions provide employees, customers and suppliers with useful information through ad hoc information access, enterprise reporting and analytics. Ad hoc information access enables users to customize the manner in which information is viewed and analyzed. Enterprise reporting delivers timely analysis and drill-down capabilities on a structured basis to broad user populations. Finally, analytic applications provide management insight by enabling users to analyze transactional data to identify operational trends and variances. Examples of analytic applications include fraud detection, credit scoring and budgeting applications. To support these functional uses, robust business intelligence solutions require a strong infrastructure of data warehouse generation and management. Business intelligence is deployed in many ways to increase revenues and operating efficiencies. For instance, in e-commerce, companies can use business intelligence to better manage customer relationships by analyzing past purchases, service history, product utilization and demographics. Consumer product companies and retailers use business intelligence to deploy management applications to determine which products to promote in specific markets and channels. Companies engaged in supply chain management use business intelligence to more efficiently manage product and material order flow among distribution facilities, multiple plants and suppliers. Companies from all industries can use business intelligence to benchmark performance against goals and best business practices. The demand for business intelligence solutions and the deployment of enterprise information portals is driven by increased competitive pressures, the emergence of e-business and the availability of large amounts of operational data. A June 1998 Information Week survey of 250 information technology executives indicated that data warehousing, a core element of business intelligence, is their top post-millennium technology priority. 29 Dataquest estimates that the business intelligence software market will grow from approximately $1.9 billion in 1998 to approximately $6.9 billion in 2002, a compound annual growth rate of approximately 38%. Business intelligence solutions are data intensive and draw on a broad range of data sources. A critical foundation technology for business intelligence solutions is a scalable and reliable server platform capable of supporting a broad array of users and environments. The IBM AS/400. The AS/400 is a leading server platform used by mid- market companies to deploy enterprise resource planning, e-business and business intelligence applications. The Gartner Group estimated the AS/400 installed base to be approximately 500,000 units in 1998 and growing to approximately 650,000 units by 2001. The large number of applications developed for the AS/400 include business management systems, inventory and demand planning applications. Leading application vendors include Fiserv, Infinium Software, J.D. Edwards, Lawson Software, Lotus, PeopleSoft, SAP and System Software Associates. The popularity of the AS/400 as an application and e-business server is a function of its ease of use, reliability, security, scalability and ability to deploy Java and Windows NT business applications. Expanded interoperability with other systems facilitate the use of the AS/400 as a server in heterogeneous computing environments. New models of the AS/400 provide strong price performance and include an expanded multi-processor architecture and networking capabilities and software products for Internet delivery of applications and e-business. The AS/400's integrated hardware, operating system, database, middleware and software applications provide organizations with the performance and tools to implement a robust business intelligence solution. The AS/400 is a leading server platform deployed in the mid-market for enterprise resource applications, e-business and business intelligence and is particularly popular with mid-market companies because of its reliability, scalability, ease of deployment and low cost of operation. Problems faced by traditional approaches to business intelligence. Companies have spent extensive time and resources collecting, organizing and delivering operational data through various applications. Nevertheless, many of these companies have been unable to implement and realize the benefits of a business intelligence solution because they lack the necessary technical expertise. This problem is especially prevalent for AS/400 customers because they typically have limited IT staff and resources. Traditionally, companies have implemented business intelligence solutions through the purchase and integration of many software products from multiple vendors. However, these companies are often unable to realize the full potential of business intelligence because of the following challenges: Integrating components from multiple vendors. As a result of the fragmented business intelligence market, implementing a business intelligence solution has traditionally required the evaluation, selection, purchase and integration of many different software products from multiple vendors. Integrating these products requires extensive use of an organization's IT staff and resources and often limits the overall capability of the implemented solution. Furthermore, because these components are supplied by multiple vendors, and use many different interfaces, the solution is often difficult to use. Adapting solutions to evolving end-user needs. The initial implementation of a traditional business intelligence solution frequently provides a limited set of functionality. As organizations realize the benefits of business intelligence, they frequently wish to add more business functionality to their solutions. Integrating this increased functionality may not be possible with an organization's existing tools, or may be extremely costly or laborious. Furthermore, the resulting solution is often of limited overall effectiveness. As a result, end users frequently require sustained IT staff involvement to perform the customized reporting and follow-on analysis necessary to derive increased value from corporate data. Scaling across the enterprise. When implementing traditional business intelligence solutions, organizations frequently do not recognize the importance of strong data warehouse generation and management capabilities. As a result, the data warehouse generation and management infrastructure of a business intelligence solution is often unable to meet the demands placed on it as the diversity and size of the end-user population grows. Without this infrastructure, companies frequently experience significant data integrity and performance problems when they attempt to scale their business intelligence solutions to serve broader user populations. 30 Extending business intelligence through the Internet. Extending business intelligence through the Internet exacerbates the limitations of traditional business intelligence solutions. As companies implement enterprise information portals in an e-business environment, business intelligence solutions must be easy to use and provide a high degree of scalability and adaptability to deliver business intelligence to a growing population of employees, customers and suppliers with diverse needs. To support this large-scale deployment, business intelligence solutions must also have sufficient management, security, intuitive user interfaces and Internet browser-based capabilities. We believe that the demand for business intelligence, the limitations of traditional approaches and the large and growing AS/400 installed base provide a significant opportunity for fully integrated, end-to-end business solutions for AS/400 customers. The ShowCase Solution We are the leading provider of business intelligence solutions for AS/400 customers. Our ShowCase STRATEGY product suite and related services are designed to enable organizations to rapidly implement and deploy business intelligence solutions that create increased value from their operational and customer data. We believe our solution provides the following key benefits: Full integration and end-to-end business intelligence functionality. Our product suite and professional services are designed to provide our clients with a complete, fully integrated, end-to-end business intelligence solution. Our products can be easily integrated with industry leading enterprise software applications provided by vendors such as Fiserv, Infinium Software, J. D. Edwards, Lawson Software, Lotus and SSA. Our end-to-end solution provides each of the three functional business intelligence uses -- ad hoc information access, enterprise reporting and analytics. Our business intelligence solutions incorporate a strong infrastructure of data warehouse generation and management. This end-to-end approach eliminates the need for AS/400 customers to evaluate, select, purchase and integrate components from different vendors to realize the benefits of business intelligence. Easy deployment and expansion. Our comprehensive product suite and accompanying professional services enable our clients to quickly and easily deploy a manageable business intelligence solution that minimizes the burden on their IT departments. Our clients can deploy our modular business intelligence solution in stages as their business intelligence needs grow. Companies can start with any one of the three functional business intelligence uses and extend their solutions to include the other two as end users realize the benefits of and discover other uses for business intelligence. We also offer Deployment Accelerators, which provide adaptable applications for targeted business functions and allow some of our clients to realize benefits of business intelligence within days of deployment. Robust scalability for enterprise-wide deployment. Our product suite addresses the challenges faced by IT departments as business intelligence solutions expand in functionality and in the number of applications and end users supported. Our data warehouse generation and management capabilities and our hub-and-spoke architecture enable modular expansion of data marts and data warehouses to support additional applications and end users. Further, our product suite supports enterprise performance capabilities and scalability through its tight integration with and leverage of the AS/400 platform. Ease of use and Internet accessibility. Our product suite combines a consistent and intuitive user interface with powerful functionality that allows end users to easily access, customize and analyze information and reports with minimal IT assistance. Because users can realize the benefits of our solution through familiar applications, such as Microsoft Excel, Lotus 1-2-3 and Microsoft Word, organizations are able to leverage existing software applications and user skills. These capabilities are enhanced by our easy-to- use Internet browser-based capabilities, including query and user-defined calculations, powerful graphics and drag-and-drop features. 31 ShowCase Strategy Our objective is to extend our position as the leading provider of fully integrated, end-to-end business intelligence solutions for AS/400 customers. The following are key elements of our strategy: Expand product functionality and technology leadership. We intend to continue expending significant resources to expand our product functionality and technology leadership. One of our initiatives is to strengthen our product suite's enterprise reporting capabilities to publish specified business intelligence to defined users on a regularly scheduled basis. We also intend to further leverage Internet browser technologies to enable companies to disseminate information and business intelligence through a portal framework that will enable growing user populations both within and outside the organization to more easily search and receive information through the Internet. Furthermore, we plan to increase our product suite's ability to access additional data sources to ensure that a broader range of information is available to end users. Offer additional application Deployment Accelerators. We believe that there is a large market for adaptive applications that utilize the underlying capabilities of our product suite and offer out-of-the-box functionality in targeted markets. Our Deployment Accelerators are designed to serve as architectural models for our clients' business intelligence solutions. In 1998, we introduced Deployment Accelerators for sales and financial analysis. We believe these adaptive applications allow our clients to quickly realize benefits from our products and will extend their use for additional applications. Consequently, we plan to tightly integrate leading enterprise resource planning applications with our Deployment Accelerators, which will also incorporate future technological advancements. We also intend to leverage the knowledge gained from our experience with client implementations to develop additional Deployment Accelerators for areas such as inventory and customer relationship management. Increase our direct sales efforts. We intend to expand our direct sales force to extend market penetration to new clients and expand penetration of our product suite within existing clients. We believe a strong direct sales force is necessary to educate potential clients about the benefits of and uses for the relatively new area of business intelligence. A strong direct sales force is particularly important for AS/400 customers, which typically have relatively small IT staffs. An expanded direct sales force presence will also provide increased front-line insight into the business intelligence needs of AS/400 customers. A unit of our direct sales force has been specifically designed to build upon our existing client relationships. We believe there is a significant opportunity to sell additional components of our product suite to these clients as they decide to increase the functionality of their business intelligence solutions and make them available to a greater number of end users. Expand our distribution channels. We have recently expanded our relationship with IBM to allow us to leverage the distribution capabilities provided by IBM's large software data management group sales force. In the future, we intend to expand the number of distribution channels available for our products by increasing the number of enterprise resource planning applications with which our products are integrated. Some of our products are currently integrated with applications provided by vendors such as Dimension Data Systems, Fiserve, IBM, Infinium Software, Lawson Software, Silverlake, TSG and Walker Interactive. In addition, we are targeting the expansion of our marketing relationships to increase market awareness of our product suite and customer referrals for our direct sales force. We currently have marketing relationships with several companies, including CMDS, Data Systems International and J.D. Edwards. Provide high quality services and support to our clients. We provide comprehensive implementation, training and support services to our clients to aid them in quickly implementing and realizing the benefits of our solutions. Our focus on high quality service and support is critical to success in the AS/400 market because many of our clients do not have the internal resources necessary to implement and maintain business intelligence solutions. We currently anticipate expanding our support and professional service capabilities and our service partnerships to support the deployment of our product suite. 32 Products The ShowCase STRATEGY product suite includes all of the elements of a complete business intelligence solution. Typical configurations of business intelligence solutions include the following components of our product suite:
Analyzer Report for the Warehouse Warehouse Query Writer Essbase/400 Analyzer Web Builder Manager ----- ------ ----------- -------- -------- --------- --------- Ad hoc information access................. X X X Enterprise reporting.... X X X X Analytics............... X X X X
Our Deployment Accelerators provide our clients with both enterprise reporting and analytic capabilities and currently provide sales and financial analysis functionality. [GRAPHIC] [The graphic consists of three rectangular boxes with symbolic representations as described below. Above the entire graphic are the words "Deployment Accelerator." Box on the extreme left: On the extreme left is a rectangular box with a symbolic representation of a computer server, bearing the words "Any AS/400 Data Source." Above this representation is the acronym "OLTP." Below this representation are the words "Legacy, Human Resources, Marketing, Sales, and Financial Data." Box in the center: In the center is a rectangular box with several symbolic representations. An arrow points to the right from the symbolic representation of a computer server in the rectangular box on the extreme left to a box in the center rectangular box bearing the words "Warehouse Builder." An arrow points to the right from this rectangular box to a symbolic representation of a data warehouse. Above this representation are the words "DB2/400 Data Warehouse." An arrow points to the right from this symbolic representation to a box in the middle of the center rectangular box bearing the words "Warehouse Builder." Two arrows point to the right from this middle box. The upper arrow points to a symbolic representation of a multidimensional data mart. Above this symbolic representation are the words "ESSBASE/400 Multidimensional Data Mart." The lower arrow points to a symbolic representation of a relational data mart. Above this symbolic representation are the words "DB2/400 Relational Data Mart." An arrow points between the symbolic representations of the multidimensional data mart and the relational data mart. To the right of these symbolic representations is a rectangular box bearing the words "Warehouse Manager." Box on the extreme right: On the extreme right is a rectangular box with five symbolic representations of desk-top computers. To the left of these symbolic representations are the words "Query," "Report Writer," "Essbase/400," "Analyzer," and "Analyzer for the Web."] Ad hoc information access, enterprise reporting and analytics Query. Query provides end users high-performance access to relational data on the AS/400 for ad hoc querying and results-oriented data analysis. Users may access data warehouses and operational data through the product's interface on their desktop computer, or through familiar applications, such as Microsoft Excel, Lotus 1-2-3 and Microsoft Word. Query also provides scheduling and sophisticated search functions for the advanced end user. Report Writer. Report Writer enables end users to create fast, specialized reports for data analysis. Report Writer also combines drag-and- drop features, graphics and calculation capabilities that make report design easy and intuitive. Analyzer. Analyzer enables end users to analyze multidimensional and/or relational data through desktop computers. End users can display data as charts, spreadsheets or custom report forms. The end user can sort, rank, filter, calculate and graph this data for more in-depth analysis and can drill down to the underlying data. Analyzer for the Web. Analyzer for the Web is a "thin" version of Analyzer that allows end users to conduct basic data analysis tasks over a company's intranet or extranet. Analyzer for the Web is Java-based and accessible through Internet browsers, such as Microsoft Explorer and Netscape Navigator. Essbase/400. Essbase/400 is a 64-bit implementation of Hyperion Solutions' online analytical processing product, Essbase, on the AS/400. Essbase/400 allows end users to perform multidimensional analysis on AS/400 data. It consists of a multidimensional database server, a desktop-based tool for creating and maintaining the database and Microsoft Excel and Lotus 1-2-3 add-ins that provide end-user access. Essbase/400 can also be used with our Analyzer and Analyzer for the Web products, as well as the many third-party applications developed for use with Hyperion's Essbase product. Essbase/400 is easy to use and deploy rapidly, has robust calculation capabilities, provides rapid responses to end-user requests and incorporates user-generated scenario data. Data warehouse generation and management Warehouse Builder. For clients desiring enterprise-wide business intelligence solutions, Warehouse Builder automates the process of building a centralized data warehouse. Warehouse Builder transforms online transaction processing data from any AS/400 data source into data marts or data warehouses. Warehouse Builder enables clients to create multidimensional data marts or data warehouses by moving data from IBM's DB2 database for the AS/400 to Essbase/400. 33 Warehouse Manager. Warehouse Manager provides the tools to manage data warehouses and data marts on a day-to-day basis by integrating data simplification, warehouse security, resource allocation and user access. Warehouse Manager also enables administrators to allow users easier access to data in complicated databases and to create a simplified view of any AS/400 database, whether it is used for transaction processing or analysis. In addition, Warehouse Manager provides capabilities to interact with most AS/400 data types and with many third-party database extensions, such as the J.D. Edwards interactive data dictionary and Infinium's security system. Deployment Accelerators Sales and Financial Analysis Deployment Accelerators. ShowCase STRATEGY Deployment Accelerators are pre-configured functional data models or templates that may be used to quickly implement and adapt sales and/or financial analysis applications. These adaptive applications are designed to serve as architectural models for our clients' business intelligence solutions. Sales Analysis Deployment Accelerators include order and performance/variance analysis, sales, customer and shipping tracking, sales history and forecasting and impact analysis. Financial Analysis Deployment Accelerators include accounting and financial reporting, profit and loss analysis, budgeting, forecasting and overhead calculation, variance and unit cost analysis and business segmentation. Services Customer Support. Our support team provides comprehensive support services to our clients, including the following services: . unlimited technical support via telephone, facsimile, the Internet and e-mail; . program temporary fixes; . technical documents on demand; and . product upgrades. As of March 31, 1999, we had over 2,000 clients on our annual maintenance plan. We offer maintenance support through our regional support centers in North America, Europe, Malaysia and a partnership in Japan. Currently, our regional support offices have access to an integrated customer database that provides each office with real-time information regarding our clients and their installed product base. A client that has a maintenance problem after hours and is unable to contact its regional support office may contact any one of our other regional support offices and obtain maintenance support. Professional Services. Because they often have limited IT staff and resources, our clients require a high level of service and support. To address this need, we offer a full range of educational, consulting and support services. We work with clients to design customized service plans that will enable them to rapidly implement and realize the benefits of business intelligence solutions that can evolve with end-user needs. As an example of this approach, we recently introduced service offerings that allow clients to leverage our Deployment Accelerators to quickly implement pilot applications. For existing clients, we offer services designed to assist them in expanding their use of our product suite and using our product suite in more sophisticated applications. To increase the ability of end users to realize the functionality provided by our product suite, our educational services provide comprehensive, hands-on training through both public and on-site sessions. In addition to our own professional services personnel, we have service partners in North America, Europe and Asia Pacific that provide training and consulting for our clients. We recently entered into service partner relationships with Pinnacle and Austin/400 to provide our clients with a range of additional implementation and training options. 34 Product Development We have ten years experience delivering business intelligence solutions to our clients. During this time, we have focused on delivering rapid return on investment and enterprise-wide deployment capabilities for our clients. Our core technology competence lies in extracting and transforming raw data from IBM's DB/2 database and other unique AS/400 data structures into business intelligence. We extend the AS/400 operating system to support business intelligence with features such as data simplification, enhanced security and resource management. We also tightly integrate these database management and infrastructure technologies with end user query and reporting products and multidimensional analytical technology. Since our inception, we have made substantial investments in product development. During the fiscal years 1997 and 1998 and the nine months ended December 31, 1998, product development expenses were $2.6 million, $3.1 million and $3.2 million. Our product development group consists of product managers, software engineers, quality assurance engineers, technical documentation specialists and integration specialists and is organized by small teams. As of March 31, 1999, we had 49 employees engaged in product development. Our product development process is intended to be repeatable yet flexible thereby allowing us to reuse both source code and the processes used to develop source code. To better serve client needs and incorporate those needs into new releases, we actively solicit product enhancement requests from employees, clients, industry analysts, partners and IBM. Our product development efforts currently focus on continued compatibility with and leverage of new developments in the AS/400. We intend to develop many of our future products in Java, which will enable us to deliver our products to additional platforms as the opportunity arises. One of our initiatives is to strengthen our product suite's enterprise reporting capabilities to publish specified business intelligence to defined users on a regularly scheduled basis. We also intend to further leverage Internet browser technologies to enable companies to disseminate information and business intelligence through a portal framework that will enable growing user populations both within and outside the organization to more easily search and receive information through the Internet. Furthermore, we plan to increase our product suite's ability to access additional data sources to ensure that a broader range of information is available to end users. Although we expect that certain of our new products will be developed internally, we may, based on timing and cost considerations, acquire technology or products from third parties. See "Risk Factors--We may lose existing clients or be unable to attract new clients if we do not develop new products and enhance our current products." Sales and Marketing Sales. We sell our products and services through our direct sales force and channel partners including IBM, software application vendors, distributors and resellers. Our direct sales force operates in North America, Belgium, France, Germany, the Netherlands and the United Kingdom. Our North American direct sales force is divided into three units. Each salesperson in the new accounts unit focuses on specific potential accounts. The existing accounts unit targets existing clients. Because many of our clients initially deploy our products on a departmental basis, we believe that our existing clients represent a significant sales opportunity as they discover the potential of business intelligence and look to leverage its benefits enterprise-wide to increase operational efficiency and profitability. Our internal telesales unit focuses primarily on smaller transactions, and generally sells individual components of our product suite to new accounts, additional components of our product suite to existing clients and maintenance services. Our overseas direct sales force consists of a direct sales unit and a telesales unit that target both new clients and existing accounts. See "Risk Factors--We need to increase the size of our direct sales force to grow our sales." Our software application vendor channel partners include vendors that integrate our products within their own applications and sell the integrated products to their customers, such as Dimension Data Systems, Fiserve, IBM, Infinium Software, Lawson Software, Silverlake, TSG and Walker Interactive; and vendors with which we have joint marketing and sales arrangements, such as Data Systems International and J.D. Edwards. We also sell our products through IBM's software data management group sales force and distributors located in countries not served by our direct sales force, including Eastern European, African and Asian countries. 35 Marketing. We are focused on building market awareness and acceptance of our product suite as the leading provider of business intelligence solutions for the AS/400 customer. Our marketing organization provides a wide-range of programs, materials and events that support our sales force. These include extensive public relations activities, user group meetings, conference and trade show appearances, as well as programs to work closely with analysts and other influential third parties. We use our Internet site to augment our market presence, promote our products and services and generate sales leads. Furthermore, we have invested in building a partner and channel marketing function to help recruit, train, support and conduct cooperative marketing with strategic partners, resellers and certified service providers. Strategic Relationships IBM We have maintained a strategic relationship with IBM in sales and marketing and research and development. Our close relationship with IBM's Rochester, Minnesota facility, which has developed the AS/400, has enabled us to quickly leverage new AS/400 capabilities and influence the future direction of the AS/400 for the benefit of our clients. This association with IBM has resulted in our products being recognized as a standard business intelligence technology on the AS/400. For example, our ShowCase STRATEGY product suite is used by IBM in new database release quality control efforts. We also participate in several formal and informal programs with IBM which we believe afford us valuable experience with AS/400 products and insights into IBM's product development and marketing plans. We are one of IBM's designated "Premier Business Partners" and have won several awards from IBM, including, most recently, IBM's Powered by AS/400e Award. IBM has been a reseller of several of our products for several years. In December 1998, we entered into an expanded agreement with IBM under which our products are marketed and sold as IBM products by IBM's software data management group sales force. This agreement has an initial term of seven years. For a description of some of the risks of our relationship with IBM, see "Risk Factors--Our relationships with Hyperion Solutions and IBM are important to our success." Hyperion Solutions Our relationship with Hyperion Solutions began in late 1995 when we searched the marketplace for a high performance multidimensional database server and selected its online analytical processing product, Essbase. We expended significant resources in 1995 and 1996 porting Essbase to and optimizing its performance on the AS/400. We have the exclusive right to distribute the resulting product, Essbase/400, subject to limited distribution rights retained by Hyperion Solutions. The addition of Essbase/400 to our product line provides us with the ability to access a broader customer base, including users of multidimensional analyses. Furthermore, our Essbase/400 product provides us with additional partnering opportunities by extending Essbase to the AS/400 platform. In addition, our Analyzer and Analyzer for the Web products are based on technology licensed from Hyperion Solutions under a license agreement that expires in January 2001. For a description of some of the risks of our relationship with Hyperion Solutions, see "Risk Factors--Our relationships with Hyperion Solutions and IBM are important to our success." Our exclusive Essbase/400 distribution rights are conditioned upon us paying minimum royalties and are subject to a buy-back right. Hyperion Solutions must give us notice 12 months before exercising this buy-back right. If minimum royalty payments are not made, we have the option of paying the remaining balance to retain our exclusive distribution rights. If we do not retain our exclusive distribution rights, we must pay Hyperion Solutions minimum royalty payments to retain non-exclusive distribution rights to Essbase/400. 36 Clients As of March 31, 1999, we had over 2,000 active clients. The following is a representative list of our clients that each accounted for over $150,000 in total revenues since March 31, 1998: ADT Automotive Mississippi Chemical Corporation Abbott Laboratories Old Dominion Freight Lines AmeriServe Olympus America Ball Foster Container Corp. One 2 One/Mercury Personal Bass Brewers Limited Communications Burmah Castrol Trading Limited Omron Healthcare Cartier International Pokka Corporation Inc. Clark Construction Group Randstad Automation Center Distribution & Auto Services Rugby Joinery UK Limited EMI Compact Disc (Holland) Sara Lee Casualwear Company Groupe Point.P Skytel Communications Interface Tiel Utrecht Verzekeringen Johnsonville Sausage Tiffany & Company Land O'Lakes Toys "R" Us International Managed Health Network United Rentals Master Halco Universal Flavors Corp. York International Case Studies The following case studies illustrate how three of our clients have utilized the ShowCase STRATEGY product suite: Helzberg Diamonds Helzberg Diamonds is a jewelry retailer with nearly 200 stores throughout the United States. Challenge. Each Helzberg store generates large amounts of point-of-sale transaction data, which are fed nightly into the company's AS/400 host merchandise system and J.D. Edwards financial system. This transactional information is required to evaluate store performance and sales productivity and is used by managers in virtually all of the company's corporate functions, including general administration, finance, sales and merchandising. The largely manual process of transforming this data into useful information and delivering it to end users was time-consuming and error-prone. Furthermore, users were often dissatisfied with the content and presentation of the information provided to them. Solution. To evaluate store performance and productivity, Helzberg installed our STRATEGY product suite. Within a week, Helzberg had used our Financial Analysis Deployment Accelerator to develop a working financial analysis application prototype to show managers comparative balance sheets, profit and loss statements and store performance. Our products have enabled end users throughout the enterprise to access business-critical information on their own, without IT staff assistance. Managers have also become more sophisticated in their uses of information, creating ad hoc data views and performing speed-of-thought data analysis. Our products' ability to provide users increased access to timely, useful information has enabled Helzberg to make better decisions regarding such issues as where to open and close stores, how to staff stores and how best to develop incentives for increasing sales productivity. Because of its early successes with our products, Helzberg has plans to develop a merchandising application that will allow greater day-to- day inventory control, a corporate planning, budgeting and forecasting application, and a centralized data warehouse to serve multiple data marts and the entire enterprise. Helzberg has licensed Analyzer for the Web to enable access to this data warehouse from Helzberg field locations. 37 Abbott Laboratories Abbott Laboratories is an international health care and pharmaceutical leader with approximately 56,000 employees worldwide. Challenge. Managers in Abbott's UK nutritional products division were having difficulty pricing products and services to meet corporate profit goals because they could not quickly access necessary information. Although operational data was available to optimize pricing, it resided on Abbott's AS/400 system in forms that sales and marketing managers could only access with extensive IT staff support. Abbott's end users were also interested in accessing and analyzing additional sales, marketing and financial information from the system's wealth of data, without being dependent on IT staff to do so. Solution. To effectively leverage its existing operational data, Abbott originally pieced together a solution consisting of point products available at the time, including SQL Server and an NT server. With our 1996 introduction of ShowCase STRATEGY, Abbott was able to implement an end-to-end business intelligence solution. Our software enabled Abbott fast and flexible access to its AS/400 data, providing decision support functionality for quoting and pricing contracts. This permitted Abbott to identify profitable contracts that it previously would not have pursued due to uncertainty. From this initial success, Abbott has expanded its use of the ShowCase STRATEGY product suite to include access to additional sales, marketing and financial data. Abbott's end users now are able to create ad hoc queries, develop reports and perform analyses fast and easily without IT staff assistance. As a result of its success in the United Kingdom, Abbott has expanded its use of STRATEGY to operations in the United States, Canada and Germany. Famous Footwear Famous Footwear is a nationwide chain of shoe stores selling branded footwear for the entire family, with over 800 retail stores in 46 states. Challenge. Famous Footwear tracks its target market through daily transaction information collected from each of its retail stores. This information includes over 600,000 daily point-of-sale transactions, which are fed into the company's AS/400-based operational data systems. Decision-makers relied on weekly reports generated from this data to make decisions about pricing, inventory, promotions and other areas. Users were frequently unable to make these decisions quickly and efficiently because they were spending up to a few weeks searching for information they needed from these reports. Solution. Famous Footwear chose our ShowCase STRATEGY product suite to implement a sales analysis data mart, a store inventory analysis data mart and an item trend analysis data mart. Currently, approximately 150 of the company's managers use this business intelligence system. The sales analysis data mart has enabled the company to adjust its promotional mix to meet specific campaign goals. For example, the company has learned that freestanding inserts generate more sales than traditional newspaper advertising. The company's store inventory analysis data mart enables the company to analyze cash register activities thereby providing the company with an early indicator of point-of- sale concerns. Famous Footwear's item trend analysis data mart enables its merchandising department to dynamically tailor merchandising orders to meet unexpected demand. Our product suite has also enabled the company's IT department to redirect its activities from preparing the weekly reports to developing additional business applications to increase company productivity. Competition The markets for our products are intensely competitive and subject to rapidly changing technology. We compete primarily against providers of decision support software and data warehousing software. The bases of competition in these markets include breadth of solution, functionality, performance, scalability, ease of use, operating platform and cost. Our competitors providing business intelligence solutions for AS/400 customers 38 include Silvon and Infomanager. We also compete with vendors that provide business intelligence products implemented on Unix or Windows NT platforms and then connected to the AS/400. These vendors include Brio Technology, Business Objects, Cognos, Hyperion Solutions, Information Advantage, MicroStrategy, Microsoft, Oracle, PLATINUM Technology, which has entered into an agreement to be acquired by Computer Associates, Sagent Technology and SAS Institute. In addition, enterprise resource planning software vendors including Baan Company, PeopleSoft and SAP are beginning to offer decision support and analytical modules primarily to support the analysis of data from their own operational systems. One or more of these companies may expand their technologies to support greater business intelligence functionality. Finally, in the future, IBM may expand the functionality of the operating system for the AS/400, or of its database products, to provide some of the functions provided by our products. Many of our competitors have longer operating histories, significantly greater financial, technical, marketing or other resources and greater name recognition than we do. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements. The business intelligence software industry has recently experienced consolidation and many industry analysts expect this trend to continue. This consolidation may provide our competitors with expanded sales, distribution and marketing capabilities and broader product offerings. See "Risk Factors--Our markets are highly competitive which may lead to lower prices, reduced gross margins and loss of market share." Intellectual Property We attempt to protect our software, documentation and other written materials primarily through a combination of trade secret, trademark and copyright laws, confidentiality procedures and contractual provisions. For example, we license rather than sell our software and require licensees to enter into license agreements which impose restrictions on their use of the software. In addition, we have made efforts to avoid disclosure of our trade secrets, including requiring those persons with access to our proprietary information to enter into confidentiality agreements with us and restricting access to our source code. We have one patent issued and one patent application pending in the United States with respect to aspects of our software. The pending patent application may not be issued. In addition, our patents may not survive a legal challenge to their validity or provide us significant protection. Our means of protecting our intellectual property rights may not be adequate or our competitors may independently develop similar technology. Policing unauthorized use of our products is difficult, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. We anticipate that software product developers increasingly will be subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps. As a result, we may become involved in these claims. Any of these claims, with or without merit, could result in costly litigation, divert our management's time, attention and resources, delay our product shipments or require us to enter into royalty or licensing agreements. If a claim of product infringement against us is successful, our business and operating results could be seriously harmed. See "Risk Factors--We may face increased competition if we are unable to protect our intellectual property rights, and we may be subject to intellectual property infringement claims." Employees As of March 31, 1999, we had a total of 240 employees, including 107 in sales and marketing, 49 in product development, 56 in professional services and customer support and 28 in administration. Our future performance depends in significant part on our ability to attract, train and retain highly qualified personnel. None of our employees are represented by a labor union, and we believe that our relations with our employees are good. 39 Facilities Our principal offices currently occupy approximately 27,000 square feet in Rochester, Minnesota under a lease which expires June 30, 2004. In addition, we also lease offices domestically and internationally in a variety of locations, including domestic offices in the metropolitan areas of Atlanta, Boston, Chicago and Dallas and international offices in Belgium, France, Germany, Malaysia, the Netherlands and the United Kingdom. We believe that our facilities are adequate for the next 12 months and that, if required, suitable additional or alternative space will be available on commercially reasonable terms to accommodate expansion of our operations. 40 MANAGEMENT Executive Officers and Directors The following table provides information as of March 31, 1999 concerning our executive officers and directors:
Name Age Position - ---- --- -------- Kenneth H. Holec........... 44 President, Chief Executive Officer and Director Craig W. Allen............. 44 Chief Financial Officer Roger E. Bottum............ 40 Vice President, Marketing Patrick Dauga.............. 39 Vice President, International Jonathan P. Otterstatter... 39 Vice President, Development Kevin R. Potrzeba.......... 38 Vice President, Sales Promod Haque............... 51 Director C. McKenzie Lewis III...... 52 Director Jack Noonan................ 51 Director Dennis J. Semerad.......... 58 Director
Kenneth H. Holec has been our president and chief executive officer and a member of our board of directors since November 1993. From 1985 to 1993, Mr. Holec was president and chief executive officer of Lawson Software, a provider of high-end financial and human resource management software solutions. Currently, Mr. Holec is a director of IntraNet Solutions, Inc., a maker of Web- based document management products for corporate intranets. Mr. Holec holds a B.S. degree in business administration from the University of Minnesota. Craig W. Allen joined us as controller in July 1993 and was promoted to chief financial officer in March 1997. From 1982 to 1993, Mr. Allen was vice president of operations at Metafile Information Systems, Inc., a software development and systems integration company. Prior to 1982, Mr. Allen was audit manager at the accounting firm McGladrey Pullen & Co. in Rochester, Minnesota. Mr. Allen holds a B.S. degree in business from the University of Minnesota and is a certified public accountant. Roger E. Bottum has been our vice president, marketing since August 1998. From August 1994 to July 1998, Mr. Bottum worked at System Software Associates, a designer of business information systems for manufacturing companies, where his last position was general manager of product management. From 1987 to July 1994, Mr. Bottum worked at Andersen Consulting, where his last position was associate partner and director of marketing. Mr. Bottum holds a B.S. degree in political science from Colorado College. Patrick Dauga joined us as vice president, European operations in June 1997 and was promoted to vice president, international in March 1998. From 1986 to 1997, Mr. Dauga worked at Comshare, Inc., a software company specializing in decision support systems, where his last position was vice president for southern Europe. Mr. Dauga holds a degree from Sup de Co Bordeaux, a business school in France. Jonathan P. Otterstatter has been our vice president, development since May 1994. From 1983 to May 1994, Mr. Otterstatter was employed by IBM where his last position was senior development manager. Mr. Otterstatter holds a B.S. degree in computer science from the University of Wisconsin at LaCrosse and an M.S. degree in management of technology from the Massachusetts Institute of Technology. Kevin R. Potrzeba has been our vice president, sales since September 1996. From 1987 to August 1996, Mr. Potrzeba was employed by Software AG, a software products company, where his last position was vice president of sales for eastern operations. Mr. Potrzeba holds a B.A. degree in advertising and marketing from Northern Illinois University. Promod Haque has been one of our directors since March 1992. Dr. Haque joined Norwest Venture Capital Management, Inc., a venture capital firm, in November 1990. He is currently a partner of Itasca 41 Partners V, L.L.P., the general partner of Norwest Equity Partners V, L.P., and a partner of Itasca Partners, the general partner of Norwest Equity Partners IV, L.P. Dr. Haque is a director of Connect, Inc., Information Advantage, Inc., Optical Sensors, Inc., Raster Graphics, Inc., Transaction Systems Architects, Inc. and several privately held companies. Dr. Haque holds a B.S.E.E. degree from the University of Delhi, India, an M.S.E.E. degree and a Ph.D.E.E. degree from Northwestern University, and an M.M. degree from the J.L. Kellogg Graduate School of Management, Northwestern University. C. McKenzie Lewis III has been one of our directors since June 1994. Mr. Lewis is president of Sherpa Partners LLC, an investment and management company, and the managing general partner of Minnesota Management Partners, L.P., a venture capital fund. From 1986 through 1995 he was the president and chief executive officer of Computer Network Technology Corporation, a developer and manufacturer of high performance extended channel networking systems. Mr. Lewis currently is a director of Digital Biometrics, Inc. and several privately held companies. Mr. Lewis holds a B.S.E.E. degree from Princeton University. Jack Noonan has been one of our directors since February 1995. Mr. Noonan has been president and chief executive officer and a director of SPSS Inc., a statistical software products company, since January 1992. Mr. Noonan was president and chief executive officer of Microrim Corp., a developer of database software products, from 1990 until December 1991. From 1985 to 1990, Mr. Noonan was vice president of the Product Group of Candle Corporation, a developer of IBM mainframe system software. Mr. Noonan holds an engineering degree from the Rockford School of Business and Engineering in Rockford, Illinois. Dennis J. Semerad was one of our initial investors and has been one of our directors since 1989. Mr. Semerad founded Cord Cable Co., a manufacturer of computer equipment, and was its president from 1979 to 1987. Board Composition Following the offering, our board of directors will consist of five directors divided into three classes with each class serving for a term of three years. At each annual meeting of shareholders, directors will be elected by the holders of common stock to succeed those directors whose terms are expiring. Mr. Semerad will be a Class I director whose term will expire in 2000, Dr. Haque and Mr. Holec will be Class II directors whose terms will expire in 2001 and Messrs. Lewis and Noonan will be Class III directors whose terms will expire in 2002. Board Committees Our board of directors has established a compensation committee and an audit committee. Dr. Haque and Mr. Lewis are members of our compensation committee and Mr. Lewis is the chairman. Our compensation committee makes recommendations to the board of directors concerning executive compensation and administers our stock option plans. Dr. Haque and Messrs. Lewis and Noonan are members of our audit committee and Mr. Noonan is the chairman. Our audit committee reviews the results and scope of the audit and other accounting related services and reviews our accounting practices and systems of internal accounting controls. Director Compensation We do not currently pay any compensation to directors for serving in that capacity, but we reimburse directors for out-of-pocket expenses incurred in attending board meetings. Our board of directors has the discretion to grant options to non-employee directors pursuant to our stock option plans. Each of Messrs. Lewis and Noonan currently holds options to purchase 45,000 shares of our common stock. See "Principal Shareholders." 42 Compensation Committee Interlocks and Insider Participation Dr. Haque and Mr. Lewis currently serve on compensation committee. Neither of these individuals has at any time been an officer or employee of ShowCase. Prior to the formation of our compensation committee, all decisions regarding executive compensation were made by the full board of directors. No interlocking relationship exists between the board of directors or the compensation committee and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past. On March 26, 1998, we sold an aggregate of 875,000 shares of our Series B convertible preferred stock at a purchase price of $4.00 per share, including 625,000 shares to Norwest Equity Partners V, L.P. Dr. Haque, one of our directors and a member of our compensation committee, is a partner of Itasca Partners V, L.L.P., a general partner of Norwest Equity Partners V, L.P. Employment Agreements We entered into an employment agreement with Kenneth H. Holec, our president and chief executive officer, on November 22, 1993 that governs Mr. Holec's employment with us. The agreement establishes Mr. Holec's compensation level and eligibility for salary increases, bonuses, benefits and option grants under our stock option plans. The initial employment term was one year. Mr. Holec's employment term is automatically renewed for additional one-year terms, unless either we or Mr. Holec provide written notice to the other party at least 30 days before the expiration of any one-year employment term that the employment agreement will not be renewed. We may also terminate Mr. Holec's employment without cause if we give him written notice 30 days before this termination. If we do not renew the agreement or terminate his employment without cause, we must pay Mr. Holec severance equal to six months salary plus salary for up to six additional months until he finds full-time employment. We also entered into an employment agreement with Patrick Dauga, our vice president, international, on March 17, 1998. The agreement establishes Mr. Dauga's minimum compensation level and eligibility for salary increases, bonuses, benefits and option grants. We may terminate Mr. Dauga's employment agreement if we give him written notice twelve months before his termination. We may terminate his employment immediately without notice if we pay to Mr. Dauga his base salary, targeted commissions, bonus and fringe benefits. Mr. Dauga may terminate his employment agreement if he gives us written notice three months before his termination. Under the terms of our offer letter dated July 31, 1998 to Mr. Bottum, our vice president, marketing, and our offer letter dated August 23, 1996 to Mr. Potrzeba, our vice president, sales, if we terminate either Mr. Bottum's or Mr. Potrzeba's employment without cause, we must continue to pay his base salary for up to six months until he has obtained permanent employment elsewhere. In the case of Mr. Potrzeba, if after six months he has been unable to obtain employment elsewhere and we believe he has made a good faith effort to do so, we will continue to pay Mr. Potrzeba his base salary for up to six months until he has obtained full-time employment elsewhere. Neither Mr. Bottum nor Mr. Potrzeba is entitled to salary continuance if he voluntarily terminates his employment with us for any reason other than a change in control that results in a substantial change in the scope of his employment responsibilities or job location. 43 Executive Compensation The following table provides information concerning compensation paid or accrued by us to or on behalf of our chief executive officer and each of our other four most highly compensated executive officers during the fiscal year ended March 31, 1999: Summary Compensation Table
Long Term Annual Compensation Compensation (1) Awards -------------------- ------------ Shares Name and Principal Underlying All Other Position Salary Bonus Options Compensation - ------------------ -------- -------- ------------ ------------ Kenneth H. Holec President and Chief Executive Officer........ $205,000 $127,625 200,000 $ 4,245(4) Patrick Dauga Vice President, International............ 180,654 92,053(3) 30,000 45,275(5) Kevin R. Potrzeba Vice President, Sales.... 135,000 109,476(3) 20,000 4,245(4) Jonathan P. Otterstatter Vice President, Development.............. 126,000 40,100 60,000 4,245(4) Roger E. Bottum Vice President, Marketing................ 109,375(2) 13,125 135,000 2,995(4)(6)
- -------- (1) The aggregate amount of perquisites and other personal benefits, securities or property received by each named executive officer was less than either $50,000 or 10% of the total annual salary and bonus reported for each respective named executive officer. (2) Mr. Bottum joined ShowCase in August 1998. His annual salary as of March 31, 1999 is $175,000. (3) Includes sales commissions in the amount of $79,003 for Mr. Dauga and $76,226 for Mr. Potrzeba. (4) Includes amounts which, at the recipient's discretion, may be allocated toward our 401(k) plan or toward medical premiums, medical expense reimbursement or dependent care expense reimbursement on a pre-tax basis under our flexible benefit plan. (5) Includes amounts we pay for health insurance and retirement benefits. (6) Includes 401(k) plan matching contributions in the amount of $500. 44 The following table provides information concerning the stock option grants we made to each of our named executive officers during the fiscal year ended March 31, 1999. An aggregate of 765,500 shares of common stock were granted to our employees during fiscal 1999. Option Grants in Fiscal 1999
Potential Realizable Value at Assumed Annual % of Total Rates of Stock Number of Options Exercise Price Securities Granted to Price Appreciation for Underlying Employees Per Option Term (5) Options in Fiscal Share Expiration ----------------- Name Granted 1999 (4) Date 5% 10% - ---- ---------- ---------- -------- ---------- -------- -------- Kenneth H. Holec........ 125,000(1) 16.3% $1.50 06/02/08 $117,918 $298,827 75,000(2) 9.8 5.35 02/12/09 252,344 639,489 Patrick Dauga........... 30,000(2) 3.9 5.35 02/12/09 100,938 255,796 Kevin R. Potrzeba....... 20,000(2) 2.6 5.35 02/12/09 67,292 170,530 Jonathan P. Otterstatter........... 25,000(1) 3.3 1.50 06/02/08 23,584 59,765 35,000(2) 4.6 5.35 02/12/09 117,761 298,428 Roger E. Bottum......... 90,000(1) 11.8 2.00 08/17/08 113,201 286,874 45,000(3) 5.9 2.00 08/17/08 56,601 143,437
- -------- (1) These options vest over a five-year period beginning on the grant date. (2) These options vest over a five-year period beginning on the earlier of the date of the closing of an initial public offering of our common stock or April 1, 2000. (3) This option vests nine years and 11 months after the grant date unless Mr. Bottum meets objectives included in his stock option agreement, in which case this option vests over a five-year period beginning on the grant date. (4) All stock options were granted with an exercise price equal to the fair market value of the common stock as determined by our board of directors on the grant date. (5) The 5% and 10% assumed annual rates of compounded stock price appreciation are required by rules of the Securities and Exchange Commission and do not represent our estimates or projections of our future stock prices. 45 The following table provides information concerning the exercise of options to purchase common stock by our named executive officers during fiscal 1999 and the number and value of unexercised stock options held by these executive officers as of March 31, 1999. The value of unexercised in-the-money options is based on a value of $7.12 per share, the fair market value of our common stock as of March 31, 1999, as determined by our board of directors, less the applicable per share exercise price multiplied by the number of shares issued on exercise of the option. Aggregated Option Exercises in Fiscal 1999 and Fiscal Year-End Option Values
Number of Securities Underlying Value of Unexercised Unexercised Options In-the-Money Options Shares at Fiscal Year-End at Fiscal Year-End Acquired Value ------------------------- ------------------------- Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable - ---- ----------- -------- ----------- ------------- ----------- ------------- Kenneth H. Holec........ 450,807 $886,852 27,312 207,365 $156,486 $918,530 Patrick Dauga........... -- -- 10,000 90,000 57,000 395,100 Kevin R. Potrzeba....... -- -- 28,000 82,000 169,120 409,880 Jonathan P. Otterstatter........... -- -- 86,667 78,333 570,766 316,984 Roger E. Bottum......... -- -- 10,500 124,500 53,760 637,440
Benefit Plans 1991 Long-Term Incentive and Stock Option Plan Our 1991 Long-Term Incentive and Stock Option Plan, as amended (the "Stock Option Plan") provides for the grant of options to purchase shares of common stock and other long-term incentive awards to any of our full or part- time employees, officers, directors, consultants and independent contractors. Options granted under the Stock Option Plan may qualify as incentive stock options under the Internal Revenue Code of 1986, as amended, or may be options that do not qualify as incentive stock options. Other long-term incentive awards that may be granted under the Stock Option Plan include stock appreciation rights, restricted stock and performance awards. We have reserved an aggregate of 2,481,524 shares of common stock for issuance under the Stock Option Plan of which 816,714 shares have been issued upon exercise of options through March 31, 1999. The Stock Option Plan is administered by our compensation committee. Our compensation committee has the discretion to select the people to whom options are granted and to establish the terms and conditions of each stock option, subject to the provisions of the Stock Option Plan and to any special provisions approved by our board of directors. The exercise price of an incentive stock option granted under the Stock Option Plan must not be less than 100% of the fair market value of the common stock on the date the option is granted. In the event that a proposed optionee owns more than 10% of our common stock, any incentive stock option granted to this optionee must have an exercise price not less than 110% of the fair market value of our common stock on the grant date. The term of each option is determined by the compensation committee, but in any event the term of an incentive stock option may not exceed 10 years from the date of grant and the term of a non-qualified stock option may not exceed 15 years from the date of grant. In the case of an incentive option granted to an owner of more than 10% of our common stock, the term may not exceed five years from the date of grant. The Stock Option Plan is subject to amendment by our board of directors, except that the board may not, without the approval of our shareholders, increase the number of shares which may be issued under the Stock Option Plan, decrease the minimum exercise price of options granted under the Stock Option Plan, extend the maximum option term or extend the term of the Stock Option Plan beyond February 28, 2001. As of March 31,1999, options to purchase an aggregate of 1,545,807 shares of common stock, at a weighted average exercise price of $2.32 per share, were outstanding under the Stock Option Plan, and a total of 119,003 shares were available for future option grants. We expect to continue to grant options under the Stock Option Plan until no shares remain available for grant. 46 1999 Stock Incentive Plan Our 1999 Stock Incentive Plan (the "1999 Incentive Plan") was approved by our board of directors and shareholders in April 1999. The 1999 Incentive Plan provides for the granting of: . stock options, including incentive stock options, as defined by the Internal Revenue Code, and non-qualified stock options; . stock appreciation rights; . restricted stock and restricted stock units; . performance awards; and . other stock-based awards. We have reserved 2,500,000 shares of common stock for issuance under the 1999 Incentive Plan. The 1999 Incentive Plan is administered by our compensation committee. The compensation committee has the authority to establish rules for the administration of the 1999 Incentive Plan, to select the persons to whom awards are granted, to determine the types of awards to be granted and the number of shares of common stock covered by the awards and to set the terms and conditions of the awards. The compensation committee may also determine whether the payment of any amounts received under any award shall be deferred. Awards may provide that upon grant or exercise, the holder will receive shares of common stock, cash or any combination of both, as the compensation committee shall determine. In order to meet the requirements of Section 162(m) of the Internal Revenue Code, the 1999 Incentive Plan contains a limitation on the number of options that may be granted to any single person in any one calendar year. The exercise price per share under any incentive stock option or the grant price of any stock appreciation right cannot be less than 100% of the fair market value of our common stock on the date of the grant of the incentive stock option or stock appreciation right. Options may be exercised by payment in full of the exercise price, either in cash or, at the discretion of the compensation committee, in whole or in part by the tendering of shares of common stock or other consideration having a fair market value on the date the option is exercised equal to the exercise price. Determinations of fair market value under the 1999 Incentive Plan are made in accordance with methods and procedures established by the compensation committee. The holder of a stock appreciation right is entitled to receive the excess of the fair market value (calculated as of the exercise date or, if the compensation committee shall so determine, as of any time during a specified period before or after the exercise date) of a specified number of shares over the grant price of the stock appreciation right. The holder of restricted stock may have all of the rights of a shareholder of ShowCase, including the right to vote the shares subject to the restricted stock award and to receive any dividends, or these rights may be restricted. Restricted stock may not be transferred by the holder until the restrictions established by the compensation committee lapse. Holders of restricted stock units have the right, subject to any restrictions imposed by the compensation committee, to receive shares of common stock (or a cash payment equal to the fair market value of the shares) at some future date. Upon termination of the holder's employment during the restriction period, restricted stock and restricted stock units shall be forfeited, unless the compensation committee determines otherwise. If any shares of common stock subject to any award or to which an award relates are not purchased or are forfeited, or if any award terminates without the delivery of shares or other consideration, the shares previously used for these awards become available for future awards under the 1999 Incentive Plan. Except as provided under procedures adopted by the compensation committee to avoid double counting with respect to 47 awards granted together with or in substitution for other awards, all shares relating to awards granted are counted against the aggregate number of shares available for granting awards under the 1999 Incentive Plan. Our board of directors may amend, alter or discontinue the 1999 Incentive Plan at any time, however shareholder approval must be obtained for any change that, absent shareholder approval: . would cause Rule 16b-3 of the Securities Exchange Act or section 162(m) of the Internal Revenue Code to become unavailable with respect to the 1999 Incentive Plan; . would violate any rules or regulations of the National Association of Securities Dealers, Inc., the Nasdaq National Market or any securities exchange applicable to us; or . would cause us to be unable under the Internal Revenue Code to grant incentive stock options under the 1999 Incentive Plan. Under the 1999 Incentive Plan, the compensation committee may permit participants receiving or exercising awards, subject to the discretion of the compensation committee and upon terms and conditions as it may impose, to surrender shares of common stock (either shares received upon the receipt or exercise of the award or shares previously owned by the optionee) to us to satisfy federal and state withholding tax obligations. In addition, the compensation committee may grant, subject to its discretion and the rules it may adopt, a bonus to a participant in order to provide funds to pay all or a portion of federal and state taxes due as a result of the receipt or exercise of (or lapse of restrictions relating to) an award. 1999 Employee Stock Purchase Plan Our 1999 Employee Stock Purchase Plan (the "Stock Purchase Plan") will become effective upon consummation of this offering and is intended to qualify as an employee stock purchase plan within the meaning of Section 423 of the Code. The Stock Purchase Plan covers an aggregate of 500,000 shares of common stock. In order to participate in the Stock Purchase Plan, employees must meet specific eligibility requirements. Participating employees will be able to direct the company to make payroll deductions of up to 15% of their compensation during a purchase period for the purchase of shares of common stock. Each purchase period, with the exception of the initial offering period, will be six months. The Stock Purchase Plan will provide participating employees with the right, subject to limitations, to purchase our common stock at a price equal to 85% of the lesser of the fair market value of our common stock on the first day or the last day of the applicable purchase period, except that the price on the first day of the initial purchase period will be the initial public offering price of the shares of the common stock offered by this prospectus. The Stock Purchase Plan will terminate on the date our board of directors may determine, or automatically as of the date on which all of the shares of common stock reserved for purchase under the Stock Purchase Plan have been sold. 401(k) Plan We have established a 401(k) plan, a tax-qualified employee savings and retirement plan, for all of our employees who satisfy eligibility requirements, including requirements relating to age and length of service. Pursuant to the 401(k) plan, employees may elect to reduce their current compensation by up to the lower of 15% or the statutorily prescribed limit and have the amount of this reduction contributed to the 401(k) plan. The 401(k) plan permits us to make additional discretionary matching contributions. The 401(k) plan is intended to qualify under Section 401 of the Code so that contributions by employees or by us to the 401(k) plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the 401(k) plan, and so that our contributions, if any, will be deductible by us when made. Indemnification Matters and Limitation of Liability Minnesota law and our bylaws provide that we will, subject to limitations, indemnify any person made or threatened to be made a party to a proceeding by reason of that person's former or present official capacity with us. We will indemnify this person against judgments, penalties, fines, settlements and reasonable expenses, 48 and, subject to limitations, we will pay or reimburse reasonable expenses before the final disposition of the proceeding. As permitted by Minnesota law, our articles of incorporation provide that our directors will not be personally liable to us or our shareholders for monetary damages for a breach of fiduciary duty as a director, subject to the following exceptions: . any breach of the director's duty of loyalty to us or our shareholders; . acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; . liability for illegal distributions under section 302A.559 of the Minnesota Business Corporation Act or for civil liabilities for state securities law violations under section 80A.23 of the Minnesota statutes; . any transaction from which the director derived an improper personal benefit; and . any act or omission occurring before the effective date of Article VIII of our articles of incorporation. Dr. Haque may be entitled to indemnification in his role as one of our directors by Norwest Equity Partners IV, L.P., Norwest Equity Partners V, L.P. and/or Norwest Venture Capital Management, Inc. Presently, there is no pending litigation or proceeding involving any of our directors, officers, employees or agents where indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding that might result in a claim for indemnification. CERTAIN TRANSACTIONS On March 26, 1998, we sold an aggregate of 875,000 shares of our Series B convertible preferred stock at a purchase price of $4.00 per share, including 625,000 shares to Norwest Equity Partners V, L.P. These shares are convertible into 617,284 shares of our common stock. Dr. Haque, one of our directors, is a partner of Itasca Partners V, L.L.P., a general partner of Norwest Equity Partners V, L.P. We believe that the shares issued in the transactions described above were sold at the then fair market value of the shares and that the terms of the transactions were no less favorable than we could have obtained from unaffiliated third parties. 49 PRINCIPAL SHAREHOLDERS The following table provides information concerning beneficial ownership of our common stock as of March 31, 1999 by: . each shareholder that we know owns more than 5% of our outstanding common stock; . each of our named executive officers; . each of our directors; and . all of our directors and executive officers as a group. The following table lists the applicable percentage of beneficial ownership based on 7,262,093 shares of common stock outstanding as of March 31, 1999. The table also lists the applicable percentage of beneficial ownership based on shares of common stock outstanding upon completion of this offering, assuming no exercise of the underwriters' overallotment option. Except where noted, the persons or entities named have sole voting and investment power with respect to all shares shown as beneficially owned by them. The principal address of each of the shareholders below is c/o ShowCase Corporation, 4131 Highway 52 North, Suite G111, Rochester, Minnesota 55901, except where another address is listed below.
Percentage of Common Number of Stock Owned Shares -------------------- Beneficially Before the After the Name and Address of Beneficial Owner Owned Offering Offering - ------------------------------------ ------------ ---------- --------- Promod Haque and Norwest Equity Partners (1) 245 Lytton Avenue, Suite 250 Palo Alto, California 94301............... 2,812,312 38.7% David G. Wenz 2924 Salem Point Dr. S.W. Rochester, Minnesota 55902................ 910,000 12.5 Dennis Semerad (2).......................... 856,960 11.8 Kenneth H. Holec (3)(5)..................... 783,439 10.7 David N. Youngers 8223 75th Avenue, N.W. Oronoco, Minnesota 55460.................. 479,815 6.6 Jonathan P. Otterstatter (4)(5)............. 144,833 2.0 C. McKenzie Lewis III (5) 5759 Long Brake Circle Edina, Minnesota 55439.................... 27,083 0.4 Jack Noonan (5) SPSS Inc. 233 South Wacker Drive, 11th Floor Chicago, Illinois 60606-6307.............. 27,083 0.4 Kevin R. Potrzeba (5)....................... 28,000 0.4 Roger E. Bottum (5)......................... 13,500 0.2 Patrick Dauga (5)........................... 10,000 0.1 All directors and executive officers as a group (10 persons) (5)..................... 4,750,961 63.2
- -------- (1) Includes 1,895,028 shares held by Norwest Equity Partners IV and 917,284 shares held by Norwest Equity Partners V, L.P. Promod Haque, one of our directors, is a partner of Itasca Partners, the general partner of Norwest Equity Partners IV, L.P., and is a partner of Itasca Partners V, L.L.P., the general partner of Norwest Equity Partners V. Dr. Haque disclaims beneficial ownership of shares held by Norwest Equity Partners IV, L.P. and Norwest Equity Partners V, L.P. 50 (2) Includes 20,000 shares registered in the name of Mr. Semerad's wife, Rita M. Semerad. (3) Includes 3,738 shares registered in the name of each of Mr. Holec's three minor children. (4) Includes 17,000 shares registered jointly in the name of Jonathan and Pamela Otterstatter and 1,000 shares registered in the name of each of Mr. Otterstatter's three minor children. (5) Shares of common stock subject to options currently exercisable or exercisable within 60 days of March 31, 1999 are deemed outstanding for purposes of computing the percentage beneficially owned by the person holding these options but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person. The following table indicates those people whose total number of beneficially owned shares include shares subject to options exercisable within 60 days of March 31, 1999:
Shares Subject to Options ------------------------- Kenneth H. Holec................................. 32,632 Jonathan P. Otterstatter......................... 89,833 Kevin R. Potrzeba................................ 28,000 Craig W. Allen................................... 27,750 C. McKenzie Lewis III............................ 27,083 Jack Noonan...................................... 27,083 Roger E. Bottum.................................. 13,500 Patrick Dauga.................................... 10,000
51 DESCRIPTION OF CAPITAL STOCK Effective upon the filing of our amended and restated articles of incorporation upon the closing of this offering, our authorized capital stock will consist of 50,000,000 shares of capital stock. Unless otherwise designated by our board of directors, all issued shares shall be deemed common stock with equal rights and preferences. Common Stock As of March 31, 1999, there were 7,262,093 shares of common stock outstanding, held by 58 shareholders of record, including 2,759,226 shares that will be issued upon the automatic conversion of the outstanding shares of our preferred stock into common stock upon the closing of this offering. Holders of our common stock do not have cumulative voting rights and are entitled to one vote for each share held of record on all matters submitted to a vote of the shareholders, including the election of directors. Holders of our common stock are entitled to receive ratably dividends, if any, as may be declared by the board of directors out of funds legally available for these dividends, subject to the prior rights of any preferred stock then outstanding. See "Dividend Policy." Upon a liquidation, dissolution or winding up of ShowCase, the holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to shareholders after the payment of all debts and other liabilities of ShowCase, subject to the prior rights of any preferred stock then outstanding. Holders of our common stock have no preemptive or conversion rights or other subscription rights and there are no redemption or sinking funds provisions applicable to the common stock. All outstanding shares of common stock are, and the common stock outstanding upon completion of this offering will be, fully paid and nonassessable. Preferred Stock Effective upon the closing of this offering, our board of directors will have the authority, without further action by the shareholders, to issue from time to time shares of preferred stock in one or more series and to fix the number of shares, designations and preferences, powers and relative, participating, optional or other special rights and the qualifications or restrictions thereof. The preferences, powers, rights and restrictions of different series of preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and purchase funds and other matters. The issuance of preferred stock could decrease the amount of earnings and assets available for distribution to holders of common stock or adversely affect the rights and powers, including voting rights, of the holders of common stock. It may also have the effect of delaying, deferring or preventing a change in control of ShowCase. Warrant Effective upon the closing of this offering, the outstanding warrant to purchase 13,750 shares of our Series B preferred stock will represent the right to purchase 13,580 shares of our common stock. If we lease more than $1 million in equipment from the holder of this warrant, the holder will be entitled to purchase additional shares of our common stock equal to 5.5% of the amount leased in excess of $1 million, divided by the exercise price of $4.00. 52 Registration Rights After this offering, the holders of 2,759,226 shares of common stock will be entitled to rights with respect to the registration of these shares under the Securities Act as follows: . Demand Registration Rights: At any time, the holders of at least 51% of these shares of common stock can request that we register all or a portion of their shares. Upon this request, we must, subject to restrictions and limitations, use our best efforts to cause a registration statement covering the number of shares of common stock that are subject to the request to become effective. The holders may only require us to file two registration statements in response to their demand registration rights. . Piggyback Registration Rights: The holders of these shares can request that we register their shares anytime we are filing a registration statement to register securities for our own account. These registration opportunities are unlimited but the number of shares that can be registered may be cut back in limited situations by the underwriters. . S-3 Registration Rights: The holders of these shares can request that we register their shares if we are eligible to file a registration statement on Form S-3 and if the aggregate price of the shares offered to the public is at least $1,000,000. The holders may only require us to file two registration statements on Form S-3 per calendar year. These registration rights terminate for each holder when all of these shares held by the holder may be sold under Rule 144 under the Securities Act during any 90-day period. All holders of these registration rights have waived their registration rights to participate in this offering and have signed agreements with the underwriters prohibiting the exercise of these registration rights for 180 days following the date of this prospectus. Provisions of our Restated Articles and Bylaws and State Law Provisions with Potential Antitakeover Effects The existence of authorized but unissued preferred stock, described above, and provisions of Minnesota law, described below, could have an antitakeover effect. These provisions are intended to provide management with flexibility, to enhance the likelihood of continuity and stability in the composition of our board of directors and the policies of our board and to discourage an unsolicited takeover of ShowCase, if our board of directors determines that this takeover is not in the best interests of ShowCase and our shareholders. However, these provisions could have the effect of discouraging attempts to acquire ShowCase, which could deprive our shareholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices. Upon the closing of this offering, our board of directors will be divided into three classes serving staggered three-year terms. As a result of this division, generally at least two shareholders' meetings will be required for shareholders to effect a change in control of the board of directors. In addition, our bylaws will contain provisions that establish specific procedures for calling meetings of shareholders and appointing and removing members of the board of directors. Section 302A.671 of the Minnesota Business Corporation Act applies, with exceptions, to any acquisition of our voting stock from a person other than us, and other than in connection with certain mergers and exchanges to which we are a party, that results in the beneficial ownership of 20% or more of the voting stock then outstanding. Section 302A.671 requires approval of these acquisitions by a majority vote of our shareholders before its consummation. In general, shares acquired in the absence of this approval are denied voting rights and are redeemable by us at their then fair market value within 30 days after the acquiring person has failed to give a timely information statement to us or the date the shareholders voted not to grant voting rights to the acquiring person's shares. 53 Section 302A.673 of the Minnesota Business Corporation Act generally prohibits any business combination by us, or by any of our subsidiaries, with any shareholder that purchases 10% or more of our voting shares within four years following this interested shareholder's share acquisition date. The business combination may be permitted if it is approved by a committee of all of the disinterested members of our board of directors before the interested shareholder's share acquisition date. Listing We have applied for quotation of our common stock on the Nasdaq National Market under the symbol "SHWC." Transfer Agent and Registrar The transfer agent and registrar for our common stock will be Norwest Bank Minnesota, N.A. Its address is 161 North Concord Exchange, South Saint Paul, Minnesota 55075, and its telephone number is (651) 450-4064. 54 SHARES ELIGIBLE FOR FUTURE SALE Upon the closing of this offering, we will have shares of common stock outstanding, assuming no exercise of the underwriters' over-allotment option and no exercise of outstanding options to purchase common stock. All of our directors and executive officers and substantially all of our shareholders, holding in the aggregate in excess of 95% of the outstanding shares of our common stock, have agreed that they will not, without the prior written consent of the representatives of the underwriters, sell or otherwise dispose of any shares of common stock or options to acquire shares of common stock during the 180-day period following the closing of this offering. See "Underwriting." shares of common stock being sold in this offering will be freely tradeable without restriction or further registration under the Securities Act, except for shares held by our "affiliates," as defined in Rule 144 under the Securities Act, which may generally only be sold in compliance with the limitations of Rule 144, described below. The remaining 7,262,093 shares were issued and sold by us in private transactions and are deemed restricted securities under Rule 144. These shares may be sold in the public market only if registered under the Securities Act or if exempt from registration under Rules 144, 144(k) or 701 under the Securities Act, which rules are summarized below. Subject to the agreements between our shareholders and the underwriters, described above, and the provisions of Rules 144, 144(k) and 701, additional shares will be available for sale in the public market, subject in the case of shares held by affiliates to compliance with volume restrictions, as follows: . 22,440 shares will be available for immediate sale in the public market on the date of this prospectus; . 28,620 shares will be available for sale beginning 90 days after the date of this prospectus; and . 7,211,033 shares will be available for sale under Rules 144 and 701 upon the expiration of agreements between our shareholders and the underwriters beginning 180 days after the date of this prospectus. In general, under Rule 144, beginning 90 days after the date of this prospectus, a person or persons whose shares are aggregated, including an affiliate, who has beneficially owned restricted shares for at least one year, is entitled to sell within any three-month period a number of shares that does not exceed the greater of 1% of the then outstanding shares of common stock, approximately shares immediately after this offering, or the average weekly trading volume of our common stock on the Nasdaq National Market during the four calendar weeks preceding the date of the sale. Sales under Rule 144 also are subject to requirements pertaining to the manner and notice of the sales and the availability of current public information concerning ShowCase. Under Rule 144(k), a person who is not deemed to have been an affiliate of ShowCase at any time during the 90 days before a sale and who has beneficially owned the shares proposed to be sold for at least two years would be entitled to sell these shares without regard to the requirements described above. To the extent that shares were acquired from an affiliate of ShowCase, the transferee's holding period for the purpose of effecting a sale under Rule 144(k) commences on the date of transfer from the affiliate. Rule 701 provides that, beginning 90 days after the date of this prospectus, persons other than affiliates may sell shares of common stock acquired from us in connection with written compensatory benefit plans, including our stock option plans, subject only to the manner of sale provisions of Rule 144. Beginning 90 days after the date of this prospectus, affiliates may sell these shares of common stock subject to all provisions of Rule 144 except the one-year minimum holding period. Shortly after the closing of this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register all shares of common stock issuable under the Stock Option Plan, the 1999 Incentive Plan and the Stock Purchase Plan. See "Management--Benefit Plans." This Form S- 8 registration statement is expected to become effective immediately upon filing and shares covered by that registration statement will then be eligible for sale in the public markets, subject to the Rule 144 limitations applicable to affiliates. 55 Prior to this offering there has been no public market for our common stock, and no predictions can be made regarding the effect, if any, that sales of shares in the open market or the availability of shares for sale will have on the market price prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock in the public market could adversely affect the prevailing market price. After the closing of this offering, the holders of 2,759,226 shares of our common stock will be entitled to rights with respect to the registration of these shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming freely tradeable without restriction under the Securities Act, except for shares purchased by affiliates, immediately upon the effectiveness of registration. For a discussion of these rights, see "Description of Capital Stock--Registration Rights." 56 UNDERWRITING General We intend to offer our common stock in the United States through a number of underwriters. Merrill Lynch, Pierce, Fenner & Smith Incorporated, U.S. Bancorp Piper Jaffray Inc., Dain Rauscher Wessels, a division of Dain Rauscher Incorporated, and FAC/Equities, a division of First Albany Corporation, are acting as representatives of each of the underwriters named below. Subject to the terms and conditions set forth in a purchase agreement between us and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters severally and not jointly has agreed to purchase from us, the number of shares of our common stock indicated opposite its name below.
Number of Underwriters Shares ------------ ------ Merrill Lynch, Pierce, Fenner & Smith Incorporated............................................. U.S. Bancorp Piper Jaffray Inc. .................................. Dain Rauscher Wessels............................................. FAC/Equities, a division of First Albany Corporation.............. ------- Total........................................................ =======
In the purchase agreement, the several underwriters have agreed, subject to the terms and conditions provided in that agreement, to purchase all of the shares of our common stock being sold under the terms of the agreement if any of the shares of common stock are purchased. Under the purchase agreement, the commitments of non-defaulting underwriters may be increased. We have agreed to indemnify the underwriters against liabilities under the Securities Act or to contribute to payments the underwriters may be required to make in respect of those liabilities. The expenses of this offering, exclusive of the underwriting discount, are estimated at $ and are payable by us. The shares of common stock are being offered by the several underwriters, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by counsel for the underwriters and other conditions. The underwriters reserve the right to withdraw, cancel or modify this offer and to reject orders in whole or in part. Commissions and Discounts The representatives have advised us that the underwriters propose initially to offer the shares of our common stock to the public at the initial public offering price on the cover page of this prospectus, and to dealers at this price less a concession not in excess of $ per share of common stock. The underwriters may allow, and the dealers may reallow, a discount not in excess of $ per share of common stock to other dealers. After the initial public offering, the public offering price, concession and discount may be changed. The following table shows the per share and total public offering price, the underwriting discount to be paid by us to the underwriters and the proceeds before expenses to us. This information is presented assuming either no exercise or full exercise by the underwriters of their over-allotment options.
Without With Per Share Option Option --------- ------- ------ Public offering price............................ $ $ $ Underwriting discount............................ $ $ $ Proceeds, before expenses, to ShowCase........... $ $ $
57 Over-Allotment Option We have granted an option to the underwriters, exercisable for 30 days after the date of this prospectus, to purchase up to an aggregate of an additional shares of our common stock at the initial public offering price on the cover of this prospectus, less the underwriting discount. The underwriters may exercise this option solely to cover over-allotments, if any, made on the sale of our common stock offered by this prospectus. To the extent that the underwriters exercise this option, each underwriter will be obligated to purchase a number of additional shares of our common stock in proportion to the underwriter's initial amount reflected in the table above. Reserved Shares At our request, the underwriters have reserved for sale, at the initial public offering price, up to of the shares offered by this prospectus to be sold to some of our employees and directors and other persons with whom we have relationships. The number of shares of our common stock available for sale to the general public will be reduced to the extent that those persons purchase the reserved shares. Any reserved shares that are not orally confirmed for purchase within one day of the pricing of the offering will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus. No Sales of Similar Securities We and our executive officers and directors and substantially all of our shareholders, holding in the aggregate in excess of 95% of the outstanding shares of our common stock, have agreed not to directly or indirectly . offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, lend or otherwise dispose of or transfer any shares of our common stock or securities convertible into or exchangeable or exercisable for our common stock, whether now owned or later acquired by the person executing the agreement or with respect to which the person executing the agreement later acquires the power of disposition, or file any registration statement under the Securities Act relating to any shares of our common stock or . enter into any swap or other agreement or any other agreement that transfers, in whole or in part, the economic consequence of ownership of our common stock whether this swap or transaction is to be settled by delivery of our common stock or other securities, in cash or otherwise without the prior written consent of Merrill Lynch on behalf of the underwriters for a period of 180 days after the date of the prospectus. See "Shares Eligible for Future Sale." Nasdaq National Market Listing Before this offering, there has been no market for our common stock. The initial public offering price will be determined through negotiations between us and the representatives of the underwriters. The factors to be considered in determining the initial public offering price, in addition to prevailing market conditions, include the valuation multiples of publicly traded companies that the representatives believe to be comparable to us, some of our financial information, the history of, and the prospects for, us and the industry in which we compete, and an assessment of our management, its past and present operations, the prospects for, and timing of, our future revenues, the present state of our development, the percentage interest of ShowCase being sold as compared to the valuation for ShowCase and the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours. There can be no assurance that an active trading market will develop for our common stock or that our common stock will trade in the public market subsequent to the offering at or above the initial public offering price. 58 We expect our common stock to be approved for listing on the Nasdaq National Market, subject to notice of issuance, under the symbol "SHWC." The underwriters do not expect sales of our common stock to any accounts over which they exercise discretionary authority to exceed 5% of the number of shares being offered under the prospectus. Price Stabilization and Short Positions Until the distribution of our common stock is completed, rules of the Securities and Exchange Commission may limit the ability of the underwriters and selling group members to bid for and purchase our common stock. As an exception to these rules, the underwriters are permitted to engage in transactions that stabilize the price of our common stock. These transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of our common stock. If the underwriters create a short position in our common stock in connection with the offering, that is, if they sell more shares of our common stock than are indicated on the cover page of this prospectus, the underwriters may reduce that short position by purchasing our common stock in the open market. The underwriters may also elect to reduce any short position by exercising all or part of the over-allotment option described above. Penalty Bids The underwriters may also impose a penalty bid on other underwriters and selling group members. This means that if the underwriters purchase shares of our common stock in the open market to reduce their short position or to stabilize the price of our common stock, they may reclaim the amount of the selling concession from the underwriters and selling group members who sold those shares as part of the offering. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of these purchases. The imposition of a penalty bid might also have an effect on the price of our common stock to the extent that it discourages resales of our common stock. Neither we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice. LEGAL MATTERS Dorsey & Whitney LLP, Minneapolis, Minnesota, will pass upon the validity of the issuance of shares of common stock offered by this prospectus for ShowCase. Fenwick & West LLP, Palo Alto, California, will pass upon certain legal matters in connection with the offering for the underwriters. EXPERTS The consolidated balance sheets as of March 31, 1997 and 1998 and the related consolidated statements of operations and comprehensive income (loss), of stockholders' equity, and cash flows for each of the years in the three-year period ended March 31, 1998 included in this prospectus have been included in reliance on the report of KPMG Peat Marwick LLP, independent certified public accountants, given on their authority as experts in auditing and accounting. 59 WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S-1 with respect to the common stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information provided in the registration statement or the exhibits and schedules which are part of the registration statement. For further information on ShowCase and our common stock, you should review the registration statement, including exhibits and schedules. You may read and copy any document we file at the Commission's public reference room in Washington, D.C. Please call the Commission at 1-800-SEC-0330 for further information on the public reference room. Our filings are also available to the public from the Commission's web site at http://www.sec.gov. Upon completion of this offering, we will be required to file periodic reports, proxy statements and other information with the Commission. These periodic reports, proxy statements and other information will be available for inspection and copying at the Commission's public reference rooms and the website of the Commission referred to above. 60 SHOWCASE CORPORATION AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ---- Independent Auditors' Report.............................................. F-2 Consolidated Balance Sheets, March 31, 1997 and 1998...................... F-3 Consolidated Statements of Operations and Comprehensive Income (Loss), Years ended March 31, 1996, 1997, and 1998............................... F-4 Consolidated Statements of Stockholders' Equity, Years ended March 31, 1996, 1997, and 1998............................... F-5 Consolidated Statements of Cash Flows, Years ended March 31, 1996, 1997, and 1998............................... F-6 Notes to Consolidated Financial Statements................................ F-7 Unaudited Consolidated Balance Sheet, December 31, 1998................... F-17 Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss), Nine months ended December 31, 1997 and 1998............................. F-18 Unaudited Consolidated Statements of Cash Flows, Nine months ended December 31, 1997 and 1998............................. F-19 Notes to Unaudited Consolidated Financial Statements...................... F-20
F-1 Independent Auditors' Report The Board of Directors and Stockholders of ShowCase Corporation: We have audited the accompanying consolidated balance sheets of ShowCase Corporation and subsidiaries (the Company) as of March 31, 1997 and 1998, and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended March 31, 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the accompanying consolidated financial statements referred to above present fairly, in all material respects, the financial position of ShowCase Corporation and subsidiaries as of March 31, 1997 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 1998 in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP May 15, 1998 Minneapolis, MN F-2 SHOWCASE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts)
March 31, --------------- 1997 1998 Assets ------- ------- Current assets: Cash......................................................... $ 2,989 $ 5,404 Marketable securities........................................ -- 443 Accounts receivable, net of allowances of $300 in 1997 and $500 in 1998................................................ 4,891 6,162 Prepaid expenses and other current assets.................... 656 1,032 Income taxes receivable...................................... -- 251 Deferred income taxes........................................ 640 340 ------- ------- Total current assets....................................... 9,176 13,632 ------- ------- Property and equipment, net................................... 1,513 2,191 Investment in affiliates...................................... 165 192 Product rights, net of accumulated amortization............... 310 124 Goodwill, net of accumulated amortization..................... 236 176 ------- ------- Total assets............................................... $11,400 $16,315 ======= ======= Liabilities and Stockholders' Equity Current liabilities: Accounts payable............................................. $ 1,067 $ 1,094 Accrued liabilities.......................................... 1,510 2,885 Current portion of long-term debt............................ 275 397 Current portion of obligations under capital leases.......... 134 135 Income taxes payable......................................... 295 -- Deferred revenue............................................. 4,835 7,542 ------- ------- Total current liabilities.................................. 8,116 12,053 ------- ------- Long-term debt, less current portion.......................... 624 944 Capital lease obligations, less current portion............... 58 213 ------- ------- Total liabilities.......................................... 8,798 13,210 ------- ------- Commitments (note 12) Stockholders' equity: Series A convertible preferred stock; $.01 par value; 473,757 shares authorized, issued, and outstanding, total liquidation preference of $2,400...................... 5 5 Series B convertible preferred stock; $.01 par value; 1,777,500 shares authorized, 875,000 issued and outstanding, total liquidation preference of $3,500...................... -- 9 Common stock, $.01 par value, 10,000,000 shares authorized, 3,852,731 and 3,988,560 shares issued and outstanding....... 39 40 Additional paid-in capital................................... 2,465 5,988 Accumulated other comprehensive income: Cumulative translation adjustment........................... 26 107 Unrealized holding gain on securities....................... -- 123 Retained earnings (accumulated deficit)...................... 67 (3,167) ------- ------- Total stockholders' equity................................. 2,602 3,105 ------- ------- Total liabilities and stockholders' equity................. $11,400 $16,315 ======= =======
See accompanying notes to consolidated financial statements. F-3 SHOWCASE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (in thousands, except per share amounts)
Years ended March 31, ------------------------- 1996 1997 1998 ------- ------- ------- Revenues: License fees....................................... $ 9,451 $11,639 $14,279 Maintenance and support............................ 2,707 4,888 6,651 Professional service fees.......................... 1,120 1,500 2,825 ------- ------- ------- Total revenues................................... 13,278 18,027 23,755 ------- ------- ------- Cost of revenues: License fees....................................... 1,145 1,365 2,645 Maintenance and support............................ 520 990 1,572 Professional service fees.......................... 676 1,172 2,005 ------- ------- ------- Total cost of revenues........................... 2,341 3,527 6,222 ------- ------- ------- Gross margin........................................ 10,937 14,500 17,533 ------- ------- ------- Operating expenses: Sales and marketing................................ 6,661 9,940 15,494 Product development................................ 2,070 2,553 3,051 General and administrative......................... 1,380 1,971 2,590 ------- ------- ------- Total operating expenses......................... 10,111 14,464 21,135 ------- ------- ------- Operating income (loss)............................. 826 36 (3,602) ------- ------- ------- Other income (expense), net: Interest expense................................... (97) (97) (123) Interest income.................................... 104 156 74 Equity in income (losses) of unconsolidated affiliates........................................ (52) (33) 27 Gain on sales of securities........................ -- -- 551 Other income (expense), net........................ 183 (12) 14 ------- ------- ------- Total other income (expense), net................ 138 14 543 ------- ------- ------- Net income (loss) before income taxes............... 964 50 (3,059) Income taxes........................................ 150 -- 175 ------- ------- ------- Net income (loss)................................... 814 50 (3,234) ------- ------- ------- Other comprehensive income (loss): Foreign currency translation adjustment............ (5) 31 81 Unrealized holding gain on securities.............. -- -- 123 ------- ------- ------- Comprehensive income (loss)......................... $ 809 $ 81 $(3,030) ======= ======= ======= Net income (loss) per share (note 10): Basic.............................................. $ 0.21 $ 0.01 $ (0.82) ======= ======= ======= Diluted............................................ $ 0.13 $ 0.01 $ (0.82) ======= ======= ======= Weighted average shares outstanding used in computing basic net income (loss) per share........ 3,850 3,847 3,928 Weighted average shares outstanding used in computing diluted net income (loss) per share...... 6,457 6,455 3,928
See accompanying notes to consolidated financial statements. F-4 SHOWCASE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands, except share data)
Series A Series B convertible convertible preferred preferred stock stock Common stock -------------- -------------- ----------------- Accumulated Retained Number Number Additional other earnings Total of of Number of paid-in comprehensive (accumulated stockholders' shares Amount shares Amount shares Amount capital income (loss) deficit) equity ------- ------ ------- ------ --------- ------ ---------- ------------- ------------ ------------- Balances at March 31, 1995.......... 473,757 $ 5 -- $-- 3,907,780 $ 39 $2,478 $ -- $ (797) $1,725 Net income......... -- -- -- -- -- -- -- -- 814 814 Change in foreign currency translation adjustment........ -- -- -- -- -- -- -- (5) -- (5) Stock purchased and retired under stock repurchase agreement......... -- -- -- -- (72,779) (1) (17) -- -- (18) Stock issued pursuant to stock option plan....... -- -- -- -- 7,940 -- 3 -- -- 3 ------- ---- ------- --- --------- ---- ------ ---- ------- ------ Balances at March 31, 1996.......... 473,757 5 -- -- 3,842,941 38 2,464 (5) 17 2,519 Net income......... -- -- -- -- -- -- -- -- 50 50 Change in foreign currency translation adjustment........ -- -- -- -- -- -- -- 31 -- 31 Stock issued pursuant to stock option plan....... -- -- -- -- 9,790 1 1 -- -- 2 ------- ---- ------- --- --------- ---- ------ ---- ------- ------ Balances at March 31, 1997.......... 473,757 5 -- -- 3,852,731 39 2,465 26 67 2,602 Net loss........... -- -- -- -- -- -- -- -- (3,234) (3,234) Change in foreign currency translation adjustment........ -- -- -- -- -- -- -- 81 -- 81 Unrealized holding gain on marketable securities........ -- -- -- -- -- -- -- 123 -- 123 Stock issued pursuant to stock option plan....... -- -- -- -- 135,829 1 32 -- -- 33 Preferred Series B stock issued...... -- -- 875,000 9 -- -- 3,491 -- -- 3,500 ------- ---- ------- --- --------- ---- ------ ---- ------- ------ Balances at March 31, 1998.......... 473,757 $ 5 875,000 $ 9 3,988,560 $ 40 $5,988 $230 $(3,167) $3,105 ======= ==== ======= === ========= ==== ====== ==== ======= ======
See accompanying notes to consolidated financial statements. F-5 SHOWCASE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Years Ended March 31, ----------------------- 1996 1997 1998 ------ ------ ------- Cash flows from operating activities: Net income (loss).................................... $ 814 $ 50 $(3,234) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation and amortization...................... 408 618 749 Equity in income (losses) of unconsolidated affiliates........................................ 52 32 (27) Deferred income taxes.............................. (125) (515) 300 Gain on sale of securities......................... -- -- (551) Loss on disposition of property and equipment...... 13 13 14 Changes in operating assets and liabilities, net of acquisitions: (Increase) decrease in: Accounts receivable.............................. 942 (2,998) (1,271) Prepaid expenses and other current assets........ 131 (394) (376) Income taxes receivable.......................... -- -- (251) Increase (decrease) in: Accounts payable................................. 23 314 27 Accrued liabilities.............................. (65) 765 1,375 Deferred revenue................................. 44 3,022 2,707 Income taxes payable............................. (7) 262 (295) ------ ------ ------- Net cash provided by (used in) operating activities..................................... 2,230 1,169 (833) ------ ------ ------- Cash flows from investing activities: Purchase of property and equipment................... (307) (804) (822) Investments in affiliates............................ (20) (198) -- Proceeds from sale of securities..................... -- -- 256 Acquisition of subsidiaries, net of cash acquired.... (119) -- -- Purchase of product rights........................... (200) (55) -- ------ ------ ------- Net cash used in investing activities........... (646) (1,057) (566) ------ ------ ------- Cash flows from financing activities: Proceeds from exercise of stock options.............. 3 2 33 Proceeds from issuance of preferred stock............ -- -- 3,500 Proceeds from issuance of long-term debt............. -- 722 784 Payments on long-term debt........................... (179) (236) (342) Repurchase of common stock........................... (18) -- -- Payments under capital lease obligations............. (129) (198) (161) ------ ------ ------- Net cash provided by (used in) financing activities..................................... (323) 290 3,814 ------ ------ ------- Net increase in cash.................................. 1,261 402 2,415 Cash, beginning of year............................... 1,326 2,587 2,989 ------ ------ ------- Cash, end of year..................................... $2,587 $2,989 $ 5,404 ====== ====== ======= Supplemental disclosure of cash flow information: Cash paid during the year for: Interest............................................ $ 97 $ 97 $ 123 ====== ====== ======= Income taxes........................................ $ 282 $ 207 $ 240 ====== ====== =======
Supplemental disclosure of noncash investing and financing activities: The Company acquired property and equipment totaling $109 and $317 under capital leases during 1996 and 1998, respectively. During 1998, the Company sold stock purchase warrants in another company with a basis of $25 in exchange for marketable securities with a fair market value of $320 and cash. See accompanying notes to consolidated financial statements. F-6 SHOWCASE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 and 1998 (1) Summary of Significant Accounting Policies (a) Nature of Operations ShowCase Corporation (the "Company" or "ShowCase") was incorporated in 1988, and in 1991, introduced a Windows-based query tool for the IBM AS/400, ShowCase VISTA. The Company has subsequently introduced additional data access products. The Company's product suite is sold under the name ShowCase STRATEGY. The Company has wholly owned subsidiaries in Germany, the United Kingdom, Belgium, and France that distribute ShowCase products and provide related services to clients in these countries. The Company owns 40% of ShowCase Japan and 20% of ShowCase Italia SpA (Italy), which distribute ShowCase products and provide related services to clients in these countries. The Company uses the equity method to account for its investment in these affiliates. (b) Principles of Consolidation The consolidated financial statements include the accounts of ShowCase Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. (c) Revenue Recognition Revenues derived from software licenses are recognized upon (a) the execution of a license agreement, (b) delivery of the software product, (c) reasonable assurance of customer acceptance of the software and collectibility of the receivable, and (d) fulfillment of any other of the Company's contract obligations. For software provided for demonstration or pilot purposes, or where significant post-delivery obligations exist, revenues are deferred until execution of a license agreement and fulfillment of all revenue recognition requirements. Revenues derived from maintenance contracts which are bundled with the initial licenses and all revenues from extended maintenance contracts are deferred and recognized ratably over the term of the maintenance contract. Revenues from maintenance contracts are included in maintenance and support revenues. Revenues from training and consulting services are recognized as the services are performed. The Company's policy is in compliance with the provisions of the American Institute of Certified Public Accountants' Statement of Position ("SOP") 91-1, Software Revenue Recognition. SOP No. 97-2, Software Revenue Recognition, will be effective for the Company beginning April 1, 1998. The Company does not expect the adoption of SOP No. 97-2 to have a material effect on the Company's operating results. (d) Capitalized Software Costs Costs associated with the planning and designing phase of software development, including coding and testing activities necessary to establish technological feasibility, are classified as research and development and expensed as incurred. Once technological feasibility has been determined, additional costs incurred in development, including coding, testing, and product quality assurance are capitalized. During 1996, 1997 and 1998, no software development costs were capitalized. (e) Product Rights The Company purchases rights to software source code used in conjunction with certain of its products. The product rights have been capitalized and are amortized on a straight-line basis over periods of three to five years. Unamortized product rights are reviewed periodically to determine F-7 SHOWCASE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) March 31, 1997 and 1998 recoverability based upon undiscounted forecasted cash flows. If it is determined that the asset is impaired, the Company recognizes an impairment charge to reduce the unamortized balance to its net realizable value. As of March 31, 1998, no impairment charges have been recognized. Accumulated amortization was $269,584 and $431,250 as of March 31, 1997 and 1998, respectively. (f) Goodwill The excess of the cost over fair value of net assets acquired is recorded as goodwill and amortized on a straight-line basis over five years. Unamortized goodwill balances are reviewed periodically to determine recoverability based upon forecasted undiscounted cash flows. If it is determined that the asset is impaired, the Company recognizes an impairment charge to reduce the unamortized balance to its net realizable value. As of March 31, 1998, no impairment charges have been recognized. Accumulated amortization was $64,000 and $124,000 as of March 31, 1997 and 1998, respectively. (g) Income Taxes Deferred taxes are provided on an asset and liability method for temporary differences and operating loss and tax credit carryforwards. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. (h) Foreign Currency Translation Exchange adjustments resulting from foreign currency transactions are generally recognized in net income (loss), whereas adjustments resulting from the translation of financial statements are reflected as a separate component of accumulated other comprehensive income within stockholders' equity. Revenues and expenses of foreign subsidiaries are translated at the average exchange rates that prevail over the applicable year. (i) Use of Estimates Management of the Company has made certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the periods. Actual results could differ from those estimates. (j) Stock-based Compensation Compensation expense for employee stock option grants is recognized in accordance with Accounting Principles Board ("APB") Opinion 25, Accounting for Stock Issued to Employees. The pro forma effect on net income (loss) is provided as if the fair value based method defined in SFAS No. 123, Accounting for Stock-based Compensation, had been applied. (k) Marketable Securities All marketable securities are classified as available-for-sale and available to support current operations or to take advantage of other investment opportunities. These securities are stated at the estimated fair value based upon market quotes with unrealized holding gains or losses reported as a separate component of accumulated other comprehensive income within stockholders' equity. Realized gains and losses are included in net interest and other income. The cost of securities sold is based on the specific identification method. F-8 SHOWCASE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) March 31, 1997 and 1998 (l) Comprehensive Income (Loss) Comprehensive income represents the change in stockholders' equity resulting from other than stockholder investments and distributions. For ShowCase, comprehensive income consists of net earnings or loss plus changes in foreign currency translation adjustment and unrealized holding gains (losses) on marketable securities available for sale as displayed in the accompanying consolidated statements of stockholders' equity. Amounts recognized in net income (loss) which previously were reported as other comprehensive income (loss) are reclassified to avoid duplication. The effect of deferred income taxes on other comprehensive income (loss) is not material. (m) Reclassifications Certain amounts previously reported have been reclassified to conform to the 1998 presentation. (2) Profit Sharing and Savings Plan The Company has adopted a profit sharing plan under Section 401(k) of the Internal Revenue Code. This plan allows employees to defer a portion of their income through contributions to this plan. At the Company's board of directors' discretion, the Company may match a percentage of employees' voluntary contributions or may make additional contributions based on profits. In fiscal 1998, the Company initiated a Company match determined annually by the Company's board of directors. This Company match was approximately $44,000 in fiscal 1998. There were no Company contributions to this plan in fiscal 1996 or 1997. (3) Significant Customers Revenues from one unaffiliated customer aggregated approximately 15% and 21% of revenue in 1996 and 1997, respectively. Accounts receivable from this unaffiliated customer were not significant as of March 31, 1997. Revenues from the Company's Japan affiliate aggregated approximately 6% of total revenue for 1998. Accounts receivable from the Company's Japan affiliate aggregated approximately 6% of total accounts receivable as of March 31, 1998. (4) Marketable Securities During 1998, the Company acquired stock in a vendor which is classified as available for sale. The estimated fair value and cost basis of this security at March 31, 1998 were $442,986 and $319,972, respectively. Unrealized holding gain for the year ended March 31, 1998 was $123,014. (5) Property and Equipment Property and equipment are recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Property and equipment are summarized as follows (in thousands):
March 31, ---------------- Estimated useful life 1997 1998 --------------------- ------- ------- Computers and software.......... 3 to 5 years $ 2,040 $ 2,930 Office furniture and equipment.. 4 to 10 years 559 645 Leasehold improvements.......... 5 to 9 years 75 102 ------- ------- 2,674 3,677 Less accumulated depreciation and amortization............... (1,161) (1,486) ------- ------- Net property and equipment...... $ 1,513 $ 2,191 ======= =======
F-9 SHOWCASE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) March 31, 1997 and 1998 (6) Investment in Affiliate On March 26, 1997, the Company entered into a joint venture agreement and acquired a 40% interest in ShowCase Japan for $165,000. ShowCase Japan began operations April 1, 1997 as the distributor of ShowCase products and services in Japan. (7) Income Taxes Income before income taxes was derived from the following sources (in thousands):
Year Ended March 31, --------------------- 1996 1997 1998 ------ ---- ------- Domestic........................................... $1,158 $(34) $(2,597) Foreign............................................ (194) 84 (462) ------ ---- ------- $ 964 $ 50 $(3,059) ====== ==== =======
The provision for current income tax expense consists of the following (in thousands):
Year Ended March 31, ---------------------- 1996 1997 1998 ------ ------ ------ Current: Federal......................................... $ 263 $ 490 $(325) State and local................................. 12 25 -- Foreign......................................... -- -- 200 Deferred: Federal......................................... (125) (492) 300 State and local................................. -- (23) -- ------ ------ ------ $ 150 $ -- $ 175 ====== ====== ======
The provision for income taxes differs from the expected tax expense, computed by applying the federal corporate tax rate of 34% to earnings before income taxes, as follows (in thousands):
Year Ended March 31, -------------------- 1996 1997 1998 ----- ---- ------- Expected federal income tax expense (benefit)...... $ 328 $ 17 $(1,040) State taxes, net of federal benefit................ 9 2 (52) Change in valuation allowance...................... (158) -- 1,085 Research and experimentation credits............... -- (23) -- Foreign sales corporation.......................... (30) (20) -- Foreign operations and withholding taxes........... -- -- 152 Other.............................................. 1 24 30 ----- ---- ------- $ 150 $ -- $ 175 ===== ==== =======
F-10 SHOWCASE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) March 31, 1997 and 1998 The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at March 31, 1997 and 1998 are presented below (in thousands):
1997 1998 ------ ------- Deferred tax assets: Accounts receivable allowances......................... $ 102 $ 170 Vacation and other accruals............................ 82 111 Deferred revenues...................................... 874 1,266 Foreign net operating loss carryforwards............... 24 161 Research and experimentation credit carryforwards...... -- 196 Other.................................................. 50 46 ------ ------- 1,132 1,950 Valuation allowance...................................... (415) (1,500) ------ ------- 717 450 Deferred tax liabilities: Depreciation........................................... (77) (110) ------ ------- Net deferred tax asset................................... $ 640 $ 340 ====== =======
The valuation allowance for deferred tax assets as of March 31, 1997 and 1998 was $415,000 and $1,500,000, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of the deferred tax asset is dependent upon the ability to generate tax refunds from the carryback of losses to prior periods and the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers its projected taxable income and tax planning strategies in making this assessment. At March 31, 1998, there are foreign net operating loss carryforwards of approximately $473,000, which will expire through 2012. (8) Long-term Debt Long-term debt consists of the following (in thousands):
1997 1998 ----- ------ Note payable to bank with principal due in monthly installments of $31, plus interest at the bank's base rate (8.5% at March 31, 1998) plus 1.5% through September 2002..................................................... $ 854 $1,312 Note payable to Belgian bank with interest at 6.95%, due in monthly installments of $3 through December 1998......... 45 18 Note payable to IBM, interest at 6.25%, principal and interest payable quarterly through November 2000.................. -- 11 ----- ------ 899 1,341 Less current portion...................................... (275) (397) ----- ------ $ 624 $ 944 ===== ======
F-11 SHOWCASE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) March 31, 1997 and 1998 The Company has a $2,000,000 revolving line of credit agreement with a bank through September 30, 1998, bearing interest at the bank's base rate plus 1.5%. Borrowings are limited to 75% of eligible accounts receivable reduced by 50% of the outstanding term loan and are payable on demand. No borrowings were outstanding under the line of credit at March 31, 1998. The note payable to bank and the revolving line of credit note are secured by substantially all of the Company's assets and contain certain restrictive financial covenants which, among other things, require the Company to maintain $1,500,000 of tangible net worth, a debt to tangible net worth ratio of not more than 6.5 to 1, and restrict property and plant acquisitions as well as the incurring of additional debt. The bank has granted a waiver related to an event of default as of March 31, 1998. Future maturities of long-term debt as of March 31, 1998 are as follows (in thousands): 1999............................................................... $ 397 2000............................................................... 380 2001............................................................... 377 2002............................................................... 187 ------ $1,341 ======
(9) Stockholders' Equity (a) Series A Convertible Preferred Stock In 1991, the Company issued convertible preferred stock under the terms of an investment agreement (the "Agreement"). Each preferred share is convertible at the option of the holder at any time at a rate of four shares of common stock for each preferred share, subject to certain adjustments. In the event of a qualified public offering, the preferred stock is required to be converted to common stock. The preferred stockholders are entitled to the same number of votes as if the preferred stock was converted into common shares. In addition, if the Company decides to sell additional shares of capital stock, the Company must first offer the preferred stockholder its pro rata share of capital stock on the same terms and conditions. The per share conversion rate will be adjusted if the Company sells common stock or issues stock options (other than those designated in the March 1991 stock option plan as amended) or warrants at less than the conversion price in effect, which is $1.26645 per common share at March 31, 1998. The Agreement contains certain restrictive covenants that, among other things, limit additional indebtedness, declaration and payment of dividends, guarantees and investments. In connection with the issuance of the Company's convertible preferred stock, the common and preferred stockholders entered into an agreement that prohibits the common stockholders from selling shares of common stock unless the preferred stockholder is permitted to sell a pro rata number of preferred shares, except in the event of sales related to a public offering or certain other events, as defined. (b) Series B Convertible Preferred Stock In 1998, the Company issued convertible preferred stock under the terms of an investment agreement (the "1998 Agreement"). Each preferred share is convertible at the option of the holder at any time at a rate of one share of common stock for each preferred share, subject to certain adjustments. In the event of a qualified public offering, the preferred stock is required to be converted to common stock. The preferred stockholders are entitled to the same number of votes as if the preferred stock was F-12 SHOWCASE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) March 31, 1997 and 1998 converted into common shares. In addition, if the Company decides to sell additional shares of capital stock, the Company must first offer the preferred stockholder its pro rata share of capital stock on the same terms and conditions. The per share conversion rate will be adjusted if the Company sells common stock or issues stock options (other than those designated in the March 1991 stock option plan as amended) or warrants at less than the conversion price in effect, which is $4.00 per common share at March 31, 1998. The conversion price will also vary from $3.00 to $4.50 per common share depending upon the revenue the Company achieves in fiscal year 1999. The 1998 Agreement contains certain restrictive covenants that, among other things, limit additional indebtedness, declaration and payment of dividends, guarantees, and investments. (c) Undesignated Preferred Shares As of March 31, 1998, the Company has authorized 2,748,743 undesignated preferred shares, none of which are outstanding. (d) Stock Options The Company has adopted a stock option plan. Options granted under this plan may be incentive stock options or non-qualified stock options. Incentive stock options may be granted to certain employees and directors at a price not less than the fair market value of the common stock on the day the option is granted and must be exercisable no later than ten years after the date of grant. Nonqualified stock options may be granted for terms up to ten years after the date of grant, at prices determined by the stock option committee. At March 31, 1998, the Company had 1,539,117 shares of its common stock reserved for issuance upon the exercise of options granted under the Company's stock option plan. The Company has elected to continue to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations to account for its stock options. Accordingly, no compensation expense related to stock option plans has been recorded in 1998, 1997 and 1996. The following pro forma amounts, in accordance with the disclosure requirements of Statement of Financial Accounting Standards No. 123, Accounting for Stock-based Compensation ("SFAS 123"), were determined as if the Company had accounted for its stock options using the fair value method as described in that statement:
1996 1997 1998 ---- ---- ------- Net income (loss) (in thousands): As reported........................................... $814 $50 $(3,234) Pro forma............................................. 811 34 (3,266)
Because the method of accounting under SFAS 123 has not been applied to stock options granted prior to April 1, 1995, the resulting pro forma compensation cost may not be representative of compensation cost to be disclosed in future years. The fair value of stock options granted was $.27, $.30 and $.39 per option in 1996, 1997 and 1998, respectively. The fair value at the date of grant was estimated using the Black-Scholes stock option pricing model with the following average assumptions for 1996, 1997 and 1998: a weighted average risk free interest rate of 6.5%; weighted average dividend yield of 0%; weighted average expected volatility of 0%; and weighted average expected lives of five years. F-13 SHOWCASE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) March 31, 1997 and 1998 The following table summarizes the activity of the Company's stock option plan:
Weighted average Shares exercise price --------- ---------------- Outstanding--March 31, 1995.................... 957,153 $ .25 Options granted.............................. 205,700 .98 Options exercised............................ (7,940) .35 Options canceled............................. (47,360) .56 --------- ----- Outstanding--March 31, 1996.................... 1,107,553 .37 Options granted.............................. 398,650 1.08 Options exercised............................ (9,790) .19 Options canceled............................. (123,460) .96 --------- ----- Outstanding--March 31, 1997.................... 1,372,953 .53 Options granted.............................. 181,400 1.42 Options exercised............................ (135,829) .25 Options canceled............................. (53,740) 1.04 --------- ----- Outstanding--March 31, 1998.................... 1,364,784 $ .65 ========= =====
The following table summarizes the Company's stock options outstanding at March 31, 1998:
Options outstanding Options exercisable -------------------------------------- ------------------------- Number Weighted Number Weighted outstanding Weighted average average exercisable average at March 31, remaining exercise at March 31, exercise Range of exercise price 1998 contractual life price 1998 price ----------------------- ------------ ---------------- -------- ------------ -------- $ .07- .21.............. 592,484 5 years $.19 493,387 $.18 .35- .87.............. 178,800 7 years .47 139,797 .48 .98-1.42.............. 593,500 9 years 1.17 95,180 1.05 --------- ------- 1,364,784 728,364 ========= =======
(10) Net Income (Loss) per Share The Company calculates net income (loss) per share in accordance with SFAS No. 128, Earnings per Share. For ShowCase, basic income (loss) per share represents net income (loss) divided by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share represents net income (loss) divided by the sum of the weighted average number of common shares outstanding plus shares derived from other potentially dilutive securities. For ShowCase, potentially dilutive securities include "in-the-money" fixed stock options and the amount of weighted average common shares which would be added by the conversion of outstanding convertible preferred stock. The number of shares added for stock options is determined by the treasury stock method, which assumes exercise of these options and the use of any proceeds from such exercise to repurchase a portion of these shares at the average market price for the period. When the results of operations are a loss, other potentially dilutive securities are not included in the calculation of loss per share. F-14 SHOWCASE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) March 31, 1997 and 1998 The following computations reconcile net income (loss) with basic and diluted net income (loss) per share (in thousands, except for per share data):
Years ended March 31, ------------------------ 1996 1997 1998 ------- ------- -------- Basic income (loss) per share: Net income (loss)............................ $ 814 $ 50 $ (3,234) Weighted average shares...................... 3,850 3,847 3,928 ------- ------- -------- Basic income (loss) per share................ $ .21 $ .01 $ (.82) ======= ======= ======== Diluted income (loss) per share: Net income (loss)............................ $ 814 $ 50 $ (3,234) Weighted average shares...................... 3,850 3,847 3,928 Effect of dilutive "in-the-money" stock options..................................... 712 713 -- Effect of conversion of preferred stock...... 1,895 1,895 -- ------- ------- -------- Total dilutive shares...................... 6,457 6,455 3,928 ------- ------- -------- Diluted income (loss) per share................ $ .13 $ .01 $ (.82) ======= ======= ========
The number of weighted average option shares excluded from the calculation of potentially dilutive securities either because the exercise price exceeded the average market price or because their inclusion in a calculation of net loss per share would have been antidilutive was 902,469 for fiscal 1998. For the year ended March 31, 1998, the effect of conversion of the Company's Series A and Series B convertible preferred stock was excluded from the calculation of net loss per diluted share because the resulting impact would have been antidilutive. At March 31, 1998, the Series A and Series B convertible preferred stock were convertible into 1,895,028 and 875,000 common shares, respectively. (11) Geographic Segment Data The operations of the Company are primarily conducted in the United States, the Company's country of domicile. Geographic data, determined by references to the location of the Company's operations, as of March 31, 1997 and 1998 and for each of the years for the three-year period ended March 31, 1998 is as follows (in thousands):
Years ended March 31, ----------------------- 1996 1997 1998 ------- ------- ------- Revenues: U.S. operations................................. $11,009 $14,904 $17,890 Non-U.S. operations............................. 2,269 3,123 5,865 ------- ------- ------- $13,278 $18,027 $23,755 ======= ======= ======= March 31, --------------- 1997 1998 ------- ------- Tangible long-lived assets: U.S. operations................................. $ 1,307 $ 1,842 Non-U.S. operations............................. 206 349 ------- ------- $ 1,513 $ 2,191 ======= =======
F-15 SHOWCASE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) March 31, 1997 and 1998 (12)Leases (a) Capital Leases The Company has entered into capital lease agreements for computers and software, office furniture and equipment, vehicles and product rights. The following is a summary of the leased property (in thousands):
1997 1998 ----- ----- Computers and software....................................... $ 337 $ 645 Office furniture and equipment............................... 55 53 Product rights............................................... 325 325 ----- ----- 717 1,023 Less accumulated amortization................................ (405) (609) ----- ----- $ 312 $ 414 ===== =====
The following is a schedule of future minimum lease payments under capital lease with the present value of the minimum lease payments as of March 31, 1998 (in thousands):
Years ending March 31: ---------------------- 1999................................................................ $ 173 2000................................................................ 144 2001................................................................ 82 ----- Total minimum lease payments........................................ 399 Less amount representing interest from 5% to 16%.................... (51) ----- Present value of minimum lease payments............................. 348 Less current portion................................................ (135) ----- $ 213 =====
(b) Operating Leases The Company leases certain office facilities and equipment under operating leases. Total lease expense aggregated $559,713, $1,056,102 and $1,363,336 in 1996, 1997 and 1998, respectively. Minimum future obligations as of March 31, 1998, including operating costs under non- cancelable leases, are approximately as follows (in thousands):
Years ending March 31: ---------------------- 1999............................................................... $ 842 2000............................................................... 378 2001............................................................... 214 2002............................................................... 48 2003............................................................... 10 ------- $ 1,492 =======
F-16 SHOWCASE CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEET (in thousands, except share and per share amounts)
December 31, 1998 ------------ Assets Current assets: Cash............................................................. $ 7,464 Marketable securities............................................ 173 Accounts receivable, net of allowances of $675................... 8,453 Prepaid expenses and other current assets........................ 856 Deferred income taxes............................................ 340 ------- Total current assets........................................... 17,286 ------- Property and equipment, net........................................ 1,949 Investment in affiliates........................................... 180 Goodwill, net of accumulated amortization.......................... 131 ------- Total assets................................................... $19,546 ======= Liabilities and Stockholders' Equity Current liabilities: Accounts payable................................................. $ 1,019 Accrued liabilities.............................................. 4,187 Current portion of long-term debt................................ 375 Current portion of obligations under capital leases.............. 161 Income taxes payable............................................. 131 Deferred revenue................................................. 10,804 ------- Total current liabilities...................................... 16,677 ------- Long-term debt, less current portion............................... 656 Capital lease obligations, less current portion.................... 95 ------- Total liabilities.............................................. 17,428 ------- Stockholders' equity: Series A convertible preferred stock; $.01 par value; 473,757 shares authorized, issued, and outstanding, total liquidation preference of $2,400.......................... 5 Series B convertible preferred stock; $.01 par value; 1,777,500 shares authorized, 875,000 issued and outstanding, total liquidation preference of $3,500............. 9 Common stock, $.01 par value, 10,000,000 shares authorized, 4,486,327 shares issued and outstanding............. 45 Additional paid-in capital....................................... 6,313 Accumulated other comprehensive income: Cumulative translation adjustment.............................. 91 Unrealized holding loss on securities.......................... (147) Deferred compensation............................................ (197) Accumulated deficit.............................................. (4,001) ------- Total stockholders' equity................................... 2,118 ------- Total liabilities and stockholders' equity................... $19,546 =======
See accompanying notes to unaudited consolidated financial statements. F-17 SHOWCASE CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (in thousands, except per share amounts)
Nine Months Ended December 31, ---------------- 1997 1998 ------- ------- Revenues: License fees................................................ $10,077 $15,077 Maintenance and support..................................... 4,765 7,302 Professional service fees................................... 1,909 2,883 ------- ------- Total revenues............................................ 16,751 25,262 ------- ------- Cost of revenues: License fees................................................ 1,709 2,894 Maintenance and support..................................... 1,122 1,828 Professional service fees................................... 1,343 1,995 ------- ------- Total cost of revenues.................................... 4,174 6,717 ------- ------- Gross margin................................................. 12,577 18,545 ------- ------- Operating expenses: Sales and marketing......................................... 11,153 13,723 Product development......................................... 2,204 3,236 General and administrative.................................. 1,840 2,339 ------- ------- Total operating expenses.................................. 15,197 19,298 ------- ------- Operating loss............................................... (2,620) (753) Other income (expense), net: Interest expense............................................ (109) (139) Interest income............................................. 56 186 Gain on sales of securities................................. 551 -- Other income (expense), net................................. 9 7 ------- ------- Total other income (expense), net......................... 507 54 ------- ------- Net loss before income taxes................................. (2,113) (699) Income taxes................................................. 125 135 ------- ------- Net loss..................................................... (2,238) (834) ------- ------- Other comprehensive income (loss): Foreign currency translation adjustment..................... 32 (16) Unrealized holding loss on securities....................... -- (270) ------- ------- Comprehensive loss........................................... $(2,206) $(1,120) ======= ======= Net loss per share (note 3): Basic....................................................... $ (0.57) $ (0.19) ======= ======= Diluted..................................................... $ (0.57) $ (0.19) ======= ======= Weighted average shares outstanding used in computing basic net loss per share.......................... 3,909 4,348 Weighted average shares outstanding used in computing diluted net loss per share........................ 3,909 4,348
See accompanying notes to unaudited consolidated financial statements. F-18 SHOWCASE CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Nine Months Ended December 31, ------------------ 1997 1998 -------- -------- Cash flows from operating activities: Net loss.................................................. $ (2,113) $ (834) Adjustments to reconcile net loss to cash provided by (used in) operating activities: Depreciation and amortization............................ 489 655 Gain on sale of securities............................... (551) -- Deferred compensation amortization....................... -- 22 Changes in operating assets and liabilities, net of acquisitions: (Increase) decrease in: Accounts receivable.................................... (797) (2,141) Prepaid expenses and other current assets.............. (248) 175 Income taxes receivable................................ -- 251 Increase (decrease) in: Accounts payable....................................... (131) (75) Accrued liabilities.................................... 847 1,302 Deferred revenue....................................... 888 3,112 Income taxes payable................................... (371) 130 -------- -------- Net cash provided by (used in) operating activities.. (1,987) 2,597 -------- -------- Cash flows from investing activities: Purchase of property and equipment........................ (558) (259) Proceeds from affiliates.................................. -- 12 Proceeds from sale of securities.......................... 256 -- -------- -------- Net cash used in investing activities................ (302) (247) -------- -------- Cash flows from financing activities: Proceeds from exercise of stock options................... 29 111 Proceeds from issuance of long-term debt.................. 338 -- Payments on long-term debt................................ (281) (281) Payments under capital lease obligations.................. (92) (120) -------- -------- Net cash used in financing activities................ (6) (290) -------- -------- Net increase (decrease) in cash............................ (2,295) 2,060 Cash, beginning of period.................................. 2,989 5,404 -------- -------- Cash, end of period........................................ $ 694 $ 7,464 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest ................................................. $ 109 $ 139 ======== ======== Income taxes.............................................. $ 391 $ 142 ======== ======== Cash received during the period from income tax refunds.... $ 19 $ 389 ======== ========
Supplemental disclosure of noncash investing and financing activities: During the nine months ended December 31, 1998, the Company sold stock purchase warrants in another company with a basis of $25 in exchange for marketable securities with a fair market value of $320 and cash. See accompanying notes to unaudited consolidated financial statements. F-19 SHOWCASE CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 (1)Basis of Presentation The unaudited interim consolidated financial statements include the accounts of Showcase Corporation and its wholly owned subsidiaries and have been prepared by the Company in accordance with generally accepted accounting principles, pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in the financial statements have been omitted or condensed pursuant to such rules and regulations. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the financial statements and related notes included herein. The information furnished reflects, in the opinion of the management of the Company, all adjustments, consisting primarily of recurring accruals, considered necessary for a fair presentation of the financial position and the results of operations. (2)New Accounting Pronouncements The Company adopted the provisions of Statement of Position ("SOP") No. 97-2, Software Revenue Recognition, as amended by SOP No. 98-4, Deferral of the Effective Date of Certain Provisions of SOP No. 97-2, effective April 1, 1998. SOP No. 97-2 supersedes SOP No. 91-1, Software Revenue Recognition. SOP No. SOP 97-2 generally requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on its relative fair value. The fair value of the element must be based on objective evidence that is specific to the vendor. If the vendor does not have objective evidence of the fair value of all elements in a multiple-element arrangement, all revenue from the arrangement must be deferred until such evidence exists or until all elements have been delivered. Under SOP No. 97-2, the Company recognizes license revenue when the software product has been delivered, if a signed contract exists, the fee is fixed and determinable, collection of resulting receivables is probable and product returns are reasonably estimable. License fee revenues that are contingent upon sale to an end user by distributors and other channel partners are recognized upon receipt of a report of delivery. Maintenance and support fees committed as part of new product licenses and maintenance resulting from renewed maintenance contracts are deferred and recognized ratably over the contract period. Professional service revenue is recognized when services are performed. The adoption of SOP No. 97-2 did not have a material effect on the Company's operating results. In March 1998, the American Institute of Certified Public Accountants ("AICPA") issued SOP No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, and in April 1998, the AICPA issued SOP No. 98-5, Reporting on the Costs of Start-up Activities. SOP No. 98-1 requires that entities capitalize certain costs related to internal-use software once certain criteria have been met. SOP No. 98-5 requires that all start-up costs related to new operations must be expensed as incurred. In addition, all start-up costs that were capitalized in the past must be written off when SOP No. 98-5 is adopted. The Company will be required to adopt SOP Nos. 98-1 and 98-5 for the year ending March 31, 2000. The Company expects that SOP Nos. 98-1 and 98-5 will have no material impact on its financial position, results of operations or cash flows. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 established methods of accounting for derivative financial instruments and hedging activities F-20 SHOWCASE CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 31, 1998 related to those instruments, as well as other hedging activities. SFAS No. 133 will be effective for the Company in April 2001. The Company is currently reviewing the potential impact of this accounting standard. In December 1998, the AICPA issued SOP No. 98-9, Modification of SOP 97- 2, Software Revenue Recognition, with Respect to Certain Transactions. SOP No. 98-9 requires recognition of revenue using the "residual method" in a multiple-element software arrangement when fair value does not exist for one or more of the delivered elements in the arrangement. Under the "residual method," the total fair value of the undelivered elements is deferred and recognized in accordance with SOP No. 97-2. The Company will be required to implement SOP No. 98-9 for the year beginning April 1, 1999. SOP No. 98-9 also extends the deferral of the application of SOP No. 97-2 to certain other multiple element software arrangements until the date SOP No. 98-9 becomes effective. The Company does not expect a material change to its accounting for revenues as a result of the provisions of No. SOP 98-9. (3)Net Income (Loss) per Share For ShowCase Corporation, basic income (loss) per share represents net income (loss) divided by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share represents net income (loss) divided by the sum of the weighted average number of common shares outstanding plus shares derived from other potentially dilutive securities. For the Company, potentially dilutive securities include "in-the-money" fixed stock options and warrants and the amount of weighted average common shares which would be added by the conversion of outstanding convertible preferred stock. The number of shares added for stock options and warrants is determined by the treasury stock method, which assumes exercise of these options and warrants and the use of any proceeds from such exercise to repurchase a portion of these shares at the average market price for the period. When the results of operations are a loss, other potentially dilutive securities are not included in the calculation of loss per share. For the nine months ended December 31, 1997 and 1998, basic loss per share is the same as diluted loss per share because the effect of the inclusion of other potentially dilutive securities in the calculation of diluted loss per share was antidilutive. The total number of weighted average option and warrant shares excluded from the calculation of potentially dilutive securities either because the exercise price exceeded the average market price or because their inclusion in the calculation of net loss per share would have been antidilutive was 901,547 and 564,055 for the nine months ended December 31, 1997 and 1998, respectively. The effect of conversion of the Company's preferred stock was also excluded from the calculation of net loss per diluted share because the resulting impact would also have been antidilutive for the nine months ended December 31, 1997 and 1998. At December 31, 1998, the Series A and Series B convertible preferred stock were convertible into 1,895,028 and 864,198 common shares, respectively. (4)Deferred Compensation During the nine months ended December 31, 1998, the Company granted options to purchase 438,900 shares of stock to employees for which the related exercise price was less than the deemed value of the Company's common stock for accounting purposes on the date of grant. Deferred compensation cost recognized for these option grants totaled approximately $219,000. The Company recognized an expense of approximately $22,000 for the nine months ended December 31, 1998 for these stock option grants based on the intrinsic value method in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees, and will recognize the remainder of the deferred compensation cost over the respective vesting periods (five years) of the options granted. F-21 SHOWCASE CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 31, 1998 (5) Warrants Issued In May 1998, the Company issued a warrant to purchase 13,750 shares of series B convertible preferred stock at an exercise price of $4.00 per share in consideration for the warrant-holder executing certain equipment leases with the Company. The warrant is exercisable through the earlier of May 13, 2008 or five years from the effective date of the Company's initial public offering. The warrant had not been exercised in whole or in part as of December 31, 1998. The Company recognizes lease expense equal to the fair value of the warrants amortized over the related lease term. (6) Undesignated Preferred Shares As of December 31, 1998, the Company has authorized 2,748,743 undesignated preferred shares, none of which are outstanding. F-22 [Inside back cover -- graphics to come] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Through and including , 1999 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. Shares Common Stock -------------------- P R O S P E C T U S -------------------- Merrill Lynch & Co. U.S. Bancorp Piper Jaffray Inc. Dain Rauscher Wessels, a division of Dain Rauscher Incorporated FAC/Equities , 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution Except as set forth below, the following fees and expenses will be paid by ShowCase in connection with the issuance and distribution of the securities registered hereby and do not include underwriting commissions and discounts. All such expenses, except for the SEC registration, NASD filing and Nasdaq listing fees, are estimated. SEC registration fee............................................... $9,730 NASD filing fee.................................................... $4,000 Nasdaq National Market listing fee................................. $ Legal fees and expenses............................................ $ Accounting fees and expenses....................................... $ Transfer Agent's and Registrar's fees.............................. $ Printing and engraving expenses.................................... $ Miscellaneous...................................................... $ Total.............................................................. $
Item 14. Indemnification of Directors and Officers Section 302A.521 of the Minnesota Statutes provides that a corporation shall indemnify any person made or threatened to be made a party to a proceeding by reason of the former or present official capacity of such person against judgments, penalties, fines (including, without limitation, excise taxes assessed against such person with respect to any employee benefit plan), settlements and reasonable expenses, including attorneys' fees and disbursements, incurred by such person in connection with the proceeding, if, with respect to the acts or omissions of such person complained of in the proceeding, such person (1) has not been indemnified therefor by another organization or employee benefit plan for the same judgments, penalties or fines; (2) acted in good faith; (3) received no improper personal benefit and Section 302A.255 (with respect to director conflicts of interest), if applicable, has been satisfied; (4) in the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and (5) in the case of acts or omissions in such person's official capacity for the corporation, reasonably believed that the conduct was in the best interests of the corporation, or in the case of acts or omissions in such person's official capacity for other affiliated organizations, reasonably believed that the conduct was not opposed to the best interests of the corporation. Section 302A.521 also requires payment by a corporation, upon written request, of reasonable expenses in advance of final disposition of the proceeding in certain instances. A decision as to required indemnification is made by a disinterested majority of the Board of Directors present at a meeting at which a disinterested quorum is present, or by a designated committee of the Board, by special legal counsel, by the shareholders or by a court. Provisions regarding indemnification of officers and directors of ShowCase to the extent permitted by Section 302A.521 are contained in ShowCase's articles of incorporation and bylaws. The Company maintains a policy of directors' and officers' liability insurance that insures the Company's directors and officers against the cost of defense, settlement or payment of a judgment under certain circumstances. In conjunction with the effectiveness of the registration statement, the Company plans to expand its coverage to include securities law claims. Item 15. Recent Sales of Unregistered Securities Since March 31, 1996, the Company has issued and sold the following securities that were not registered under the Securities Act: 1. At various times during the period from March 31, 1996 through March 31, 1999, the Company has granted to employees and directors stock options under its Stock Option Plan covering an aggregate of shares of the Company's Common Stock, at exercise prices ranging from $1.08 to $7.12 per share. 2. On March 26, 1998, the Company sold an aggregate of 875,000 shares of Series B Convertible Preferred Stock at a purchase price of $4.00 per share, including 625,000 shares to Norwest Equity Partners V, L.P. and 250,000 shares to Beacon Information Technology. 3. On May 13, 1998, the Company issued a warrant (the "Series B Warrant") to purchase 13,750 shares of Series B Convertible Preferred Stock (at an exercise price of $4.00 per share) to Comdisco, Inc. (the "Warrantholder") in consideration for the Warrantholder executing and delivering certain equipment leases (the "Leases") to the Company. Upon the closing of the offering, the warrant will represent the right to purchase 13,580 shares of our common stock. If the total cost of equipment leased by the Company pursuant to the Leases exceeds $1,000,000, the Warrantholder has the right to purchase an additional number of shares determined by multiplying the amount by which the Warrantholder's total equipment cost exceeds $1,000,000 by 5.5% and dividing the product thereof by the exercise price per share. The sale and issuance of securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving a public offering, where the purchasers represented their intention to acquire securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof, and received or had access to adequate information about the Company, or Rule 701 promulgated thereunder in that they were offered and sold either pursuant to written compensatory benefit plans or pursuant to a written contract relating to compensation. II-2 Item 16. Exhibits and Financial Statement Schedules (a) Exhibits
Number Description - ------ ----------- 1.1* Form of Purchase Agreement. 3.1 Articles of Incorporation of the Company, as currently in effect. Amended and Restated Articles of Incorporation of the Company, adopted subject to 3.2 completion of this offering. 3.3 Amended and Restated Bylaws of the Company, as currently in effect. Amended and Restated Bylaws of the Company, adopted subject to completion of the 3.4 offering. 4.1* Specimen of Common Stock certificate. Warrant Agreement to purchase shares, of the Series B Preferred Stock of the 4.2 Company, issued to Comdisco, Inc. 4.3 Registration Rights Provisions, for preferred shareholders. 5.1* Opinion of Dorsey & Whitney LLP. 10.1 Amended 1991 Long-Term Incentive and Stock Option Plan. 10.2 1999 Stock Incentive Plan. 10.3 1999 Employee Stock Purchase Plan. Lease Agreement dated as of November 30, 1998 between Mortenson Properties, Inc. 10.4 as Landlord and the Company as Tenant. Employment Agreement dated as of November 22, 1993, between the Company and 10.5 Kenneth H. Holec. Service Agreement dated as of March 17, 1998, between the Company and Patrick 10.6 Dauga. 10.7 Employment offer letter to Kevin R. Potrzeba dated as of August 23, 1996. 10.8 Employment offer letter to Roger E. Bottum dated as of July 31, 1998. License Agreement, effective as of April 1, 1998, between the Company and Arbor 10.9** Software Corporation (the "Hyperion License Agreement"). Amendment No. 1 to the Hyperion License Agreement, effective as of September 14, 10.10** 1998, between the Company and Hyperion Solutions Corporation. Software License and Marketing Agreement, effective as of January 4, 1996, 10.11** between the Company and AppSource. 10.12** Amendment to AppSource/Showcase License Agreement, effective as of March 7, 1997. ShowCase License Agreement, dated as of December 9, 1998, between the Company and 10.13** International Business Machines Corporation ("IBM"). Outbound License Agreement, dated as of December 9, 1998, between the Company and 10.14** IBM. Marketing Relationship Agreement, dated as of May 22, 1997, between the Company 10.15** and IBM (the "Marketing Relationship Agreement"). Amendment No. 1, dated as of October 28, 1998, to Marketing Relationship 10.16** Agreement between the Company and IBM. Amendment No. 2, dated as of March 15, 1999, to Marketing Relationship Agreement 10.17** between the Company and IBM. 21.1 Subsidiaries of the Company. 23.1 Consent of Independent Auditors and Report on Schedules. Consent of Dorsey & Whitney LLP (included in Exhibit No. 5.1 to the Registration 23.2 Statement). 24.1 Powers of Attorney (included on signature page). 27.1 Financial Data Schedule.
- -------- * To be filed by amendment. ** Confidential information has been omitted from these exhibits and filed separately with the Securities and Exchange Commission accompanied by a confidential treatment request pursuant to Rule 406 under the Securities Act of 1933, as amended. II-3 Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of instruments defining the rights of holders of certain long-term debt of the Company are not filed, and in lieu thereof, the Company agrees to furnish copies thereof to the Commission upon request. (b) Financial Statement Schedules II--Valuation and Qualifying Accounts Schedules other than those listed have been omitted since they are not required or are not applicable or the required information is shown in the financial statements or related notes. Columns omitted from schedules filed have been omitted since the information is not applicable. Item 17. Undertakings The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Rochester, State of Minnesota, on April 28, 1999. Showcase Corporation /s/ Kenneth H. Holec By:__________________________________ Kenneth H. Holec President and Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Kenneth H. Holec and Craig W. Allen, and each of them, his true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all (i) amendments (including post-effective amendments) and additions to this registration statement and (ii) registration statements, and any and all amendments thereto (including post-effective amendments), relating to the offering contemplated pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents and each of them full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys- in-fact and agents or any of them or his or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ Kenneth H. Holec President, Chief Executive Officer and Director (principal executive officer) April 28, _____________________________________ 1999 Kenneth H. Holec /s/ Craig W. Allen Chief Financial Officer (principal financial officer and principal accounting officer) April 28, _____________________________________ 1999 Craig W. Allen /s/ Promod Haque Director April 28, _____________________________________ 1999 Promod Haque /s/ C. McKenzie Lewis Director April 28, _____________________________________ 1999 C. McKenzie Lewis III /s/ Jack Noonan Director April 28, _____________________________________ 1999 Jack Noonan /s/ Dennis Semerad Director April 28, _____________________________________ 1999 Dennis Semerad II-5 SHOWCASE CORPORATION AND SUBSIDIARIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS (In Thousands) Allowance for Doubtful Accounts and Sales Returns
Year Ended March 31, ---------------------- 1996 1997 1998 ------ ------ ------ Balance at beginning of year........................ $ 228 $ 250 $ 300 Additions charged to costs and expenses............. 410 281 500 Write-offs and returns.............................. (388) (231) (300) Balance at end of year.............................. 250 300 500
II-6 EXHIBIT INDEX
Number Description - ------ ----------- 1.1* Form of Purchase Agreement. 3.1 Articles of Incorporation of the Company, as currently in effect. Amended and Restated Articles of Incorporation of the Company, adopted subject to 3.2 completion of this offering. 3.3 Amended & Restated Bylaws of the Company, as currently in effect. Amended and Restated Bylaws of the Company, adopted subject to completion of the 3.4 offering. 4.1* Specimen of Common Stock certificate. Warrant Agreement to purchase shares, of the Series B Preferred Stock of the 4.2 Company, issued to Comdisco, Inc. 4.3 Registration Rights Provisions, for preferred shareholders. 5.1* Opinion of Dorsey & Whitney LLP. 10.1 Amended 1991 Long-Term Incentive and Stock Option Plan. 10.2 1999 Stock Incentive Plan. 10.3 1999 Employee Stock Purchase Plan. Lease Agreement dated as of November 30, 1998 between Mortenson Properties, Inc. 10.4 as Landlord and the Company as Tenant. Employment Agreement dated as of November 22, 1993, between the Company and 10.5 Kenneth H. Holec. Service Agreement dated as of March 17, 1998, between the Company and Patrick 10.6 Dauga. 10.7 Employment offer letter to Kevin R. Potrzeba dated as of August 23, 1996. 10.8 Employment offer letter to Roger E. Bottum dated as of July 31, 1998. License Agreement, effective as of April 1, 1998, between the Company and Arbor 10.9** Software Corporation (the "Hyperion License Agreement"). Amendment No. 1 to the Hyperion License Agreement, effective as of September 14, 10.10** 1998, between the Company and Hyperion Solutions Corporation. Software License and Marketing Agreement, effective as of January 4, 1996, 10.11** between the Company and AppSource. 10.12** Amendment to AppSource/ShowCase License Agreement effective as of March 7, 1997. ShowCase License Agreement, dated as of December 9, 1998, between the Company and 10.13** International Business Machines Corporation ("IBM"). Outbound License Agreement, dated as of December 9, 1998, between the Company and 10.14** IBM. Marketing Relationship Agreement, dated as of May 22, 1997, between the Company 10.15** and IBM (the "Marketing Relationship Agreement"). Amendment No. 1, dated as of October 28, 1998, to Marketing Relationship 10.16** Agreement between the Company and IBM. Amendment No. 2, dated as of March 15, 1999, to Marketing Relationship Agreement 10.17** between the Company and IBM. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Independent Auditors and Report on Schedules. Consent of Dorsey & Whitney LLP (included in Exhibit No. 5.1 to the Registration 23.2 Statement). 24.1 Powers of Attorney (included on signature page). 27.1 Financial Data Schedule.
- -------- * To be filed by amendment. ** Confidential information has been omitted from the exhibits and filed separately with the Securities and Exchange Commission accompanied by a confidential treatment request pursuant to Rule 406 under the Securities Act of 1933, as amended. EX-3.1 2 CURRENT ARTICLES OF INCORPORATION EXHIBIT 3.1 ARTICLES OF INCORPORATION OF SHOWCASE CORPORATION ARTICLE I The name of this Corporation is ShowCase Corporation. ARTICLE II The registered office of this Corporation is located at 4909 North Highway 52, Rochester, Minnesota 55901. ARTICLE III Section 1. Shares and Series Authorized. The aggregate number of shares of capital -stock which this Corporation is authorized to issue is 15,000,000 shares, 10,000,000 of which shall be designated common shares, $.01 par value, 473,757 of which shall be designated series A convertible preferred shares, $.01 par value (hereinafter referred to as "Series A Preferred Shares"), and 4,526,243 of which shall be undesignated preferred shares with respect to which the Board of Directors is authorized to designate the rights and preferences attributable thereto. Section 2. Description of the Series A Preferred Shares. The rights, preferences, privileges and restrictions granted to or imposed upon the Series A Preferred Shares or the holders thereof are as follows: (A) Voting Rights. Each holder of Series A Preferred Shares shall have one vote on all matters submitted to the shareholders for each share of this Corporation's common stock, $.01 par value (hereinafter referred to as "Common Shares") which such holder of Series A Preferred Shares would be entitled to receive upon the conversion of his Series A Preferred Shares pursuant to the provisions of subsection 2(B)(4). In addition, each holder of Series A Preferred Shares shall have the special voting rights which are described in subsection 2(B)(3). Common Shares and Series A Preferred Shares shall sometimes be collectively referred to as "Capital Stock." (B) Other Preferences and Special Rights. (1) Dividends. Dividends shall be payable on the Series A Preferred Shares out of funds legally available for the declaration of dividends, only if and when declared by this Corporation's Board of Directors. However, in no event shall any dividend be paid on any Common Shares unless comparable dividends are paid on the Series A Preferred Shares. Series A Preferred Shares shall be counted on an as-if-converted basis in determining whether dividends on Series A Preferred Shares and Common Shares are comparable. (2) Liquidation Right and Preference. In the event of the liquidation, dissolution or winding up of this Corporation, whether voluntary or involuntary, or in the event of the sale of all or substantially all of its assets to another Corporation, or in the event of a consolidation or merger of this Corporation with another Corporation, the holders of Series A Preferred Shares shall be entitled to receive in cash, out of the assets of this Corporation, an amount equal to $5.0658 per share for each outstanding Series A Preferred Share, plus, all declared but unpaid dividends, before any payment shall be made or any assets distributed to the holders of Common Shares or any other class of shares of this Corporation ranking junior to the Series A Preferred Shares. If, upon any liquidation or dissolution of this Corporation or the sale by this Corporation of all or substantially all of its assets or such reorganization or consolidation or merger, the assets of this Corporation are insufficient to pay such $5.0658 per Series A Preferred Share, plus all declared but unpaid dividends, the holders of Series A Preferred Shares shall share pro rata in any such distribution in proportion to the full amounts to which they would otherwise be respectively entitled. Following such payment to the holders of Series A Preferred Shares upon such liquidation, dissolution, sale, reorganization, consolidation or merger, the holders of Common Shares shall then be entitled, to the exclusion of the holders of Series A Preferred Shares, to share ratably in all the assets of this Corporation thereafter remaining. The merger or consolidation of this Corporation into or with another Corporation or the merger or consolidation of any other Corporation into or with this Corporation (in which consolidation or merger the shareholders of this Corporation receive distribution of cash or securities or other property as a result of such consolidation or merger), or the sale, transfer or other disposition of all or substantially all of the assets of this Corporation, shall be deemed to be a liquidation or dissolution of this Corporation for purposes of this subsection 2(B)(2). (3) Special Voting Rights. (a) The holders of a majority (determined on an as-if-converted basis) of Series A Preferred Shares (acting together as a class) shall have the right to elect one (1) member of this Corporation's Board of Directors at all times. (b) Without the affirmative vote of the holders (acting together as a class) of at least a majority (with respect to (i), (ii), (iii) and (v) below determined on an as-if-converted basis) or at least 90% (with respect to (iv) below) of Series A Preferred Shares at the time outstanding given in person or by proxy at any annual meeting, or at such special meeting called for that purpose, or, if permitted by law, in writing without a meeting, this Corporation shall not: (i) authorize or issue any (A) additional Series A Preferred Shares, (B) shares of stock (other than Common Shares) having priority over Series A Preferred Shares or ranking on a parity therewith as to the payment of dividends or as to the payment or distribution of assets upon the liquidation or dissolution, voluntary or involuntary, of this Corporation, or (C) any share of stock having special voting rights that are not available to the Series A Preferred Shares; or (ii) declare or pay any dividend or make any other distribution on any shares of Capital Stock of this Corporation at any time created and issued ranking junior to Series A Preferred Shares with respect to the right to receive dividends and/or the right to the distribution of assets upon liquidation, dissolution or winding up of this Corporation (hereinafter called "Junior Stock"), other than dividends or distributions payable solely in shares of junior Stock, or purchase, redeem or otherwise acquire for any consideration (other than in exchange for or out of the net cash proceeds of the contemporaneous issue or sale of other shares of junior Stock or debt securities convertible into other shares of Junior Stock), or set aside a sinking fund or other fund for the redemption or repurchase of any shares of junior Stock or any warrants, rights or options to purchase shares of Junior Stock; (iii) issue Common Shares at a price below $5.0658 per share or any stock purchase rights, except for such share issuances or stock purchase rights specifically permitted by the terms of the Investment Agreement dated February 28,1991 by and between Norwest Equity Partners IV, a Minnesota Limited Partnership and this Corporation (the "Investment Agreement"); (iv) alter or amend the rights or preferences of Series A Preferred Shares as stated in article 3 of these articles of incorporation; or (v) sell, lease, license or otherwise dispose of all or substantially all of its assets, or any asset or assets which have a material effect upon the business or financial condition of this Corporation, or consolidate with or merge into any other Corporation or entity, or permit any other Corporation or entity to consolidate or merge into it, or enter into a plan of exchange with any other Corporation or entity, or otherwise acquire any other Corporation or entity; or permit any subsidiary to do any of the forgoing, except that any subsidiary of this Corporation may merge into another subsidiary or into this Corporation. (c) If an unremedied event of default (an "Event of Default") occurs under section 15 of the Investment Agreement, which Investment Agreement may not be amended without the approval of the shareholders of this Corporation, the holders of Series A Preferred Shares, voting jointly as a separate class, shall be entitled to designate and elect that number of directors that is the lowest number that constitutes a majority (the "Majority") of the members of this Corporation's Board of Directors, and the holders of Common Shares, voting separately as a class, shall be entitled to elect the remaining members of this Corporation's Board of Directors. Such right of the holders of Series A Preferred Shares to designate and elect the Majority of the members of the Board of Directors may be exercised until the Event of Default under the Investment Agreement has been cured or waived. When such Event of Default under the Investment Agreement shall have been cured or waived, the holders of Series A Preferred Shares shall be divested of such right to elect the Majority of the members of the Board of Directors, and any directors elected by the holders of Series A Preferred Shares shall be automatically removed from the Board of Directors without further action by the Directors or shareholders; subject always to the same provisions in the vesting of such right in the holders of the Series A Preferred Shares in the case of the occurrence of any future Event of Default under the Investment Agreement. The foregoing right of the holders of Series A Preferred Shares with respect to the election of directors of this Corporation may be exercised at any annual meeting of shareholders or, within the limitations hereinafter provided, at a special meeting of the shareholders held for such purpose. If the date upon which such right of the holders of Series A Preferred Shares shall become vested shall be more than thirty (30) days preceding the date of the next ensuing annual meeting of shareholders as fixed by the Bylaws of this Corporation, the President of this Corporation shall, immediately after delivery to this Corporation at its principal office of a request to such effect signed by the holders of at least a majority of Series A Preferred Shares then outstanding, call a special meeting of the shareholders, to be held within fifteen (15) days after the delivery of such request for the purpose of electing the directors who they shall designate as the representatives of Series A Preferred Shares on the Board of Directors, which directors shall serve until the next annual meeting, until their successors shall be elected and shall qualify or until they are divested of such office pursuant to the immediately preceding paragraph. Notice of such meeting shall be mailed to each shareholder not less than ten (10) days prior to the date of such meeting. Whenever the holders of Series A Preferred Shares shall be entitled to elect the Majority of the members of the Board of Directors, any holder of such Series A Preferred Shares shall have the right, during regular business hours, in person or by a duly authorized representative, to examine and to make transcripts of the stock records of this Corporation for Series A Preferred Shares for the purpose of communicating with other holders of Series A Preferred Shares with respect to the exercise of such right of election. At any annual or special meeting of shareholders held for the purpose of electing directors when the holders of Series A Preferred Shares shall be entitled to elect the Majority of the members of the Board of Directors, the presence in person or by proxy of the holders of a majority of the outstanding Series A Preferred Shares shall be required to constitute a quorum for the election by such class of such directors, and the presence in person or by proxy of the holders of a majority of the outstanding Common Shares shall be required to constitute a quorum for the election by such class of the remaining directors; provided, however, that the holders of a majority of either such class of stock who are present in person or by proxy shall have power to adjourn such meeting for the election of directors by such class from time to time without notice other than announcement at the meeting. No delay or failure by the holders of either of such classes of stock to elect the members of the Board of Directors whom such holders are entitled to elect shall invalidate the election of the remaining members of the Board of Directors by the holders of the other such class of stock. If, during any interval between annual meetings of shareholders for the election of directors and while the holders of Series A Preferred Shares shall be entitled to elect the Majority of the members of the Board of Directors, the number of directors in office who have been elected by the holders of Series A Preferred Shares or Common Shares, as the case may be, shall, by reason of resignation, death or removal, be less than the total number of directors subject to election by the holders of shares of such class, the vacancy or vacancies in the directors elected by the holders of Common Shares, shall be filled by a majority vote of the remaining directors then in office who were elected by the holders of Common Shares or succeeded a director so elected, although such majority be less than a quorum, and the vacancy in the directors elected by the holders of Series A Preferred Shares shall be filled by a majority vote of the remaining directors then in office who were elected by the holders of Series A Preferred Shares or succeeded a director so elected, although such majority may be less than a quorum. (4) Conversion Rights. (a) Optional Conversion. Each Preferred Share shall be convertible at the option of the holder thereof into Common Shares of this Corporation in accordance with the provisions and subject to the adjustments provided for in subsection 2(C)(4)(c). In order to exercise the conversion privilege, a holder of Series A Preferred Shares shall surrender the certificate representing such Series A Preferred Shares to this Corporation at its principal office, duly endorsed to this Corporation and accompanied by written notice to this Corporation that the holder elects to convert a specified portion or all of such shares. Series A Preferred Shares converted at the option of the holder shall be deemed to have been converted on the day of surrender of the certificate representing such shares for conversion in accordance with the foregoing provisions, and at such time the rights of the holder of such Series A Preferred Shares, as such holder, shall cease and such holder shall be treated for all purposes as the record holder of Common Shares issuable upon conversion. As promptly as practicable on or after the conversion date, this Corporation shall issue and mail or deliver to such holder a certificate or certificates for the number of Common Shares issuable upon conversion, computed to the nearest one hundredth of a full share, and a certificate or certificates for the balance of Series A Preferred Shares surrendered, if any, not so converted into Common Shares. (b) Automatic Conversion. Series A Preferred Shares shall be automatically converted into Common Shares, upon the election of this Corporation and delivery of written notice of such election to the holders of Series A Preferred Shares (which election and notice may be delivered within ninety (90) days before or after the automatic conversion events described below without effecting the effective time of such automatic conversion), if this Corporation closes the issuance and sale of Common Shares in an underwritten public offering, pursuant to an effective registration statement under the Securities Act of 1933, as amended, in which (i) the net proceeds received by this Corporation equal or exceed $7,500,000 and (ii) the public offering price equals or exceeds $28.1433 per share (as adjusted from time to time to reflect stock splits, share dividends or other corporate recapitalizations effected subsequent to February 28,1992). (c) Conversion Price and Adjustments. The number of Common Shares issuable in exchange for Series A Series A Preferred Shares upon either optional or automatic conversion shall be equal to $5.0658 divided by the conversion price then in effect (the "Conversion Price") for that series of Series A Preferred Shares. The Conversion Price for Series A Preferred Shares shall initially be $5.0658, but shall be subject to adjustment from time to time as hereinafter provided: (i) In case this Corporation shall at any time after February 28,1992 subdivide or split its outstanding Common Shares into a greater number of shares or declare any dividend payable in Common Shares, the Conversion Price for each series of Series A Preferred Shares in effect immediately prior to such subdivision, split or dividend shall be proportionately decreased, and conversely, in case the outstanding Common Shares of this Corporation shall be combined into a smaller number of shares, the Conversion Price for each series of Series A Preferred Shares in effect immediately prior to such combination shall be proportionately increased. (ii) Except for issuances of shares or other equity purchase rights specifically permitted by the terms of the Investment Agreement and except for the issuance to Marc Shinbrood of options to purchase up to 84,809 Common Shares and to others of options to purchase up to an additional 62,133 Common Shares, if and whenever this Corporation shall issue or sell any Common Shares prior to January 1, 1993, for a consideration per share less than the Conversion Price then in effect for the Series A Preferred Shares (other than dividends payable in Common Shares), or shall issue any options, warrants or other rights for the purchase of such shares at a consideration per share of less than the Conversion Price then in effect for the Series A Preferred Shares, the Conversion Price for the Series A Preferred Shares in effect immediately prior to such issuance or sale shall be adjusted and shall be equal to the consideration per share at which such Common Shares were issued or sold or at which such options, warrants or other rights are exercisable. Except for issuances of shares or other equity purchase rights specifically permitted by the terms of the Investment Agreement, if and whenever this Corporation shall issue or sell any Common Shares after December 31, 1992, for a consideration per share less than the Conversion Price then in effect for the Series A Preferred Shares (other than dividends payable in Common Shares), or shall issue any options, warrants or other rights for the purchase of such shares at a consideration per share of less than the Conversion Price then in effect for the Series A Preferred Shares, the Conversion Price for the Series A Preferred Shares in effect immediately prior to such issuance or sale shall be adjusted and shall be equal to (i) the Conversion Price for the Series A Preferred Shares then in effect, multiplied by (ii) a fraction, the numerator of which shall be an amount equal to the sum of (a) the number of Common Shares outstanding immediately prior to such issuance or sale multiplied by the Conversion Price for the Series A Preferred Shares then in effect, and (b) the total consideration payable to this Corporation upon such issuance or sale of such shares and such purchase rights and upon the exercise of such purchase rights, and the denominator of which shall be the amount determined by multiplying (aa) the number of Common Shares outstanding immediately after such issuance or sale plus the number of the Common Shares issuable upon the exercise of any purchase rights thus issued, by (bb) the Conversion Price for the Series A Preferred Shares then in effect. If any options or purchase rights that are taken into account in any such adjustment of the Conversion Price for the Series A Preferred Shares subsequently expire without exercise, the Conversion Price for that the Series A Preferred Shares shall be recomputed by deleting such options or purchase rights. If the Conversion Price for the Series -A Preferred Shares is adjusted as the result of the issuance of any options, warrants or other purchase rights, no further adjustment of the Conversion Price for the Series A Preferred Shares shall be made at the time of the exercise of such options, warrants or other purchase rights. (iii) The anti-dilution provisions Of this subsection 2(B)(4)(c) may be waived by the affirmative vote of the holders (acting together as a class) of at least ninety percent (90%) of the then outstanding Series A Preferred Shares. (d) Notice of Conversion Price Adjustment. Upon any adjustment of the Conversion Price, then and in each such case the Corporation shall give written notice thereof, by first-class mail, postage prepaid, addressed to the registered holders of Series A Preferred Shares at the addresses of such holders as shown on the books of this Corporation, which notice shall state the Conversion Price resulting from such adjustment and the increase or decrease, if any, in the number of shares receivable at such price upon the conversion of Series A Preferred Shares, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. (e) Rights to Preconversion Distributions. The holders of Series A Preferred Shares shall have the following rights to certain properties received by the holders of Common Shares: (i) In case this Corporation shall declare a dividend or distribution upon Common Shares payable other than in cash out of earnings or surplus or other than in Common Shares, then thereafter each holder of Series A Preferred Shares upon the conversion thereof will be entitled to receive the number of Common Shares into which such Series A Preferred Shares shall be converted, and, in addition and without payment therefor, the property which such holder would have received as a dividend if continuously since the record date for any such dividend or distribution such holder (A) had been the record holder of the number of Common Shares then received, and (B) had retained all dividends or distributions in stock or securities payable in respect of such Common Shares or in respect of any stock or securities paid as dividends or distributions and originating directly or indirectly from such Common Shares. (ii) Subject to the provisions of subsection 2(B)(2) regarding liquidation rights, if any capital reorganization or reclassification of the capital stock of this Corporation, or consolidation or merger of this Corporation with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that holders of Common Shares shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Shares, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby the holders of Series A Preferred Shares shall thereafter have the right to receive, in lieu of Common Shares of this Corporation immediately theretofore receivable upon the conversion of such Series A Preferred Shares, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding Common Shares equal to the number of Common Shares immediately theretofore receivable upon the conversion of such Series A Preferred Shares had such reorganization, reclassification, consolidation, merger or sale not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of the holders of the Series A Preferred Shares to the end that the provisions hereof (including without limitation provisions for adjustments of the Conversion Price and of the number of shares receivable upon the conversion of such Series A Preferred Shares) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter receivable upon the conversion of such Series A Preferred Shares. This Corporation shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof the surviving corporation (if other than this Corporation), the corporation resulting from such consolidation or the corporation purchasing such assets shall assume by written instrument executed and mailed to the registered holders of the Series A Preferred Shares at the last address of such holders appearing on the books of the corporation, the obligation to deliver to such holders such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holders may be entitled to receive. (f) Notice of Certain Events. In case any time: (i) this Corporation shall pay any dividend payable in stock upon Common Shares or make any distribution (other than regular cash dividends) to the holders of Common Shares; or (ii) this Corporation shall offer for subscription pro rata to the holders of Common Shares any additional shares of stock of any class or other rights; or (iii) there shall be any capital reorganization, reclassification of the capital stock of this Corporation, or consolidation or merger of this Corporation with, or sale of all or substantially all of its assets to, another corporation; provided, however, that this provision shall not be applicable to the merger or consolidation of this Corporation with or into another corporation if, following such merger or consolidation, the shareholders of this Corporation immediately prior to such merger or consolidation own at least 80% of the equity of the combined entity; or (iv) there shall be a voluntary or involuntary dissolution liquidation or winding up of this Corporation; then, in any one or more of said cases, this Corporation shall give written notice, by first-class mail, postage prepaid, addressed to the holders of Series A Preferred Shares at the addresses of such holders as shown on the books of this Corporation, of the date on which (A) the books of this Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights, or (B) such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall also specify the date as of which the holders of Common Shares of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their Common Shares for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. Such written notice shall be given at least 20 days prior to the action in question and not less than 20 days prior to the record date or the date on which this Corporation's transfer books are closed in respect thereto. (g) Definition of Common Shares. As used in this subsection 2(B)(4) the term "Common Shares" shall mean and include this Corporation's presently authorized Common Shares and shall also include any capital stock of any class of this Corporation hereafter authorized which shall have the right to vote on all matters submitted to the shareholders of this Corporation and shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of this Corporation; provided that the shares receivable pursuant to conversion of Series A Preferred Shares shall include shares designated as Common Shares of this Corporation as of the date of issuance of such Series A Preferred Shares, or, in case of any reclassification of the outstanding shares thereof, the stock, securities or assets provided for in subsection 2(B)(4)(e)(ii) above. ARTICLE IV The shareholders of the Corporation shall not have any preemptive rights to subscribe for or acquire securities or rights to purchase securities of any class, kind or series of the Corporation. ARTICLE V No shareholder of this Corporation shall have any cumulative voting rights. ARTICLE VI The shareholders shall take action by the affirmative vote of holders of a majority of the voting power of the shares present, except where a larger proportion is required by law, these Articles or a shareholder control agreement. ARTICLE VII Any action required or permitted to be taken by the Board of Directors of this Corporation may be taken by written action signed by that number of directors that would be required to take the same action at a meeting of the Board at which all directors are present, except as to those matters requiring shareholder approval, in which case the written action must be signed by all members of the Board of Directors then in office. ARTICLE VIII No director of this Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director; provided, however, that this Article shall not eliminate or limit the liability of a director to the extent provided by applicable law (i) for any breach of the director's duty of loyalty to the Corporation or its shareholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under section 302A.559 or 80A.23 of the Minnesota Statutes, (iv) for any transaction from which the director derived an improper personal benefit, or (v) for any act or omission occurring prior to the effective date of this Article. No amendment to or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any' director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. CERTIFICATE OF DESIGNATION OF SERIES B CONVERTIBLE PREFERRED STOCK AND SERIES B-1 CONVERTIBLE PREFERRED STOCK OF SHOWCASE CORPORATION The undersigned hereby certifies that the Board of Directors of ShowCase Corporation (the "Corporation"), a corporation organized and existing under the Minnesota Business Corporation Act, duly approved the terms contained in the following resolution effective on March 11, 1998: RESOLVED, that two series of preferred stock of the Corporation are hereby created, and the designations and amounts thereof and the relative rights and preferences of the shares of each series, are as follows: Section 1. Designation and Amount. The shares of one series shall be designated as "Series B Convertible Preferred Stock" (the "Series B Preferred Shares"), and the number of shares constituting the Series B Preferred Shares shall be 902,500, $.01 par value per share. The shares of the other series shall be designated as "Series B-1 Convertible Preferred Stock" (the "Series B-1 Preferred Shares" and, together with the Series B Preferred Shares, the "Series B Shares"), and the number of shares constituting the Series B-1 Preferred Shares shall be 875,000, $.01 par value per share. The number of shares of each such series may be increased or decreased by resolution of the Board of Directors and any necessary shareholder approval; provided, however, that no decrease shall reduce the number of Series B Preferred Shares or Series B-1 Preferred Shares to a number less than the number of shares of such series then outstanding plus the number of shares of such series reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series B Preferred Shares or Series B-1 Preferred Shares, as the case may be. Section 2. Voting Rights. Each holder of Series B Shares shall have one vote on all matters submitted to the shareholders for each share of the Corporation's common stock, $.01 par value per share ("Common Shares"), which such holder of Series B Shares would be entitled to receive upon the conversion of his Series B Shares pursuant to the provisions of Section 6. In addition, each holder of Series B Shares shall have the special voting rights described in Section 3. Except as otherwise provided in this Section 2 or as required under the Minnesota Business Corporation Act, the holders of the Company's Series A Convertible Preferred Shares, $.01 par value per share (the "Series A Preferred Shares"), Series B Preferred Shares, Series B-1 Preferred Shares and Common Shares shall vote together as a single class. The Series A Preferred Shares and the Series B Shares shall be hereinafter be referred to as the "Preferred Shares." Section 3. Special Voting Rights. So long as ten percent (10%) of the originally issued Series B Shares are outstanding, without the affirmative vote or consent of holders of at least a majority of the Series B Shares, at the time outstanding, the Corporation shall not: (i) authorize or issue any (A) additional Series A Preferred Shares, (B) additional Series B Preferred Shares, except as specifically permitted by the terms of that certain Stock Purchase Agreement dated March 26, 1998 (the "Stock Purchase Agreement") between the Corporation and the Purchasers named therein, (C) additional Series B-1 Preferred Shares, except as provided in Section 6 hereof or (D) shares of capital stock having priority over Series B Preferred Shares or Series B-1 Preferred Shares or ranking on a parity therewith as to the payment of dividends or as to the payment or distribution of assets upon the liquidation or dissolution, voluntary or involuntary, of the Corporation; (ii) declare or pay any dividend or make any other distribution on any shares of capital stock of the Corporation at any time created and issued ranking junior to Series B Preferred Shares or Series B-1 Preferred Shares with respect to the right to receive dividends and/or the right to the distribution of assets upon liquidation, dissolution or winding up of the Corporation (hereinafter called "Junior Stock"), other than dividends or distributions payable solely in shares of Junior Stock, or purchase, redeem or otherwise acquire for any consideration (other than in exchange for or out of the net cash proceeds of the contemporaneous issue or sale of other shares of Junior Stock), or set aside as a sinking fund or other fund for the redemption or repurchase of any shares of Junior Stock or any warrants, rights or options to purchase shares of Junior Stock; (iii) sell, lease, license or otherwise dispose of all or substantially all of its assets, or any asset or assets which have a material effect upon the business or financial condition of the Corporation, or consolidate with or merge into any other corporation or entity, or permit any other corporation or entity to consolidate or merge into it, or enter into a plan of exchange with any other corporation or entity, or otherwise acquire any other corporation or entity or permit any subsidiary to do any of the foregoing, except that any subsidiary of the Corporation may merge into another subsidiary or into the Corporation; (iv) alter or amend the rights or preferences of Series B Shares as stated in this Certificate of Designation; or (v) issue Common Shares or Common Share purchase rights at a price below $3.00 per share (as adjusted from time to time to reflect stock splits, share dividends or other corporate recapitalizations effected subsequent to March 26, 1998), except for issuance of Common Shares or Common Share purchase rights (A) upon conversion of Preferred Shares, (B) pursuant to options, warrants, notes or other rights to acquire Common Shares outstanding as of the date hereof, (C) to employees, directors or consultants of the Corporation pursuant to any stock option plan approved by the Corporation's Board of Directors, or (D) as specifically permitted by Section 3.3 of the Stock Purchase Agreement. Section 4. Dividends. Dividends shall be payable on the Series B Shares out of funds legally available for the declaration of dividends, only if and when declared by the Corporation's Board of Directors. In no event shall any dividend be paid or declared, nor shall any distribution be made, on Common Shares, unless holders of Series B Shares shall participate in such dividend on a pro rata basis with the holders of Common Shares, counting Series B Shares on an as-if-converted basis. Section 5. Liquidation Preference. In the event of the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of Series B Shares shall be entitled to receive out of the assets of the Corporation, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Common Shares or any other class of shares of the Corporation ranking junior to the Series B Shares, a cash amount equal to $4.00 per share for each outstanding Series B Share, plus any dividends declared but not paid on Series B Shares (the "Series B Preferred Liquidation Amount"); provided, however, if the assets of the Corporation are insufficient to pay (x) the liquidation preference the holders of Series A Preferred Shares are entitled to under Section 2(B)(2) of Article III of the Corporation's Amended and Restated Articles of Incorporation, as amended (the "Articles") plus (y) the Series B Preferred Liquidation Amount, the holders of the Preferred Shares shall share pro rata in any such distribution in proportion to the full amounts to which they would otherwise be entitled. Following such payment to the holders of Preferred Shares, the holders of Series B Shares shall then share ratably on an as-if converted basis with the holders of Common Shares in all remaining assets of the Corporation. For purposes of this Section 5, a consolidation or merger of the Corporation with or into any other person or entity or a consolidation or merger of any other person or entity with or into the Corporation (in which consolidation or merger the shareholders of the Corporation receive distribution of cash or securities or other property as a result of such consolidation or merger), or a sale, transfer or disposition of all or substantially all the Corporation's assets, shall be considered a liquidation, dissolution or winding up of the Corporation, unless, with respect to a merger, consolidation or sale, the holders of Common Shares immediately preceding such merger or consolidation hold at least a majority of the equity securities of the surviving entity entitled to vote in the election of directors (or similar governing body) of the surviving entity. Section 6. Conversion Rights. (a) Optional Conversion. Each Series B Share shall be convertible at the option of the holder thereof at any time into Common Shares in accordance with Section 6(c) below. In order to exercise the conversion privilege, a holder of Series B Shares shall surrender the certificate(s) representing such Series B Shares to the Corporation at its principal office, duly endorsed to the Corporation and accompanied by written notice to the Corporation that the holder elects to convert a specified portion or all of such shares. Series B Shares converted at the option of the holder shall be deemed to have been converted on the day of surrender of the certificate representing such shares for conversion in accordance with the foregoing provisions, and at such time the rights of such holder of Series B Shares, as such holder, shall cease and such holder shall be treated for all purposes as the record holder of the Common Shares issuable upon conversion. As promptly as practicable on or after the conversion date, the Corporation shall issue and mail or deliver to such holder or to the nominee or nominees of such holder a certificate or certificates representing the number of Common Shares issuable upon conversion, computed to the nearest one hundredth of a full share, and a certificate or certificates for the balance of the Series B Shares surrendered, if any, not so converted into Common Shares. (b) Automatic Conversion. Series B Shares shall be automatically converted into Common Shares upon the election of the Corporation and delivery of written notice of such election to the holders of Series B Shares (which election and notice may be delivered within ninety (90) days before or after the automatic conversion events described below without effecting the effective time of such automatic conversion), if the Corporation closes the issuance and sale of Common Shares in an underwritten public offering, pursuant to an effective registration statement under the Securities Act of 1933, as amended, in which (i) the net proceeds received by the Corporation equal or exceed $15,000,000 and (ii) the public offering price equals or exceeds $10.00 per share (as adjusted from time to time to reflect stock splits, share dividends or other corporate recapitalizations effected subsequent to March 26, 1998). (c) Special Mandatory Conversion. (i) At any time following the date of the Stock Purchase Agreement, if (a) the holders of Series B Preferred Shares are entitled to exercise the right of first refusal (the "Right of First Refusal") set forth in Section 8.11 of the Stock Purchase Agreement with respect to any issuance or sale by the Corporation of Additional Securities (as defined in such Section 8.11) at a price per share that is less than the Conversion Price (as defined below) for the Series B Preferred Shares then in effect (the "Equity Financing"), (b) the Corporation has complied with its notice of obligations, or such obligations have been waived with respect to such holder, under the Right of First Refusal with respect to such Equity Financing, and the Corporation thereafter proceeds to consummate the Equity Financing and (c) such holder or Purchaser Affiliate (as defined in the Stock Purchase Agreement) (a "Non-Participating Holder") does not by exercise of such holder's Right of First Refusal to acquire its pro rata share (as defined in Section 8.11 of the Stock Purchase Agreement) offered in such Equity Financing (a "Mandatory Offering"), then all of such Non-Participating Holder's Series B Preferred Shares shall automatically and without further action on the part of such holder be converted effective upon, subject to, and concurrently with, the consummation of the Mandatory Offering (the "Equity Financing Date") into an equivalent number of shares of Series B-1 Preferred Shares; provided, however, that no such conversion shall occur in connection with a particular Equity Financing if, pursuant to the written request of the Corporation, holders of 80% of the issued and outstanding Series B Preferred Shares agree in writing to waive their Right of First Refusal with respect to such Equity Financing. The Conversion Price for such Series B-1 Preferred Shares shall be the Conversion Price of the Series B Preferred Shares in effect immediately prior to the issuance of such Series B-1 Preferred Shares as adjusted pursuant to the provisions of Section 6, except for this Section 6(c). Upon conversion pursuant to this Section 6(c), the Series B Preferred Shares so converted shall be canceled and not subject to reissuance. (ii) The holder of any Series B Preferred Shares converted pursuant to this Section 6(c) shall deliver to the Corporation during regular business hours at the office of any transfer agent of the Corporation, or at such other place as may be designated by the Corporation, the certificate or certificates for the shares so converted, duly endorsed or assigned in blank or to the Corporation. As promptly as practicable thereafter, the Corporation shall issue and deliver to such holder, at the place designated by such holder, a certificate or certificates for the number of full shares of the Series B-1 Preferred Shares to be issued and such holder shall be deemed to have become a shareholder of record of Series B-1 Preferred Shares on the Equity Financing Date unless the transfer books of the Corporation are closed on that date, in which event it shall be deemed to have become a shareholder of record of Series B-1 Preferred Shares on the next succeeding date on which the transfer books are open. Series B-1 Preferred Shares may be issued only in exchange for Series B Preferred Shares pursuant to this Section 6(c). (iii) In the event that any Series B-1 Preferred Shares are issued, concurrently with such issuance, the Corporation shall use its best efforts to take all such action as may be required, including amending the Articles, (a) to cancel all authorized Series B Preferred Shares that remain unissued after such issuance; (b) to create and reserve for issuance upon any future Special Mandatory Conversion of any Series B Preferred Shares, a new series of preferred stock designated Series B-2 Convertible Preferred Stock ("Series B-2 Preferred Shares") equal in number to the number of authorized Series B Preferred Shares, with the designations, powers, preferences and rights and the qualifications, limitations and restrictions identical to those then applicable to the Series B Preferred Shares, except that the Conversion Price for such Series B-2 Preferred Shares once initially issued shall be the Conversion Price of Series B Preferred Shares in effect immediately prior to such issuance; and (c) to amend the provisions of this Section 6(c) to provide that any subsequent Special Mandatory Conversion will be into Series B-2 Preferred Shares rather than Series B-1 Preferred Shares. The Corporation shall take the same actions as provided in this Section 6(c)(iii) with respect to the Series B-2 Preferred Shares and each subsequently authorized series of preferred stock created pursuant to this Section 6(c)(iii) upon initial issuance of shares of the last such series to be authorized. The right to receive any dividend declared but unpaid at the time of conversion on any shares of Series B Shares converted pursuant to the provisions of this Section 6(c) shall accrue to the benefit of the new shares of preferred stock issued upon conversion thereof. (iv) This Section 6(c) shall be applicable only upon amendment of Article IV of the Articles to eliminate the reference to the Investment Agreement dated February 21, 1991 by and between this Corporation and Norwest Equity Partners IV, a Minnesota Limited Partnership. (d) Conversion Price and Adjustments. The number of Common Shares issuable in exchange for Series B Shares upon either optional or automatic conversion shall be equal to $4.00 divided by the conversion price then in effect (the "Conversion Price") for the Series B Shares. The Conversion Price shall initially be $4.00, but shall be subject to adjustment from time to time as hereinafter provided: (i) In case the Corporation shall at any time after March 26, 1998 subdivide or split its outstanding Common Shares into a greater number of shares or declare any dividend payable in Common Shares, the Conversion Price in effect immediately prior to such subdivision, split or dividend shall be proportionately decreased, and conversely, in case the outstanding Common Shares of the Corporation shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased. (ii) If the Corporation's total revenues for the fiscal year ended March 31, 1999 is less than $35,000,000, the Conversion Price then in effect shall be adjusted and shall be equal to $3.00 plus the dollar amount obtained by dividing (x) the difference between the Corporation's total revenues for the fiscal year ended March 31, 1999 and $30,000,000 by (y) 5,000,000; provided, however, that if the Corporation's total revenues for the fiscal year ended March 31, 1999 is less than $30,000,000, the Conversion Price shall be $3.00. Notwithstanding the foregoing, the Conversion Price shall be adjusted pursuant to this Section 6(c)(ii) only if the Conversion Price then in effect is greater than the Conversion Price obtained pursuant to this Section 6(c)(ii). (iii) If the Corporation's total revenues for the fiscal year ended March 31, 1999 is greater than $35,000,000 and the Conversion Price then in effect is $4.00, the Conversion Price then in effect shall be adjusted and shall be equal to $4.00 plus the dollar amount obtained by dividing (x) the difference between the Corporation's total revenues for the fiscal year ended March 31, 1999 and $35,000,000 by (y) 10,000,000; provided, however, that if the Corporation's total revenues for the fiscal year ended March 31, 1999 is greater than $40,000,000, the Conversion Price shall be $4.50. (iv) Except for (a) issuances of Common Shares upon conversion of Preferred Shares, (b) issuances of capital stock pursuant to options, to acquire capital stock of the Corporation outstanding as of the date hereof and (c) issuance of options and/or shares of capital stock to employees, directors or consultants of the Corporation pursuant to any stock purchase plan or stock option plan approved by the Corporation's Board of Directors (including any such plan in effect prior to March 26, 1998), if and whenever the Corporation shall issue or sell any Common Shares or shares of stock of the Corporation which are convertible into, or exchangeable for, Common Stock or other shares of capital stock of the Corporation ("Convertible Shares") for a consideration per share (the amount, if any, payable upon the conversion of such Convertible Share for each Common Share receivable thereby shall be included in determining such consideration per share) less than the Conversion Price for Series B Preferred Shares then in effect (other than dividends payable in Common Shares), or shall issue any options, warrants or other rights for the purchase of such Common Shares or Convertible Shares at a consideration per share (the amount, if any, payable upon the exercise of such warrant, option or right for each Common Share receivable thereby shall be included in determining such consideration per share) of less than the Conversion Price for Series B Preferred Shares then in effect, then, forthwith upon such issuance or sale, the Conversion Price for Series B Preferred Shares (but not for Series B-1 Preferred Shares) in effect immediately prior to such issuance or sale shall be adjusted and shall be equal to the consideration per share at which such Common Shares or Convertible Shares were issued or sold or at which such options, warrants, or other purchase rights are exercisable. If any such options, warrants or other purchase rights that are taken into account in any such adjustment of the Conversion Price for Series B Preferred Shares subsequently expire without exercise, the Conversion Price for Series B Preferred Shares shall be recomputed at the time of expiration by deleting such options, warrants or other rights. (v) For the purposes of Sections 6(d)(ii) and 6(d)(iii), the calculation of the Company's total revenues for the fiscal year ended March 31, 1999 shall be in accordance with generally accepted accounting principals and consistent with past practice. Furthermore, the calculation of the Company's total revenues for the fiscal year ended March 31, 1999 shall not include revenues due to acquisitions, consolidations, mergers, exchanges or similar transactions by the Company after March 26, 1998 or the introduction of new lines of business by the Company after March 26, 1998. (vi) The anti-dilution provisions of this Section 6(d) may be waived by the affirmative vote of the holders of at least fifty percent (50%) of the then outstanding Series B Preferred Shares voting together as a class, and in the event the anti-dilution provisions of Section 6(d)(iv) are so waived, the special mandatory conversion provisions of Section 6(c) shall not apply to the Equity Financing which is the subject of such waiver. Such waiver shall be at the sole discretion of the holders of the then outstanding Series B Preferred Shares. (e) Notice Regarding Conversion Price Adjustments. Upon any adjustment of the Conversion Price, then and in each such case the Corporation shall promptly give written notice thereof, by first-class mail, postage prepaid, addressed to the registered holders of the Series B Shares at the addresses of such holders as shown on the books of the Corporation, which notice shall state the Conversion Price resulting from such adjustment and the increase or decrease, if any, in the number of shares receivable at such price upon the conversion of Series B Shares, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. (f) Rights to Preconversion Distributions. The holders of Series B Shares shall have the following right to certain properties received by the holders of Common Shares: (i) In case the Corporation shall declare a dividend or other distribution upon Common Shares payable otherwise than in cash out of earnings or surplus or other than in Common Shares, then thereafter each holder of Series B Shares upon the conversion thereof will be entitled to receive the number of Common Shares into which such Series B Shares shall be converted, and, in addition and without payment therefor, the property which such holder would have received as a dividend if continuously since the record date for any such dividend or distribution such holder (A) had been the record holder of the number of Common Shares then received, and (B) had retained all dividends or distributions in stock or securities payable in respect of such Common Shares or in respect of any stock or securities paid as dividends or distributions and originating directly or indirectly from such Common Shares. (ii) Subject to the provisions of Section 5 regarding liquidation rights, if any capital reorganization or reclassification of the capital stock of the Corporation, or consolidation or merger of the Corporation with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that holders of Common Shares shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Shares, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby the holders of the Series B Shares shall thereafter have the right to receive, in lieu of Common Shares of the Corporation immediately theretofore receivable upon the conversion of the Series B Shares, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding Common Shares equal to the number of Common Shares immediately theretofore receivable upon the conversion of such Series B Shares had such reorganization, reclassification, consolidation, merger or sale not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of the holders of Series B Shares to the end that the provisions hereof (including without limitation provisions for adjustments of the Conversion Price and of the number of shares receivable upon the conversion of such Series B Shares) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter receivable upon the conversion of such Series B Shares. The Corporation shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof the surviving corporation (if other than the Corporation), the corporation resulting from such consolidation or the corporation purchasing such assets shall assume by written instrument executed and mailed to the registered holders of the Series B Shares at the last address of such holders appearing on the books of the Corporation, the obligation to deliver to such holders such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holders may be entitled to receive. (g) Notice of Certain Events. In case any time: (i) the Corporation shall pay any dividend payable in stock upon Common Shares or make any distribution (other than regular cash dividends) to the holders of Common Shares; or (ii) the Corporation shall offer for subscription pro rata to the holders of Common Shares any additional shares of stock of any class or other rights; or (iii) there shall be any capital reorganization, reclassification of the capital stock of the Corporation, or consolidation or merger of the Corporation with, or sale of all or substantially all of its assets to, another corporation; provided, however, that this provision shall not be applicable to the merger or consolidation of the Corporation with or into another corporation if, following such merger or consolidation, the shareholders of the Corporation immediately prior to such merger or consolidation own at least 80% of the equity of the combined entity; or (iv) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then, in any one or more of said cases, the Corporation shall give written notice, by first-class mail, postage prepaid, addressed to the holders of the Series B Shares at the addresses of such holders as shown on the books of the Corporation, on the date on which (A) the books of the Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights, or (B) such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall also specify the date as of which the holders of Common Shares of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their Common Shares for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. Such written notice shall be given at least twenty (20) days prior to the action in question and not less than twenty (20) days prior to the record date or the date on which the Corporation's transfer books are closed in respect thereto. (h) Definition of Common Shares. As used in this Section 6, the term "Common Shares" shall mean and include the Corporation's presently authorized Common Shares and shall also include any capital stock of any class of the Corporation hereafter authorized which shall have the right to vote on all matters submitted to the shareholders of the Corporation and shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution, or winding up of the Corporation; provided, that the shares receivable pursuant to conversion of Series B Shares shall include shares designated as Common Shares of the Corporation as of the date of issuance of such Series B Shares, or, in case of any reclassification of the outstanding shares thereof, the stock, securities or assets provided for in Section 6(e)(ii) above. EX-3.2 3 AMENDED AND RESTATED ARTICLES OF INCORPORATION EXHIBIT 3.2 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF SHOWCASE CORPORATION ARTICLE I The name of this corporation is ShowCase Corporation. ARTICLE II The registered office of this corporation is located at 4115 Highway 52 North, Suite 300, Rochester, Minnesota 55901. ARTICLE III The aggregate number of authorized shares of the corporation is 50,000,000 shares, $.01 par value. The shares shall be divisible into classes and series, have the designations, voting rights, and other rights and preferences, and be subject to the restrictions, that the board of directors may from time to time establish, fix, and determine, consistent with these articles of incorporation. Unless otherwise designated by the board of directors, all issued shares shall be deemed common stock with equal rights and preferences. ARTICLE IV The shareholders of the Corporation shall not have any preemptive rights to subscribe for or acquire securities or rights to purchase securities of any class, kind or series of the Corporation. ARTICLE V No shareholder of this Corporation shall have any cumulative voting rights. ARTICLE VI The shareholders shall take action by the affirmative vote of holders of a majority of the voting power of the shares present, except where a larger proportion is required by law, these Articles or a shareholder control agreement. ARTICLE VII Any action required or permitted to be taken by the Board of Directors of this Corporation may be taken by written action signed by that number of directors that would be required to take the same action at a meeting of the Board at which all directors are present, except as to those matters requiring shareholder approval, in which case the written action must be signed by all members of the Board of Directors then in office. ARTICLE VIII No director of this Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director; provided, however, that this Article shall not eliminate or limit the liability of a director to the extent provided by applicable law (i) for any breach of the director's duty of loyalty to the Corporation or its shareholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under section 302A.559 or 80A.23 of the Minnesota Statutes, (iv) for any transaction from which the director derived an improper personal benefit, or (v) for any act or omission occurring prior to the effective date of this Article. No amendment to or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. -2- EX-3.3 4 CURRENT BYLAWS OF THE COMPANY EXHIBIT 3.3 AMENDED AND RESTATED BY-LAWS of ROCHESTER SOFTWARE CONNECTION, INC. SHAREHOLDERS Section 1.01 Place of Meetings. Each meeting of the shareholders shall be held at the principal executive office of the Corporation or at such other place as may be designated by the Board of Directors or the Chief Executive Officer; provided, however, that any meeting called by or at the demand of a shareholder or shareholders shall be held in the county where the principal executive office of the Corporation is located. Section 1.02 Regular Meetings. Regular meetings of the shareholders may be held on an annual or other less frequent basis as determined by the Board of Directors; provided, however, that if a regular meeting has not been held during the immediately preceding 15 months, a shareholder or shareholders holding three percent or more of the voting power of all shares entitled to vote may demand a regular meeting of shareholders by written demand given to the Chief Executive Officer or Chief Financial Officer of the Corporation. At each regular meeting the shareholders shall elect qualified successors for directors who serve for an indefinite term or whose terms have expired or are due to expire within six months after the date of the meeting and may transact any other business, provided, however, that no business with respect to which special notice is required by law shall be transacted unless such notice shall have been given. Section 1.03 Special Meetings. A special meeting of the shareholders may be called for any purpose or purposes at any time by the Chief Executive Officer; by the Chief Financial Officer; by the Board of Directors or any two or more members thereof; or by one or more shareholders holding not less than ten percent of the voting power of all shares of the Corporation entitled to vote, who shall demand such special meeting by written notice given to the Chief Executive Officer or the Chief Financial Officer of the Corporation specifying the purposes of such meeting. Section 1.04 Meetings Held Upon Shareholder Demand. Within 30 days of receipt of a demand by the Chief Executive Officer or the Chief Financial Officer from any shareholder or shareholders entitled to call a meeting of the shareholders, it shall be the duty of the Board of Directors of the Corporation to cause a special or regular meeting of shareholders, as the case may be, to be duly called and held on notice no later than ninety days after receipt of such demand. If the Board of Directors fails to cause such a meeting to be called and held as required by this Section, the shareholder or shareholders making the demand may call the meeting by giving notice as provided in Section 1.06 hereof at the expense of the Corporation. Section 1.05 Adjournments. Any meeting of the shareholders may be adjourned from time to time to another date, time and place. If any meeting of the shareholders is so adjourned, no notice as to such adjourned meeting need be given if the date, time and place at which the meeting will be reconvened are announced at the time of adjournment. Section 1.06 Notice of Meetings. Except as otherwise specified in Section 1.05 or required by law, written notice of each meeting of the shareholders, stating the date, time and place and, in the case of a special meeting, the purpose or purposes, shall be given at least ten days and not more than sixty days prior to the meeting to every holder of shares entitled to vote at such meeting. The business transacted at a special meeting of shareholders is limited to the purposes stated in the notice of the meeting. Section 1.07 Waiver of Notice. A shareholder may waive notice of the date, time, place and purpose or purposes of a meeting of shareholders. A waiver of notice by a shareholder entitled to notice is effective whether given before, at or after the meeting, and whether given in writing, orally or by attendance. Attendance by a shareholder at a meeting is a waiver of notice of that meeting, unless the shareholder objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened, or objects before a vote on an item of business because the item may not lawfully be considered at that meeting and does not participate in the consideration of the item at that meeting. Section 1.08 Quorum; Acts of Shareholders. The holders of a majority of the voting power of the shares entitled to vote at a shareholders meeting are a quorum for the transaction of business. If a quorum is present when a duly called or held meeting is convened, the shareholders present may continue to transact business until adjournment, even though the withdrawal of a number of the shareholders originally present leaves less than the proportion or number otherwise required for a quorum. Except as otherwise required by law or specified in the Articles of Incorporation of the Corporation, the shareholders shall take action by the affirmative vote of the holders of a majority of the voting power of the shares present and entitled to vote at a duly held meeting of shareholders. Section 1.09 Voting Rights. Subdivision 1. A shareholder shall have one vote for each share held which is entitled to vote. Except as otherwise required by law, a holder of shares entitled to vote may vote any portion of the shares in any way the shareholder chooses. If a shareholder votes without designating the proportion or number of shares voted in a particular way, the shareholder is deemed to have voted all of the shares in that way. Subdivision 2. The Board may fix a date not more than sixty days before the date of a meeting of shareholders as the date for the determination of the holders of shares entitled to notice of and entitled to vote at the meeting. When a date is so fixed, only shareholders on that date are entitled to notice of and permitted to vote at that meeting of shareholders. Section 1.10 Proxies. A shareholder may cast or authorize the casting of a vote by filing a written appointment of a proxy with an officer of the Corporation at or before the meeting at which the appointment is to be effective. -2- Section 1.11 Action-Without a Meeting. Any action required or permitted to be taken at a meeting of the shareholders of the Corporation may be taken without a meeting by written action signed by all of the shareholders entitled to vote on that action. The written action is effective when it has been signed by all of those shareholders, unless a different effective time is provided in the written action. DIRECTORS Section 2.01 Number; Qualifications. Except as authorized by the shareholders pursuant to a shareholder control agreement or unanimous affirmative vote, the business and affairs of the Corporation shall be managed by or under the direction of a Board of one or more directors. Directors shall be natural persons. The shareholders at each regular meeting shall determine the number of directors to constitute the Board, provided that thereafter the authorized number of directors may be increased by the shareholders or the Board and decreased by the shareholders. Directors need not be shareholders. Section 2.02 Term. Each director shall serve for an indefinite term that expires at the next regular meeting of the shareholders. A director shall hold office until a successor is elected and has qualified or until the earlier death, resignation, removal or disqualification of the director. Section 2.03 Vacancies. Vacancies on the Board of Directors resulting from the death, resignation, removal or disqualification of a director may be filled by the affirmative vote of a majority of the remaining members of the Board, though less than a quorum. Vacancies on the Board resulting from newly created directorships may be filled by the affirmative vote of a majority of the directors serving at the time such directorships are created. Each person elected to fill a vacancy shall hold office until a qualified successor is elected by the shareholders at the next regular meeting or at any special meeting duly called for that purpose. Section 2.04 Place of Meetings. Each meeting of the Board of Directors shall be held at the principal executive office of the Corporation or at such other place as may be designated from time to time by a majority of the members of the Board. Section 2.05 Regular Meetings. Regular meetings of the Board of Directors for the election of officers and the transaction of any other business shall be held without notice at the place of and immediately after each regular meeting of the shareholders. Section 2.06 Special Meetings. A special meeting of the Board of Directors may be called for any purpose or purposes at any time by any member of the Board by giving not less than two days' notice to all directors of the date, time and place of the meeting, provided that when notice is mailed, at least four days' notice shall be given. The notice need not state the purpose of the meeting. -3- Section 2.07 Waiver of Notice; Previously Scheduled Meetings. Subdivision 1. A director of the Corporation may waive notice of the date, time and place of a meeting of the Board. A waiver of notice by a director entitled to notice is effective whether given before, at or after the meeting, and whether given in writing, orally or by attendance. Attendance by a director at a meeting is a waiver of notice of that meeting, unless the director objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and thereafter does not participate in the meeting. Subdivision 2. If the day or date, time and place of a Board meeting have been provided herein or announced at a previous meeting of the Board, no notice is required. Notice of an adjourned meeting need not be given other than by announcement at the meeting at which adjournment is taken of the date, time and place at which the meeting will be reconvened. Section 2.08 Quorum; Acts of Board. The presence in person of a majority of the directors currently holding office shall be necessary to constitute a quorum for the transaction of business. In the absence of a quorum, a majority of the directors present may adjourn a meeting from time to time without further notice until a quorum is present. If a quorum is present when a duly held meeting is convened, the directors present may continue to transact business until adjournment, even though the withdrawal of a number of the directors originally present leaves less than the proportion or number otherwise required for a quorum. Except as otherwise required by law or specified in the Articles of Incorporation of the Corporation, the Board shall take action by the affirmative vote of a majority of the directors present at a duly held meeting. Section 2.09 Electronic Communications. A conference among directors by any means of communication through which the directors may simultaneously hear each other during the conference constitutes a Board meeting, if the same notice is given of the conference as would be required for a meeting, and if the number of directors participating in the conference would be sufficient to constitute a quorum at a meeting. A director may participate in a Board meeting not described in the immediately preceding sentence by any means of communication through which the director, other directors so participating and all directors physically present at the meeting may simultaneously hear each other during the meeting. Participation in a meeting by any means referred to in this Section 2.09 constitutes presence in person at the meeting. Section 2.10 Absent Directors. A director of the Corporation may give advance written consent or opposition to a proposal to be acted on at a Board meeting. If the director is not present at the meeting, consent or opposition to a proposal does not constitute presence for purposes of determining the existence of a quorum, but consent or opposition shall be counted as a vote in favor of or against the proposal and shall be entered in the minutes or other record of action at the meeting, if the proposal acted on at the meeting is substantially the same or has substantially the same effect as the proposal to which the director has consented or objected. -4- Section 2.11 Action Without a Meeting. An action required or permitted to be taken at a Board meeting may be taken without a meeting by written action signed by all of the directors. Any action, other than an action requiring shareholder approval, if the Articles of Incorporation so provide, may be taken by written action signed by the number of directors that would be required to take the same action at a meeting of the Board at which all directors were present. The written action is effective when signed by the required number of directors, unless a different effective time is provided in the written action. When written action is permitted to be taken by less than all directors, all directors shall be notified immediately of its text and effective date. Section 2.12 Committees. Subdivision 1. A resolution approved by the affirmative vote of a majority of the Board may establish committees having the authority of the Board in the management of the business of the Corporation only to the extent provided in the resolution. Committees shall be subject at all times to the direction and control of the Board, except as provided in Section 2.13. Subdivision 2. A committee shall consist of one or more natural persons, who need not be directors, appointed by affirmative vote of a majority of the directors present at a duly held Board meeting. Subdivision 3. Section 2.04 and Sections 2.06 to 2.11 hereof shall apply to committees and members of committees to the same extent as those sections apply to the Board and directors. Subdivision 4. Minutes, if any, of committee meetings shall be made available upon request to members of the committee and to any director. Section 2.13 Special Litigation Committee. Pursuant to the procedure set forth in Section 2.12, the Board may establish a committee composed of one or more independent directors or other independent persons to determine whether it is in the best interests of the Corporation to pursue a particular legal right or remedy of the Corporation and whether to cause, to the extent permitted by law, the dismissal or discontinuance of a particular proceeding that seeks to assert a right or remedy on behalf of the Corporation. The committee, once established, is not subject to the direction or control of, or termination by, the Board. A vacancy on the committee may be filled by a majority vote of the remaining committee members. The good faith determinations of the committee are binding upon the Corporation and its directors, officers and shareholders to the extent permitted by law. The committee terminates when it issues a written report of its determinations to the Board. Section 2.14 Compensation. The Board may fix the compensation, if any, of directors. -5- OFFICERS Section 3.01 Number and Designation. The Corporation shall have one or more natural persons exercising the functions of the offices of Chief Executive Officer and Chief Financial Officer. The Board of Directors may elect or appoint such other officers or agents as it deems necessary for the operation and management of the Corporation, with such powers, rights, duties and responsibilities as may be determined by the Board, including, without limitation, a President, one or more vice Presidents, a Secretary and a Treasurer, each of whom shall have the powers, rights, duties and responsibilities set forth in these By-Laws unless otherwise determined by the Board. Any of the offices or functions of those offices may be held by the same person. Section 3.02 Chief Executive Officer. Unless provided otherwise by a resolution adopted by the Board of Directors, the Chief Executive Officer (a) shall have general active management of the business of the Corporation; (b) shall, when present, preside at all meetings of the shareholders and Board of Directors; (c) shall see that all orders and resolutions of the Board are carried into effect; (d) may maintain records of and certify proceedings of the Board and shareholders; and (e) shall perform such other duties as may from time to time be assigned by the Board of Directors. Section 3.03 Chief Financial Officer. Unless provided otherwise by a resolution adopted by the Board of Directors, the Chief Financial Officer (a) shall keep accurate financial records for the Corporation; (b) shall deposit all monies, drafts and checks in the name of and to the credit of the Corporation in such banks and depositories as the Board of Directors shall designate from time to time; (c) shall endorse for deposit all notes, checks and drafts received by the Corporation as ordered by the Board, making proper vouchers therefor; (d) shall disburse corporate funds and issue checks and drafts in the name of the Corporation, as ordered by the Board; (e) shall render to the Chief Executive Officer and the Board of Directors, whenever requested, an account of all of such officer's transactions as Chief Financial Officer and of the financial condition of the Corporation; and (f) shall perform such other duties as may be prescribed by the Board of Directors or the Chief Executive Officer from time to time. Section 3.04 President. Unless otherwise determined by the Board, the President shall be the Chief Executive Officer of the Corporation. If an officer other than the President is designated Chief Executive Officer, the President shall perform such duties as may from time to time be assigned by the Board of Directors. Section 3.05 Vice Presidents. Any one or more vice Presidents, if any, may be designated by the Board of Directors as Executive Vice Presidents or Senior Vice Presidents. During the absence or disability of the President, it shall be the duty of the highest ranking Executive Vice President, and, in the absence of any such Vice President, it shall be the duty of the highest ranking Senior Vice President or other Vice President, who shall be present at the time and able to act, to perform the duties of the President. The determination of who is the highest ranking of two or more persons holding the same office shall, in the absence of specific -6- designation of order of rank by the Board of Directors, be made on the basis of the earliest date of appointment or election, or, in the event of simultaneous appointment or election, on the basis of the longest continuous employment by the Corporation. Section 3.06 Secretary. The Secretary, unless otherwise determined by the Board, shall attend all meetings of the shareholders and all meetings of the Board of Directors, shall record or cause to be recorded all proceedings thereof in a book to be kept for that purpose, and may certify such proceedings. Except as otherwise required or permitted by law or by these By-Laws, the Secretary shall give or cause to be given notice of all meetings of the shareholders and all meetings of the Board of Directors. Section 3.07 Treasurer. Unless otherwise determined by the Board, the Treasurer shall be the Chief Financial Officer of the Corporation. If an officer other than the Treasurer is designated Chief Financial Officer, the Treasurer shall perform such duties as may from time to time be assigned by the Board of Directors. Section 3.08 Authority and Duties. In addition to the foregoing authority and duties, all officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be designated from time to time by the Board of Directors. Unless prohibited by a resolution approved by the affirmative vote of a majority of the directors present, an officer elected or appointed by the Board may, without the approval of the Board, delegate some or all of the duties and powers of an office to other persons. Section 3.09 Term. Subdivision 1. All officers of the Corporation shall hold office until their respective successors are chosen and have qualified or until their earlier death, resignation or removal. Subdivision 2. An officer may resign at any time by giving written notice to the Corporation. The resignation is effective without acceptance when the notice is given to the Corporation, unless a later effective date is specified in the notice. Subdivision 3. An officer may be removed at any time, with or without cause, by a resolution approved by the affirmative vote of a majority of the directors present at a duly held Board meeting. Subdivision 4. A vacancy in an office because of death, resignation, removal, disqualification or other cause may, or in the case of a vacancy in the office of Chief Executive Officer or Chief Financial Officer shall, be filled for the unexpired portion of the term by the Board. Section 3.10 Salaries. The salaries of all officers of the Corporation shall be fixed by the Board of Directors or by the Chief Executive Officer if authorized by the Board. -7- INDEMNIFICATION Section 4.01 Indemnification. The Corporation shall indemnify such persons, for such expenses and liabilities, in such manner, under such circumstances, and to such extent, as required or permitted by Minnesota Statutes, Section 302A.521, as amended from time to time, or as required or permitted by other provisions of law. Section 4.02 Insurance. The Corporation may purchase and maintain insurance on behalf of any person in such person's official capacity against any liability asserted against and incurred by such person in or arising from that capacity, whether or not the Corporation would otherwise be required to indemnify the person against the liability. SHARES Section 5.01 Certificated and Uncertificated Shares. Subdivision 1. The shares of the Corporation shall be either certificated shares or uncertificated shares. Each holder of duly issued certificated shares is entitled to a certificate of shares. Subdivision 2. Each certificate of shares of the Corporation shall bear the corporate seal, if any, and shall be signed by the Chief Executive Officer, or the President or any Vice President, and the Chief Financial Officer, or the Secretary or any Assistant Secretary, but when a certificate is signed by a transfer agent or a registrar, the signature of any such officer and the corporate seal upon such certificate may be facsimiles, engraved or printed. If a person signs or has a facsimile signature placed upon a certificate while an officer, transfer agent or registrar of the Corporation, the certificate may be issued by the Corporation, even if the person has ceased to serve in that capacity before the certificate is issued, with the same effect as if the person had that capacity at the date of its issue. Subdivision 3. A certificate representing shares issued by the Corporation shall, if the Corporation is authorized to issue shares of more than one class or series, set forth upon the face or back of the certificate, or shall state that the Corporation will furnish to any shareholder upon request and without charge, a full statement of the designations, preferences, limitations and relative rights of the shares of each class or series authorized to be issued, so far as they have been determined, and the authority of the Board to determine the relative rights and preferences of subsequent classes or series. Subdivision 4. A resolution approved by the affirmative vote of a majority of the directors present at a duly held meeting of the Board may provide that some or all of any or all classes and series of the shares of the Corporation will be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until the certificate is surrendered to the Corporation. -8- Section 5.02 Declaration of Dividends and Other Distributions. The Board of Directors shall have the authority to declare dividends and other distributions upon the shares of the Corporation to the extent permitted by law. Section 5.03 Transfer of Shares. Shares of the Corporation may be transferred only on the books of the Corporation by the holder thereof, in person or by such person's attorney. In the case of certificated shares, shares shall be transferred only upon surrender and cancellation of certificates for a like number of shares. The Board of Directors, however, may appoint one or more transfer agents and registrars to maintain the share records of the Corporation and to effect transfers of shares. Section 5.04 Record Date. The Board of Directors may fix a time, not exceeding sixty days preceding the date fixed for the payment of any dividend or other distribution, as a record date for the determination of the shareholders entitled to receive payment of such dividend or other distribution, and in such case only shareholders of record on the date so fixed shall be entitled to receive payment of such dividend or other distribution, notwithstanding any transfer of any shares on the books of the Corporation after any record date so fixed. MISCELLANEOUS Section 6.01 Execution of Instruments. Subdivision 1. All deeds, mortgages, bonds, checks, contracts and other instruments pertaining to the business and affairs of the Corporation shall be signed on behalf of the Corporation by the Chief Executive Officer, or the President, or any Vice President, or by such other person or persons as may be designated from time to time by the Board of Directors. Subdivision 2. If a document must be executed by persons holding different offices or functions and one person holds such offices or exercises such functions, that person may execute the document in more than one capacity if the document indicates each such capacity. Section 6.02 Advances. The Corporation may, without a vote of the directors, advance money to its directors, officers or employees to cover expenses that can reasonably be anticipated to be incurred by them in the performance of their duties and for which they would be entitled to reimbursement in the absence of an advance. Section 6.03 Corporate Seal. The seal of the Corporation, if any, shall be a circular embossed seal having inscribed thereon the name of the Corporation and the following words: "Corporate Seal Minnesota". -9- Section 6.04 Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 6.05 Amendments. The Board of Directors shall have the power to adopt, amend or repeal the By-Laws of the Corporation, subject to the power of the shareholders to change or repeal the same, provided, however, that the Board shall not adopt, amend or repeal any By-Law fixing a quorum for meetings of shareholders, prescribing procedures for removing directors or filling vacancies in the Board, or fixing the number of directors or their classifications, qualifications or terms of office, but may adopt or amend a By-Law that increases the number of directors. -10- EX-3.4 5 AMENDED AND RESTATED BYLAWS OF THE COMPANY EXHIBIT 3.4 AMENDED AND RESTATED BYLAWS OF SHOWCASE CORPORATION ARTICLE I. OFFICES, CORPORATE SEAL Section 1.01. Registered Office. The registered office of the corporation in Minnesota shall be that set forth in the Articles of Incorporation or in the most recent amendment of the Articles of Incorporation or resolution of the directors filed with the Secretary of State of Minnesota changing the registered office. Section 1.02. Other Offices. The corporation may have such other offices, within or without the State of Minnesota, as the directors shall, from time to time, determine. Section 1.03. Corporate Seal. The corporation shall have no corporate seal. ARTICLE II. MEETINGS OF SHAREHOLDERS Section 2.01. Place and Time of Meetings. Except as provided otherwise by Minnesota Statutes Chapter 302A, meetings of the shareholders may be held at any place, within or without the State of Minnesota, as may from time to time be designated by the directors and, in the absence of such designation, shall be held at the registered office of the corporation in the State of Minnesota. The directors shall designate the time of day for each meeting and, in the absence of such designation, every meeting of shareholders shall be held at ten o'clock a.m. Section 2.02. Regular Meetings. (a) A regular meeting of the shareholders shall be held on such date as the Board of Directors shall by resolution establish. (b) At a regular meeting the shareholders, voting as provided in the Articles of Incorporation and these Bylaws, shall designate the number of directors to constitute the Board of Directors (subject to the authority of the Board of Directors thereafter to increase or decrease the number of directors as permitted by law and these Bylaws), shall elect qualified successors for directors who serve for an indefinite term or whose terms have expired or are due to expire within six months after the date of the meeting and shall transact such other business as may properly come before them. Section 2.03. Special Meetings. Special meetings of the shareholders may be held at any time and for any purpose and may be called by the President, Treasurer, any two directors, or by a shareholder or shareholders holding 10% or more of the shares entitled to vote on the matters to be presented to the meeting; except that a special meeting for the purpose of considering any action to directly or indirectly facilitate or affect a business combination, including any action to change or otherwise affect the composition of the board of directors for that purpose, must be called by 25% or more of the voting power of all shares entitled to vote. A shareholder or shareholders holding the requisite percentage of the voting power of all shares entitled to vote may demand a special meeting of the shareholders by written notice of demand given to the chief executive officer or chief financial officer of the corporation and containing the purposes of the meeting. Within 30 days after receipt of demand by one of those officers, the board of directors shall cause a special meeting of shareholders to be called and held on notice no later than 90 days after receipt of the demand, at the expense of the corporation. Special meetings shall be held on the date and at the time and place fixed by the chief executive officer or the board of directors, except that a special meeting called by or at demand of a shareholder or shareholders shall be held in the county where the principal executive office is located. The business transacted at a special meeting shall be limited to the purposes as stated in the notice of the meeting. Section 2.04. Quorum, Adjourned Meetings. The holders of a majority of the shares entitled to vote shall constitute a quorum for the transaction of business at any regular or special meeting. In case a quorum shall not be present at a meeting, those present may adjourn the meeting to such day as they shall, by majority vote, agree upon, and a notice of such adjournment and the date and time at which such meeting shall be reconvened shall be mailed to each shareholder entitled to vote at least 5 days before such adjourned meeting. If a quorum is present, a meeting may be adjourned from time to time without notice other than announcement at the meeting. At adjourned meetings at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally noticed. If a quorum is present, the shareholders may continue to transact business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Section 2.05. Voting. At each meeting of the shareholders every shareholder having the right to vote shall be entitled to vote either in person or by proxy. Each shareholder, unless the Articles of Incorporation or statute provide otherwise, shall have one vote for each share having voting power registered in such shareholder's name on the books of the corporation. Jointly owned shares may be voted by any joint owner unless the corporation receives written notice from any one of them denying the authority of that person to vote those shares. Upon the demand of any shareholder, the vote upon any question before the meeting shall be by ballot. All questions shall be decided by a majority vote of the number of shares entitled to vote and represented at the meeting at the time of the vote except if otherwise required by statute, the Articles of Incorporation, or these Bylaws. Section 2.06. Closing of Books. The Board of Directors may fix a time, not exceeding 60 days preceding the date of any meeting of shareholders, as a record date for the determination of the shareholders entitled to notice of, and to vote at, such meeting, notwithstanding any transfer of shares on the books of the corporation after any record date so fixed. The Board of Directors may close the books of the corporation against the transfer of shares during the whole -2- or any part of such period. If the Board of Directors fails to fix a record date for determination of the shareholders entitled to notice of, and to vote at, any meeting of shareholders, the record date shall be the 20th day preceding the date of such meeting. Section 2.07. Notice of Meetings. There shall be mailed to each shareholder, shown by the books of the corporation to be a holder of record of voting shares, at his address as shown by the books of the corporation, a notice setting out the time and place of each regular meeting and each special meeting, except where the meeting is an adjourned meeting and the date, time and place of the meeting were announced at the time of adjournment, which notice shall be mailed at least ten days prior thereto; except that notice of a meeting at which an agreement of merger or exchange is to be considered shall be mailed to all shareholders of record, whether entitled to vote or not, at least fourteen days prior thereto. Every notice of any special meeting called pursuant to Section 2.03 hereof shall state the purpose or purposes for which the meeting has been called, and the business transacted at all special meetings shall be confined to the purpose stated in the notice. Section 2.08. Waiver of Notice. Notice of any regular or special meeting may be waived by any shareholder either before, at or after such meeting orally or in a writing signed by such shareholder or a representative entitled to vote the shares of such shareholder. A shareholder, by his attendance at any meeting of shareholders, shall be deemed to have waived notice of such meeting, except where the shareholder objects at the beginning of the meeting to the transaction of business because the item may not lawfully be considered at that meeting and does not participate in the consideration of the item at that meeting. Section 2.09. Written Action. Any action which might be taken at a meeting of the shareholders may be taken without a meeting if done in writing and signed by all of the shareholders entitled to vote on that action. Section 2.10 Conduct of Shareholder Meetings. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for conduct of the meeting. To the extent not prohibited by law, such rules, regulations or procedures may include, without limitation, establishment of (i) an agenda or order of business for the meeting and the method by which business may be proposed, (ii) rules and procedures for maintaining order at the meeting and the safety of those present, (iii) limitations on attendance at or participation in the meeting to shareholders of record of the corporation, their duly authorized proxies or such other persons as the chairman of the meeting shall determine, (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof and (v) limitations on the time allotted to questions or comments by participants. Any proposed business contained in the notice of a regular meeting is deemed to be on the agenda and no further motions or other actions shall be required to bring such proposed business up for consideration. Unless and to the extent otherwise determined by the chairman of the meeting, it shall not be necessary to follow Robert's Rules of Order or any other rules of parliamentary procedure at the meeting of the shareholders. Following completion -3- of the business of the meeting as determined by the chairman of the meeting, the chairman of the meeting shall have the exclusive authority to adjourn the meeting. Section 2.11 Shareholder Proposals. To be properly brought before a regular meeting of shareholders, business must be (i) specified in the notice of the meeting, (ii) directed to be brought before the meeting by the Board of Directors or (iii) proposed at the meeting by a shareholder who (A) was a shareholder of record at the time of giving of notice provided for in these bylaws, (B) is entitled to vote at the meeting and (C) gives prior notice of the matter, which must otherwise be a proper matter for shareholder action, in the manner herein provided. For business to be properly brought before a regular meeting by a shareholder, the shareholder must give written notice to the Secretary of the corporation so as to be received at the principal executive offices of the corporation at least 120 days before the date that is one year after the date of the corporation's proxy statement for the prior year's regular meeting. Such notice shall set forth (i) the name and record address of the shareholder and of the beneficial owner, if any, on whose behalf the proposal will be made, (ii) the class and number of shares of the corporation owned by the shareholder and beneficially owned by the beneficial owner, if any, on whose behalf the proposal will be made, (iii) a brief description of the business desired to be brought before the regular meeting and the reasons for conducting such business and (iv) any material interest in such business of the shareholder and the beneficial owner, if any, on whose behalf the proposal is made. The chairman of the meeting may refuse to acknowledge any proposed business not made in compliance with the foregoing procedure. ARTICLE III. DIRECTORS Section 3.01. General Powers. The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors, except as otherwise permitted by statute. Section 3.02. Number, Qualification and Term of Office. The Board of Directors shall consist of one or more directors, the precise number to be established by resolution of the shareholders (subject to the authority of the Board of Directors to increase or decrease the number of directors as permitted by law and these bylaws). In the absence of such shareholder resolution, the number of directors shall be the number last fixed by the shareholders, the Board of Directors, the incorporator or the Articles of Incorporation. Directors need not be shareholders. The directors shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the 2000 regular meeting of shareholders, the term of office of the second class to expire at the 2001 regular meeting of shareholders and the term of office of the third class to expire at the 2002 regular meeting of shareholders. At each regular meeting of shareholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected to hold office for a term of three consecutive years. Each director of the corporation shall serve until such director's successor shall have been elected and shall qualify, or until the earlier death, -4- resignation, removal or disqualification of such director. In case of an increase or decrease in the number of directors, the increase or decrease shall be distributed among the several classes as nearly equal as possible, as shall be determined by the affirmative vote of a majority of the entire Board of Directors or by the holders of at least two-thirds of the stock of the corporation entitled to vote, considered as one class. Section 3.03. Board Meetings. Meetings of the Board of Directors may be held from time to time at such time and place within or without the State of Minnesota as may be designated in the notice of such meeting. Section 3.04. Calling Meetings; Notice. Meetings of the Board of Directors may be called by the Chairman of the Board by giving at least twenty-four hours' notice, or by any other director by giving at least five days' notice, of the date, time and place thereof to each director by mail, telephone, telegram or in person. Section 3.05. Waiver of Notice. Notice of any meeting of the Board of Directors may be waived by any director either before, at, or after such meeting orally or in a writing signed by such director. A director, by his attendance at any meeting of the Board of Directors, shall be deemed to have waived notice of such meeting, except where the director objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and does not participate thereafter in the meeting. Section 3.06. Quorum. A majority of the directors holding office immediately prior to a meeting of the Board of Directors shall constitute a quorum for the transaction of business at such meeting. Section 3.07. Absent Directors. A director may give advance written consent or opposition to a proposal to be acted on at a meeting of the Board of Directors. If such director is not present at the meeting, consent or opposition to a proposal does not constitute presence for purposes of determining the existence of a quorum, but consent or opposition shall be counted as a vote in favor of or against the proposal and shall be entered in the minutes or other record of action at the meeting, if the proposal acted on at the meeting is substantially the same or has substantially the same effect as the proposal to which the director has consented or objected. Section 3.08. Conference Communications. Any or all directors may participate in any meeting of the Board of Directors, or of any duly constituted committee thereof, by any means of communication through which the directors may simultaneously hear each other during such meeting. For the purposes of establishing a quorum and taking any action at the meeting, such directors participating pursuant to this Section 3.08 shall be deemed present in person at the meeting, and the place of the meeting shall be the place of origination of the conference communication. -5- Section 3.09. Vacancies; Newly Created Directorships. Vacancies in the Board of Directors of this corporation occurring by reason of death, resignation, removal or disqualification shall be filled for the unexpired term by a majority of the remaining directors of the Board although less than a quorum; newly created directorships resulting from an increase in the authorized number of directors by action of the Board of Directors as permitted by Section 3.02 may be filled by a two-thirds vote of the directors serving at the time of such increase; and each director elected pursuant to this Section 3.09 shall be a director until such director's successor is elected by the shareholders at their next regular or special meeting. Section 3.10. Removal. Any or all of the directors may be removed from office at any time, but only for cause, by the affirmative vote of the shareholders holding a majority of the shares entitled to vote at an election of directors. A director named by the Board of Directors to fill a vacancy may be removed from office at any time, with or without cause, by the affirmative vote of the remaining directors if the shareholders have not elected directors in the interim between the time of the appointment to fill such vacancy and the time of the removal. In the event that the entire Board or any one or more directors be so removed, new directors shall be elected at the same meeting. Section 3.11. Committees. A resolution approved by the affirmative vote of a majority of the Board of Directors may establish committees having the authority of the board in the management of the business of the corporation to the extent provided in the resolution. A committee shall consist of one or more persons, who need not be directors, appointed by affirmative vote of a majority of the directors present. Committees are subject to the direction and control of, and vacancies in the membership thereof shall be filled by, the Board of Directors, except as provided by Minnesota Statutes Section 302A.243. A majority of the members of the committee present at a meeting is a quorum for the transaction of business, unless a larger or smaller proportion or number is provided in a resolution approved by the affirmative vote of a majority of the directors present. Section 3.12. Written Action. Any action which might be taken at a meeting of the Board of Directors, or any duly constituted committee thereof, may be taken without a meeting if done in writing and signed by all of the directors or committee members, unless the Articles provide otherwise and the action need not be approved by the shareholders. Section 3.13. Compensation. Directors who are not salaried officers of this corporation shall receive such fixed sum per meeting attended or such fixed annual sum as may be determined, from time to time, by resolution of the Board of Directors. The Board of Directors may, by resolution, provide that all directors shall receive their expenses, if any, of attendance at meetings of the Board of Directors or any committee thereof. Nothing herein contained shall be construed to preclude any director from serving this corporation in any other capacity and receiving proper compensation therefor. -6- Section 3.14. Nomination of Directors. Nominations of persons for election as directors may be made at a regular meeting of shareholders (i) by or at the direction of the Board of Directors or (ii) by any shareholder who (A) was a shareholder of record at the time of giving of notice provided for in these bylaws, (B) is entitled to vote at the meeting and (C) gives prior notice of the nomination in the manner herein provided. For a nomination to be properly made by a shareholder, the shareholder must give written notice to the Secretary of the corporation so as to be received at the principal executive offices of the corporation at least 120 days before the date that is one year after the date of the corporation's proxy statement for the prior year's regular meeting. Such notice shall set forth (i) as to the shareholder giving the notice: (A) the name and record address of the shareholder and of the beneficial owner, if any, on whose behalf the nomination will be made, and (B) the class and number of shares of the corporation owned by the shareholder and beneficially owned by the beneficial owner, if any, on whose behalf the nomination will be made and (ii) as to each person the shareholder proposes to nominate: (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person and (C) the class and number of shares of the corporation's capital stock beneficially owned by the person. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. ARTICLE IV. OFFICERS Section 4.01. Number. The officers of the corporation shall consist of a Chairman of the Board (if one is elected by the Board), a President, a Treasurer, a Secretary (if one is elected by the Board) and such other officers and agents as may, from time to time, be elected or appointed by the Board of Directors. Any number of offices may be held by the same person. Section 4.02. Election, Term of Office and Qualifications. The Board of Directors shall elect or appoint, by resolution approved by the affirmative vote of a majority of the directors present, from within or without their number, the President, Treasurer and such other officers as may be deemed advisable, each of whom shall have the powers, rights, duties, responsibilities, and terms in office provided for in these Bylaws or a resolution of the Board of Directors not inconsistent therewith. The President and all other officers who may be directors shall continue to hold office until the election and qualification of their successors, notwithstanding an earlier termination of their directorship. Section 4.03. Removal and Vacancies. Any officer may be removed from his office by the Board of Directors at any time, with or without cause. Such removal, however, shall be without prejudice to the contract rights of the person so removed. If there be a vacancy among the officers of the corporation by reason of death, resignation or otherwise, such vacancy shall be filled for the unexpired term by the Board of Directors. -7- Section 4.04. Chairman of the Board. The Chairman of the Board, if one is elected, shall preside at all meetings of the shareholders and directors and shall have such other duties as may be prescribed, from time to time, by the Board of Directors. Section 4.05. President. The President shall be the chief executive officer and shall have general active management of the business of the corporation. In the absence of the Chairman of the Board, he shall preside at all meetings of the shareholders and directors. He shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall execute and deliver, in the name of the corporation, any deeds, mortgages, bonds, contracts or other instruments pertaining to the business of the corporation unless the authority to execute and deliver is required by law to be exercised by another person or is expressly delegated by the Articles or Bylaws or by the Board of Directors to some other officer or agent of the corporation. He shall maintain records of and, whenever necessary, certify all proceedings of the Board of Directors and the shareholders, and in general, shall perform all duties usually incident to the office of the President. He shall have such other duties as may, from time to time, be prescribed by the Board of Directors. Section 4.06. Vice President. Each Vice President, if one or more are elected, shall have such powers and shall perform such duties as prescribed by the Board of Directors or by the President. In the event of the absence or disability of the President, Vice Presidents shall succeed to his power and duties in the order designated by the Board of Directors. Section 4.07. Secretary. The Secretary, if one is elected, shall be secretary of and shall attend all meetings of the shareholders and Board of Directors and shall record all proceedings of such meetings in the minute book of the corporation. He shall give proper notice of meetings of shareholders and directors. He shall perform such other duties as may, from time to time, be prescribed by the Board of Directors or by the President. Section 4.08. Treasurer. The Treasurer shall be the chief financial officer and shall keep accurate financial records for the corporation. He shall deposit all moneys, drafts and checks in the name of, and to the credit of, the corporation in such banks and depositories as the Board of Directors shall, from time to time, designate. He shall have power to endorse, for deposit, all notes, checks and drafts received by the corporation. He shall disburse the funds of the corporation, as ordered by the Board of Directors, making proper vouchers therefor. He shall render to the President and the directors, whenever requested, an account of all his transactions as Treasurer and of the financial condition of the corporation, and shall perform such other duties as may, from time to time, be prescribed by the Board of Directors or by the President. Section 4.09. Compensation. The officers of this corporation shall receive such compensation for their services as may be determined, from time to time, by resolution of the Board of Directors. -8- ARTICLE V. SHARES AND THEIR TRANSFER Section 5.01. Certificates for Shares. All shares of the corporation shall be certificated shares. Every owner of shares of the corporation shall be entitled to a certificate, to be in such form as shall be prescribed by the Board of Directors, certifying the number of shares of the corporation owned by such shareholder. The certificates for such shares shall be numbered in the order in which they shall be issued and shall be signed, in the name of the corporation, by the President and by the Secretary or an Assistant Secretary or by such officers as the Board of Directors may designate. If the certificate is signed by a transfer agent or registrar, such signatures of the corporate officers may be by facsimile if authorized by the Board of Directors. Every certificate surrendered to the corporation for exchange or transfer shall be cancelled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so canceled, except in cases provided for in Section 5.04. Section 5.02. Issuance of Shares. The Board of Directors is authorized to cause to be issued shares of the corporation up to the full amount authorized by the Articles of Incorporation in such amounts as may be determined by the Board of Directors and as may be permitted by law. No shares shall be allotted except in consideration of cash or other property, tangible or intangible, received or to be received by the corporation under a written agreement, of services rendered or to be rendered to the corporation under a written agreement, or of an amount transferred from surplus to stated capital upon a share dividend. At the time of such allotment of shares, the Board of Directors making such allotments shall state, by resolution, their determination of the fair value to the corporation in monetary terms of any consideration other than cash for which shares are allotted. Section 5.03. Transfer of Shares. Transfer of shares on the books of the corporation may be authorized only by the shareholder named in the certificate, or the shareholder's legal representative, or the shareholder's duly authorized attorney-in-fact, and upon surrender of the certificate or the certificates for such shares. The corporation may treat as the absolute owner of shares of the corporation, the person or persons in whose name shares are registered on the books of the corporation. Section 5.04. Loss of Certificates. Except as otherwise provided by Minnesota Statutes Section 302A.419, any shareholder claiming a certificate for shares to be lost, stolen or destroyed shall make an affidavit or that fact in such form as the Board of Directors shall require and shall, if the Board of Directors so requires, give the corporation a bond of indemnity in form, in an amount, and with one or more sureties satisfactory to the Board of Directors, to indemnify the corporation against any claim which may be made against it on account of the reissue of such certificate, whereupon a new certificate may be issued in the same tenor and for the same number of shares as the one alleged to have been lost, stolen or destroyed. -9- ARTICLE VI. DIVIDENDS, RECORD DATE Section 6.01. Dividends. Subject to the provisions of the Articles of Incorporation, of these Bylaws, and of law, the Board of Directors may declare dividends whenever, and in such amounts as, in its opinion, are deemed advisable. Section 6.02. Record Date. Subject to any provisions of the Articles of Incorporation, the Board of Directors may fix a date not exceeding 120 days preceding the date fixed for the payment of any dividend as the record date for the determination of the shareholders entitled to receive payment of the dividend and, in such case, only shareholders of record on the date so fixed shall be entitled to receive payment of such dividend notwithstanding any transfer of shares on the books of the corporation after the record date. The Board of Directors may close the books of the corporation against the transfer of shares during the whole or any part of such period. ARTICLE VII. BOOKS AND RECORDS, FISCAL YEAR Section 7.01. Share Register. The Board of Directors of the corporation shall cause to be kept at its principal executive office, or at another place or places within the United States determined by the board: (1) a share register not more than one year old, containing the names and addresses of the shareholders and the number and classes of shares held by each shareholder; and (2) a record of the dates on which certificates or transaction statements representing shares were issued. Section 7.02. Other Books and Records. The Board of Directors shall cause to be kept at its principal executive office, or, if its principal executive office is not in Minnesota, shall make available at its registered office within ten days after receipt by an officer of the corporation of a written demand for them made by a shareholder or other person authorized by Minnesota Statutes Section 302A.461, originals or copies of: (1) records of all proceedings of shareholders for the last three years; (2) records of all proceedings of the board for the last three years; (3) its articles and all amendments currently in effect; (4) its bylaws and all amendments currently in effect; -10- (5) financial statements required by Minnesota Statutes Section 302A.463 and the financial statement for the most recent interim period prepared in the course of the operation of the corporation for distribution to the shareholders or to a governmental agency as a matter of public record; (6) reports made to shareholders generally within the last three years; (7) a statement of the names and usual business addresses of its directors and principal officers;. (8) any shareholder voting or control agreements of which the corporation is aware; and (9) such other records and books of account as shall be necessary and appropriate to the conduct of the corporate business. Section 7.03. Fiscal Year. The fiscal year of the corporation shall be determined by the Board of Directors. ARTICLE VIII. LOANS, GUARANTEES, SURETYSHIP Section 8.01. The corporation may lend money to, guarantee an obligation of, become a surety for, or otherwise financially assist a person if the transaction, or a class of transactions to which the transaction belongs, is approved by the affirmative vote of a majority of the directors present and: (1) is in the usual and regular course of business of the corporation; (2) is with, or for the benefit of, a related corporation, an organization in which the corporation has a financial interest, an organization with which the corporation has a business relationship, or an organization to which the corporation has the power to make donations; (3) is with, or for the benefit of, an officer or other employee of the corporation or a subsidiary, including an officer or employee who is a director of the corporation or a subsidiary, and may reasonably be expected, in the judgment of the board, to benefit the corporation; or (4) has been approved by the affirmative vote of the holders of two-thirds of the outstanding shares. -11- The loan, guarantee, surety contract or other financial assistance may be with or without interest, and may be unsecured, or may be secured in the manner as a majority of the directors approve, including, without limitation, a pledge of or other security interest in shares of the corporation. Nothing in this section shall be deemed to deny, limit, or restrict the powers of guaranty or warranty of the corporation at common law or under a statute of the State of Minnesota. ARTICLE IX. INDEMNIFICATION OF CERTAIN PERSONS Section 9.01. The corporation shall indemnify such persons, for such expenses and liabilities, in such manner, under such circumstances, and to such extent as permitted by Minnesota Statutes Section 302A.521, as now enacted or hereafter amended. Section 9.02. Insurance. The Corporation may purchase and maintain insurance on behalf of any person in such person's official capacity against any liability asserted against and incurred by such person in or arising from that capacity, whether or not the Corporation would otherwise be required to indemnify the person against the liability. ARTICLE X. AMENDMENTS Section 10.01. These Bylaws may be amended or altered by a vote of the majority of the whole Board of Directors at any meeting provided that notice of such proposed amendment shall have been given in the notice given to the directors of such meeting. Such authority in the Board of Directors is subject to the power of the shareholders to change or repeal such Bylaws by a majority vote of the shareholders present or represented at any regular or special meeting of shareholders called for such purpose, and the Board of Directors shall not make or alter any, Bylaws fixing a quorum for meetings of shareholders, prescribing procedures for removing directors or filling vacancies in the Board of Directors, or fixing the number of directors or their classifications, qualifications, or terms of office, except that the Board of Directors may adopt or amend by unanimous action any Bylaw to increase the number of directors. ARTICLE XI. SECURITIES OF OTHER CORPORATIONS Section 11.01. Voting Securities Held by the Corporation. Unless otherwise ordered by the Board of Directors, the President shall have full power and authority on behalf of the corporation (a) to attend any meeting of security holders of other corporations in which the corporation may hold securities and to vote such securities on behalf of this corporation; (b) to execute any proxy for such meeting on behalf of the corporation; or (c) to execute a written action in lieu of a meeting of such other corporation on behalf of this corporation. At such meeting, the President shall possess and may exercise any and all rights and powers incident to the ownership of such securities that the corporation possesses. The Board of Directors may, -12- from time to time, grant such power and authority to one or more other persons and may remove such power and authority from the President upon any other person or persons. Section 11.02. Purchase and Sale of Securities. Unless otherwise ordered by the Board of Directors, the President shall have full power and authority on behalf of the corporation to purchase, sell, transfer or encumber any and all securities of any other corporation owned by the corporation, and may execute and deliver such documents as may be necessary to effectuate such purchase, sale, transfer or encumbrance. The Board of Directors may, from time to time, confer like powers upon any other person or persons. -13- EX-4.2 6 WARRANT TO PURCHASE STOCK EXHIBIT 4.2 THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. WARRANT AGREEMENT To Purchase Shares of the Series B Preferred Stock of ShowCase Corporation Dated as of May 13, 1998 (the "Effective Date") WHEREAS, ShowCase Corporation, a Minnesota corporation (the "Company") has entered into a Global Master Rental Agreement dated as of May 13, 1998, Equipment Schedule Nos. US-1, UK-1, D-1, BEL-1, FRA-1, and related Summary Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and WHEREAS, the Company desires to grant to Warrantholder, in consideration for such Leases, the right to purchase shares of its Series B Preferred Stock; NOW, THEREFORE, in consideration of the Warrantholder executing and delivering such Leases and in consideration of mutual covenants and agreements contained herein, the Company and Warrantholder agree as follows: 1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK. The Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe to and purchase, from the Company, 13,750 fully paid and non-assessable shares of the Company's Series B Preferred Stock ("Preferred Stock") at a purchase price of $4.00 per share (the "Exercise Price"). The number and purchase price of such shares are subject to adjustment as provided in Section 8 hereof. 2. TERM OF THE WARRANT AGREEMENT. Except as otherwise provided for herein, the term of this Warrant Agreement and the right to purchase Preferred Stock as granted herein shall commence on the Effective Date and shall be exercisable for a period of (i) ten (10) years or (ii) five (5) years from the effective date of the Company's initial public offering, whichever is shorter. Notwithstanding the term of this Warrant Agreement as set forth above, the right to purchase Preferred Stock as granted shall expire, if not previously exercised, immediately upon the closing of the issuance and sale of shares of Common Stock of the Company in the Company's first public offering of securities for its own account pursuant to an effective registration statement under the Securities Act of 1933, as amended in which (i) the net proceeds received by the Company equal or exceed $15,000,000.00 and (ii) the public offering price equals or exceeds $10.00 per share (as adjusted from time to time to reflect stock splits, share dividend or other corporate recapitalization effected subsequent to the date hereof (the "Initial Public Offering"), provided that the Preferred stock issuable to Warrantholder upon exercise hereof shall be included in such registration statement, and provided further that the underwriters so request that the Warrantholder exercise at that time. The Company shall notify the Warrantholder if the Initial Public Offering is proposed within a reasonable period of time prior to the filing of a registration statement and if the Company fails to deliver such written notice within a reasonable period of time, anything to the contrary in this Warrant Agreement notwithstanding, the rights to purchase will not expire until ten (10) business days after the Company delivers such notice to the Warrantholder. Such notice shall also contain such details of the proposed Initial Public Offering as are reasonable in the circumstances and notice that this Warrant Agreement is expected to expire upon closing thereof. If such closing does not take place, the Company shall promptly notify the Warrantholder that such proposed transaction has been terminated. Anything to the contrary in this Warrant Agreement notwithstanding, the Warrantholder may rescind any exercise of its purchase rights promptly after such notice of termination of the proposed transaction if the exercise of warrants occurred after the Company notified the Warrantholder that the Initial Public Offering was proposed or if the exercise were otherwise precipitated by such proposed Initial Public Offering. In the event of such rescission, the Warrants will continue to be exercisable on the same terms and conditions. 3. EXERCISE OF THE PURCHASE RIGHTS. The purchase rights set forth in this Warrant Agreement are exercisable by the Warrantholder, in whole or in part, at any time, or from time to time, prior to the expiration of the term set forth in Section 2 above, by tendering to the Company at its principal office a notice of exercise in the form attached hereto as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly upon receipt of the Notice of Exercise and the payment of the purchase price in accordance with the terms set forth below, and in no event later than twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a certificate for the number of shares of Preferred Stock purchased and shall execute the acknowledgment of exercise in the form attached hereto as Exhibit II (the "Acknowledgment of Exercise") indicating the number of shares which remain subject to future purchases, if any. The Exercise Price may be paid at the Warrantholder's election either (i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as determined below. If the Warrantholder elects the Net Issuance method, the Company will issue Preferred Stock in accordance with the following formula: X = Y(A-B) ----- A Where: X = the number of shares of Preferred Stock to be issued to the Warrantholder. Y = the number of shares of Preferred Stock requested to be exercised under this Warrant Agreement. A = the fair market value of one (1) share of Preferred Stock. B = the Exercise Price. For purposes of the above calculation, current fair market value of Preferred Stock shall mean with respect to each share of Preferred Stock: (i) if the exercise is in connection with an initial public offering of the Company's Common Stock, and if the Company's Registration Statement relating to such public offering has been declared effective by the SEC, then the fair market value per share shall be the product of (x) the initial "Price to Public" specified in the final prospectus with respect to the offering and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise; (ii) if this Warrant is exercised after, and not in connection with the Company's initial public offering, and: -2- (a) if traded on a securities exchange, the fair market value shall be deemed to be the product of (x) the average of the closing prices over a twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise; or (b) if actively traded over-the-counter, the fair market value shall be deemed to be the product of (x) the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) over the twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise; (iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the current fair market value of Preferred Stock shall be the product of (x) the highest price per share which the Company could obtain from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by its Board of Directors and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise, unless the Company shall become subject to a merger, acquisition or other consolidation pursuant to which the Company is not the surviving party, in which case the fair market value of Preferred Stock shall be deemed to be the value received by the holders of the Company's Preferred Stock on a common equivalent basis pursuant to such merger or acquisition. Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended Warrant Agreement representing the remaining number of shares purchasable hereunder. All other terms and conditions of such amended Warrant Agreement shall be identical to those contained herein, including, but not limited to the Effective Date hereof. 4. RESERVATION OF SHARES. (a) Authorization and Reservation of Shares. During the term of this Warrant Agreement, the Company will at all times have authorized and reserved a sufficient number of shares of its Preferred Stock to provide for the exercise of the rights to purchase Preferred Stock as provided for herein. (b) Registration or Listing. If any shares of Preferred Stock required to be reserved hereunder require registration with or approval of any governmental authority under any Federal or State law (other than any registration under the Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any similar Federal statute then enforced, or any state securities law, required by reason of any transfer involved in such conversion), or listing on any domestic securities exchange, before such shares may be issued upon conversion, the Company will, at its expense and as expeditiously as possible, use its best efforts to cause such shares to be duly registered, listed or approved for listing on such domestic securities exchange, as the case may be. 5. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect. 6. NO RIGHTS AS SHAREHOLDER. This Warrant Agreement does not entitle the Warrantholder to any voting rights or other rights as a shareholder of the Company prior to the exercise of the Warrant. -3- 7. WARRANTHOLDER REGISTRY. The Company shall maintain a registry showing the name and address of the registered holder of this Warrant Agreement. 8. ADJUSTMENT RIGHTS. The purchase price per share and the number of shares of Preferred Stock purchasable hereunder are subject to adjustment, as follows: (a) Merger and Sale of Assets. If at any time there shall be a capital reorganization of the shares of the Company's stock (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), or a merger or consolidation of the Company with or into another corporation whether or not the Company is the surviving corporation, or the sale of all or substantially all of the Company's properties and assets to any other person (hereinafter referred to as a "Merger Event"), then, as a part of such Merger Event, lawful provision shall be made so that the Warrantholder shall thereafter be entitled to receive, upon exercise of the Warrant, the number of shares of preferred stock or other securities of the successor corporation resulting from such Merger Event, equivalent in value to that which would have been issuable if Warrantholder had exercised this Warrant immediately prior to the Merger Event. In any such case, appropriate adjustment (as determined in good faith by the Company's Board of Directors) shall be made in the application of the provisions of this Warrant Agreement with respect to the rights and interest of the Warrantholder after the Merger Event to the end that the provisions of this Warrant Agreement (including adjustments of the Exercise Price and number of shares of Preferred Stock purchasable) shall be applicable to the greatest extent possible. (b) Reclassification of Shares. If the Company at any time shall, by combination, reclassification, exchange or subdivision of securities or otherwise, change any of the securities as to which purchase rights under this Warrant Agreement exist into the same or a different number of securities of any other class or classes, this Warrant Agreement shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Warrant Agreement immediately prior to such combination, reclassification, exchange, subdivision or other change. (c) Subdivision or Combination of Shares. If the Company at any time shall combine or subdivide its Preferred Stock, the Exercise Price shall be proportionately decreased in the case of a subdivision, or proportionately increased in the case of a combination. (d) Stock Dividends. If the Company at any time shall pay a dividend payable in, or make any other distribution (except any distribution specifically provided for in the foregoing subsections (a) or (b)) of the Company's stock, then the Exercise Price shall be adjusted, from and after the record date of such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction (i) the numerator of which shall be the total number of all shares of the Company's stock outstanding immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of all shares of the Company's stock outstanding immediately after such dividend or distribution. The Warrantholder shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of shares of Preferred Stock (calculated to the nearest whole share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Preferred Stock issuable upon the exercise hereof immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. (e) Right to Purchase Additional Stock. If, the Warrantholder's total cost of equipment leased pursuant to the Leases exceeds $1,000,000, Warrantholder shall have the right to purchase from the Company, at the Exercise Price (adjusted as set forth herein), an additional number of shares, which number shall be determined by (i) multiplying -4- the amount by which the Warrantholder's total equipment cost exceeds $1,000,000 by 5.5%, and (ii) dividing the product thereof by the Exercise Price per share referenced above. (f) Antidilution Rights. Additional antidilution rights applicable to the Preferred Stock purchasable hereunder are as set forth in the Company's Certificate of Incorporation, as amended through the Effective Date, a true and complete copy of which is attached hereto as Exhibit IV (the "Charter"). The Company shall promptly provide the Warrantholder with any restatement, amendment, modification or waiver of the Charter. The Company shall provide Warrantholder with prior written notice of any issuance of its stock or other equity security to occur after the Effective Date of this Warrant, which notice shall include (a) the price at which such stock or security is to be sold, (b) the number of shares to be issued, and (c) such other information as necessary for Warrantholder to determine if a dilutive event has occurred. (g) Notice of Adjustments. If: (1) the Company shall declare any dividend or distribution upon its stock, whether in cash, property, stock or other securities; (ii) the Company shall offer for subscription prorata to the holders of any class of its Preferred or other convertible stock any additional shares of stock of any class or other rights; (iii) there shall be any Merger Event; (iv) there shall be an initial public offering; or (v) there shall be any voluntary dissolution, liquidation or winding up of the Company; then, in connection with each such event, the Company shall send to the Warrantholder: (A) at least twenty (20) days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution, subscription rights (specifying the date on which the holders of Preferred Stock shall be entitled thereto) or for determining rights to vote in respect of such Merger Event, dissolution, liquidation or winding up; (B) in the case of any such Merger Event, dissolution, liquidation or winding up, at least twenty (20) days' prior written notice of the date when the same shall take place (and specifying the date on which the holders of Preferred Stock shall be entitled to exchange their Preferred Stock for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding up); and (C) in the case of a public offering, the Company shall give the Warrantholder at least twenty (20) days written notice prior to the effective date thereof. Each such written notice shall set forth, in reasonable detail, (i) the event requiring the adjustment, (ii) the amount of the adjustment, (iii) the method by which such adjustment was calculated, (iv) the Exercise Price, and (v) the number of shares subject to purchase hereunder after giving effect to such adjustment, and shall be given by first class mail, postage prepaid, addressed to the Warrantholder, at the address as shown on the books of the Company. (h) Timely Notice. Failure to timely provide such notice required by subsection (f) above shall entitle Warrantholder to retain the benefit of the applicable notice period notwithstanding anything to the contrary contained in any insufficient notice received by Warrantholder. The notice period shall begin on the date Warrantholder actually receives a written notice containing all the information specified above. 9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. (a) Reservation of Preferred Stock. The Preferred Stock issuable upon exercise of the Warrantholder's rights has been duly and validly reserved and, when issued in accordance with the provisions of this Warrant Agreement, will be validly issued, fully paid and non-assessable, and will be free of any taxes, liens, charges or encumbrances of any nature whatsoever; provided, however, that the Preferred Stock issuable pursuant to this Warrant Agreement may be subject to restrictions on transfer under state and/or Federal securities laws. The Company has made available to the Warrantholder true, correct and complete copies of its Charter and Bylaws, as amended. The issuance of certificates for shares of Preferred Stock upon exercise of the Warrant Agreement shall be made without charge to the Warrantholder for any issuance tax in respect thereof, or other cost incurred by the Company in connection with such exercise and the related issuance of shares of Preferred Stock. The Company shall not be required to pay any tax which may be payable in respect of any transfer involved and the issuance and delivery of any certificate in a name other than that of the Warrantholder. -5- (b) Due Authority. The execution and delivery by the Company of this Warrant Agreement and the performance of all obligations of the Company hereunder, including the issuance to Warrantholder of the right to acquire the shares of Preferred Stock, have been duly authorized by all necessary corporate action on the part of the Company, and the Leases and this Warrant Agreement are not inconsistent with the Company's Charter or Bylaws, do not contravene any law or governmental rule, regulation or order applicable to it, do not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument to which it is a party or by which it is bound, and the Leases and this Warrant Agreement constitute legal, valid and binding agreements of the Company, enforceable in accordance with their respective terms. (c) Consents and Approvals. No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, Federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Warrant Agreement, except for the filing of notices pursuant to Regulation D under the 1933 Act and any filing required by applicable state securities law, which filings will be effective by the time required thereby. (d) Issued Securities. All issued and outstanding shares of Common Stock, Preferred Stock or any other securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable. All outstanding shares of Common Stock, Preferred Stock and any other securities were issued in full compliance with all Federal and state securities laws. In addition: (i) The authorized capital of the Company consists of (A) 10,000,000 shares of Common Stock, of which 3,988,560 shares are issued and outstanding, (B) 473,757 shares of Series A preferred stock, of which 473,757 shares are issued and outstanding , (C) 902,500 shares of Series B preferred stock, of which 875,000 are issued and outstanding and (D) 875,000 shares of Series B-1 preferred stock, none of which are issued and outstanding.. (ii) The Company has reserved 1,841,542 shares of Common Stock for issuance under its Stock Option Plan, under which 1,364,784 options are outstanding as of March 31, 1998. There are no other options, warrants, conversion privileges or other rights presently outstanding to purchase or otherwise acquire any authorized but unissued shares of the Company's capital stock or other securities of the Company. (iii) In accordance with the Company's Articles of Incorporation, except as provided in the Investment Agreement dated February 28, 1991 between the Company and Norwest Equity Partner IV and the Series B Convertible Preferred Stock Purchase Agreement dated March 26, 1998 between the Company and the purchasers named therein, no shareholder of the Company has preemptive rights to purchase new issuances of the Company's capital stock. (e) Insurance. The Company has in full force and effect insurance policies, with extended coverage, insuring the Company and its property and business against such losses and risks, and in such amounts, as are customary for corporations engaged in a similar business and similarly situated and as otherwise may be required pursuant to the terms of any other contract or agreement. (f) Other Commitments to Register Securities. Except as set forth in this Warrant Agreement, the Investment Agreement dated February 28, 1991 between the Company and Norwest Equity Partner IV and the Series B Convertible Preferred Stock Purchase Agreement dated March 26, 1998 between the Company and the purchasers named therein, the Company is not, pursuant to the terms of any other agreement currently in existence, under any obligation to register under the 1933 Act any of its presently outstanding securities or any of its securities which may hereafter be issued. (g) Exempt Transaction. Subject to the accuracy of the Warrantholder's representations in Section 10 hereof, the issuance of the Preferred Stock upon exercise of this Warrant will constitute a transaction exempt from (i) -6- the registration requirements of Section 5 of the 1933 Act, in reliance upon Section 4(2) thereof, and (ii) the qualifi cation requirements of the applicable state securities laws. (h) Compliance with Rule 144. At the written request of the Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise of the Warrant in compliance with Rule 144 promulgated by the Securities and Exchange Commission, the Company shall furnish to the Warrantholder, within ten days after receipt of such request, a written statement confirming the Company's compliance with the filing requirements of the Securities and Exchange Commission as set forth in such Rule, as such Rule may be amended from time to time. 10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER. This Warrant Agreement has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder: (a) Investment Purpose. The right to acquire Preferred Stock or the Preferred Stock issuable upon exercise of the Warrantholder's rights contained herein will be acquired for investment and not with a view to the sale or distribution of any part thereof, and the Warrantholder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption. (b) Private Issue. The Warrantholder understands (i) that the Preferred Stock issuable upon exercise of this Warrant is not registered under the 1933 Act or qualified under applicable state securities laws on the ground that the issuance contemplated by this Warrant Agreement will be exempt from the registration and qualifications requirements thereof, and (ii) that the Company's reliance on such exemption is predicated on the representations set forth in this Section 10. (e) Disposition of Warrantholder's Rights. In no event will the Warrantholder make a disposition of any of its rights to acquire Preferred Stock or Preferred Stock issuable upon exercise of such rights unless and until (i) it shall have notified the Company of the proposed disposition, and (ii) if requested by the Company, it shall have furnished the Company with an opinion of counsel (which counsel may either be inside or outside counsel to the Warrantholder) satisfactory to the Company and its counsel to the effect that (A) appropriate action necessary for compliance with the 1933 Act has been taken, or (B) an exemption from the registration requirements of the 1933 Act is available. Notwithstanding the foregoing, the restrictions imposed upon the transferability of any of its rights to acquire Preferred Stock or Preferred Stock issuable on the exercise of such rights do not apply to transfers from the beneficial owner of any of the aforementioned securities to its nominee or from such nominee to its beneficial owner, and shall terminate as to any particular share of Preferred Stock when (1) such security shall have been effectively registered under the 1933 Act and sold by the holder thereof in accordance with such registration or (2) such security shall have been sold without registration in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been issued to the Warrantholder at its request by the staff of the Securities and Exchange Commission or a ruling shall have been issued to the Warrantholder at its request by such Commission stating that no action shall be recommended by such staff or taken by such Commission, as the case may be, if such security is transferred without registration under the 1933 Act in accordance with the conditions set forth in such letter or ruling and such letter or ruling specifies that no subsequent restrictions on transfer are required. Whenever the restrictions imposed hereunder shall terminate, as hereinabove provided, the Warrantholder or holder of a share of Preferred Stock then outstanding as to which such restrictions have terminated shall be entitled to receive from the Company, without expense to such holder, one or more new certificates for the Warrant or for such shares of Preferred Stock not bearing any restrictive legend. (d) Financial Risk. The Warrantholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, and has the ability to bear the economic risks of its investment. (e) Risk of No Registration. The Warrantholder understands that if the Company does not register with the Securities and Exchange Commission pursuant to Section 12 of the 1934 Act (the "1934 Act"), or file reports -7- pursuant to Section 15(d), of the 1934 Act", or if a registration statement covering the securities under the 1933 Act is not in effect when it desires to sell (i) the rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to purchase, it may be required to hold such securities for an indefinite period. The Warrantholder also understands that any sale of its rights of the Warrantholder to purchase Preferred Stock or Preferred Stock which might be made by it in reliance upon Rule 144 under the 1933 Act may be made only in accordance with the terms and conditions of that Rule. (f) Accredited Investor. Warrantholder is an "accredited investor" within the meaning of the Securities and Exchange Rule 501 of Regulation D, as presently in effect. 11. TRANSFERS. Subject to the terms and conditions contained in Section 10 hereof, this Warrant Agreement and all rights hereunder are transferable in whole or in part by the Warrantholder and any successor transferee, provided, however, in no event shall the number of transfers of the rights and interests in all of the Warrants exceed three (3) transfers. The transfer shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer. 12. MISCELLANEOUS. (a) Effective Date. The provisions of this Warrant Agreement shall be construed and shall be given effect in all respects as if it had been executed and delivered by the Company on the date hereof. This Warrant Agreement shall be binding upon any successors or assigns of the Company. (b) Attorney's Fees. In any litigation, arbitration or court proceeding between the Company and the Warrantholder relating hereto, the prevailing party shall be entitled to attorneys' fees and expenses and all costs of proceedings incurred in enforcing this Warrant Agreement. (c) Governing Law. This Warrant Agreement shall be governed by and construed for all purposes under and in accordance with the laws of the State of Illinois. (d) Counterparts. This Warrant Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (e) Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, facsimile transmission (provided that the original is sent by personal delivery or mail as hereinafter set forth) or seven (7) days after deposit in the United States mail, by registered or certified mail, addressed (i) to the Warrantholder at 6111 North River Road, Rosemont, Illinois 60018, Attention: James Labe, Venture Group, cc: Legal Department, Attention.: General Counsel, (and/or, if by facsimile, (847) 518-5465 and (847) 518-5088) and (ii) to the Company at 4131 Highway 52 North, Suite G111, Rochester, MN 55901-3144, Attention: Craig W. Allen (and/or if by facsimile, (507) 287-2803 or at such other address as any such party may subsequently designate by written notice to the other party. (f) Remedies. In the event of any default hereunder, the non-defaulting party may proceed to protect and enforce its rights either by suit in equity and/or by action at law, including but not limited to an action for damages as a result of any such default, and/or an action for specific performance for any default where Warrantholder will not have an adequate remedy at law and where damages will not be readily ascertainable. The Company expressly agrees that it shall not oppose an application by the Warrantholder or any other person entitled to the benefit of this Agreement requiring specific performance of any or all provisions hereof or enjoining the Company from continuing to commit any such breach of this Agreement. -8- (g) No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Warrantholder against impairment. (h) Survival. The representations, warranties, covenants and conditions of the respective parties contained herein or made pursuant to this Warrant Agreement shall survive the execution and delivery of this Warrant Agreement. (i) Severability. In the event any one or more of the provisions of this Warrant Agreement shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Warrant Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision, which comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision. (j) Amendments. Any provision of this Warrant Agreement may be amended by a written instrument signed by the Company and by the Warrantholder. (k) Additional Documents. The Company, upon execution of this Warrant Agreement, shall provide the Warrantholder with certified resolutions with respect to the representations, warranties and covenants set forth in subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase price for the Leases referenced in the preamble of this Warrant Agreement exceeds $1,000,000, the Company will also provide Warrantholder with an opinion from the Company's counsel with respect to those same representations, warranties and covenants. The Company shall also supply such other documents as the Warrantholder may from time to time reasonably request. IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be executed by its officers thereunto duly authorized as of the Effective Date. Company: SHOWCASE CORPORATION By: /s/ Craig W. Allen ------------------------------ Title: CFO --------------------------- Warrantholder: COMDISCO, INC. By: /s/ James P. Labe ------------------------------ James P. Labe Title: President --------------------------- COMDISCO VENTURES DIVISION -9- EXHIBIT I NOTICE OF EXERCISE To: _________________ (1) The undersigned Warrantholder hereby elects to purchase _____ shares of the Series ___ Preferred Stock of __________, pursuant to the terms of the Warrant Agreement dated the ___ day of __________, 19__ (the "Warrant Agreement") between __________ and the Warrantholder, and tenders herewith payment of the purchase price for such shares in full, together with all applicable transfer taxes, if any. (2) In exercising its rights to purchase the Series ___ Preferred Stock of __________, the undersigned hereby confirms and acknowledges the investment representations and warranties made in Section 10 of the Warrant Agreement. (3) Please issue a certificate or certificates representing said shares of Series ___ Preferred Stock in the name of the undersigned or in such other name as is specified below. ________________________ (Name) ________________________ (Address) Warrantholder: COMDISCO, INC. By:______________________ Title:___________________ Date:____________________ -10- EXHIBIT II ACKNOWLEDGMENT OF EXERCISE The undersigned _______________________________, hereby acknowledge receipt of the "Notice of Exercise from Comdisco, Inc., to purchase _____ shares of the Series _____ Preferred Stock of ________________________, pursuant to the terms of the Warrant Agreement, and further acknowledges that _____ shares remain subject to purchase under the terms of the Warrant Agreement. Company: By: ------------------------- Title: ---------------------- Date: ----------------------- -11- EXHIBIT III TRANSFER NOTICE (To transfer or assign the foregoing Warrant Agreement execute this form and supply required Information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights evidenced thereby are hereby transferred and assigned to - -------------------------------------------------------------------------------- (Please Print) whose address is --------------------------------------------------------------- - -------------------------------------------------------------------------------- Dated: ----------------------------------- Holder's Signature: ---------------------- Holder's Address: ------------------------ ----------------------------------------- Signature Guaranteed: -------------- NOTE: The signature to this Transfer Notice must correspond with the name as it appears on the face of the Warrant Agreement, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant Agreement. -12- EX-4.3 7 REGISTRATION RIGHTS PROVISIONS EXHIBIT 4.3 REGISTRATION RIGHTS PROVISIONS 1. Registration of Stock. 1.1 Definitions. "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Common Shares" shall mean the shares of Common Stock, par value $.01 per share ("Common Stock"), authorized by the Company's Amended and Restated Articles of Incorporation and any additional shares of Common Stock which may be authorized in the future by the Company, and any stock into which such Common Shares may hereafter be changed. "Company" shall mean ShowCase Corporation, a Minnesota corporation. "Preferred Stock" shall mean the outstanding shares of Series A Preferred Stock and Series B Preferred Stock of the Company and any securities (other than Common Shares) into which such shares may hereafter be changed. "Public Offering" shall mean any offering of Common Shares to the public, either on behalf of the Company or any of its security holders, pursuant to an effective registration statement under the Securities Act or any event causing the Company to have any class of its equity securities registered with the Commission pursuant to the Securities Exchange Act of 1934, as amended. "Registrable Securities" shall mean (i) the Common Shares issued upon conversion of Preferred Stock and (ii) any additional securities issued with respect to the above described securities upon any stock split, stock dividend, recapitalization, or similar event, provided, however, that none of the above described securities shall be treated as Registrable Securities if (a) a registration statement covering the sale of such Registrable Securities has been declared effective under the Securities Act and the Registrable Securities have been sold in accordance with the registration statement, (b) they shall be eligible to be distributed to the public pursuant to Rule 144 promulgated under the Securities Act in a single three-month period by the holder thereof, (c) they have been sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale or (d) they cease to be outstanding. "Registration Expenses" shall mean the expenses described in Section 1.6. "Series A Preferred Stock" shall mean the shares of the Company's Series A Convertible Preferred Stock, $.01 par value per share. "Series B Preferred Stock" shall mean the shares of the Company's Series B Convertible Preferred Stock, $.01 par value per share. "Securities Act" shall mean the Securities Act of 1933, as amended. 1.2 Demand Registration. (a) Subject to Section 1.2(d) and Section 1.2(e), if at any time the Company shall receive a written request therefor from the record holder or holders of an aggregate of at least 51% of the Registrable Securities, the Company shall prepare and file a registration statement under the Securities Act covering such number of Registrable Securities as are the subject of such request and shall use its best efforts to cause such registration statement to become effective. Upon the receipt of a registration request meeting the requirements of this Section 1.2(a), the Company shall promptly give written notice to all other record holders of Registrable Securities that such registration is to be effected. The Company shall include in such registration statement such additional Registrable Securities as such other record holders request within thirty (30) days after the date of the Company's written notice to them. If (x) (i) the holders of a majority of the Registrable Securities for which registration has been requested pursuant to this Section 1.2(a) determine for any reason not to proceed with the registration at any time before the related registration statement has been declared effective by the Commission, (ii) such registration statement, if theretofore filed with the Commission, is withdrawn and (iii) the holders of the Registrable Securities subject to such registration statement agree to bear their own Registration Expenses incurred in connection therewith and to reimburse the Company for the Registration Expenses incurred by it in such connection or (y) if such registration statement, if theretofore filed with the Commission, is withdrawn at the initiative of the Company, then the holders of the Registrable Securities shall not be deemed to have exercised one of their two demand registration rights pursuant to this Section 1.2(a). (b) At the request of the holders of a majority of the Registrable Securities to be registered, the method of disposition of all Registrable Securities included in a registration under Section 1.2(a) shall be an underwritten offering. The managing underwriter of any such offering shall be selected by the holders of a majority of the Registrable Securities for which registration has been requested and shall be reasonably acceptable to the Company. Neither the Company nor any holder of securities (other than Registrable Securities) of the Company shall have the right to include any securities in a registration statement to be filed as part of a demand registration pursuant to Section 1.2(a) or Section 1.4 unless (i) such securities are of the same class as the Registrable Securities to be included in the registration, (ii) the holders of a majority of the Registrable Securities to be registered consent to such inclusion in -2- writing, (iii) if such registration is an underwritten offering, the Company and such other holders agree in writing to sell their securities on the same terms and conditions as apply to the Registrable Securities being sold pursuant to the request for registration and (iv) the inclusion of such securities will not, in the judgment of any managing underwriter of the Public Offering, interfere with the successful marketing of the Registrable Securities. (c) The Company shall be obligated to prepare, file and cause to be effective only two (2) registration statements (other than on Form S-3 as provided in Section 1.4 hereof) pursuant to Section 1.2(a). (d) Notwithstanding the foregoing, the Company may defer the filing of any registration statement or delay the effectiveness of any such registration statement requested pursuant to Section 1.2(a) for a period not to exceed (i) ninety (90) days if in the good faith judgment of the Company's Board of Directors effecting the registration would be seriously detrimental to the Company or its shareholders or (ii) ninety days (90) days if a request for registration is received during the period starting with the date sixty (60) days prior to the Company's good faith estimate of the date of the filing of a Company-initiated registration subject to Section 1.3 below, provided that the company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective. If such a determination is made, the Company shall furnish to all record holders of Registrable Securities a certificate signed by the President of the Company stating that the Board of Directors has made such a determination. (e) If, at the time any written request for registration is received by the Company pursuant to this Section 1.2, the Company determined to proceed with the actual preparation and filing of a registration statement under the Securities Act in connection with the proposed offer and sale for cash of any of its securities by it or any of its security holders, such written request shall be deemed to have been given pursuant to Section 1.3 hereof rather than this Section 1.2, and the rights of the holders of Registrable Securities covered by such written request shall be governed by Section 1.3 hereof. 1.3 (a) Piggyback Registration. Each time the Company shall determine to proceed with the actual preparation and filing of a registration statement under the Securities Act in connection with the proposed offer and sale for money of any of its securities by it or any of its security holders (other than a registration statement on Form S-8, Form S-4 or other limited purpose form), the Company will give written notice of its determination to all record holders of Registrable Securities. Upon the written request of a record holder of any shares of Registrable Securities given within 30 days after the date of mailing of any such notice from the Company, the -3- Company will, except as herein provided, cause all the Registrable Securities the registration of which is requested to be included in such registration statement, all to the extent requisite to permit the sale or other disposition by the prospective seller or sellers of the Registrable Securities to be so registered; provided, however, that nothing herein shall prevent the Company from, at any time, abandoning or delaying any registration initiated by it; and provided, further, that if the Company determines not to proceed with a registration after the registration statement has been filed with the Commission and the Company's decision not to proceed is primarily based upon the anticipated public offering price of the securities to be sold by the Company, the Company shall promptly complete the registration for the benefit of those selling security holders who wish to proceed with a Public Offering of their Registrable Securities and who bear all of the Registration Expenses in excess of $25,000 incurred by the Company as the result of such registration after the Company has decided not to proceed. In the discretion of the holders of the Registrable Securities to be included in the registration (provided that such holders are the record holders of at least 51% of the Registrable Securities), such registration may count as a demand registration under Section 1.2 (if it otherwise meets the requirements of Section 1.2(a)) for which the Company will pay the Registration Expenses. (b) If any registration pursuant to this Section 1.3 is underwritten in whole or in part, the Company may require that the Registrable Securities included in the registration be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters. If, (i) in the event that the Registrable Securities requested for inclusion pursuant to this Section 1.3 would constitute more than 25% of the total number of shares to be included in the proposed underwritten Public Offering, and if in the good faith judgment of the managing underwriter of the Public Offering, the inclusion of all of the Registrable Securities originally covered by requests for registration would reduce the number of shares to be offered by the Company or interfere with the successful marketing of the shares offered by the Company, the number of Registrable Securities to be included in the Offering may be reduced in the following manner: first, securities held by officers and directors of the Company (other than Registrable Securities) shall be excluded from such underwritten public offering to the extent required by the managing underwriter, second, any securities, other than Registrable Securities, proposed to be sold in the Public Offering by persons other than the Company shall be excluded and third, if a further reduction in the Offering is required, the Registrable Securities requested to be included in the Offering shall be reduced, pro rata, among the requesting holders thereof in proportion to the number of Registrable Securities included in their respective requests for registration; provided, however that after any such required reduction the Registrable Securities to be included in such Public Offering shall constitute at least 25% of the total number of shares to be included in such Public Offering. The Registrable Securities which are thus excluded from the underwritten -4- Public Offering shall be withheld from the market by the holders thereof for a period which the managing underwriter reasonably determines is necessary in order to effect the Public Offering. 1.4 Short Form Registration. In addition to the registration rights provided in Sections 1.2 and 1.3, if the Company qualifies for the use of Form S-3 (or any similar registration form), the Company shall at the request of holders of Registrable Securities from time to time register Registrable Securities on behalf of such holder or holders on such form; provided, however, that the Company shall not be required to effect any such registration pursuant to this Section 1.4 if the holders of Registrable Securities, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters' discounts or commissions) of less than $1,000,000. The Company shall be obligated to prepare, file and cause to be effective only two (2) registration statements pursuant to this Section 1.4 per calendar year. The Company shall give notice of any proposed Form S-3 registration to the record holders of Registrable Securities who did not join in the request therefor and afford them a reasonable opportunity to do so. 1.5 Registration Procedures. If and whenever the Company is required by the provisions of Sections 1.2, 1.3 or 1.4 to effect the registration of shares of Registrable Securities under the Securities Act, the Company will use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended methods of disposition specified by the holders participating therein. Without limiting the foregoing, the Company in each such case will, as expeditiously as possible: (a) prepare and file with the Commission the requisite registration statement to effect such registration (including such audited financial statements as may be required by the Securities Act or the rules and regulations promulgated thereunder) and use its best efforts to cause such registration statement to become and remain effective for such period as may be reasonably necessary to affect the sale of such securities provided, that such period shall not exceed one hundred eighty (180) days; provided, further, that as far in advance as practical before filing such registration statement or any amendment thereto required by Section 1.5(b), the Company will furnish to counsel for the requesting holders copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits), and any such holder shall have the opportunity to object to any information pertaining solely to such holder that is contained therein and the Company will make the corrections reasonably requested by such holder with respect to such information prior to filing any such registration statement or amendment; -5- (b) prepare and file with the Commission such amendments and supplements to such registration statement and any prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration statement and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities included in such registration statement, in accordance with the intended methods of disposition thereof, until the earlier of (i) such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement and (ii) one hundred eighty (180) days after such registration statement becomes effective; (c) promptly notify each requesting holder and the underwriter or underwriters, if any: (i) when such registration statement or any prospectus used in connection therewith, or any amendment or supplement thereto, has been filed and, with respect to such registration statement or any post-effective amendment thereto, when the same has become effective; (ii) of any written request by the Commission for amendments or supplements to such registration statement or prospectus; (iii) of the notification to the Company by the Commission of its initiation or threatening of any proceeding with respect to the issuance by the Commission of, or of the issuance by the Commission of, any stop order suspending the effectiveness of such registration statement and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued; and (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction; (d) furnish to each seller of Registrable Securities included in such registration statement such number of conformed copies of such registration statement, each amendment and supplement thereto, the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 promulgated under the Securities Act relating to such seller's Registrable Securities, and such other documents, as such seller may reasonably request to facilitate the disposition of its Registrable Securities; -6- (e) use its best efforts to register or qualify all Registrable Securities included in such registration statement under such other securities or blue sky laws of such jurisdictions as each holder of Registrable Securities thereof shall reasonably request within twenty (20) days following the original filing of such registration statement and to keep such registration or qualification in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such holder, except that the Company shall not for any such purpose be required (i) to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this paragraph (e) be obligated to be so qualified or (ii) to consent to general service of process in any such jurisdiction; (f) use its best efforts to cause all Registrable Securities included in such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable each holder thereof to consummate the disposition of such Registrable Securities; (g) if and to the extent any of the following are obtained by or furnished to the Company or the underwriters, furnish to any holder who so requests a signed counterpart, addressed to such holder (and the underwriters, if any), of (i) an opinion of counsel for the Company, dated the effective date of such registration statement (or, if such registration includes an underwritten Public Offering, dated the date of any closing under the underwriting agreement), covering such matters as such underwriters and holder or holders may reasonably request, and (ii) a "cold comfort" letter or letters, dated the effective date of such registration statement (and, if such registration includes an underwritten Public Offering, dated the date of any closing under the underwriting agreement), signed by the certified independent public accountants of the Company, covering such matters as such underwriters and holder or holders may reasonably request; provided, however, that the obligation to furnish a "cold comfort" letter or letters shall only be imposed to the extent permitted under any then-prevailing rules of accounting procedure; (h) prepare and promptly file with the Commission and promptly notify each holder whose Registrable Securities are included in such registration statement of the filing of such amendment or supplement to such registration statement -7- or prospectus as may be necessary to correct any statements or omissions if, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, any event shall have occurred, the result of which any prospectus included in such registration statement, as then in effect, would include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and at the request of any such holder promptly prepare and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (i) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission; (j) provide a transfer agent and registrar for all Registrable Securities included in such registration statement not later than the effective date of such registration statement; and (k) use its best efforts to cause all Registrable Securities included in such registration statement to be listed, upon official notice of issuance, on any securities exchange or quotation system on which any of the securities of the same class as the Registrable Securities are then listed. (l) prepare and file with the Commission, promptly upon the request of any such holders, any amendments or supplements to such registration statement or prospectus which, in the opinion of counsel for such holders (and concurred in by counsel for the Company), are required under the Securities Act or the rules and regulations thereunder in connection with the distribution of the Registrable Securities by such holder. (m) The Company may require each holder whose Registrable Securities are being registered to, and each such holder, as a condition to including Registrable Securities in such registration, shall, furnish the Company and the underwriters with such information regarding such holder and the distribution of such securities as the Company and the underwriters may from time to time reasonably request in writing in connection with such registration. At any time during the effectiveness of any registration statement covering Registrable Securities offered by a holder, if such holder becomes aware of any change materially affecting the accuracy of the information contained in such registration statement or the prospectus (as then -8- amended or supplemented) relating to such holder, it will immediately notify the Company of such change. (n) Upon receipt of any notice from the Company of the happening of any event of the kind described in paragraph (h) of this Section 1.5, each holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder receives the copies of the supplemented or amended prospectus contemplated by paragraph (h) of this Section 1.5 and, if so directed by the Company, shall deliver to the Company all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. 1.6 Expenses. With respect to any registration requested pursuant to Section 1.2 (except as otherwise provided in such Section with respect to a registration voluntarily terminated at the request of the requesting holders of Registrable Securities), Section 1.3 (except as otherwise provided in such Section with respect to a registration continued by selling security holders who wish to proceed with a Public Offering that is withdrawn by the Company) or Section 1.4, the Company shall bear all of the expenses ("Registration Expenses") incident to the Company's performance of or compliance with its obligations under this Agreement in connection with such registration including, without limitation, all registration, filing, securities exchange or quotation system listing and NASD fees, all registration, filing, qualification and other fees and expenses or complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, premiums and other costs of any policies of insurance against liabilities arising out of the Public Offering of the Registrable Securities being registered obtained by the Company (it being understood that the Company shall have no obligation to obtain such insurance), fees and disbursements of counsel for the underwriter or underwriters of such Registrable Securities (if the Company and/or selling security holders are required to bear such fees and disbursements), all internal Company expenses, all legal fees and disbursements and other expenses of complying with state securities or blue sky laws of any jurisdiction in which the securities to be offered are to be registered or qualified and fees and disbursements of underwriters customarily paid by issuers or sellers of securities. Fees and disbursements of counsel and accountants, underwriting discounts and commissions and transfer taxes, if any, relating to the Registrable Securities being registered shall in any registration be payable by the holders of the Registrable Securities being registered, pro rata in proportion to the number of Registrable Securities being sold by them. -9- 1.7 Delay of Registration. No holder of Registrable Securities shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. 1.8 Indemnification. (a) The Company will, to the full extent permitted by law, indemnify and hold harmless each holder of Registrable Securities which are included in a registration statement pursuant to the provisions of this Section 1 and its directors, officers and partners and each other person, if any, who controls such holder within the meaning of the Securities Act from and against any and all losses, claims, damages, expenses or liabilities, (collectively, "Losses") to which such holder or any such director, officer, partner or controlling person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in a registration statement prepared and filed hereunder, any preliminary, final or summary prospectus contained therein or any amendment or supplement thereto or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the circumstances in which they were made) not misleading and the Company will reimburse the holder and each such director, officer, partner and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending against any such Losses (or action or proceeding, whether commenced or threatened, in respect thereof); provided, however, that the Company will not be liable in any such case to the extent that any such Losses arise out of or are based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in conformity with written information furnished by such holder specifically for use in the preparation of the registration statement or (ii) such holder's failure to send or give a copy of the final prospectus to the persons asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or any such director, officer, partner or controlling person of such holder and shall survive the transfer of such securities by such holder. The Company shall also indemnify each other person who participates (including as an underwriter) in the offering or sale of Registrable Securities, their officers and directors, and partners, and each other person, if any, who controls any such participating person within the meaning of the Securities Act to the same extent as provided above with respect to holders of Registrable Securities. -10- (b) Each holder of shares of Registrable Securities which are included in a registration pursuant to the provisions of this Section 1 will, to the full extent permitted by law, indemnify and hold harmless the Company, its officers, directors and each other person, if any, who controls the Company within the meaning of the Securities Act from and against any and all Losses to which the Company or any such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in a registration statement prepared and filed hereunder, any preliminary, final or summary prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon and in strict conformity with written information furnished by such holder specifically for use in the preparation of such registration statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person of the Company. The holder of Registrable Securities included in a registration statement shall also indemnify each other person who participates (including as an underwriter) in the offering or sale of Registrable Securities, their officers and directors, and partners, and each other person, if any, who controls any such participating person within the meaning of the Securities Act to the same extent as provided above with respect to the Company. In no event shall the liability of any holder under this Section 1.7(b) exceed the net proceeds received by such holder from the sale of their Registrable Securities. Each holder under this Section 1.8 shall be severally, not jointly, liable. (c) Promptly after receipt by an indemnified party pursuant to the provisions of paragraph (a) or (b) of this Section 1.7 of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of paragraph (a) or (b), promptly notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against any indemnified party, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that if the defendants in any action include both the indemnified -11- party and the indemnifying party and the indemnified party reasonably concludes that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, or if there is a conflict of interest that would prevent counsel for the indemnifying party from also representing the indemnified party, the indemnified party shall have the right to select separate counsel to participate in the defense of such action on behalf of the indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of said paragraph (a) or (b) for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof, other than reasonable costs of investigation, unless (i) the indemnified party shall have employed counsel in accordance with the proviso of the preceding sentence, (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel for the indemnified parties with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of additional counsel or counsels for the indemnified parties. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation without the consent of the indemnified party. No indemnifying party shall be subject to any liability for any settlement made without its consent. An indemnified party may at any time elect to participate in the defense of any claim or proceeding at its own expense. (d) The obligations of the Company and holders of Registrable Securities under this Section 1.8 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise. 1.9 Underwritten Offerings. If a distribution of Registrable Securities pursuant to a registration statement is to be underwritten, the holders whose Registrable Securities are to be distributed by such underwriters shall be parties to such underwriting agreement. No requesting holder may participate in such underwritten offering unless such holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers -12- of attorney, indemnities (as they relate to statements, omissions, representations or warranties of such holder regarding solely such holder and the Registrable Securities owned by it) and other documents reasonably required under the terms of such underwriting agreement. If any requesting holder disapproves of the terms of an underwriting, such holder may elect to withdraw therefrom and from such registration by notice to the Company and the managing underwriter, and each of the remaining requesting holders shall be entitled to increase the number of Registrable Securities being registered to the extent of the Registrable Securities so withdrawn in the proportion which the number of Registrable Securities being registered by such remaining requesting holder bears to the total number of Registrable Securities being registered by all such remaining requesting holders. 1.10 Stand-Off Agreement. Each holder of Registrable Securities agrees, in connection with the Company's initial Public Offering, upon request of the Company or the underwriters managing such Public Offering, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Common Shares of the Company other than those included in the registration without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not exceeding 120 days) from the effective date of such registration as may be requested by the underwriters; provided, however, that all of the officers and directors of the Company who own stock of the Company must also agree to not less onerous restrictions. 1.11 Amendment of Registration Rights. Without the written consent of the holders of more than 50% of the then outstanding Registrable Securities, the Company shall not amend this Section 1. 1.12 Registration Rights of Transferees. The registration rights granted to the holder of Registrable Securities pursuant to this Section 1 shall also be for the benefit of, and enforceable by, any subsequent holder of Registrable Securities, whether or not an express assignment of such rights to any such subsequent holder is made, so long as such subsequent holder acquires at least five percent (5%) of the Registrable Securities then outstanding. -13- EX-10.1 8 AMENDED 1991 LONG-TERM INCENTIVE STOCK OPTION PLAN EXHIBIT 10.1 AMENDED SHOWCASE CORPORATION 1991 LONG-TERM INCENTIVE AND STOCK OPTION PLAN Section 1. Purpose of Plan. This Amended Plan shall be known as the "AMENDED SHOWCASE CORPORATION 1991 LONG-TERM INCENTIVE AND STOCK OPTION PLAN" and is hereinafter referred to as the "Plan". The purpose of the Plan is to aid in maintaining and developing personnel capable of assuring the future success of Showcase Corporation, a Minnesota corporation (the "Company"), to offer such personnel additional incentives to put forth maximum efforts for the success of the business, and to afford them an opportunity to acquire a proprietary interest in the Company through stock options and other long-term incentive awards as provided herein. Options granted under this Plan may be either incentive stock options ("Incentive Stock Options") within the meaning of Section 422 of the Internal Revenue Code of 1986 (the "Code"), or options that do not qualify as Incentive Stock Options. Awards granted under this Plan shall be SARs, restricted stock or performance awards as hereinafter described. With respect to outstanding Incentive Stock Options at the time of amendment of this Plan, such options shall continue to be governed by the terms of the plan prior to this amendment. Section 2. Stock Subject to Plan. Subject to the provisions of Section 16 hereof, the stock to be subject to options or other awards under the Plan shall be the Company's authorized common shares, par value $0.01 per share (the "Common Shares"). Such Common Shares may be either authorized but unissued shares, or issued shares which have been reacquired by the Company. Subject to adjustment as provided in Section 16 hereof, the maximum number of shares on which options may be exercised or other awards issued under this Plan shall be 1,281,524 shares. If an option or award under the Plan expires, or for any reason is terminated or unexercised with respect to any shares, such shares shall again be available for options or awards thereafter granted during the term of the Plan. Section 3. Administration of Plan. (a) The Plan shall be administered by the Board of Directors of the Company or a committee thereof. The members of any such committee shall be appointed by and serve at the pleasure of the Board of Directors. (The group administering the Plan shall hereinafter be referred to as the "Committee".) (b) The Committee shall have plenary authority in its discretion, but subject to the express provisions of the Plan: (i) to determine the purchase price of the Common Stock covered by each option or award, (ii) to determine the employees to whom and the time or times at which such options and awards shall be granted and the number of shares to be subject to each, (iii) to determine the form of payment to be made upon the exercise of an SAR or in connection with performance awards, either cash, Common Shares of the Company or a combination thereof, (iv) to determine the terms of exercise of each option and award, (v) to accelerate the time at which all or any part of an option or award may be exercised, (vi) to amend or modify the terms of any option or award with the consent of the optionee, (vii) to interpret the Plan, (viii) to prescribe, amend and rescind rules and regulations relating to the Plan, (ix) to determine the terms and provisions of each option and award agreement under the Plan (which agreements need not be identical), including the designation of those options intended to be Incentive Stock Options, and (x) to make all other determinations necessary or advisable for the administration of the Plan, subject to the exclusive authority of the Board of Directors under Section 17 herein to amend or terminate the Plan. The Committee's determinations on the foregoing matters, unless otherwise disapproved by the Board of Directors of the Company, shall be final and conclusive. (c) The Committee shall select one of its members as its Chair and shall hold its meetings at such times and places as it may determine. A majority of its members shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The grant of an option or award shall be effective only if a written agreement shall have been duly executed and delivered by and on behalf of the Company following such grant. The Committee may appoint a Secretary and may make such rules and regulations for the conduct of its business as it shall deem advisable. Section 4. Eligibility and Grant. (a) Eligibility. Incentive Stock Options may only be granted under this Plan to any full or part-time employee (which term as used herein includes, but is not limited to, officers and directors who are also employees) of the Company and of its present and future subsidiary corporations within the meaning of Section 424(f) of the Code (herein called "subsidiaries"). Full or part-time employees, directors who are not employees, consultants or independent contractors to the Company or one of its subsidiaries or affiliates shall be eligible to receive options which do not qualify as Incentive Stock Options and awards. In determining the persons to whom options and awards shall be granted and the number of shares subject to each, the Committee may take into account the nature of services rendered by the respective employees or consultants, their present and potential contributions to the success of the Company and such other factors as the Committee in its discretion shall deem relevant. (b) Grant of Additional Options. A person who has been granted an option or award under this Plan may be granted additional options or awards under the Plan if the Committee shall so determine; provided, however, that to the extent the aggregate fair market value (determined at the time the Incentive Stock Option is granted) of the Common Shares with -2- respect to which all Incentive Stock Options are exercisable for the first time by an employee during any calendar year (under all plans described in subsection (d) of Section 422 of the Code of his or her employer corporation and its parent and subsidiary corporations) exceeds $100,000, such options shall be treated as options that do not qualify as Incentive Stock Options. Nothing in the Plan or in any agreement thereunder shall confer on any employee any right to continue in the employ of the Company or any of its subsidiaries or affect, in any way, the right of the Company or any of its subsidiaries to terminate his or her employment at any time. Section 5. Price. The option price for all Incentive Stock Options granted under the Plan shall be determined by the Committee but shall not be less than 100% of the fair market value of the Common Shares at the date of grant of such option. The option price for options granted under the Plan that do not qualify as Incentive Stock Options and, if applicable, the price for all awards shall also be determined by the Committee. For purposes of the preceding sentence and for all other valuation purposes under the Plan, the fair market value of the Common Shares shall be as reasonably determined by the Committee. If on the date of grant of any option or award hereunder the Common Shares are not traded on an established securities market, the Committee shall make a good faith attempt to satisfy the requirements of this Section 5 and in connection therewith shall take such action as it deems necessary or advisable. Section 6. Term. Each option and award and all rights and obligations thereunder shall expire on the date determined by the Committee and specified in the option or award agreement. The Committee shall be under no duty to provide terms of like duration for options or awards granted under the Plan, but the term of an Incentive Stock Option may not extend more than ten (10) years from the date of grant of such option and the term of options granted under the Plan which do not qualify as Incentive Stock Options may not extend more than fifteen (15) years from the date of granting of such option. Section 7. Exercise Option or Award. (a) Exercisability. The Committee shall have full and complete authority to determine whether an option or award will be exercisable in full at any time or from time to time during the term thereof, or to provide for the exercise thereof in such installments, upon the occurrence of such events (such as termination of employment for any reason) and at such times during the term of the option as the Committee may determine and specify in the option or award agreement. (b) No Violation of State or Federal Laws. The exercise of any option or award granted hereunder shall only be effective at such time that the sale of Common Shares pursuant to such exercise will not violate any state or federal securities or other laws. -3- (c) Method of Exercise. An optionee or grantee electing to exercise an option or award shall give written notice to the Company of such election and of the number of shares subject to such exercise. The full purchase price of such shares shall be tendered with such notice of exercise. Payment shall be made to the Company in cash (including bank check, certified check, personal check, or money order), or, at the discretion of the Committee and as specified by the Committee, (i) by delivering certificates for the Company's Common Shares already owned by the optionee or grantee having a fair market value as of the date of grant equal to the full purchase price of the shares, or (ii) by delivering the optionee's or grantee's promissory note, which shall provide for interest at a rate not less than the minimum rate required to avoid the imputation of income, original issue discount or a below-market-rate loan pursuant to Sections 483, 1274 or 7872 of the Code or any successor provisions thereto, or (iii) a combination of cash, the optionee's or grantee's promissory note and such shares. The fair market value of such tendered shares shall be determined as provided in Section 5 herein. The optionee's or grantee's promissory note shall be a full recourse liability of the optionee and may, at the discretion of the Committee, be secured by a pledge of the shares being purchased. Until such person has been issued the shares subject to such exercise, he or she shall possess no rights as a shareholder with respect to such shares. Section 8. Restoration Options. The Committee may grant "restoration" options, separately or together with another option, pursuant to which, subject to the terms and conditions established by the Committee and any applicable requirements of Rule 16b-3 promulgated under the Exchange Act or any other applicable law, the optionee would be granted a new option when the payment of the exercise price of the option to which such "restoration" option relates is made by the delivery of shares of the Company's Common Shares owned by the optionee, as described in this Section 8, which new option would be an option to purchase the number of shares not exceeding the sum of (a) the number of shares of the Company's Common Shares tendered as payment upon the exercise of the option to which such "restoration" option relates and (b) the number of shares of the Company's Common Shares, if any, tendered as payment of the amount to be withheld under applicable income tax laws in connection with the exercise of the option to which such "restoration" option relates, as described in Section 12 hereof. "Restoration" options may be granted with respect to options previously granted under this Plan or any prior stock option plan of the Company, and may be granted in connection with any option granted under this Plan at the time of such grant. The purchase price of the Common Shares under each such new option, and the other terms and conditions of such option, shall be determined by the Committee, consistent with the provisions of the Plan. Section 9. Stock Appreciation Rights. (a) Grant. At the time of grant of an option or award under the Plan (or at any other time), the Committee, in its discretion, may grant a Stock Appreciation Right ("SAR") evidenced by an agreement in such form as the Committee shall from time to time approve. Any such SAR -4- may be subject to restrictions on the exercise thereof as may be set forth in the agreement representing such SAR, which agreement shall comply with and be subject to the following terms and conditions and any additional terms and conditions established by the Committee that are consistent with the terms of the Plan. (b) Exercise. An SAR shall be exercised by the delivery to the Company of a written notice which shall state that the holder thereof elects to exercise his or her SAR as to the number of shares specified in the notice and which shall further state what portion, if any, of the SAR exercise amount (hereinafter defined) the holder thereof requests is to be paid in cash and what portion, if any, is to be paid in Common Shares of the Company. The Committee promptly shall cause to be paid to such holder the SAR exercise amount either in cash, in Common Shares of the Company, or any combination of cash and shares as the Committee may determine. Such determination may be either in accordance with the request made by the holder of the SAR or in the sole and absolute discretion of the Committee. The SAR exercise amount is the excess of the fair market value of one share of the Company's Common Shares on the date of exercise over the per share exercise price in respect of which the SAR was granted, multiplied by the number of shares as to which the SAR is exercised. For the purposes hereof, the fair market value of the Company's shares shall be determined as provided in Section 5 herein. Section 10. Restricted Stock Award. Awards of Common Shares subject to forfeiture and transfer restrictions may be granted by the Committee. Any restricted stock award shall be evidenced by an agreement in such form as the Committee shall from time to time approve, which agreement shall comply with and be subject to the following terms and conditions and any additional terms and conditions established by the Committee that are consistent with the terms of the Plan: (a) Grant of Restricted Stock Awards. Each restricted stock award made under the Plan shall be for such number of Common Shares as shall be determined by the Committee and set forth in the agreement containing the terms of such restricted stock award. Such agreement shall set forth a period of time during which the grantee must remain in the continuous employment of the Company in order for the forfeiture and transfer restrictions to lapse. If the Committee so determines, the restrictions may lapse during such restricted period in installments with respect to specified portions of the shares covered by the restricted stock award. The agreement may also, in the discretion of the Committee, set forth performance or other conditions that will subject the Common Shares to forfeiture and transfer restrictions. The Committee may, at its discretion, waive all or any part of the restrictions applicable to any or all outstanding restricted stock awards. (b) Delivery of Common Shares and Restrictions. At the time of a restricted stock award, a certificate representing the number of Common Shares awarded thereunder shall be registered in the name of the grantee. Such certificate shall be held by the Company or any custodian appointed by the Company for the account of the grantee -5- subject to the terms and conditions of the Plan, and shall bear such a legend setting forth the restrictions imposed thereon as the Committee, in its discretion, may determine. The grantee shall have all rights of a shareholder with respect to the Common Shares, including the right to receive dividends and the right to vote such shares, subject to the following restrictions:(i) the grantee shall not be entitled to delivery of the stock certificate until the expiration of the restricted period and the fulfillment of any other restrictive conditions set forth in the restricted stock agreement with respect to such Common Shares; (ii) none of the Common Shares may be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of during such restricted period or until after the fulfillment of any such other restrictive conditions; and (iii) except as otherwise determined by the Committee, all of the Common Shares shall be forfeited and all rights of the grantee to such Common Shares shall terminate, without further obligation on the part of the Company, unless the grantee remains in the continuous employment of the Company for the entire restricted period in relation to which such Common Shares were granted and unless any other restrictive conditions relating to the restricted stock award are met. Any Common Shares, any other securities of the Company and any other property (except for cash dividends) distributed with respect to the Common Shares subject to restricted stock awards shall be subject to the same restrictions, terms and conditions as such restricted Common Shares. (c) Termination of Restrictions. At the end of the restricted period and provided that any other restrictive conditions of the restricted stock award are met, or at such earlier time as otherwise determined by the Committee, all restrictions set forth in the agreement relating to the restricted stock award or in the Plan shall lapse as to the restricted Common Shares subject thereto, and a stock certificate for the appropriate number of Common Shares, free of the restrictions and the restricted stock legend, shall be delivered to the grantee or his or her beneficiary or estate, as the case may be. Section 11. Performance Awards. The Committee is further authorized to grant performance awards. Subject to the terms of this Plan and any applicable award agreement, a performance award granted under the Plan (i) may be denominated or payable in cash, Common Shares (including, without limitation, restricted stock), other securities, other awards, or other property and (ii) shall confer on the holder thereof rights valued as determined by the Committee, in its discretion, and payable to, or exercisable by, the holder of the Performance awards, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee, in its discretion, shall establish. Subject to the terms of this Plan and any applicable award agreement, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance award granted, and the amount of any payment or transfer to be made by the grantee and by the Company under any Performance award shall be determined by the Committee. -6- Section 12. Income Tax Withholding and Tax Bonuses. (a) Withholding of Taxes. In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are the sole and absolute responsibility of an optionee or grantee under the Plan, are withheld or collected from such optionee or grantee. In order to assist an optionee or grantee in paying all federal and state taxes to be withheld or collected upon exercise of an option or award which does not qualify as an Incentive Stock Option hereunder, the Committee, in its absolute discretion and subject to such additional terms and conditions as it may adopt, shall permit the optionee or grantee to satisfy such tax obligation by (i) electing to have the Company withhold a portion of the shares otherwise to be delivered upon exercise of such option or award with a fair market value, determined in accordance with Section 5 herein, equal to such taxes or (ii) delivering to the Company Common Shares other than the shares issuable upon exercise of such option or award with a fair market value, determined in accordance with Section 5, equal to such taxes. (b) Tax Bonus. The Committee shall have the authority, at the time of grant of an option under the Plan or at any time thereafter, to approve tax bonuses to designated optionees or grantees to be paid upon their exercise of options or awards granted hereunder. The amount of any such payments shall be determined by the Committee. The Committee shall have full authority in its absolute discretion to determine the amount of any such tax bonus and the terms and conditions affecting the vesting and payment thereafter. Section 13. Additional Restrictions. The Committee shall have full and complete authority to determine whether all or any part of the Common Shares of the Company acquired upon exercise of any of the options or awards granted under the Plan shall be subject to restrictions on the transferability thereof or any other restrictions affecting in any manner the optionee's or grantee's rights with respect thereto, but any such restriction shall be contained in the agreement relating to such options or awards. Section 14. Ten Percent Shareholder Rule. Notwithstanding any other provision in the Plan, if at the time an option is otherwise to be granted pursuant to the Plan the optionee owns directly or indirectly (within the meaning of Section 424(d) of the Code) Common Shares of the Company possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or its parent or subsidiary corporations, if any (within the meaning of Section 422(b)(6) of the Code), then any Incentive Stock Option to be granted to such optionee pursuant to the Plan shall satisfy the requirements of Section 422(c)(5) of the Code, and the option price shall be not less than 110% of the fair market value of the Common Shares of the Company determined as described herein, -7- and such option by its terms shall not be exercisable after the expiration of five (5) years from the date such option is granted. Section 15. Non-Transferability. No option or award granted under the Plan shall be transferable by an optionee or grantee, otherwise than by will or the laws of descent or distribution. Except as otherwise provided in an option or award agreement, during the lifetime of an optionee or grantee, the option shall be exercisable only by such optionee or grantee. Section 16. Dilution or Other Adjustments. If there shall be any change in the Common Shares through merger, consolidation, reorganization, recapitalization, dividend in the form of stock (of whatever amount), stock split or other change in the corporate structure, appropriate adjustments in the Plan and outstanding options and awards shall be made by the Committee. In the event of any such changes, adjustments shall include, where appropriate, changes in the aggregate number of shares subject to the Plan, the number of shares and the price per share subject to outstanding options and awards and the amount payable upon exercise of outstanding awards, in order to prevent dilution or enlargement of option or award rights. Section 17. Amendment or Discontinuance of Plan. The Board of Directors may amend or discontinue the Plan at any time. Subject to the provisions of Section 16 no amendment of the Plan, however, shall without shareholder approval: (i) increase the maximum number of shares under the Plan as provided in Section 2 herein, (ii) decrease the minimum price provided in Section 5 herein, (iii) extend the maximum term under Section 6, or (iv) modify the eligibility requirements for participation in the Plan. The Board of Directors shall not alter or impair any option or award theretofore granted under the Plan without the consent of the holder of the option. Section 18. Time of Granting. Nothing contained in the Plan or in any resolution adopted or to be adopted by the Board of Directors or by the shareholders of the Company, and no action taken by the Committee or the Board of Directors (other than the execution and delivery of an option or award agreement), shall constitute the granting of an option or award hereunder. Section 19. Effective Date and Termination of Plan. (a) The Plan was approved by the Board of Directors on January 19, 1994, and shall be approved by the shareholders of the Company within twelve (12) months thereof. -8- (b) Unless the Plan shall have been discontinued as provided in Section 16 hereof, the Plan shall terminate February 28, 2001. No option or award may be granted after such termination, but termination of the Plan shall not, without the consent of the optionee or grantee, alter or impair any rights or obligations under any option or award theretofore granted. -9- EX-10.2 9 1999 STOCK INCENTIVE PLAN EXHIBIT 10.2 SHOWCASE CORPORATION 1999 STOCK INCENTIVE PLAN Section 1. Purpose (a) Purpose. The purpose of the ShowCase 1999 Stock Incentive Plan (the "Plan") is to aid in attracting and retaining employees, management personnel and other personnel and members of the Board of Directors who are not also employees ("Non-Employee Directors") of ShowCase Corporation (the "Company") capable of assuring the future success of the Company, to offer such personnel and Non-Employee Directors incentives to put forth maximum efforts for the success of the Company's business and to afford such personnel and Non-Employee Directors an opportunity to acquire a proprietary interest in the Company. Section 2. Definitions. As used in the Plan, the following terms shall have the meanings set forth below: (a) "Affiliate" shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, as determined by the Committee. (b) "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award or other Stock-Based Award granted under the Plan. (c) "Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award granted under the Plan. (d) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. (e) "Committee" shall mean a committee of the Board of Directors of the Company designated by such Board to administer the Plan and composed of not less than two directors, each of whom is a "Non-Employee Director" within the meaning of Rule 16b-3 (which term "Non-Employee Director" is defined in this paragraph for purposes of the definition of "Committee" only and is not intended to define such term as used elsewhere in the Plan). Each member of the Committee shall also be an "outside director" within the meaning of Section 162(m) of the Code. (f) "Eligible Person" shall mean any employee, officer, director (including any Non-Employee Director), consultant or independent contractor providing services to the Company or any Affiliate who the Committee determines to be an Eligible Person. (g) "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. (h) "Incentive Stock Option" shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision. (i) "Non-Qualified Stock Option" shall mean an option granted under Section 6(a) of the Plan, that is not intended to be an Incentive Stock Option. (j) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option. (k) "Other Stock-Based Award" shall mean any right granted under Section 6(e) of the Plan. (l) "Participant" shall mean an Eligible Person designated to be granted an Award under the Plan. (m) "Performance Award" shall mean any right granted under Section 6(d) of the Plan. (n) "Person" shall mean any individual, corporation, partnership, association or trust. (o) "Restricted Stock" shall mean any Share granted under Section 6(c) of the Plan. (p) "Restricted Stock Unit" shall mean any unit granted under Section 6(c) of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date. (q) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934. -2- (r) "Shares" shall mean shares of Common Stock, $.01 par value, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan. (s) "Stock Appreciation Right" shall mean any right granted under Section 6(b) of the Plan. Section 3. Administration. The Plan shall be administered by the Committee. Subject to the terms of the Plan and applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in connection with) each Award; (iv) determine the terms and conditions of any Award or Award Agreement; (v) amend the terms and conditions of any Award or Award Agreement and accelerate the exercisability of Options or the lapse of restrictions relating to Restricted Stock or Restricted Stock Units; (vi) determine whether, to what extent and under what circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended; (vii) determine whether, to what extent and under what circumstances cash, Shares, other securities, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or the Committee; (viii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (ix) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award and any employee of the Company or any Affiliate. Section 4. Shares Available for Awards. (a) Shares Available. Subject to adjustment as provided in Section 4(c), the total number of Shares available for granting Awards under the Plan shall be 2,500,000. If any Shares covered by an Award or to which an Award relates are not purchased or are forfeited, or if an Award otherwise terminates without delivery of any Shares, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be available for granting Awards under the Plan. -3- (b) Accounting for Awards. For purposes of this Section 4, if an Award entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan. Such Shares may again become available for granting Awards under the Plan pursuant to the provisions of Section 4(a) of the Plan, subject to the limitations set forth in Section 4(c) of the Plan. (c) Adjustments. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) which thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards and (iii) the purchase or exercise price with respect to any Award; provided, however, that the number of Shares covered by any Award or to which such Award relates shall always be a whole number. (d) Award Limitations Under the Plan. No Eligible Person may be granted any Award or Awards, the value of which Awards are based solely on an increase in the value of the Shares after the date of grant of such Awards, for more than 500,000 Shares, subject to adjustment as provided in the Plan, in any calendar year. The foregoing annual limitation specifically includes the grant of any "performance-based" Awards within the meaning of Section 162(m) of the Code. Section 5. Eligibility. Any Eligible Person, including any Eligible Person who is an officer or director of the Company or any Affiliate, shall be eligible to be designated a Participant; provided, however, that an Incentive Stock Option may only be granted to full or part-time employees (which term as used herein includes, without limitation, officers and directors who are also employees) and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a "subsidiary corporation" of the Company within the meaning of Section 424(f) of the Code or any successor provision. -4- Section 6. Awards. (a) Options. The Committee is hereby authorized to grant Options to Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: (i) Exercise Price. The purchase price per Share purchasable under an Option shall be determined by the Committee; provided, however, that such purchase price for Shares granted as Incentive Stock Options shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Incentive Stock Option. (ii) Option Term. The term of each Option shall be fixed by the Committee. (iii) Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part and the method or methods by which, and the form or forms (including, without limitation, cash, Shares, other securities, other Awards or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price) in which, payment of the exercise price with respect thereto may be made or deemed to have been made. (iv) Reload Options. The Committee may grant "reload" options, separately or together with another Option, pursuant to which, subject to the terms and conditions established by the Committee and any applicable requirements of Rule 16b-3 or any other applicable law, the Participant would be granted a new Option when the payment of the exercise price of a previously granted option is made by the delivery of shares of the Company's Common Stock owned by the Participant pursuant to Section 6(a)(iii) hereof or the relevant provisions of another plan of the Company, and/or when shares of the Company's Common Stock are tendered or forfeited as payment of the amount to be withheld under applicable tax laws in connection with the exercise of an option, which new Option would be an option to purchase the number of Shares not exceeding the sum of (A) the number of shares of the Company's Common Stock provided as consideration upon the exercise of the previously granted option to which such "reload" option relates and (B) the number of shares of the Company's Common Stock tendered or forfeited as payment of the amount to be withheld under applicable tax laws in connection with the exercise of the option to which such "reload" option relates. "Reload" options may be granted with respect to options granted under this Plan or any other stock option plan of the Company or any of its affiliates (which shall explicitly include plans assumed by the Company in connection with mergers and the like). Such "reload" options shall have a per share exercise price equal to the Fair Market Value as of the date of grant of the new Option. Any such reload options shall be subject to availability of sufficient shares for grant under the Plan. -5- (b) Stock Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Participants subject to the terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine, at any time during a specified period before or after the date of exercise) over (ii) the grant price of the Stock Appreciation Right as specified by the Committee, which price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right. Subject to the terms of the Plan and any applicable Award Agreement, the grant price, term, methods of exercise, dates of exercise, methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate. (c) Restricted Stock and Restricted Stock Units. The Committee is hereby authorized to grant Awards of Restricted Stock and Restricted Stock Units to Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: (i) Restrictions. Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate. (ii) Stock Certificates. Any Restricted Stock granted under the Plan shall be evidenced by issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company. Such certificate or certificates shall be registered in the name of the Participant and shall bear an appropriate legend referring to the restrictions applicable to such Restricted Stock. In the case of Restricted Stock Units, no Shares shall be issued at the time such Awards are granted. (iii) Forfeiture; Delivery of Shares. Except as otherwise determined by the Committee, upon termination of employment (as determined under criteria established by the Committee) during the applicable restriction period, all Shares of Restricted Stock and all Restricted Stock Units at such time subject to restriction shall be forfeited and reacquired by the Company; provided, however, that the Committee may, when it finds that a waiver would be in the best interest of the Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock or Restricted Stock Units. Shares representing Restricted Stock that is no longer subject to restrictions shall be delivered to the holder thereof promptly after the applicable restrictions lapse or are waived. Upon the lapse or waiver of restrictions and the restricted period relating to -6- Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the holders of the Restricted Stock Units. (d) Performance Awards. The Committee is hereby authorized to grant Performance Awards to Participants subject to the terms of the Plan and any applicable Award Agreement. A Performance Award granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock), other securities, other Awards or other property and (ii) shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan and any applicable Award Agreement, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted and the amount of any payment or transfer to be made pursuant to any Performance Award shall be determined by the Committee. (e) Other Stock-Based Awards. The Committee is hereby authorized to grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan; provided, however, that such grants must comply with applicable law. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of such Awards. Shares or other securities delivered pursuant to a purchase right granted under this Section 6(e) shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms (including without limitation, cash, Shares, other securities, other Awards or other property or any combination thereof), as the Committee shall determine, the value of which consideration, as established by the Committee, shall not be less than 100% of the Fair Market Value of such Shares or other securities as of the date such purchase right is granted. (f) General. (i) No Cash Consideration for Awards. Awards shall be granted for no cash consideration or for such minimal cash consideration as may be required by applicable law. (ii) Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any plan of the Company or any Affiliate other than the Plan. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under any such other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards. -7- (iii) Forms of Payment under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, other securities, other Awards or other property or any combination thereof), and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments. (iv) Limits on Transfer of Awards. No Award and no right under any such Award shall be transferable by a Participant otherwise than by will or by the laws of descent and distribution; provided, however, that, if so determined by the Committee, a Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of the Participant and receive any property distributable with respect to any Award upon the death of the Participant; and provided, further, except in the case of an Incentive Stock Option, Awards may be transferable as specifically provided in any applicable Award Agreement or amendment thereto pursuant to terms determined by the Committee. Except as otherwise provided in any applicable Award Agreement or amendment thereto (other than an Award Agreement relating to an Incentive Stock Option), pursuant to terms determined by the Committee, each Award or right under any Award shall be exercisable during the Participant's lifetime only by the Participant or, if permissible under applicable law, by the Participant's guardian or legal representative. Except as otherwise provided in any applicable Award Agreement or amendment thereto (other than an Award Agreement relating to an Incentive Stock Option), no Award or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. (v) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee. (vi) Restrictions; Securities Exchange Listing. All certificates for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. If the Shares or other securities are traded on a securities exchange, the Company shall not be required to deliver any Shares or other securities covered by an Award unless and until such Shares or other securities have been admitted for trading on such securities exchange. -8- Section 7. Amendment and Termination; Adjustments. Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan: (a) Amendments to the Plan. The Board of Directors of the Company may amend, alter, suspend, discontinue or terminate the Plan; provided, however, that, notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the shareholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such approval: (i) would cause Rule 16b-3 or Section 162(m) of the Code to become unavailable with respect to the Plan; (ii) would violate the rules or regulations of the NASDAQ National Market, any other securities exchange or the National Association of Securities Dealers, Inc. that are applicable to the Company; or (iii) would cause the Company to be unable, under the Code, to grant Incentive Stock Options under the Plan. (b) Amendments to Awards. The Committee may waive any conditions of or rights of the Company under any outstanding Award, prospectively or retroactively. The Committee may not amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, without the consent of the Participant or holder or beneficiary thereof, except as otherwise herein provided or in the Award Agreement. (c) Correction of Defects, Omissions and Inconsistencies. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect. Section 8. Income Tax Withholding; Tax Bonuses. (a) Withholding. In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant are withheld or collected from such Participant. In order to assist a Participant in paying all or a portion of the federal and state taxes to be withheld or collected upon exercise or receipt of (or the lapse of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (i) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount -9- of such taxes or (ii) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined. (b) Tax Bonuses. The Committee, in its discretion, shall have the authority, at the time of grant of any Award under this Plan or at any time thereafter, to approve cash bonuses to designated Participants to be paid upon their exercise or receipt of (or the lapse of restrictions relating to) Awards in order to provide funds to pay all or a portion of federal and state taxes due as a result of such exercise or receipt (or the lapse of such restrictions). The Committee shall have full authority in its discretion to determine the amount of any such tax bonus. Section 9. General Provisions. (a) No Rights to Awards. No Eligible Person, Participant or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to different Participants. (b) Delegation. The Committee may delegate to one or more officers of the Company or any Affiliate or a committee of such officers the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to Eligible Persons who are not officers or directors of the Company for purposes of Section 16 of the Securities Exchange Act of 1934, as amended. (c) Award Agreements. No Participant will have rights under an Award granted to such Participant unless and until an Award Agreement shall have been duly executed on behalf of the Company. (d) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. (e) No Right to Employment, Etc. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ, or as giving a Non-Employee Director the right to continue as a Director, of the Company or any Affiliate. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment, or terminate the term of a Non-Employee Director, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. -10- (f) Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Minnesota. (g) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect. (h) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate. (i) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. (j) Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. (k) Section 16 Compliance. The Plan is intended to comply in all respects with Rule 16b-3 or any successor provision, as in effect from time to time and in all events the Plan shall be construed in accordance with the requirements of Rule 16b-3. If any Plan provision does not comply with Rule 16b-3 as hereafter amended or interpreted, the provision shall be deemed inoperative. The Board of Directors, in its absolute discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan with respect to persons who are officers or directors subject to Section 16 of the Securities and Exchange Act of 1934, as amended, without so restricting, limiting or conditioning the Plan with respect to other Participants. Section 10. Effective Date of the Plan. The Plan shall be effective as of April 9, 1999, subject to approval by the Company's shareholders in accordance with applicable law. -11- Section 11. Term of the Plan. New Awards shall only be granted under the Plan during a 10-year period beginning on the effective date of the Plan. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond the end of such 10-year period, and the authority of the Committee provided for hereunder with respect to the Plan and any Awards, and the authority of the Board of Directors of the Company to amend the Plan, shall extend beyond the end of such period. -12- EX-10.3 10 1999 EMPLOYEE STOCK PURCHASE PLAN EXHIBIT 10.3 SHOWCASE CORPORATION 1999 EMPLOYEE STOCK PURCHASE PLAN ARTICLE I. INTRODUCTION Section 1.01 Purpose. The purpose of the ShowCase Corporation 1999 Employee Stock Purchase Plan (the "Plan") is to provide employees of ShowCase Corporation, a Minnesota corporation (the "Company"), and certain related corporations with an opportunity to share in the ownership of the Company by providing them with a convenient means for regular and systematic purchases of the Company's Common Stock, par value $.01 per share, and, thus, to develop a stronger incentive to work for the continued success of the Company. Section 1.02 Rules of Interpretation. It is intended that the Plan be an "employee stock purchase plan" as defined in Section 423(b) of the Internal Revenue Code of 1986, as amended (the "Code"), and Treasury Regulations promulgated thereunder. Accordingly, the Plan shall be interpreted and administered in a manner consistent therewith if so approved. All Participants in the Plan will have the same rights and privileges consistent with the provisions of the Plan. Section 1.03 Definitions. For purposes of the Plan, the following terms will have the meanings set forth below: (a) "Acceleration Date" means the earlier of the date of stockholder approval or approval by the Company's Board of Directors of (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which stockholders of the Company immediately prior to the merger have the same proportionate ownership of stock in the surviving corporation immediately after the merger; (ii) any sale, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company; or (iii) any plan of liquidation or dissolution of the Company. (b) "Affiliate" means any subsidiary corporation of the Company, as defined in Section 424(f) of the Code, whether now or hereafter acquired or established. (c) "Committee" means the committee described in Section 10.01. (d) "Common Stock" means the Company's Common Stock, $.01 par value, as such stock may be adjusted for changes in the stock or the Company as contemplated by Article XI herein. (e) "Company" means ShowCase Corporation, a Minnesota corporation, and its successors by merger or consolidation as contemplated by Article XI herein. (f) "Current Compensation" means all regular wage, salary and commission payments paid by the Company to a Participant in accordance with the terms of his or her employment, but excluding annual bonus payments and all other forms of special compensation. (g) "Effective Date" means the date immediately prior to the date on which the Company's registration statement relating to its initial public offering of Common Stock is declared effective by the Securities and Exchange Commission. (h) "Fair Market Value" as of a given date means such value of the Common Stock as reasonably determined by the Committee, but shall not be less than (i) the closing price of the Common Stock as reported for composite transactions if the Common Stock is then traded on a national securities exchange, (ii) the last sale price if the Common Stock is then quoted on the NASDAQ National Market System, or (iii) the average of the closing representative bid and asked prices of the Common Stock as reported on NASDAQ on the date as of which the fair market value is being determined; provided, however, that the Fair Market Value on the Effective Date shall be the initial public offering price set forth on the cover of the final prospectus used in connection with the Company's initial public offering of Common Stock. If on a given date the shares of Common Stock are not traded on an established securities market, the Committee shall make a good faith attempt to satisfy the requirements of this Section 1.03 and in connection therewith shall take such action as it deems necessary or advisable. (i) "Participant" means a Permanent Full-Time Employee who is eligible to participate in the Plan under Section 2.01 and who has elected to participate in the Plan. (j) "Participating Affiliate" means an Affiliate which has been designated by the Committee in advance of the Purchase Period in question as a corporation whose eligible Permanent Full-Time Employees may participate in the Plan. (k) "Permanent Full-Time Employee" means an employee of the Company or a Participating Affiliate as of the first day of a Purchase Period, including an officer or director who is also an employee, but excluding an employee whose customary employment is less than 20 hours per week. (l) "Plan" means the ShowCase Corporation 1999 Employee Stock Purchase Plan, as amended, the provisions of which are set forth herein. (m) "Purchase Period" means any of the approximate six-month periods beginning on the first business day in January and July, as appropriate, and ending on the last business day in June and December, respectively; provided, however, that the initial Purchase Period will commence on the Effective Date and will terminate on December 31, 1999, and that the then current Purchase Period will end upon the occurrence of an Acceleration Date. -2- (n) "Stock Purchase Account" means the account maintained on the books and records of the Company recording the amount received from each Participant through payroll deductions made under the Plan and from the Company through matching contributions. ARTICLE II. ELIGIBILITY AND PARTICIPATION Section 2.01 Eligible Employees. All Permanent Full-Time Employees shall be eligible to participate in the Plan beginning on the first day of the first Purchase Period to commence after such person becomes a Permanent Full-Time Employee. Subject to the provisions of Article VI, each such employee will continue to be eligible to participate in the Plan so long as he or she remains a Permanent Full-Time Employee. Section 2.02 Election to Participate. An eligible Permanent Full-Time Employee may elect to participate in the Plan for a given Purchase Period by filing with the Company, in advance of that Purchase Period and in accordance with such terms and conditions as the Committee in its sole discretion may impose, a form provided by the Company for such purpose (which authorizes regular payroll deductions from Current Compensation beginning with the first payday in that Purchase Period and continuing until the employee withdraws from the Plan or ceases to be eligible to participate in the Plan). Section 2.03 Limits on Stock Purchase. No employee shall be granted any right to purchase Common Stock hereunder if such employee, immediately after such a right to purchase is granted, would own, directly or indirectly, within the meaning of Section 423(b)(3) and Section 424(d) of the Code, Common Stock possessing 5% or more of the total combined voting power or value of all the classes of the capital stock of the Company or of all Affiliates. Section 2.04 Voluntary Participation. Participation in the Plan on the part of a Participant is voluntary and such participation is not a condition of employment nor does participation in the Plan entitle a Participant to be retained as an employee. ARTICLE III. PAYROLL DEDUCTIONS, COMPANY CONTRIBUTIONS AND STOCK PURCHASE ACCOUNT Section 3.01 Deduction from Pay. The form described in Section 2.02 will permit a Participant to elect payroll deductions of any multiple of 1% but not less than 1% or more than 15% of such Participant's Current Compensation for each pay period, subject to such other limitations as the Committee in its sole discretion may impose. A Participant may cease making payroll deductions at any time, subject to such limitations as the Committee in its sole discretion may impose. In the event that during a Purchase Period the entire credit balance in a Participant's Stock Purchase Account exceeds the product of (a) 85% of the Fair Market Value of the Common Stock on the first business day of that Purchase Period, and (b) 5,000, then payroll deductions for such Participant shall automatically cease, and shall resume on the first pay period of the next Purchase Period. -3- Section 3.02 Company Contributions. The Company may, in the sole discretion of the Committee, from time to time contribute to each Participant's Stock Purchase Account an amount equal to up to 50% of each payroll deduction credited to such Account. No Company contributions shall be deemed to have been made until such contributions are credited to the Participant's Stock Purchase Account as provided in Section 3.03. Section 3.03 Credit to Account. Payroll deductions will be credited to the Participant's Stock Purchase Account on each payday, and Company contributions will be credited to the Participant's Stock Purchase Account on the last business day of the Purchase Period at the time of and in connection with the purchase of shares of Common Stock in accordance with Articles IV and V hereof. Section 3.04 Interest. No interest will be paid upon payroll deductions, Company contributions or on any amount credited to, or on deposit in, a Participant's Stock Purchase Account. Section 3.05 Nature of Account. The Stock Purchase Account is established solely for accounting purposes, and all amounts credited to the Stock Purchase Account will remain part of the general assets of the Company or the Participating Affiliate (as the case may be). Section 3.06 No Additional Contributions. A Participant may not make any payment into the Stock Purchase Account other than the payroll deductions made pursuant to the Plan. ARTICLE IV. RIGHT TO PURCHASE SHARES Section 4.01 Number of Shares. Each Participant will have the right to purchase on the last business day of the Purchase Period all, but not less than all, of the largest number of whole shares of Common Stock that can be purchased at the price specified in Section 4.02 with the entire credit balance in the Participant's Stock Purchase Account, subject to the limitations that (a) no more than 5,000 shares of Common Stock may be purchased under the Plan by any one Participant for a given Purchase Period, (b) in accordance with Section 423(b)(8) of the Code, no more than $25,000 in Fair Market Value (determined at the beginning of each Purchase Period) of Common Stock and other stock may be purchased under the Plan and all other employee stock purchase plans (if any) of the Company and the Affiliates by any one Participant for any calendar year and (c) if the purchases for all Participants in any Purchase Period would result in the sale of more than 50,000 shares of Common Stock in the aggregate under the Plan for such Purchase Period, each Participant shall be allocated a pro rata portion of the 50,000 shares of Common Stock to be sold for that Purchase Period. If the purchases for all Participants would otherwise cause the aggregate number of shares of Common Stock to be sold under the Plan to exceed the number specified in Section 10.03, each Participant shall be allocated a pro rata portion of the Common Stock to be sold. Section 4.02 Purchase Price. The purchase price for any Purchase Period shall be the lesser of (a) 85% of the Fair Market Value of the Common Stock on the first business day of that -4- Purchase Period or (b) 85% of the Fair Market Value of the Common Stock on the last business day of that Purchase Period, in each case rounded up to the next higher full cent. ARTICLE V. EXERCISE OF RIGHT Section 5.01 Purchase of Stock. On the last business day of a Purchase Period, the entire credit balance in each Participant's Stock Purchase Account will be used to purchase the largest number of whole shares of Common Stock purchasable with such amount (subject to the limitations of Section 4.01), unless the Participant has filed with the Company, in advance of that date and subject to such terms and conditions as the Committee in its sole discretion may impose, a form provided by the Company which requests the distribution of the entire credit balance in cash. Section 5.02 Cash Distributions. Any amount remaining in a Participant's Stock Purchase Account after the last business day of a Purchase Period will be paid to the Participant in cash within 30 days after the end of that Purchase Period. Section 5.03 Notice of Acceleration Date. The Company shall use its best efforts to notify each Participant in writing at least ten days prior to any Acceleration Date that the then current Purchase Period will end on such Acceleration Date. ARTICLE VI. WITHDRAWAL FROM PLAN; SALE OF STOCK Section 6.01 Voluntary Withdrawal. A Participant may, in accordance with such terms and conditions as the Committee in its sole discretion may impose, withdraw from the Plan and cease making payroll deductions by filing with the Company a form provided for this purpose. In such event, the entire credit balance in the Participant's Stock Purchase Account will be paid to the Participant in cash within 30 days, provided that in no event shall any Participant be entitled to withdraw from such Account any Company contributions credited to such Account at the end of the Purchase Period pursuant to Section 3.03. A Participant who withdraws from the Plan will not be eligible to reenter the Plan until the beginning of the next Purchase Period following the date of such withdrawal. Section 6.02 Death. Subject to such terms and conditions as the Committee in its sole discretion may impose, upon the death of a Participant, no further amounts shall be credited to the Participant's Stock Purchase Account. Thereafter, on the last business day of the Purchase Period during which such Participant's death occurred and in accordance with Section 5.01, the entire credit balance in such Participant's Stock Purchase Account will be used to purchase Common Stock, unless such Participant's estate has filed with the Company, in advance of that day and subject to such terms and conditions as the Committee in its sole discretion may impose, a form provided by the Company which elects to have the entire credit balance in such Participant's Stock Account distributed in cash within 30 days after the end of that Purchase Period or at such earlier time as the Committee in its sole discretion may decide, provided that in no event shall any Participant's estate be entitled to receive from such Account any Company contributions credited to such Account at the -5- end of the Purchase Period pursuant to Section 3.03. Each Participant, however, may designate one or more beneficiaries who, upon death, are to receive the Common Stock or the amount that otherwise would have been distributed or paid to the Participant's estate and may change or revoke any such designation from time to time. No such designation, change or revocation will be effective unless made by the Participant in writing and filed with the Company during the Participant's lifetime. Unless the Participant has otherwise specified the beneficiary designation, the beneficiary or beneficiaries so designated will become fixed as of the date of the death of the Participant so that, if a beneficiary survives the Participant but dies before the receipt of the payment due such beneficiary, the payment will be made to such beneficiary's estate. Section 6.03 Termination of Employment. Subject to such terms and conditions as the Committee in its sole discretion may impose, upon a Participant's normal or early retirement with the consent of the Company under any pension or retirement plan of the Company or Participating Affiliate, no further amounts shall be credited to the Participant's Stock Purchase Account. Thereafter, on the last business day of the Purchase Period during which such Participant's approved retirement occurred and in accordance with Section 5.01, the entire credit balance in such Participant's Stock Purchase Account will be used to purchase Common Stock, unless such Participant has filed with the Company, in advance of that day and subject to such terms and conditions as the Committee in its sole discretion may impose, a form provided by the Company which elects to receive the entire credit balance in such Participant's Stock Purchase Account in cash within 30 days after the end of that Purchase Period, provided that (i) in no event shall any Participant be entitled to receive from such Account any Company contributions credited to such Account at the end of the Purchase Period pursuant to Section 3.03, and (ii) such Participant shall have no right to purchase Common Stock in the event that the last day of such a Purchase Period occurs more than three months following the termination of such Participant's employment with the Company by reason of such an approved retirement. In the event of any other termination of employment (other than death) with the Company or a Participating Affiliate, participation in the Plan will cease on the date the Participant ceases to be a Permanent Full-Time Employee for any reason. In such event, the entire credit balance in such Participant's Stock Purchase Account will be paid to the Participant in cash within 30 days, provided that in no event shall any Participant be entitled to receive from such Account any Company contributions credited to such Account at the end of the Purchase Period pursuant to Section 3.03. For purposes of this Section 6.03, a transfer of employment to any Affiliate, or a leave of absence which has been approved by the Committee, will not be deemed a termination of employment as a Permanent Full-Time Employee. ARTICLE VII. NONTRANSFERABILITY Section 7.01 Nontransferable Right to Purchase. The right to purchase Common Stock hereunder may not be assigned, transferred, pledged or hypothecated (whether by operation of law or otherwise), except as provided in Section 6.02, and will not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition or levy of attachment or similar process upon the right to purchase will be null and void and without effect. -6- Section 7.02 Nontransferable Account. Except as provided in Section 6.02, the amounts credited to a Stock Purchase Account may not be assigned, transferred, pledged or hypothecated in any way, and any attempted assignment, transfer, pledge, hypothecation or other disposition of such amounts will be null and void and without effect. ARTICLE VIII. STOCK CERTIFICATES Section 8.01 Delivery. Promptly after the last day of each Purchase Period and subject to such terms and conditions as the Committee in its sole discretion may impose, the Company will cause to be delivered to or for the benefit of the Participant a certificate representing the Common Stock purchased on the last business day of such Purchase Period. Section 8.02 Securities Laws. The Company shall not be required to issue or deliver any certificate representing Common Stock prior to registration under the Securities Act of 1933, as amended, or registration or qualification under any state law if such registration is required. The Company shall use its best efforts to accomplish such registration (if and to the extent required) not later than a reasonable time following the Purchase Period, and delivery of certificates may be deferred until such registration is accomplished. Section 8.03 Completion of Purchase. A Participant shall have no interest in the Common Stock purchased until a certificate representing the same is issued to or for the benefit of the Participant. Section 8.04 Form of Ownership. The certificates representing Common Stock issued under the Plan will be registered in the name of the Participant or jointly in the name of the Participant and another person, as the Participant may direct on a form provided by the Company. ARTICLE IX. EFFECTIVE DATE, AMENDMENT AND TERMINATION OF PLAN Section 9.01 Effective Date. The Plan was approved by the Board of Directors on April 9, 1999 and shall be approved by the stockholders of the Company prior to the Effective Date. Section 9.02 Plan Commencement. The initial Purchase Period under the Plan will commence on the Effective Date. Thereafter, each succeeding Purchase Period will commence and terminate in accordance with Section 1.03(m). Section 9.03 Powers of Board. The Board of Directors may amend or discontinue the Plan at any time. No amendment or discontinuation of the Plan, however, shall without stockholder approval be made that: (i) absent such stockholder approval, would cause Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Act") to become unavailable with respect to the Plan, (ii) requires stockholder approval under any rules or regulations of the National -7- Association of Securities Dealers, Inc. or any securities exchange that are applicable to the Company, or (iii) permit the issuance of Common Stock before payment therefor in full Section 9.04 Automatic Termination. The Plan shall automatically terminate when all of the shares of Common Stock provided for in Section 10.03 have been sold. ARTICLE X. ADMINISTRATION Section 10.01 The Committee. The Plan shall be administered by a committee (the "Committee") of two or more directors of the Company, none of whom shall be officers or employees of the Company and all of whom shall be "disinterested persons" with respect to the Plan within the meaning of Rule 16b-3 under the Act. The members of the Committee shall be appointed by and serve at the pleasure of the Board of Directors. Section 10.02 Powers of Committee. Subject to the provisions of the Plan, the Committee shall have full authority to administer the Plan, including authority to interpret and construe any provision of the Plan, to establish deadlines by which the various administrative forms must be received in order to be effective, and to adopt such other rules and regulations for administering the Plan as it may deem appropriate. The Committee shall have full and complete authority to determine whether all or any part of the Common Stock acquired pursuant to the Plan shall be subject to restrictions on the transferability thereof or any other restrictions affecting in any manner a Participant's rights with respect thereto but any such restrictions shall be contained in the form by which a Participant elects to participate in the Plan pursuant to Section 2.02. Decisions of the Committee will be final and binding on all parties who have an interest in the Plan. Section 10.03 Stock to be Sold. The Common Stock to be issued and sold under the Plan may be treasury shares or authorized but unissued shares, or the Company may purchase Common Stock in the market for sale under the Plan. Except as provided in Section 11.01, the aggregate number of shares of Common Stock to be sold under the Plan will not exceed 500,000 shares. Section 10.04 Notices. Notices to the Committee should be addressed as follow: ShowCase Corporation 4115 Highway 52 North, Suite 300 Rochester, Minnesota 55901-8701 Attention: Craig W. Allen -8- ARTICLE XI. ADJUSTMENT FOR CHANGES IN STOCK OR COMPANY Section 11.01 Stock Dividend or Reclassification. If the outstanding shares of Common Stock are increased, decreased, changed into or exchanged for a different number or kind of securities of the Company, or shares of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation, reverse stock split or otherwise, an appropriate adjustment shall be made in the maximum numbers and kind of securities to be purchased under the Plan with a corresponding adjustment in the purchase price to be paid therefor. Section 11.02 Merger or Consolidation. If the Company is merged into or consolidated with one or more corporations during the term of the Plan, appropriate adjustments will be made to give effect thereto on an equitable basis in terms of issuance of shares of the corporation surviving the merger or of the consolidated corporation, as the case may be. ARTICLE XII. APPLICABLE LAW Rights to purchase Common Stock granted under the Plan shall be construed and shall take effect in accordance with the laws of the State of Minnesota. -9- EX-10.4 11 LEASE AGREEMENT EXHIBIT 10.4 LEASE AGREEMENT between MORTENSON PROPERTIES, INC. (Landlord) and SHOWCASE CORPORATION (Tenant) November 30, 1998 LEASE SUMMARY 1. Landlord: Mortenson Properties, Inc., a Minnesota corporation 2. Tenant: ShowCase Corporation, a Minnesota corporation 3. Premises: A portion of Building 662, 4111 41st Street N.W., Rochester, MN 4. Rentable Square Feet: 26,716 5. Usable Square Feet: 21,950 6. Commencement Date: June 26, 1999 8. Expiration Date: June 30, 2004 9. Rent Commencement Date: June 26, 1999 10. Initial Base Rent (Annually): $243,115.60 11. Initial Base Rent (Monthly): $20,259.64 13. Tenant's Pro Rata Share of the Building: 25.52% 14. Option to Renew: 1 Option for 5 years EXHIBITS: A - Premises B - Legal Description C - Estoppel and Commencement Date Certificate D - Approved Signage E - Rules and Regulations F - Plans and Specifications for Tenant Improvements Note: This Lease Summary does not, in any way, modify the terms of the lease, but rather is for information purposes only. BUILDING LEASE THIS LEASE (the Lease) is made this 30th day of November, 1998, between MORTENSON PROPERTIES, INC., a Minnesota corporation (Landlord), and SHOWCASE CORPORATION, a Minnesota corporation (Tenant). 1. Premises: Landlord hereby leases to Tenant those certain premises designated on the Plans attached hereto as Exhibit A and incorporated herein by this reference (the Premises), consisting of a total of approximately 26,716 square feet of space (BOMA rentable area) on the third floor of the building located at 4111 41st Street, N.W., Rochester, MN (hereinafter the Building), located on the real property more particularly described on Exhibit B attached hereto and incorporated herein by this reference, together with a non-exclusive right, subject to the provisions hereof, to use all appurtenances thereunto, including, but not limited to, sidewalks, drives, parking areas and any other external areas designated by Landlord for use by tenants of the Building (the Building and real property hereinafter collectively sometimes called the Building Complex). For purposes of this Lease, "BOMA Rentable Area" shall mean and refer to the measuring formula for full floor tenants defined in Building Owners and Managers Association (BOMA) publication Z65.1-1980, a revision of Z65.1-1972, together with all updated revisions thereof. This Lease is subject to the terms, covenants and conditions set forth herein and Tenant and Landlord each covenant as a material part of the consideration for this Lease to keep and perform each and all of said terms, covenants and conditions to be kept and performed by them. 2. Term: (a) The initial term (the Initial Term) of this Lease shall be for a term of five (5) years and six (6) days commencing at 12:01 a.m. on June 26, 1999 (the Commencement Date), and terminating at 12:00 midnight on June 30, 2004 (the Expiration Date), unless sooner terminated pursuant to the terms hereof. (b) If the Initial Term begins other than on the first day of the month, Tenant shall pay proportionate rent at the same monthly rate set forth herein (also in advance) for such partial month and all other terms and conditions of this Lease shall be in force and effect during such partial month but the end of the Initial Term hereof shall not be adjusted or extended due to any change in the Commencement Date. Landlord and Tenant shall execute an Estoppel and Commencement Date Certificate in the form attached hereto as Exhibit C, within ten (10) days of the date the term commences, certifying as to the actual commencement and expiration dates of the term, the rent commencement date, if different, and such other matters as may be reasonably required by Landlord. (c) Tenant may renew this Lease for one additional term of five (5) years (the Additional Term) in the manner provided for herein. Tenant may extend the term of this Lease provided (i) Tenant delivers written notice (a Renewal Notice) of such extension to Landlord at least nine (9) months prior to the expiration of the Initial Tenn and (ii) Tenant is not in default hereunder as of the date of such notice. If Tenant elects an Additional Term, all of the terms and conditions of this Lease shall govern the Additional Term, except that Base Rent shall be adjusted pursuant to Paragraph 3(b) hereof. All references to the "term" of this Lease refers to the Initial Term and any Additional Term elected by Tenant. 3. Rent: (a) Tenant shall pay to Landlord as Base Rent, an annual rent for the Premises (Base Rent) during the Initial Term in the amounts set forth below: Base Rent Schedule Period Rate Annual Base Rent Monthly Installment ------ ---- ---------------- ------------------- June 26, 1999 to $9.10 per rentable $243,115.60 $20.259.64 December 31, 2001 square foot January 1, 2001 to $9.60 per rentable $265,473.60 $21,372.80 Expiration Date square foot The foregoing amounts shall be adjusted, if necessary, to reflect the actual rentable area of the Premises. All installments of Base Rent shall be payable in advance, on the first (1st) day of each calendar month during the term hereof. Rent for the first and last months of the term hereof shall be prorated based upon the number of days during each of said months that the Lease term was in effect. One monthly installment of Base Rent shall be due and payable on the date of execution of this Lease by Tenant. All Base Rent shall be paid without notice, demand, deduction or offset, at the offices of Landlord or to such other person or at such other place as Landlord may designate in writing. Tenant shall pay to Landlord as "Additional Rent" all other sums due under this Lease. (b) The annual Base Rent for the Additional Term, if elected by Tenant hereunder, shall be adjusted effective as of the first day of the Additional Tenn to the annual "Market Rent" of the Premises. For purposes of this Lease, "Market Rent" means the prevailing market rent for the Premises determined as follows: For purposes of this Lease "Market Rent" shall be the amount for which the Premises could be leased for the Additional Term in an arm's-length transaction upon the same terms and conditions (other than Basic Rent) as are otherwise contained in this Lease, assuming both the Landlord and Tenant are prudent persons willing to enter into such a Lease but under no compulsion to do so. Landlord and Tenant shall, within thirty (30) days after the date Landlord receives a Renewal Notice from Tenant, attempt to agree between themselves as to the Market Rent of the Premises for purposes of establishing the Base Rent for the Additional Term. If the parties are unable to agree upon the Market Rent within said thirty (30) days, then the Market Rent shall be determined by an appraisal process. The appraisal process shall be completed by three reputable real estate professionals, each of whom shall (i) have no interest in the business of either party hereto; (ii) have at least five (5) years of experience appraising commercial properties similar to the 2 Premises; and (iii) be a member of the American Institute of Real Estate Appraisers with the designation of "MAI." One appraiser shall be appointed by Tenant and the second appraiser shall be appointed by Landlord. The third appraiser shall be appointed by the first two appraisers. If, for any reason the first two appraisers are unable to agree on the third appraiser within ten (10) days after the appointment of the second appraiser or if either party refuses or neglects to appoint an appraiser as herein provided within ten (10) days after the appointment of the first appraiser, then such third appraiser or other appraiser whose appointment was not made as previously specified shall be appointed by the President of the Minnesota chapter of the American Institute of Real Estate Appraisers, or such other such bodies exercising similar functions. Such appointment shall be made within ten (10) days after the request is submitted to the President. The appraisers shall submit their written determinations of Market Rent within thirty (30) days after the appointment of the third appraiser. The determinations of all three appraisers shall be issued in sealed envelopes and shall be opened simultaneously. If the determinations of at least two of the appraisers are identical in amount, said amount shall be deemed to be the Market Rent. If the determinations of all three appraisers are different in amount, the Market Rent shall be determined as follows: (i) If neither the highest value nor the lowest value differs from the middle appraised market value by more than 15% of such middle appraised value, then the Market Rent shall be deemed to be average of the three appraisals; and (ii) If either the highest value or the lowest value differs from the middle appraised value by more than 15% of such middle appraised value, then the Market Rent shall be deemed to be the average of the middle appraised value and the appraised value closest in amount to said middle value. Upon the completion of the process, the Market Rent as determined above shall constitute the Base Rent for the Additional Term. Each party shall bear its own expense in connection with the appraisal process, except that the fees for all of the appraisers shall be split equally between Landlord and Tenant. Notwithstanding any other term or condition of this Lease to the contrary, in no event shall the Market Rent as determined by the appraisers set forth above be less than the Base Rent as of the expiration of the Initial Term. 4. Rent Adjustment: (a) The following terms shall have the following meanings with respect to the provisions of this Paragraph 4: (1) "Building Rentable Area" shall mean all rentable space available for lease in the Building, calculated on the basis set forth in BOMA Publication 265.1-1980. If there is a significant change in the aggregate Building Rentable Area, of a permanent nature, as a result of an 3 addition to the Building, partial destruction thereof or similar circumstance, Landlord's Accountants (as herein defined) shall determine and make an appropriate adjustment to the provisions herein. (2) "Tenant's Pro Rata Share" shall mean a fraction, the numerator of which is the BOMA Rentable Area of the Premises occupied by Tenant (i.e., 26,716 square feet) and the denominator of which is the Building Rentable Area (i.e., 104,698.60 square feet), and is equal to 25.52%. At such time, if ever, any space is added to or subtracted from the Premises pursuant to the terms of this Lease, Tenant's Pro Rata Share shall be increased or decreased accordingly. (3) "Operating Expenses" shall mean: A. All operating expenses of any kind or nature which are necessary, ordinary or customarily incurred with respect to the operation and maintenance of the Building as determined in accordance with generally accepted accounting principles and shall include, but not be limited to: (i) Costs of supplies, including but not limited to the cost of "relamping" all tenant lighting as the same may be required from time to time; (ii) Costs incurred in connection with obtaining and providing energy for the Building, including but not limited to costs of propane, butane, natural gas, steam, electricity, solar energy and fuel oils, coal or any other energy sources as well as costs for heating, ventilation, and air conditioning services (HVAC); (iii) Costs of water and sanitary and storm drainage services; (iv) Costs of janitorial and security services, if any, provided to the common areas of the Building; (v) Costs of general maintenance and repairs, including costs under HVAC and other mechanical maintenance contracts; and repairs and replacements of equipment used in connection with such maintenance and repair work; (vi) Costs of maintenance and replacement of landscaping; and costs of maintenance, repair, striping and seal coating of parking areas, common areas, plazas and other areas used by tenants of the Building, including trash and snow removal; (vii) Insurance premiums, including fire and all-risk coverage, together with loss of rent endorsement; public liability insurance; and any other insurance carried by Landlord on the Building or any component parts thereof, 4 (viii) Labor costs, including wages and other payments, costs to Landlord of workmen's compensation and disability insurance, payroll taxes, welfare fringe benefits and all legal fees and other costs or expenses incurred in resolving any labor disputes; (ix) Professional building management fees in amounts consistent with building management fees charged for similar buildings in Rochester, Minnesota; (x) Legal, accounting, inspection and other consultation fees (including, without limitation, fees charged by consultants retained by Landlord for services that are designed to produce a reduction in Operating Expenses or reasonably to improve the operation, maintenance or state of repair of the Building) incurred for the normal prudent operation of the Building; (xi) The costs of capital improvements and structural repairs and replacements made in or to the Building or the cost of any machinery or equipment installed in the Building in order to conform to changes, subsequent to the Lease Commencement Date, in any applicable laws, ordinances, rules, regulations or orders of any governmental or quasi-governmental authority having jurisdiction over the Building (herein, Required Capital Improvement); the costs of any capital improvements and structural repairs and replacements designed primarily to reduce Operating Expenses (herein, Cost Savings Improvements); and all other capital improvements and structural repairs and replacements (Other Capital Improvements) reasonably necessary to permit Landlord to maintain the Building as a first class office building. The expenditures for Other Capital Improvements, Required Capital Improvements and Cost Savings Improvements shall be amortized over the useful life of such capital improvement or structural repair or replacement (as reasonably determined by Landlord's accountants); and (xiii) Any other expense which under generally accepted accounting principles would be considered a normal maintenance or operating expense. If Landlord selects an accrual accounting basis for calculating Operating Expenses, Operating Expenses shall be deemed to have been paid when such expenses have accrued in accordance with generally accepted accounting principles, provided a switch from cash to accrual accounting shall not result in Tenant paying twice for any expenses in any year. Landlord may incur Operating Expenses for the Building Complex as whole and prorate such Building Complex Operating Expenses to the Building in a reasonable manner. B. Expressly exclude Landlord's income taxes; leasing commissions, legal expenses, advertising and promotional expenses; interest on debt or amortization payments on any mortgages or deeds of trust; costs of repairs or other work occasioned by fire, windstorm or other casualty to the extent of insurance proceeds received; and any other expense which under generally accepted accounting principles would not be considered a normal maintenance or operating expense, except as otherwise specifically provided herein. 5 (4) "Real Estate Taxes" shall mean all real property taxes and assessments levied against the Building by any governmental or quasi-governmental authority, including any taxes, assessments, surcharges, or service or other fees of a nature not presently in effect which shall hereafter be levied on the Building as a result of the use, ownership or operation of the Building or for any other reason, whether in lieu of or in addition to any current real estate taxes and assessments; provided, however, that any taxes which shall be levied on the rentals of the Building shall be determined as if the Building were Landlord's only property and provided further, that in no event shall the term "Taxes and Assessments", as used herein, include any federal, state or local income taxes levied or assessed on Landlord, unless such taxes are a specific substitute for real property taxes; such term shall, however, include gross taxes on rentals and expenses incurred by Landlord for tax consultants and in contesting the amount or validity of any such Taxes or Assessments (all of the foregoing are collectively referred to herein as Taxes); provided expenses for tax consultants and for contesting the amount or validity of such Taxes or Assessments charged to Tenant shall not exceed the savings achieved. "Assessments" shall include any and all so-called special assessments, license tax, business license fee, business license tax, commercial rental tax, levy, charge or tax imposed by any authority having the direct power to tax, including any city, county, state or federal government, or any school, agricultural, lighting, water, drainage or other improvement or special district thereof, against the Premises or the Building, or against any legal or equitable interest of Landlord therein. For the purposes of this Lease, any special assessment shall be deemed payable in maximum number of installments as is permitted by law, whether or not actually so paid. (b) It is hereby agreed that Tenant shall pay to Landlord as Additional Rent during each calendar year during the term hereof an estimate of Tenant's Pro Rata Share of Operating Expenses for the calendar year and an estimate of Tenant's Pro Rata Share of Real Estate Taxes for the calendar year, as reasonably estimated by Landlord, payable monthly, at the rate of one twelfth (1/12) thereof, on the same date and at the same place Base Rent is payable, with an adjustment to be made between the parties at a later date as hereinafter provided. Landlord shall deliver to Tenant, as soon as practicable following the end of any calendar year, an estimate of the Operating Expenses and Real Estate Taxes for the new calendar year (the Budget Sheet). Until receipt of the Budget Sheet, Tenant shall continue to pay its monthly Tenant's Pro Rata Share of Operating Expenses and Real Estate Taxes based upon the estimate for the preceding calendar year. To the extent that the Budget Sheet reflects an estimate of Tenant's Pro Rata Share of Operating Expenses and Real Estate Taxes for the new calendar year greater than the amount actually paid to the date of receipt of the Budget Sheet for the new calendar year, Tenant shall pay such amount to Landlord within thirty (30) days of receipt of the Budget Sheet. Upon receipt of the Budget Sheet, Tenant shall thereafter pay the amount of its monthly Tenant's Pro Rata Share of Operating Expenses and Real Estate Taxes as set forth in the Budget Sheet. As soon as practicable following the end of any calendar year, Landlord shall submit to Tenant a statement in reasonable detail describing the computations of the Operating Expenses and Real Estate Taxes, setting forth the exact amount of Tenant's Pro Rata Share of Operating Expenses and Real Estate Taxes for the calendar year just completed (the Statement), and the difference, if any, between the actual Tenant's Pro Rata Share of Operating Expenses and Real Estate Taxes for the calendar year just completed and the estimated amount of Tenant's Pro Rata 6 Share of Operating Expenses and Real Estate Taxes paid by Tenant to Landlord. Notwithstanding the foregoing, Landlord's failure to deliver the Statement to Tenant shall in no way serve as a waiver of Landlord's rights under this Paragraph. To the extent that the actual Tenant's Pro Rata Share of Operating Expenses and Real Estate Taxes for the period covered by the Statement is higher than the estimated Tenant's Pro Rata Share of Operating Expenses and Real Estate Taxes which Tenant previously paid during the calendar year just completed, Tenant shall also pay to Landlord such balance within thirty (30) days following receipt of the Statement from Landlord. To the extent that the actual Tenant's Pro Rata Share of Operating Expenses and Real Estate Taxes for the period covered by the Statement is less than the estimated Tenant's Pro Rata Share of Operating Expenses and Real Estate Taxes which Tenant previously paid during the calendar year just completed, Landlord shall promptly pay the excess in cash to Tenant. (c) If the Lease term hereunder covers a period of less than a full calendar year during the first or last calendar years of the term hereof, Tenant's Pro Rata Share of Operating Expenses and Real Estate Taxes for such partial year shall be calculated by proportionately reducing the Operating Expenses and Real Estate Taxes to reflect the number of months in such year during which Tenant leased the Premises (the Adjusted Operating Expenses and Adjusted Real Estate Taxes). The Adjusted Operating Expenses and Adjusted Real Estate Taxes shall then be compared with the actual Operating Expenses and actual Real Estate Taxes for said partial year to determine the amount, if any, of any increases in the actual Operating Expenses and Real Estate Taxes for such partial year over the Adjusted Operating Expenses and Adjusted Real Estate Taxes. Tenant shall pay Tenant's Pro Rata Share of any such increases within ten (10) days following receipt of notice thereof. (d) Tenant shall have the right at its own expense and at a reasonable time (after written notice to Landlord) within one hundred eighty (180) days after receipt of the Statement to audit Landlord's books relevant to the Additional Rent due under this Paragraph 4. If Tenant does not audit Landlord's books and deliver the results thereof to Landlord within said one hundred eighty (180) day period, the terms and amounts set forth in the Statement shall be deemed conclusive and final and Tenant shall have no further right to adjustment. If Tenant's examination reveals that an error has been made in Landlord's determination of Tenant's Pro Rata Share of Operating Expenses and Real Estate Taxes and Landlord agrees with such determination, then the amount of such adjustment shall be payable by Landlord or Tenant, to the other party as the case may be. If Tenant's examination reveals an error has been made in Landlord's determination of Tenant's Pro Rata Share of Operating Expenses and Real Estate Taxes, and Landlord disagrees with the results thereof, Landlord shall have thirty (30) days to obtain an audit from an accountant of its choice to determine Tenant's Pro Rata Share of Operating Expenses and Real Estate Taxes. If Landlord's accountant and Tenant's accountant are unable to reconcile their audits, both accountants shall mutually agree upon a third accountant, whose determination of Tenant's Pro Rata Share of Operating Expenses and Real Estate Taxes shall be conclusive. If the amount of error by Landlord is determined to be five percent (5%) or more, the reasonable costs of the three audits made pursuant to this subparagraph shall be paid by Landlord. In the event the amount of error by Landlord is determined to be less than five percent (5%), the reasonable costs of the three audits made pursuant to this subparagraph shall be paid by Tenant. 7 (e) Landlord's failure during the Lease term to prepare and deliver any statements or bills, or Landlord's failure to make a demand under this Paragraph or under any other provision of this Lease shall not in any way be deemed to be a waiver of, or cause Landlord to forfeit or surrender its rights to collect any items of Additional Rent which may have become due pursuant to this Paragraph during the term of this Lease. Tenant's liability for all Additional Rent due under this Lease shall survive the expiration or earlier termination of this Lease. (f) Notwithstanding any provision herein to the contrary, if the Building is not fully occupied during any full or partial calendar year, Operating Expenses shall be adjusted so that the Operating Costs shall be computed for such year as though the Building was fully occupied during such year. 5. Character of Occupancy: (a) The Premises are to be used for general office purposes and for no other purpose without the prior written consent of Landlord, which consent shall not be unreasonably withheld. (b) Tenant shall not suffer nor permit the Premises nor any part thereof to be used in any manner, nor anything to be done therein, nor suffer or permit anything to be brought into or kept therein, which would in any way (i) make void or voidable any fire or liability insurance policy then in force with respect to the Building Complex, (ii) make unobtainable from reputable insurance companies authorized to do business in Minnesota any fire insurance with extended coverage, or liability, elevator, boiler or other insurance required to be furnished by Landlord under the terms of any lease or mortgage to which this Lease is subordinate at standard rates, (iii) cause or in Landlord's reasonable opinion be likely to cause physical damage to the Building Complex or any part thereof, (iv) constitute a public or private nuisance, (v) impair, in the reasonable opinion of Landlord, the exterior appearance of the Building Complex, (vi) discharge objectionable fumes, vapors or odors into the Building air conditioning system or into the Building flues or vents not designed to receive them or otherwise in such manner as may unreasonably offend other occupants of the Building, (vii) impair or interfere with any of the Building services or impair or interfere with the use of any of the other areas of the Building by the other tenants or occupants of the Building Complex, any such impairment or interference to be based upon the reasonable judgment of Landlord, (viii) create waste in, on or around the Premises, Building, or Building Complex, or (ix) make any noise or set up any vibration which will disturb other tenants, except in the course of permitted repairs or alterations at times permitted by Landlord. (c) Tenant shall not use the Premises nor permit anything to be done in or about the Premises or Building Complex which will in any way conflict with any law, statute, ordinance, protective covenants affecting the Building Complex or governmental or quasi-governmental rules or regulations now in force or which may hereafter be enacted or promulgated. Tenant shall give written notice within five (5) days from receipt thereof to Landlord of any notice it receives of the violation of any law or requirement of any public authority with respect to the Premises or the use 8 or occupation thereof. Landlord shall give prompt notice to Tenant of any notice it receives relative to the violation by Tenant of any law or requirement of any public authority with respect to the Premises or the use or occupation thereof. 6. Services and Utilities: (a) Landlord agrees, without charge except as provided herein, and in accordance with standards from time to time prevailing for similar office buildings in the Rochester area, to furnish water to the Building for use in lavatories and drinking fountains and to the Premises; during ordinary business hours (at least the hours of 7:00 a.m. to 7 p.m. Monday through Saturday) to furnish such heated or cooled air to the Premises as may be reasonably required for the comfortable use and occupancy of the Premises provided that Tenant complies with the recommendations of Landlord's engineer or other duly authorized representative, regarding occupancy and use of the Premises, and during ordinary business hours to cause electric current to be supplied for lighting the Premises and public halls. (b) Landlord shall provide electricity for normal office purposes including but not limited to fluorescent and incandescent lighting, including task and task ambient lighting systems and for normal office equipment including but not limited to duplicating (reproduction) machines, communications and audio visual equipment, vending machines, portable computers (provided they do not require any significant additional voltage or special electrical requirements), executive kitchen equipment and internal communication systems (which may include piped-in music). To the extent that electric current is utilized in excess of the amounts indicated above, Tenant's rent shall be increased from time to time by Landlord in such amounts to cover the cost of providing such increased use. Landlord shall have the right, if it determines based on its own judgment that Tenant is using electric current for purposes other than those described above or for other than normal office use, to require Tenant to install a check meter to determine the amount which Tenant is utilizing. The cost of such excess usage, and check meter, including but not limited to monitoring, installation and repair thereof, shall be paid by Tenant. (c) If Tenant requires water in excess of that usually furnished or supplied for use in the Premises as general office space, Tenant agrees to pay to Landlord such amounts as Landlord determines are necessary to cover the costs of such increased use of water, including, but not limited to, the cost of installation, monitoring, maintenance and repair of any check meter or other instrument necessary to measure the use of additional water. (d) Tenant agrees that Landlord shall not be liable for failure to supply any heating, air conditioning, elevator, electrical, lighting or other services during any period when Landlord uses reasonable diligence to supply such services, or during any period Landlord is required to reduce or curtail such services pursuant to any applicable laws, rules or regulations, now or hereafter in force or effect, it being understood and agreed to by Tenant that Landlord may discontinue, reduce or curtail such services, or any of them at such times as it may be necessary by reason of accident, unavailability of employees, repairs, alterations, improvements, strikes, lockouts, riots, acts of God, 9 application of applicable laws, statutes, rules and regulations, or due to any other happening beyond the reasonable control of Landlord. In the event of any such interruption, reduction or discontinuance of Landlord's services, Landlord shall not be liable for damages to persons or property as a result thereof, nor shall the occurrence of any such event in any way be construed as an eviction of Tenant or cause or permit an abatement, reduction or setoff of rent, or operate to release Tenant from any of Tenant's obligations hereunder; provided Landlord shall use its best efforts to restore service if the interruption is in lines or pipes controlled by Landlord and the cause of the interruption was caused or controlled by Landlord. (e) Whenever heat generating machines or equipment are used by Tenant in the Premises which affect the temperature otherwise maintained by the air conditioning system, Landlord reserves the right to install supplementary air conditioning units in the Premises in the event Landlord's independent consulting engineer determines same are necessary as a result of Tenant's use of lights or equipment which generate heat loads in excess of those for which the HVAC system is designed and the cost therefor, including the cost of installation, operation and maintenance thereof, shall be paid by Tenant to Landlord upon demand by Landlord. (f) If Tenant has any special or additional electrical or mechanical requirements related to its use of the Premises, any such electrical or mechanical equipment must be located within the Premises. The foregoing shall in no way be construed as granting to Tenant additional rights to use any such special or additional electrical or mechanical equipment in its Premises without the prior written consent of Landlord. Any additional cost or expense related to or resulting from such electrical or mechanical requirements shall be the sole obligation of Tenant. (g) If Tenant requires HVAC service beyond the ordinary business hours set forth above (hereafter After Hours Usage), such service must be requested from the Building manager at least twenty-four (24) hours prior thereto. Tenant shall reimburse Landlord, as Additional Rent, for all costs and expenses for After Hours Usage in accordance with rates reasonably promulgated by Landlord from time to time. Notwithstanding the foregoing, if in Landlord's reasonable determination, Tenant's demand for After Hours Usage is or becomes excessive or sufficiently frequent as to warrant the same, Landlord may install, at Tenant's expense, separate meters to monitor or control Tenant's After Hours Usage, with all costs for the installation, maintenance and repair of such meter to be paid by Tenant. 7. Quiet Enjoyment: Subject to the provisions of this Lease, Landlord covenants that Tenant on paying the rent and performing the covenants of this Lease on its part to be performed shall and may peacefully and quietly have, hold and enjoy the Premises for the term of this Lease. Landlord shall not be responsible for the acts or omissions of any other tenant or third party not under Landlord's control which may interfere with Tenant's use and enjoyment of the Premises. In the event of any transfer or transfers of Landlord's interest in the Premises or in the real property of which the Premises are a part, other than a transfer for security purposes only, the transferor shall be automatically relieved of any and all obligations and liabilities on the part of Landlord accruing from and after the date of such transfer. 10 8. Maintenance and Repairs: (a) Prior to the Commencement Date of this Lease, Landlord shall, at its expense (and without including the expense for same within the Operating Expenses for the Building) upgrade the first level entry area and corridor with new carpeting and wall coverings. Except as otherwise specifically provided for herein, Landlord is under no obligation to make any other improvements or alternations to the Building or the Premises prior to Tenant's occupancy. (b) Notwithstanding any other provisions of this Lease, Landlord shall repair and maintain in good condition the structural portions of the Building, including the elevators, plumbing, air conditioning, heating and electrical systems installed or furnished by Landlord, unless such maintenance and repairs are caused in part or in whole by the act, neglect, fault or omission of Tenant, its agents, servants, employees, licensees or invitees, in which case Tenant shall pay to Landlord, on demand, the cost of such maintenance and repairs less the amount of any insurance proceeds received by Landlord on account thereof, if applicable. Landlord shall also maintain and keep in good order and repair the Building roof; the curtain wall, including all glass connections at the perimeter of the Building; all exterior doors, including any exterior plate glass within the Building; the Building ventilating systems; elevators; escalators; Building telephone and electrical closets; public portions of the Building or Building Complex, including but not limited to any balconies, landscaping, walkways, and upper floor lobbies and corridors, and interior portions of the Building above and below grade which are not covered by leases. Landlord, at its expense (which expense shall not be included in the Operating Expenses for the Building), shall cause the Building to comply with the ADA. Such obligation shall not extend to the Premises, it being the sole responsibility of Tenant to satisfy the ADA with respect to the premises. (c) Tenant, at Tenant's sole cost and expense, except for services furnished by Landlord pursuant to Paragraph 6 hereof, shall maintain, in good order, condition and repair, the Premises, including the interior surfaces of the ceilings (if damaged or discolored due in whole or in part to the act, neglect, omission or fault of Tenant), walls and floors, all doors, interior glass partitions or glass surfaces (not exterior windows) and pipes, electrical wiring, switches, fixtures and other special items, subject to the provisions of Paragraph 14 hereof. Tenant shall provide all necessary cleaning and janitorial services for the Premises. If Tenant fails to so maintain the Premises in good order, condition and repair, Landlord shall give Tenant notice to do such acts as are reasonably required to maintain the Premises. If Tenant fails to promptly commence such work and diligently pursue it to completion, then Landlord shall have the right, but shall not be required, to do such acts and expend such funds at the expense of Tenant as are reasonably required to perform such work. Landlord shall have no liability to Tenant for any damage, inconvenience or interference with the use of the Premises by Tenant as a result of performing any such work. (d) Landlord and Tenant shall each do all acts required to comply with all applicable laws, ordinances, regulations and rules of any public authority relating to their respective maintenance obligations as set forth herein. 11 9. Alterations and Additions: (a) Tenant shall make no new alterations, additions or improvements to the Premises or any part thereof without obtaining the prior written consent of Landlord, which consent shall not be unreasonably withheld, delayed or denied. Landlord may impose, as a condition to such consent, and at Tenant's sole cost, such reasonable requirements as Landlord may deem necessary in its reasonable judgment, including without limitation, the manner in which the work is done, a right of approval of the contractor by whom the work is to be performed and the times during which the work is to be accomplished, approval of all plans and specifications and the procurement of all licenses and permits. Landlord shall be entitled to post notices on and about the Premises with respect to Landlord's non-liability for mechanics' liens and Tenant shall not permit such notices to be defaced or removed. Tenant further agrees not to connect any apparatus, machinery or device to the Building systems, including electric wires, water pipes, fire safety, heating and mechanical systems, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, delayed or denied. (b) All alterations, improvements and additions to the Premises, including, by way of illustration but not by limitation, all counters, screens, grilles, special cabinetry work, partitions, paneling, carpeting, drapes or other window coverings and light fixtures, shall be deemed a part of the real estate and the property of Landlord and shall remain upon and be surrendered with the Premises as a part thereof without molestation, disturbance or injury at the end of the Lease term, whether by lapse of time or otherwise, unless Landlord, by notice given to Tenant no later than fifteen (15) days prior to the end of the term, shall elect to have Tenant remove all or any of such alterations, improvements or additions and in such event, Tenant shall promptly remove, at its sole cost and expense, such alterations, improvements and additions and restore the Premises to the condition in which the Premises were prior to the making of the same, reasonable wear and tear excepted. Any such removal, whether required or permitted by Landlord, shall be at Tenant's sole cost and expense, and Tenant shall restore the Premises to the condition in which the Premises were prior to the making of the same, reasonable wear and tear excepted. All movable partitions, machines and equipment which are installed in the Premises by or for Tenant, without expense to Landlord, and can be removed without structural damage to or defacement of the Building or the Premises, and all furniture, furnishings and other articles of personal property owned by Tenant and located in the Premises (all of which are herein called Tenant's Property) shall be and remain the property of Tenant and may be removed by it at any time during the term of this Lease. However, if any of Tenant's Property is removed, Tenant shall repair or pay the cost of repairing any damage to the Building or the Premises resulting from such removal. All additions or improvements which are to be surrendered with the Premises shall be surrendered with the Premises, as a part thereof, at the end of the term or the earlier termination of this Lease. (c) If Tenant utilizes persons other than Landlord to perform any alterations, repairs, modifications or additions to the Premises, then prior to the commencement of any such work, Tenant shall deliver to Landlord certificates issued by insurance companies qualified to do business in the State of Minnesota evidencing that workmen's compensation, public liability insurance and 12 property damage insurance, all in amounts, with companies and on forms satisfactory to Landlord, are in force and maintained by all such contractors and subcontractors engaged by Tenant to perform such work. All such policies shall name Landlord as an additional insured and shall provide that the same may not be canceled or modified without thirty (30) days prior written notice to Landlord. (d) Tenant, at its sole cost and expense, shall cause any permitted alterations, decorations, installations, additions or improvements in or about the Premises to be performed in compliance with all applicable requirements of insurance bodies having jurisdiction, and in such manner as not to interfere with, delay, or impose any additional expense upon Landlord in the construction, maintenance or operation of the Building, and so as to maintain harmonious labor relations in the Building. 10. Entry by Landlord: (a) Landlord and its agents shall have the right to enter the Premises at all reasonable times and upon reasonable notice for the purpose of examining or inspecting the same, to supply any services to be provided by Landlord hereunder, to show the same to prospective purchasers of the Building, to make such alterations, repairs, improvements or additions to the Premises or to the Building as Landlord may deem necessary or desirable, and to show the same to prospective tenants of the Premises. Subject to reasonable requirements specified by Tenant in order to protect the confidentiality of Tenant's patients and patient's medical records, Landlord and its agent may enter the Premises at all times and without advance notice for the purpose of responding to an actual or apparent emergency. If, during the last sixty (60) days of the term hereof, Tenant shall have removed substantially all of its property from the Premises, Landlord may immediately enter and alter, renovate and redecorate the Premises without elimination or abatement of rent or incurring liability to Tenant for any compensation. (b) Tenant shall be entitled to two (2) sets of keys to the Premises. 11. Mechanic's Liens: Tenant shall pay or cause to be paid all costs for work done by or on behalf of Tenant or caused to be done by or on behalf of Tenant on the Premises of a character which will or may result in liens against Landlord's interest in the Premises, Building or Building Complex and Tenant will keep the Premises, Building and Building Complex free and clear of all mechanic's liens and other liens on account of work done for or on behalf of Tenant or persons claiming under Tenant. Tenant hereby agrees to indemnify, defend and save Landlord harmless of and from all liability, loss, damages, costs or expenses, including attorneys' fees, incurred in connection with any claims of any nature whatsoever for work performed for, or materials or supplies furnished to Tenant, including lien claims of laborers, materialmen or others. Should any such liens be filed or recorded against the Premises, Building or Building Complex with respect to work done for or materials supplied to or on behalf of Tenant or should any action affecting the title thereto be commenced, Tenant shall cause such liens to be released of record within ten (10) days after notice thereof. If Tenant desires to contest any such claim of lien, Tenant shall nonetheless cause such lien to be released of record by the posting of adequate security with a court of competent 13 jurisdiction as may be provided by Minnesota's mechanic lien statutes. If Tenant shall be in default in paying any charge for which such a mechanic's lien or suit to foreclose such a lien has been recorded or filed and shall not have caused the lien to be released as aforesaid, Landlord may (but without being required to do so) pay such lien or claim and any costs associated therewith, and the amount so paid, together with reasonable attorneys' fees incurred in connection therewith, shall be immediately due from Tenant to Landlord as Additional Rent. 12. Damage to Property, Injury to Persons: (a) Tenant, as a material part of the consideration to be rendered to Landlord under this Lease, hereby waives all claims of liability that Tenant or Tenant's legal representatives, successors or assigns may have against Landlord, and Tenant hereby indemnifies and agrees to hold Landlord harmless from any and all claims of liability for any injury or damage to any person or property whatsoever: (1) occurring in, on or about the Premises or any part thereof; and (2) occurring in, on, or about the Building Complex, when such injury or damage is caused in part or in whole by the act, neglect, fault or omission of Tenant, its agents, contractors, employees, licensees or invitees. Tenant further agrees to indemnify and to hold Landlord harmless from and against any and all claims arising from any breach or default in the performance of any obligation on Tenant's part to be performed under the terms of this Lease, or arising from any act or negligence of Tenant, or any of its agents, contractors, employees, licensees or invitees. Such indemnities shall include by way of example, but not limitation, all costs, reasonable attorneys' fees, expenses and liabilities incurred in or about any such claim, action or proceeding. (b) Landlord shall not be liable to Tenant for any damage by or from any act or negligence of any co-tenant or other occupant of the Building Complex, or by any owner or occupant of adjoining or contiguous property. Landlord shall not be liable for any injury or damage to persons or property resulting in whole or in part from the criminal activities of others. To the extent not covered by normal fire and extended coverage insurance normally carried by a prudent building owner, Tenant agrees to pay for all damage to the Building Complex, as well as all damage to persons or property of other tenants or occupants thereof, caused by the misuse, neglect, act, omission or negligence of Tenant or any of its agents, contractors, employees, licensees or invitees. (c) Neither Landlord nor its agents or employees shall be liable for any damage to property entrusted to Landlord, its agents or employees, or employees of the building manager, if any, nor for the loss or damage to any property occurring by theft or otherwise, nor for any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Building Complex or from the pipes, appliances or plumbing works therein or from the roof, street or subsurface or from any other place or resulting from dampness, or any other cause whatsoever; provided, however, nothing contained herein shall be construed to relieve Landlord from liability for any personal injury resulting from its gross negligence. Neither Landlord nor its agents or employees shall be liable for interference with the lights, view or other incorporeal hereditaments, nor shall Landlord be liable for any latent defect in the Premises or in the Building or Building Complex. Tenant shall give prompt notice to Landlord 14 in case of fire or accidents in or about the Premises or the Building or of defects therein or in the fixtures or equipment located therein. (d) In case any claim, demand, action or proceeding is made or brought against Landlord, its agents or employees, by reason of any obligation on Tenant's part to be performed under the terms of this Lease, or arising from any act or negligence of Tenant, its agents or employees, or which gives rise to Tenant's obligation to indemnify Landlord, Tenant shall be responsible for all costs and expenses, including but not limited to reasonable attorneys' fees incurred in defending or prosecution of the same, as applicable. 13. Insurance: (a) Landlord agrees to carry and maintain the following insurance during the term of this Lease and any extension hereof: general public liability insurance against claims for personal injury, including death and property damage in or about the Premises and the Building or the Building Complex (excluding Tenant's Property), such insurance to be in amounts sufficient to provide reasonable protection for the Building Complex. Such insurance may expressly exclude property paid for by tenants or paid for by Landlord for which tenants have reimbursed Landlord located in or constituting a part of the Building or the Building Complex. Such insurance shall afford coverage for damages resulting from (a) fire, (b) perils covered by extended coverage insurance, and (c) explosion of steam and pressure boilers and similar apparatus located in the Building or the Building Complex. All such insurance shall be procured from a responsible insurance company or companies authorized to do business in Minnesota and may be obtained by Landlord by endorsement on its blanket insurance policies. (b) Tenant shall procure and maintain at its own cost at all times during the term of this Lease and any extensions hereof, hazard, fire and extended coverage on Tenant's property and the contents of the Premises, comprehensive general liability insurance, including coverage for bodily injury, property damage, personal injury (employee and contractual liability exclusions deleted), products and completed operations, contractual liability, owner's protective liability, host liquor legal liability and broad form property damage with the following limits of liability: Five Million Dollars ($5,000,000.00) each occurrence combined single limit for bodily injury, property damage and personal injury; Five Million Dollars ($5,000,000.00) aggregate for bodily injury and property damage for products and completed operations. All such insurance shall be procured from a responsible insurance company or companies authorized to do business in Minnesota, and shall be otherwise reasonably satisfactory to Landlord. All such policies shall name Landlord as an additional insured, and shall provide that the same may not be canceled or altered except upon thirty (30) days prior written notice to Landlord. All insurance maintained by Tenant shall be primary to any insurance provided by Landlord. If Tenant obtains any general liability insurance policy on a claims-made basis, Tenant shall provide continuous liability coverage for claims arising during the entire term of this Lease, regardless of when such claims are made, either by obtaining an endorsement providing for an unlimited extended reporting period in the event such policy is canceled or not renewed for any reason whatsoever or by obtaining new coverage with a retroactive 15 date the same as or earlier than the expiration date of the canceled or expired policy. Tenant shall provide certificate(s) of such insurance to Landlord upon commencement of the Lease term and at least thirty (30) days prior to any annual renewal date thereof and upon request from time to time and such certificate(s) shall disclose that such insurance names Landlord as an additional insured, in addition to the other requirements set forth herein. The limits of such insurance shall not, under any circumstances, limit the liability of Tenant hereunder. (c) Each party agrees to use its best efforts to include in each of its policies insuring against loss, damage or destruction by fire or other casualty a waiver of the insurer's right of subrogation against the other party, or if such waiver should be unobtainable or unenforceable (i) an express agreement that such policy shall not be invalidated if the insured waives the right of recovery against any party responsible for a casualty covered by the policy before the casualty; or (ii) any other form of permission for the release of the other party. If such waiver, agreement or permission shall not be, or shall cease to be, obtainable without additional charge or at all, the insured party shall so notify the other party promptly after learning thereof. In such case, if the other party shall so elect and shall pay the insurer's additional charge therefor, such waiver, agreement or permission shall be included in the policy, or the other party shall be named as an additional insured in the policy. Each such policy which shall so name a party hereto as an additional insured shall contain, if obtainable, agreements by the insurer that the policy will not be canceled without at least thirty (30) days prior notice to both insureds and the act or omission of one insured will not invalidate the policy as to the other insured. Any failure by either party, if named as an additional insured, promptly to endorse to the order of the other party, without recourse, any instrument for the payment of money under or with respect to the policy of which the other party is the owner or original or primary insured, shall be deemed a default under this Lease. (d) Each party hereby releases the other party with respect to any claim (including a claim for negligence) which it might otherwise have against the other party for loss, damage or destruction with respect to its property (including the Building, Building Complex, the Premises and rental value or business interruption) occurring during the term of this Lease to the extent to which it is insured under a policy or policies containing a waiver of subrogation or permission to release liability or naming the above party as an additional insured as provided above. (e) Any Building employee to whom property shall be entrusted by or on behalf of Tenant shall be deemed to be acting as Tenant's agent with respect to such property and neither Landlord, the Building Manager, if any, nor their respective agents, shall be liable for any damage to the property of Tenant or others entrusted to employees of the Building, nor for the loss of or damage to any property of Tenant by theft or otherwise and Tenant shall indemnify Landlord of and from any loss or damages, costs or actions Landlord may suffer or incur as a result of such loss or damage to Property. 16 14. Damage or Destruction to Building: (a) In the event that the Premises or the Building are damaged by fire or other insured casualty and the insurance proceeds have been made available therefor by the holder or holders of any mortgages or deeds of trust covering the Building, the damage shall be repaired by and at the expense of Landlord to the extent of such insurance proceeds available therefor, provided such repairs and restoration can, in Landlord's reasonable opinion, be made within two hundred seventy (270) days after the occurrence of such damage without the payment of overtime or other premiums, and until such repairs and restoration are completed, the Base Rent shall be abated in proportion to the part of the Premises which is unusable by Tenant in the conduct of its business, as may be reasonably determined by Landlord, (but there shall be no abatement of Base Rent by reason of any portion of the Premises being unusable for a period equal to one (1) day or less). Landlord agrees to notify Tenant within forty-five (45) days after such casualty if it estimates that it will be unable to repair and restore the Premises within said two hundred seventy (270) day period. Such notice shall set forth the approximate length of time Landlord estimates will be required to complete such repairs and restoration. Except as provided in this Paragraph 14, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant's business or property arising from the making of any such repairs, alterations or improvements in or to the Building, Premises or fixtures, appurtenances and equipment. Tenant understands that Landlord will not carry insurance of any kind on Tenant's Property, including furniture and furnishings, or on any fixtures or equipment removable by Tenant under the provisions of this Lease, or any improvement installed in the Premises by or on behalf of Tenant, and that Landlord shall not be obligated to repair any damage thereto or replace the same. (b) In case the Premises or the Building throughout shall be so injured or damaged, whether by fire or otherwise (though the Premises may not be affected, or if affected, cannot be repaired within said two hundred seventy (270) days), then Landlord, within sixty (60) days after the happening of such injury, may decide not to reconstruct or rebuild the Building. Thereupon, notwithstanding anything contained herein to the contrary, upon notice in writing to that effect given by Landlord to Tenant within said sixty (60) days, Tenant shall pay the rent properly apportioned up to date of such casualty, this Lease shall terminate from the date of delivery of said written notice, and both parties hereto shall be released and discharged from all further obligations hereunder (except those obligations which expressly survive termination of the Lease term). A total destruction of the Building shall automatically terminate this Lease. 15. Condemnation: (a) If the whole of the Premises or so much thereof as to render the balance unusable by Tenant for the proper conduct of its business shall be taken under power of eminent domain or transferred under threat thereof, then this Lease, at the option of either Landlord or Tenant exercised by either party giving notice to the other of such election within thirty (30) days after such conveyance or taking possession, whichever is earlier, shall forthwith cease and terminate and the rent shall be duly apportioned as of the date of such taking or conveyance. No award for any partial 17 or entire taking shall be apportioned and Tenant hereby assigns to Landlord any award which may be made in such taking or condemnation, together with any and all rights of Tenant now or hereafter arising in or to the same or any part thereof. Notwithstanding the foregoing, Tenant shall be entitled to seek, directly from the condemning authority, an award for its removable trade fixtures, equipment and personal property and relocation expenses, if any, to the extent Landlord's award is not diminished. In the event of a partial taking which does not result in a termination of this Lease, Base Rent shall be reduced in proportion to the reduction in the size of the Premises so taken and this Lease shall be modified accordingly. Promptly after obtaining knowledge thereof, Landlord or Tenant, as the case may be, shall notify the other of any pending or threatened condemnation or taking affecting the Premises or the Building. (b) If all or any portion of the Premises shall be condemned or taken for governmental occupancy for a limited period, this Lease shall not terminate and Landlord shall be entitled to receive the entire amount of any such award or payment thereof as damages, rent or otherwise. Tenant hereby assigns to Landlord any award which may be made in such temporary taking, together with any and all rights of Tenant now or hereafter arising in or to the same or any part thereof. Tenant shall be entitled to receive an abatement of Base Rent in proportion to the reduction in the size of the Premises so taken. 16. Assignment and Subletting: Tenant shall not permit any part of the Premises to be used or occupied by any persons other than Tenant, its wholly owned affiliated companies and their employees, nor shall Tenant permit any part of the Premises to be used or occupied by any licensee or concessionaire or permit any persons other than Tenant, its wholly owned affiliated companies and their employees and invitees, to be upon the Premises. Tenant shall not voluntarily, by operation of law, or otherwise, assign, transfer or encumber this Lease or any interest herein nor sublet or part with possession of all or any part of the Premises (any and all of which shall hereinafter be referred to as Transfer) without Landlord's prior written consent, which shall be in Landlord's sole discretion. Any Transfer without the prior written consent of Landlord shall constitute a default hereunder and shall be void ab initio and shall confer no rights upon any third party, notwithstanding Landlord's acceptance of rent payments from any purported transferee. Notwithstanding the foregoing, Tenant may, without Landlord's consent, assign this Lease to an affiliate of Tenant (including any party to whom Tenant has sold the majority of its assets) or the entity resulting from a merger with Tenant provided, in the first instance Tenant remains principally liable hereunder and, in the second instance, the new entity specifically assumes in writing for the benefit of Landlord all of Tenants liability hereunder. 17. Estoppel Certificate: Tenant further agrees at any time and from time to time on or before ten (10) days after written request by Landlord, to execute, acknowledge and deliver to Landlord an estoppel certificate certifying (to the extent it believes the same to be true) that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified, and stating the modifications), that there have been no defaults thereunder by Landlord or Tenant (or if there have been defaults, setting forth the nature thereof), the date to which the rent and other charges have been paid, if any, that Tenant claims no present 18 charge, lien, claim or offset against rent, the rent is not prepaid for more than one month in advance and such other matters as may be reasonably required by Landlord, Landlord's mortgagee, or any potential purchaser of the Building, it being intended that any such statement delivered pursuant to this Paragraph may be relied upon by any prospective purchaser of all or any portion of Landlord's interest herein, or a holder of any mortgage or deed of trust encumbering any portion of the Building Complex. Tenant's failure to deliver such statement within such time shall be a default under this Lease. Notwithstanding the foregoing, in the event that Tenant does not execute the statement required by this paragraph, Tenant hereby grants to Landlord a power of attorney coupled with an interest to act as Tenant's attorney in fact for the purpose of executing such statement or statements required by this Paragraph. 18. Hazardous Materials: As to the Premises and the Building Complex Tenant shall not (either with or without negligence) cause or permit, except as specifically permitted by law, the escape, disposal or release of any hazardous substances, or materials. Tenant shall not allow the storage or use of such substances or materials in any manner not sanctioned by law or by the highest standards prevailing in the industry for the storage and use of such substances or materials, nor allow to be brought into the Premises any such materials or substances except to use in the ordinary course of Tenant's business. Tenant shall, prior to the Commencement Date of the Lease, deliver to Landlord a list of all such materials and substances then expected by Tenant to be used in the ordinary course of Tenant's business on the Leased Premises, and such evidence of compliance with applicable laws and/or such prevailing standards pertaining to such materials and substances on Tenant's list or thereafter present on the Leased Premises as Landlord may reasonably request, within ten (10) days after receipt of Landlord's written demand therefore. Without limitation, hazardous substances and materials shall include those described in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et. seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et. seq., any applicable state or local laws and the regulations adopted under these acts. If Landlord and/or any lender or governmental agency shall ever require testing to ascertain whether or not there has been any release of hazardous materials, then the reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand as additional charges if such requirement applies to the Leased Premises. In all events, Tenant shall indemnify and hold Landlord harmless in the manner elsewhere provided in this Lease from any costs, damages, expenses, fines, or any other liability of any type or nature arising from or related to: (i) any release of hazardous materials on the Leased Premises occurring while Tenant is in possession, or elsewhere if caused by Tenant or persons acting under Tenant; (ii) the release of hazardous materials on the Leased Premises subsequent to the term of this Lease, if such hazardous materials were placed on the Leased Premises by Tenant or persons acting under Tenant; and (iii) the removal, cleanup, restoration, or remediation of any hazardous materials placed on the Leased Premises by Tenant or by those acting under Tenant's control. The within covenants shall survive the expiration or earlier termination of the Term of this Lease. 19 19. Default: (a) The following events (herein referred to as an Event of Default) shall constitute a default by Tenant hereunder; (1) Tenant shall fail to pay when due any installment of Base Rent, Additional Rent or any other amounts payable hereunder; (2) This Lease or the estate of Tenant hereunder shall be transferred to or shall pass to or devolve upon any other person or party in violation of the provisions of this Lease, except as permitted herein; (3) This Lease or the Premises or any part thereof shall be taken upon execution or by other process of law directed against Tenant, or shall be taken upon or subject to any attachment at the instance of any creditor or claimant against Tenant, and said attachment shall not be discharged or disposed of within fifteen (15) days after the levy thereof; (4) Tenant shall file a petition in bankruptcy or insolvency or for reorganization or arrangement under the bankruptcy laws of the United States or under any insolvency act of any state, or shall voluntarily take advantage of any such law or act by answer or otherwise, or shall be dissolved or shall make an assignment for the benefit of creditors; (5) Involuntary proceedings under any such bankruptcy law or insolvency act or for the dissolution of Tenant shall be instituted against Tenant, or a receiver or trustee shall be appointed of all or substantially all of the property of Tenant, and such proceedings shall not be dismissed or such receivership or trusteeship vacated within thirty (30) days after such institution or appointment; (6) Tenant shall fail to take possession of the Premises within thirty (30) days of the Commencement Date; (7) Tenant shall fail to perform any of the other agreements, terms, covenants or conditions hereof on Tenant's part to be performed, and such nonperformance shall continue for a period of fifteen (15) days after notice thereof by Landlord to Tenant; provided, however, that if Tenant cannot reasonably cure such nonperformance within fifteen (15) days, Tenant shall not be in default if it commences cure within said fifteen (15) days and diligently pursues the same to completion, with completion occurring in all instances within sixty (60) days; (8) Tenant shall fail to obtain a release of any mechanic's lien, as required herein; (9) All or any part of the personal property of Tenant is seized, subject to levy or attachment, or similarly repossessed or removed from the Premises. 20 (b) Upon the occurrence of an event of default, Landlord shall have the right, at its election, then or at any time thereafter and while any such event of default shall continue, either: (1) To give Tenant written notice of Landlord's intention to terminate this Lease on the date such notice is given or on any later date specified therein, whereupon, on the date specified in such notice, Tenant's right to possession of the premises shall cease and this Lease shall thereupon be terminated; provided however, all of Tenant's obligations, including but not limited to, the amount of Base Rent and other obligations reserved in this Lease for the balance of the term hereof, shall immediately be accelerated and due and payable, discounted by an amount equal to the then current interest rate on U.S. Treasury Bills having a maturity date which coincides with the expiration date of the then current term of this Lease had Tenant not defaulted. (2) To re-enter and take possession of the Premises or any part thereof and repossess the same as Landlord's former estate and expel Tenant and those claiming through or under Tenant, and remove the effects of both or either, using such force for such purposes as may be reasonably necessary, without being liable for prosecution thereof, without being deemed guilty of any manner of trespass and without prejudice to any remedies for arrears of rent or preceding breach of covenants or conditions. Should Landlord elect to re-enter the Premises as provided in this Paragraph 19(b)(2) or should Landlord take possession pursuant to legal proceedings or pursuant to any notice provided for by law, Landlord may, from time to time, without terminating this Lease, relet the Premises or any part thereof in Landlord's or Tenant's name, but for the account of Tenant, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the term of this Lease) and on such conditions and upon such other terms (which may include concessions of free rent and alteration and repair of the Premises) as Landlord, in its discretion, may determine, and Landlord may collect and receive the rents therefor. Landlord shall in no way be responsible or liable for any failure to relet the Premises or any part thereof or for any failure to collect any rent due upon such reletting. No such re-entry or taking possession of the Premises by Landlord shall be construed as an election on Landlord's part to terminate this Lease unless a written notice of such intention be given to Tenant. No notice from Landlord hereunder or under a forcible entry and detainer statute or similar law shall constitute an election by Landlord to terminate this Lease unless such notice specifically so states. Landlord reserves the right following any such re-entry and/or reletting, to exercise its right to terminate this Lease by giving Tenant such written notice, in which event, this Lease will terminate as specified in said notice. (c) In the event that Landlord does not elect to terminate this Lease as permitted in Paragraph 19(b)(1) hereof, but on the contrary, elects to take possession as provided in Paragraph 19(b)(2), Tenant shall pay to Landlord (i) the rent and other sums as herein provided, which would be payable hereunder if such repossession had not occurred, less (ii) the net proceeds, if any, of any reletting of the Premises after deducting all Landlord's expenses in connection with such reletting, including but without limitation, all repossession costs, brokerage commissions, legal expenses, attorneys' fees, expenses of employees, alteration and repair costs and expenses of preparation for such reletting. If, in connection with any reletting, the new lease term extends beyond the existing term, or the premises covered thereby include other premises not part of the Premises, a fair 21 apportionment of the rent received from such reletting and the expenses incurred in connection therewith as provided aforesaid will be made in determining the net proceeds from such reletting. Tenant shall pay such rent and other sums to Landlord monthly on the days on which the rent would have been payable hereunder if possession had not been retaken. (d) In the event this Lease is terminated, Landlord shall be entitled to recover forthwith against Tenant as damages for loss of the bargain and not as a penalty, an aggregate sum which, at the time of such termination of this Lease, represents the excess, if any, of the aggregate of the rent and all other sums payable by Tenant hereunder that would have accrued for the balance of the term over the aggregate rental value of the Premises (such rental value to be computed on the basis of a tenant paying not only a rent to Landlord for the use and occupation of the Premises, but also such other charges as are required to be paid by Tenant under the terms of this Lease) for the balance of such term, both discounted to present worth at the rate of eight percent (8%) per annum. Alternatively, at Landlord's option, Tenant shall remain liable to Landlord for damages in an amount equal to the rent and other sums arising under the Lease for the balance of the term had the lease not been terminated, less the net proceeds, if any, from any subsequent reletting, after deducting all expenses associated therewith and as enumerated above. Landlord shall be entitled to receipt of such amounts from Tenant monthly on the days on which such sums would have otherwise been payable. (e) Suit or suits for the recovery of the amounts and damages set forth above may be brought by Landlord, from time to time, at Landlord's election and nothing herein shall be deemed to require Landlord to await the date whereon this Lease or the term hereof would have expired had there been no such default by Tenant or no such termination, as the case may be. (f) After an event of default by Tenant, Landlord may sue for or otherwise collect all rents, issues and profits payable under all subleases on the Premises, including those past due and unpaid. (g) After an event of default by Tenant, Landlord may without terminating this Lease, enter upon the Premises, with force if necessary, without being liable for prosecution of any claim for damages, without being deemed guilty of any manner of trespass and without prejudice to any other remedies, and do whatever Tenant is obligated to do under the terms of this Lease. Tenant agrees to reimburse Landlord on demand for any expenses which Landlord may incur in effecting compliance with the Tenant's obligations under this Lease; further, Tenant agrees that Landlord shall not be liable for any damages resulting to Tenant from effecting compliance with Tenant's obligations under this subparagraph caused by the negligence of Landlord or otherwise. (h) No failure by Landlord to insist upon the strict performance of any agreement, term, covenant or condition hereof or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial rent during the continuance of any such breach, shall constitute a waiver of any such breach of such agreement, term, covenant or condition. No agreement, term, covenant or condition hereof to be performed or complied with by Tenant, and no breach thereof, shall be waived, altered or modified except by written instrument executed by Landlord. No waiver 22 of any breach shall affect or alter this Lease, but each and every agreement, term, covenant and condition hereof shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. Notwithstanding any unilateral termination of this Lease, this Lease shall continue in force and effect as to any provisions hereof which require observance or performance of Landlord or Tenant subsequent to termination. (i) Nothing contained in this Paragraph shall limit or prejudice the right of Landlord to prove and obtain as liquidated damages in any bankruptcy, insolvency, receivership, reorganization or dissolution proceeding, an amount equal to the maximum allowed by any statute or rule of law governing such proceeding and in effect at the time when such damages are to be proved, whether or not such amount be greater, equal to or less than the amounts recoverable, either as damages or rent, referred to in any of the preceding provisions of this Paragraph. (j) Any rents or other amounts owing to Landlord hereunder which are not paid within ten (10) days of the date they are due, shall thereafter bear interest from the due date at the rate of eighteen percent (18%) per annum or the highest rate allowed by law, whichever is lower (Interest Rate) until paid. Similarly, any amounts paid by Landlord to cure any default of Tenant or to perform any obligation of Tenant, shall, if not repaid by the Tenant within five (5) days of demand by Landlord, thereafter bear interest from the date paid by Landlord at the Interest Rate until paid. In addition to the foregoing, Tenant shall pay to Landlord whenever any Base Rent, Additional Rent or any other sums due hereunder remain unpaid more than ten (10) days after the due date thereof, a late charge equal to five percent (5%) of the amount due. Further, in the event of default by Tenant, in addition to all other rights and remedies, Landlord shall be entitled to receive from Tenant all sums, the payment of which may previously have been waived or abated by Landlord, or which may have been paid by Landlord pursuant to any agreement to grant Tenant a rental abatement or other monetary inducement or concession, including but not limited to any tenant finish allowance or moving allowance, together with interest thereon from the date or dates such amounts were paid by Landlord or would have been due from Tenant but for the abatement, at the Interest Rate, until paid; it being understood and agreed that such concession or abatement was made on the condition and basis that Tenant duly perform all obligations and covenants under the Lease for the entire term. (k) Each right and remedy provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease now or hereafter existing at law or in equity or by statute or otherwise, including, but not limited to, suits for injunctive or declaratory relief and specific performance. The exercise or commencement of the exercise by Landlord of any one or more of the rights or remedies provided for in this Lease now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or subsequent exercise by Landlord of any or all other rights or remedies provided for in this Lease, or now or hereafter existing at law or in equity or by statute or otherwise. All costs incurred by Landlord in connection with collecting any amounts and damages owing by Tenant pursuant to the provisions of this Lease or to enforce any provision of this Lease, including by way of example, but not limitation, reasonable attorneys' fees from the date any such matter is turned over to an attorney, shall also be recoverable by Landlord from Tenant. Landlord and Tenant agree that any action or proceeding arising out of 23 this Lease shall be heard by a court sitting without a jury and thus hereby waive all rights to a trial by jury. 20. As-Is-Condition: Except as provided for in Section 36 hereof, Landlord shall have no obligation for the completion of any tenant improvements to the Premises, and Tenant accepts the Premises in its "as is" condition on the Commencement Date. Landlord shall not have any obligation for the repair or replacement of any portions of the interior of the Premises, including but not limited to carpeting, draperies, window coverings, wall coverings or painting, which are damaged or wear out during the term hereof, regardless of the cause therefor, except as may otherwise be specifically set forth in this Lease. 21. Removal of Tenant's Property: All movable furniture and personal effects of Tenant not removed from the Premises upon the vacation or abandonment thereof or upon the termination of this Lease for any cause whatsoever shall conclusively be deemed to have been abandoned and may be appropriated, sold, stored, destroyed or otherwise disposed of by Landlord without notice to Tenant and without obligation to account therefor, and Tenant shall reimburse Landlord for all expenses incurred in connection with the disposition of such property. 22. Holding Over: Should Tenant, with Landlord's written consent, hold over after the termination of this Lease and continue to pay rent, Tenant shall become a tenant from month to month only upon each and all of the terms herein provided as may be applicable to such month to month tenancy and any such holding over shall not constitute an extension of this Lease. During such holding over, Tenant shall pay monthly rent equal to one hundred seventy-five percent (175%) of the last monthly rental rate and the other monetary charges as provided herein. Such tenancy shall continue until terminated by Landlord, as provided by law, or until Tenant shall have given to Landlord at least thirty (30) days written notice prior to the last day of the calendar month intended as the date of termination of such month to month tenancy. 23. Parking and Common Areas: Landlord shall have the right, without obligation, and from time to time, to change the number, size, location, shape and arrangement of parking areas and other common areas, restrict parking of tenants or their guests to designated areas, designate loading or handicap loading areas, change the level or grade of parking and to charge for all parking or any portion thereof. The parking lot located on the south side of the Building (the South Parking Lot) is for the exclusive use of other tenants and this Lease confers no rights to Tenant to use or occupy the South Parking Lot. Subject to the foregoing, all other parking areas, together with easements for parking on parcels adjacent to the parcel on which the Building is located, access roads, courtyards and other areas, facilities or improvements furnished by Landlord are for the general and nonexclusive use in common of all tenants of the Building, including Tenant, and those persons invited upon the land upon which the Building is situated and shall be subject to the exclusive control and management of Landlord, and Landlord shall have the right, without obligation, to establish, modify and enforce such rules and regulations which the Landlord may deem reasonable and/or necessary. Unless as otherwise provided, Tenant's use of the parking areas, as herein set forth, shall be in common with other tenants of the Building and any other parties permitted by 24 Landlord to use the parking area. The parking rights herein granted shall not be deemed a lease but shall be construed as a license granted by Landlord to Tenant for the term of this Lease. In addition to the general non-exclusive parking rights granted to Tenant herein, Landlord shall specifically reserve and post with signage six (6) parking spaces for short-term use by Tenant's visitors and two (2) parking spaces for delivery vehicles serving Tenant, all at locations reasonably determined from time to time by Landlord. 24. Surrender and Notice: Upon the expiration or earlier termination of this Lease, Tenant shall promptly quit and surrender to Landlord the Premises broom clean in good order and condition, ordinary wear and tear and loss by fire or other casualty excepted and Tenant shall remove all of its movable furniture and other effects and such alterations, additions and improvements as Landlord shall require Tenant to remove pursuant to Paragraph 10 hereof. In the event Tenant fails to so vacate the Premises on a timely basis as required, Tenant shall be responsible to Landlord for all costs and damages, including but not limited to, any amounts required to be paid to third parties who were to have occupied the Premises, incurred by Landlord as a result of such failure, plus interest thereon at the Interest Rate on all amounts not paid by Tenant within five (5) days of demand, until paid in full. 25. Subordination and Attornment: (a) This Lease, and all rights of Tenant hereunder, are and shall be subject and subordinate in all respects to all present and future ground leases, overriding leases and underlying leases and/or grants of term of the real property and/or the Building or the Building Complex now or hereafter existing and to all deeds of trust, mortgages and building loan agreements, including leasehold mortgages and building loan agreements, which may now or hereafter affect the Building or the Building Complex or any of such leases, whether or not such deeds of trust or mortgages shall also cover other lands or buildings, to each and every advance made or hereafter to be made under such deeds of trust or mortgages, and to all renewals, modifications, replacements and extension of such leases, deeds of trust and mortgages. The provisions of this Paragraph shall be self-operative and no further instrument of subordination shall be required. However, in confirmation of such subordination, Tenant shall promptly execute and deliver to Landlord (or such other party so designated by Landlord) at Tenant's own cost and expense, within ten (10) days after request from Landlord, an instrument, in recordable form if required, that Landlord, the lessor of any such lease or the holder of any such deed of trust or mortgage or any of their respective successors in interest or assigns may request evidencing such subordination. Failure by Tenant to comply with the requirements of this Paragraph shall be a default hereunder. Notwithstanding the foregoing, in the event that Tenant does not execute such documents as may be required to confirm the subordination set forth in this Paragraph or fails to state its objections in writing to the form of subordination within said ten (10) day period and within seven (7) days after a second request by Landlord, Tenant hereby grants to Landlord the right to execute whatever documents are necessary to evidence such subordination. The leases to which this Lease is, at the time referred to, subject and subordinate pursuant to this Paragraph are hereinafter 25 sometimes called "superior leases" and the deeds of trust or mortgages to which this Lease is, at the time referred to, subject and subordinate are hereinafter sometimes called "superior deeds of trust" or "superior mortgages." The lessor of a superior lease or the beneficiary of a superior deed of trust or superior mortgage or their successors in interest or assigns are hereinafter sometimes collectively referred to as a "superior party." Notwithstanding the foregoing, Tenant may condition its execution of a subordination instrument upon such superior party granting to Tenant a non-disturbance agreement in the form then being used by such superior party for such purposes, providing that Tenant, notwithstanding a default by Landlord, shall be entitled to remain in possession of the Premises in accordance with the terms of this Lease for so long as Tenant shall not be in default of any term, condition or covenant of this Lease. Further, Tenant shall attorn to such superior party. (b) Tenant shall take no steps to terminate this Lease without giving written notice to such superior party, and a reasonable opportunity to cure (without such superior party being obligated to cure), any default on the part of Landlord under this Lease. (c) If holder of any superior mortgage or a ground lease, or anyone claiming by, through or under such holder, shall become the lessee under the ground lease as a result of foreclosure of such superior mortgage, or by reason of an assignment of the lessee's interest under the ground lease and the giving of a deed to the Building or the Building Complex in lieu of foreclosure, there shall be no obligation on the part of such person succeeding to the interest of the lessee under the ground lease to comply with, observe or perform any obligations as sublessor, tenant or landlord under any superior lease. (d) If, in connection with the procurement, continuation or renewal of any financing for which the Building or the Building Complex or of which the interest of the lessee therein under a superior lease represents collateral in whole or in part, a lender shall request reasonable modifications of this Lease as a condition of such financing, Tenant will not unreasonably withhold its consent thereto provided that such modifications do not increase the obligations of Tenant under this Lease or adversely affect any rights of Tenant or decrease the obligations of Landlord under this Lease. 26. Payments after Termination: No payments of money by Tenant to Landlord after the termination of this Lease, in any manner, or after giving of any notice (other than a demand for payment of money) by Landlord to Tenant, shall reinstate, continue or extend the term of this Lease or affect any notice given to Tenant prior to the payment of such money, it being agreed that after the service of notice of the commencement of a suit or other final judgment granting Landlord possession of the Premises, Landlord may receive and collect any sums of rent due or any other sums of money due under the terms of this Lease or otherwise exercise its rights and remedies hereunder. The payment of such sums of money, whether as rent or otherwise, shall not waive said notice or in any manner affect any pending suit or judgment theretofore obtained. 26 27. Authorities for Action and Notice: (a) Except as otherwise provided herein, Landlord may, for any matter pertaining to this Lease, act by and through its building manager or any other person designated in writing from time to time. (b) All notices or demands required or permitted to be given to Landlord hereunder shall be in writing, and shall be deemed duly served when received, if hand delivered, or five (5) days after deposited in the United States mail, with proper postage prepaid, certified or registered, return receipt requested, addressed to Landlord at 700 Meadow Lane North, Minneapolis, MN 55422, Attn: Director of Asset Management. All notices or demands required to be given to Tenant hereunder shall be in writing, and shall be deemed duly served when received, if hand delivered, or five (5) days after deposited in the United States mail, with proper postage prepaid, certified or registered, return receipt requested, addressed to Tenant subsequent to the Lease Commencement Date at the Premises, Attn: Chief Financial Officer. Prior to the Lease Commencement Date, notices to the Tenant shall be addressed to Tenant at 4131 Highway 52 North, Suite G-111, Rochester, Minnesota, 55901-3144, Attn: Chief Financial Officer. Either party shall have the right to designate in writing, served as above provided, a different address to which notice is to be provided. (c) All notices given hereunder by either party shall also be given to New York Life Insurance Company, Attention: Mortgage Finance Department, 51 Madison Avenue, New York, New York, 10010. 28. Liability of Landlord: Landlord's liability under this Lease shall be limited to Landlord's estate and interest in the Building (or to the proceeds thereof) and no other property or other assets of Landlord shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to this Lease, the relationship of Landlord and Tenant hereunder or Tenant's use and occupancy of the Premises. Nothing contained in this Paragraph shall be construed to permit Tenant to offset against rents due a successor landlord, a judgment (or other judicial process) requiring the payment of money by reason of any default of a prior landlord, except as otherwise specifically set forth herein. 29. Brokerage: Tenant represents and warrants that it has dealt only with Hamilton Real Estate (Hamilton) in the negotiation of this Lease. Landlord shall pay any leasing commission or similar fee owing to Hamilton as a result of this Lease. Tenant hereby agrees to indemnify and hold the Landlord harmless of and from any and all loss, costs, damages or expenses (including, without limitation, all attorneys' fees and disbursements) by reason of any claim of or liability to any other representative, broker or person claiming through Tenant and arising out of or in connection with the negotiation, execution and delivery of this Lease. Additionally, Tenant acknowledges and agrees 27 that Landlord shall have no obligation for payment of any other representative fee, brokerage fee or similar compensation to any person with whom Tenant has dealt or may In the future deal with respect to leasing of any additional or expansion space in the Building or renewals or extensions of this Lease. In the event any claim shall be made against Landlord by any other broker per person who shall claim to have negotiated this Lease on behalf of Tenant or to have introduced Tenant to the Building or to Landlord, Tenant shall be liable for payment of all reasonable attorneys' fees, costs and expenses incurred by Landlord in defending against the same, and in the event such broker shall be successful in any such action, Tenant shall, in addition, make payment to such broker. Landlord similarly indemnifies and agrees to hold Tenant harmless for brokerage claims asserted by other parties claiming through Landlord. 30. Rights Reserved to Landlord: (a) Except to the extent otherwise provided in this Lease, including those rights granted to Tenant in Section 6(f) hereof, all portions of the Building are reserved to Landlord except the Premises and the inside surfaces of all walls, windows and doors bounding in the Premises, but including exterior building walls, core corridor walls and doors and any core corridor entrance. Landlord also reserves any space in or adjacent to the Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts, electric or other utilities, sinks or other building facilities, and the use thereof, as well as the right to access thereto through the Premises for the purposes of operation, maintenance and repair, upon written notice of not less than twenty-four (24) hours, except in the event of emergencies or apparent emergencies, when no prior notice shall be required. (b) Landlord shall have the following rights without liability to Tenant for damage or injury to property, person or business (all claims for damage being hereto waived and released), and without effecting an eviction or disturbance of Tenant's use or possession of the Premises or giving rise to any claim for setoffs or abatement of rent: (1) To enter the Premises as more fully provided in this Lease. (2) To install and maintain signs on the exterior and interior of the Building, except within the Premises, provided the signs do not block either completely or partially the exterior windows of the Premises. (3) To have pass keys to the Premises. (4) To decorate, remodel, repair, alter or otherwise prepare the Premises for re-occupancy during the last six (6) months of the term hereof if, during or prior to such time, Tenant has vacated the Premises, or at any time after Tenant abandons the Premises. (5) To have access to all mail chutes according to the rules of the United States Postal Service. 28 (6) To do or permit to be done any work in or about the exterior of the Building or any adjacent or nearby building, land, street or alley, provided such work shall not prevent Tenant's access to the Premises or unreasonably restrict such access. (7) To grant to anyone the exclusive right to conduct any business or render any service in the Building, provided such exclusive right shall not operate to exclude Tenant from the use expressly permitted by this Lease. 31. Force Majeure Clause: Wherever there is provided in this Lease a time limitation for performance by Landlord of any obligation, including but not limited to obligations related to construction, repair, maintenance or service, the time provided for shall be extended for as long as and to the extent that delay in compliance with such limitation is due to an act of God, governmental control or other factors beyond the reasonable control of Landlord. 32. Signage: Except for the signage specifically approved in writing by Landlord, no sign, advertisement or notice shall be inscribed, painted or affixed on any part of the inside or outside of the Building and there shall be no obligation or duty on Landlord to allow any sign, advertisement or notice to be inscribed, painted or affixed on any part of the inside or outside of the Building. A directory in a conspicuous place, with the names of Tenant shall be provided by Landlord. Any necessary revision to such directory shall be made by Landlord, at Tenant's expense, within a reasonable time after written notice from Tenant of the change making the revision necessary. Notwithstanding the foregoing, subject to Landlord's reasonable written approval with respect to size, shape, color, content and appearance, Tenant may, at its expense, install and maintain identifying signage outside of the interior space comprising the Premises. Landlord shall have the right to remove all nonpermitted signs without notice to Tenant and at the expense of Tenant. In addition to the forgoing, conditioned upon Landlord obtaining approval for same from all applicable governmented authorities, Landlord shall make available one-sixth (1/6) of the available area of space on the Building's existing pylon sign to Tenant for Tenant's use, at Tenant's expense and subject in all respects to Landlord's reasonable requirements regarding the use, contents and appearance of the pylon signs. 33. Attorneys' Fees: In the event of any dispute hereunder, or any default in the performance of any term or condition of this Lease, the prevailing party shall be entitled to recover all costs and expenses associated therewith, including reasonable attorneys' fees. 34. Miscellaneous: (a) The rules and regulations attached hereto as Exhibit D, as well as such rules and regulations as may hereafter be adopted by Landlord for the safety, care and cleanliness of the Premises and the Building and the preservation of good order thereon, are hereby expressly made a part hereof, and Tenant agrees to obey all such rules and regulations. The violation of any of such rules and regulations by Tenant shall be deemed a breach of this Lease by Tenant affording Landlord 29 all the remedies set forth herein. Landlord shall not be responsible to Tenant for the nonperformance by any other tenant or occupant of the Building of any of said rules and regulations. (b) The term "Landlord" as used in this Lease, so far as covenants or obligations on the part of Landlord are concerned, shall be limited to mean and include only the owner or owners of the Building at the time in question, and in the event of any transfer or transfers of the title thereto, Landlord herein named (and in the case of any subsequent transfers or conveyances, the then grantor) shall be automatically released from and after the date of such transfer or conveyance of all liability in respect to the performance of any covenants or obligations on the part of Landlord contained in this Lease thereafter to be performed and relating to events occurring thereafter; provided that any funds in the hands of Landlord or the then grantor at the time of such transfer in which Tenant has an interest shall be turned over to the grantee, and any amount then due and payable to Tenant by Landlord or the then grantor under any provisions of this Lease shall be paid to Tenant. (c) As used in this Lease, the term "ordinary business hours" shall mean the hours from 7:00 a.m. to 7:00 p.m., Monday through Saturday, except for New Year's Day, Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, Christmas, and any other national or state holiday as may be established from time to time (Holidays). (d) This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent and not dependent and Tenant shall not be entitled to any setoff of the rent or other amounts owing hereunder against Landlord, if Landlord fails to perform its obligations set forth herein, except as herein specifically set forth; provided, however, the foregoing shall in no way impair the right of Tenant to commence a separate action against Landlord for any violation by Landlord of the provisions hereof so long as notice is first given to Landlord and any holder of a mortgage or deed of trust covering the Building Complex or any portion thereof whose address Tenant has been notified in writing and so long as an opportunity has been granted to Landlord and such holder to correct such violation as provided in Paragraph 41 (h) hereof. (e) If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws effective during the term of this Lease, then and in that event, it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby, and it is also the intention of the parties to this Lease that in lieu of each clause or provision of this Lease that is illegal, invalid or unenforceable, there shall be added as a part of this Lease a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable, provided such addition does not increase or decrease the obligations of or derogate from the rights or powers of either Landlord or Tenant. (f) The captions of each paragraph are added as a matter of convenience only and shall be considered of no effect in the construction of any provision or provisions of this Lease. (g) Except as herein specifically set forth, all terms, conditions and covenants to be observed and performed by the parties hereto shall be applicable to and binding upon their respective 30 heirs, administrators, executors, successors and assigns. The terms, conditions and covenants hereof shall also be considered to be covenants running with the land. (h) Except as otherwise specifically provided herein, in the event Landlord shall fail to perform any of the agreements, terms, covenants or conditions hereof on Landlord's part to be performed, and such non-performance shall continue for a period of twenty (20) days after written notice thereof, from Tenant to Landlord, or if such performance cannot be reasonably had within such twenty (20) day period, and Landlord shall not in good faith have commenced such performance within such twenty (20) day period and proceed therewith to completion within a reasonable period of time, it shall be considered a default of Landlord under this Lease. Tenant shall give written notice to Landlord in the matter herein set forth and shall afford Landlord a reasonable opportunity to cure any such default. In addition, Tenant shall send notice of such default by certified or registered mail, with proper postage prepaid, to the holder of any mortgages or deeds of trust covering the Building Complex or any portion thereof of whose address Tenant has been notified in writing and shall afford such holder a reasonable opportunity to cure any alleged default on Landlord's behalf. (i) No act or thing done by Landlord or Landlord's agent during the term hereof, including but not limited to any agreement to accept surrender of the Premises or to amend or modify this Lease, shall be deemed to be binding upon Landlord unless such act or things shall be by an officer of Landlord or a party designated in writing by Landlord as so authorized to act. The delivery of keys to Landlord, or Landlord's agent, employees or officers shall not operate as a termination of this Lease or a surrender of the Premises. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy available to Landlord. (j) Landlord, during the entire term of this Lease, shall have the right to change the number and name of the Building at any time without liability to Tenant. (k) Tenant acknowledges and agrees that it has not relied upon any statements, representations, agreements or warranties, except such as are expressed in this Lease. (l) Notwithstanding anything to the contrary contained herein, Landlord's liability under this Lease shall be limited to its interests in this building. (m) Time is of the essence hereof. (n) Tenant and Landlord and the party executing this Lease on behalf of each of them represent to each other that such party is authorized to do so by requisite action of the board of 31 directors or partners, as the case may be, and agree upon request to deliver to each other a resolution or similar document to that effect. (o) This Lease shall be governed by and construed in accordance with the laws of the State of Minnesota. (p) This Lease, together with the exhibits attached hereto, contains the entire agreement of the parties and may not be amended or modified in any manner except by an instrument in writing signed by both parties. (q) This Lease may not be recorded. The parties shall execute a Memorandum of Lease to be placed of record. 35. Loading Dock: Tenant shall have the nonexclusive right to use the loading dock (the Loading Dock) located on the second floor of the Building and in space leased by the Landlord to the Mayo Foundation (Mayo). Tenant's use of the Loading Dock shall be limited to moving in and out of the Building and periodically receiving large items, but it is expressly acknowledged by Tenant that the Loading Dock shall not be used on a daily basis by Tenant. Tenant shall also comply with such reasonable rules and procedures for the use and available hours of the Loading Dock as Mayo may imposes from time to time. 36. Tenant Improvements; Planning Allowance and Tenant Improvement Allowance: Lessor shall construct certain tenant improvements (the Tenant Improvements) to the Leased Premises pursuant to plans and specifications (the Plans) agreed to by Lessor and Tenant and which will be attached hereto as Exhibit E and incorporated herein by reference. Lessor and Tenant shall approve the Plans and attach the Plans as Exhibit E on or before November 24, 1998 (the Plan Approval Date). Provided that the Plans are approved on or before the Plan Approval Date, Lessor shall substantially complete the Tenant Improvements prior to the Commencement Date, subject to force majeure delays and delays caused by the actions of Tenant. For purposes of this Lease, the date the Tenant Improvements are "substantially complete" shall mean the date when a certificate of occupancy has been issued for the Leased Premises by the City of Rochester. As part of the approval of the Plans, Lessor and Tenant shall agree as to the costs of the Tenant Improvements (the Construction Cost) include the agreed Construction Cost as part of the Plans. Upon the substantial completion of the Tenant Improvements and prior to Tenant taking possession of the Leased Premises, Tenant shall pay to Lessor the Construction Cost of the Tenant Improvements. Notwithstanding the foregoing, provided (i) Tenant is not in default under the terms and conditions of the Lease and (ii) Tenant has accepted the Tenant Improvements. Lessor shall grant Tenant a tenant improvement allowance (the Tenant Improvement Allowance) in an amount not to exceed $329,250.00 to be applied against the amounts owed to the Lessor for the Construction Cost. Notwithstanding any other term or condition of this Lease to the contrary, Tenant shall have no right to apply the Tenant Improvement Allowance to any other costs or expenses not included within the Construction Cost without the Lessor's prior written consent. 32 Tenant may, at its option, make modifications to the Plans (Construction Changes). Each Construction Change shall be documented by a written change order (a Change Order) executed by Lessor and Tenant at the time the Construction Change is ordered. Each Change Order, in addition to specifying the nature of the Construction Change, shall specify any extension to the completion date of the Tenant Improvements necessitated by the Construction Change and the Commencement Date and the Expiration Date shall be so extended. Additionally, each Change Order shall specify the cost of completing each Construction Change and the corresponding increase (or decrease, if applicable) to the total Construction Cost of the Tenant Improvements. Except as otherwise provided for herein, Lessor is not obligated to make any other tenant improvements or alterations to the Leased Premises and Tenant shall take possession of the Leased Premises in an "as-is" condition. Provided Tenant is not in default under the terms and conditions of this Lease, Landlord grants to Tenant a space planning allowance (the "Space Planning Allowance") in an amount not to exceed $2,500.00 to be used exclusively to pay the costs of Tenant's space planning fees with respect to the Tenant Improvements. Provided Tenant is not in default hereunder and upon presentation to Landlord of reasonable evidence of the costs incurred by Tenant for space planning services, Landlord will reimburse Tenant for such costs in an amount to exceed the Space Planning Allowance. 37. Right of First Refusal for Expansion Space: If, at any time during the Term, any space in the Building becomes available for lease (excluding space which is subject to renewal options by the tenant thereof), which space Landlord intends to make available for lease ("Available Space"), then Landlord shall notify Tenant in writing (the "Availability Notice") of the existence of the Available Space and the terms and conditions upon which Landlord intends to offer the lease of the Available Space to third parties. Tenant shall have twenty (20) days after receipt of the Availability Notice to accept Landlord's offer in writing and upon such acceptance, Tenant shall be obligated to lease the Available Space upon the same terms and conditions as are contained in Availability Notice. If Tenant does not accept Landlord's offer in writing within said twenty (20) days period, then Landlord may negotiate with third parties for the lease of the Available Space upon such terms and conditions as Landlord can obtain. Subsequently, if Landlord receives a bona fide offer from a third party for the lease of the Available Space, which offer Landlord desires to accept (an "Offer"), then Landlord shall deliver a true and correct copy of the Offer to Tenant. Delivery of the Offer by Landlord to Tenant (the "Offer Notice") shall constitute an offer on the part of Landlord to lease the Available Space to Tenant pursuant to the same terms and conditions as are contained in the Offer. Tenant shall have twenty (20) days after receipt of the Offer Notice to accept Landlord's offer in writing and upon such acceptance, Tenant shall be obligated to lease the Available Space upon the same terms and conditions as are contained in the Offer Notice. If Tenant does not accept Landlord's offer in writing within said twenty (20) day period, then all of Tenant's rights contained in this Section 37 with respect to the Available Space shall lapse and terminate and Landlord may then lease the Available Space to third parties upon such terms and conditions as Landlord can obtain. 33 IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the day and year first above written. LANDLORD: MORTENSON PROPERTIES, INC. By: /s/ Peter Conzemius -------------------------------- Peter Conzemius Its: Treasurer TENANT: SHOWCASE CORPORATION By: /s/ Craig W. Allen -------------------------------- Its: CFO 34 EX-10.5 12 EMPLOYMENT AGREEMENT WITH KENNETH H. HOLEC EXHIBIT 10.5 Exhibit A ROCHESTER SOFTWARE CONNECTION, INC. EMPLOYMENT AGREEMENT WITH KEN HOLEC THIS AGREEMENT is entered into effective as of the 22 day of November 1993, by and between ROCHESTER SOFTWARE CONNECTION, INC., a Minnesota corporation (the "Company"), and Ken Holec, a Minnesota resident, ("Employee"). WHEREAS, the Company desires to engage Employee in the position of President and Chief Executive Officer; WHEREAS, Employee possesses certain unique skills, talents, contacts, judgment and knowledge of the Company's businesses, strategies, ethics and objectives; and WHEREAS, Employee desires to be employed by the Company as its President and Chief Executive Officer and to be assured of reasonable tenure and terms and conditions of employment with the Company; and WHEREAS, both parties recognize the critical importance to the Company, its employees and investors, of preserving the confidentiality of the Company's trade secrets and confidential information and of protecting the Company against competition from former executives or other key employees of the Company following their separation from the Company; NOW, THEREFORE, in consideration of the foregoing premises and the parties' mutual covenants and undertakings contained in this Agreement, the sufficiency of which is hereby acknowledged, the Company and the Employee agree as follows: 1. Employment and Term. Subject to the terms and conditions herein provided, the Company hereby hires Employee, and Employee hereby accepts employment by the Company for a term commencing as of the date hereof and continuing for a minimum of one (1) year thereafter. The employment term shall automatically extend for an additional one (1) year following the expiration of each employment year (November 22 through November 21) unless, on or before October 21 of each year, one party has notified the other party in writing that this Agreement will not be extended for an additional year. In the event of such a notification, the employment term of Employee will expire at the expiration of the initial one (1) year employment term, or any extended term hereunder as the case may be, without further obligation for either party, except as described elsewhere in this agreement or in any stock option agreements then in effect between the Company and Employee. In addition, the Company may terminate the employment of Employee upon thirty (30) days notice, without cause, provided Company pays Employee severance pay as described in paragraph 3(c) of this Agreement. Notwithstanding the foregoing, Company may terminate Employee's employment for cause without notice and without further obligation of any kind to Employee. For purpose of this Agreement, "cause" means (a) an act or acts of personal dishonesty taken by Employee and intended to result in substantial personal enrichment of Employee at the expense of the Company, (b) repeated violations by Employee of his obligations which are demonstrably willful and deliberate on Employee's part and which are not remedied within a reasonable period after Employee's receipt of written notice of such violations from the Company, (c) the willful engaging by Employee in illegal conduct that is materially and demonstrably injurious to the Company, (d) sexual harassment by Employee of any other employee of the Company, as determined by a court of competent jurisdiction, or (e) excessive use of intoxicating beverages or chemical abuse, following at least one written warning. No act, or failure to act, on Executive's part shall be considered "dishonest", "willful" or "deliberate" unless done, or omitted to be done, by Executive in bad faith and without reasonable belief that Executive's action or omission was in the best interest of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. It is further agreed that the term of Employee's employment under this Agreement shall automatically terminate in the event of Employee's death. In the event Employee becomes mentally or physically disabled during the term of employment hereunder, his employment under this Agreement shall terminate as of the date such disability is established. As used in this subparagraph, the term "disabled" means suffering from any mental or physical condition, other than the use of alcohol or illegal use of narcotics, which renders Employee unable to perform substantially all of Employee's duties and services under this Agreement in a satisfactory manner (an "impaired condition") for a period of ninety (90) consecutive days. The date that Employee's disability is established shall be the ninety-first (91st) day upon which such impaired condition exists. Upon termination for disability, Employee shall be entitled to receive continuation of his base salary (as herein defined) for a period of one hundred eighty (180) days after the date of such termination. If Company maintains a disability policy covering Employee, then the amount of payments to be made by Company to Employee pursuant to this provision shall be reduced by any amounts so paid to Employee under any such insurance policy. 2. Duties and Representations of Employee. During Employee's employment hereunder, he shall serve as Company's President and Chief Executive Officer and will have the day-to-day responsibility for making decisions relating to all aspects of the Company's affairs, including purchasing, marketing, sales and service programs, and personnel assignment and management, and shall have authority to and shall perform such functions and exercise such powers and duties as are customary for such position, subject always to the control of the Company's Board of Directors. Employee shall devote his full, time, attention, knowledge and skill exclusively to the loyal service of Company and shall perform all duties reasonably assigned to him by said Board of Directors. Additionally, Employee shall do such traveling as may reasonably be required by the Company in connection with the performance of his duties -2- and responsibilities. Employee represents and warrants to the Company that (a) his acceptance of employment under this Agreement and his performance of the duties contemplated herein are not in conflict with any obligation, undertaking or agreement between Employee and any third party including' without limitation, any of Employee's former employers, and (b) he has not and will not, during the course of his employment with the Company, disclose or utilize without permission, any confidential or proprietary information, trade secrets, materials, documents, or property owned by any third party including, without limitation, any of Employee's former employers. The Company acknowledges the existence and conditions of a December 4, 1986 Employee Invention, Nondisclosure and Noncompetition Agreement between Employee, and a Covenant Not To Compete clause contained in a March 24, 1986 Agreement for the Purchase of Capital Stock of Lawson Associates, Inc. 3. Compensation. The Company shall pay to Employee the following compensation beginning November 22, 1993: a. Base Salary. The Company shall pay to Employee an annual base salary of One Hundred Seventy-Five Thousand Dollars ($175,000.00) payable in periodic installments in accordance with the standard payroll practices of Company in effect from time to time. Employee's base salary shall be reviewed for potential adjustment on the basis of performance from time to time. b. Bonuses. Bonuses shall be paid to Employee as the Board of Directors of the Company may determine in its discretion from time to time. For the Company's 1995 fiscal year, Employee's bonus target shall be 25% of base salary for such year, but shall be tied to achievement of business plan and other objectives established by the Company's Board of Directors. c. Severance Pay. In the event the Company gives notice to the Employee that this Agreement will not be extended or upon termination of the Employee's employment by the Company, other than for cause as defined in paragraph 1, the Employee shall be entitled to receive his then current base salary for an additional six months following the date of termination, to be paid as though the employee had remained in the employ of the Company. If, at the end of such six month period, Employee is not employed on a full-time basis, the Company will continue to pay Employee his monthly base salary until the earlier of twelve months after the date of termination or the date that Employee commences full-time employment. The severance pay shall be in lieu of any other compensation of any other kind otherwise payable to the Employee under this Agreement. Employee shall not be entitled to severance pay if the Employee voluntarily terminates employment with the Company or gives notice of non-renewal pursuant to paragraph 1 above; provided, however, that Employee shall not be precluded from receiving severance pay pursuant to this paragraph if he terminates his employment with the Company following a "change of control" of the Company (defined to mean the acquisition by a person not currently a shareholder of the Company of shares of Company stock representing more than fifty percent (50%) of the voting power of the outstanding shares) which results in a -3- substantial change in the scope of Employee's employment responsibilities or job relocation. Employee's entitlement to severance pay following six months after the termination date shall be conditioned upon Employee making good faith efforts to locate full-time employment at compensation and responsibility levels consistent with his employment, with the Company. d. Stock Option Plan. Employee and Company have entered into a separate Incentive Stock Option Agreement dated November 22, 1993, whereby Employee is granted an Incentive Stock Option to purchase shares of Company's common stock, which Agreement is attached hereto as Exhibit "A" and by this reference incorporated herein. g. Advance Bonus. On the first day of his employment by the Company pursuant to this Agreement, Employee shall be paid an advance bonus of Twenty-Five Thousand Dollars ($25,000.00). As an additional advance bonus, the Company will pay, up to a total of Four Thousand Two Hundred Dollars ($4,200), the initiation fees for Employee to join the Rochester Country Club and Employee's 1994 membership dues to such country club, so that such facility may be available for employee and customer meetings and for customer and prospect entertainment relating to the Company's business. h. Relocation Expense Reimbursement. The Company will reimburse Employee for up to $35,000 of out-of-pocket moving and relocation expenses relating to the relocation of Employee's personal residence from Burnsville, Minnesota to Rochester, Minnesota, including real estate brokers' fees, closing costs relating to the purchase and sale of personal residences and house-hunting expenses. In addition, the Company will reimburse Employee for any income tax costs incurred by Employee as a result of the nondeductability of any of the expenses for which he receives reimbursement from the Company pursuant to this paragraph. i. Bridge Loan. In the event that Employee's Burnsville residence is not sold prior to the closing of the purchase by Employee of a new personal residence in Rochester, the Company shall, at Employee's request, make a loan to Employee in an amount necessary to find the down payment on the Rochester residence. Any such loan will bear interest at prime rate, will be repaid in full within ten days after the closing of the sale of Employee's Burnsville residence and shall be secured by a mortgage on the Burnsville residence. 4. Additional Benefits. Employee shall be entitled to those additional Company benefits and perquisites which may be customarily made available to other executive employees of the Company. Without limiting the foregoing, Employee shall be eligible to participate in any executive bonus plan which may be offered, pension plan, or group life, health or accident insurance, or any other such plan or policy which may presently be in effect or which may hereafter be adopted by Company for the benefit of its executive employees and corporate officers generally. Furthermore, Employee shall be entitled to the following additional benefits: -4- a. Expense Reimbursement. During the term of Employee's employment under this Agreement, the Company shall bear reasonable and ordinary business expenses incurred by Employee in performing his duties, including travel and living expenses while away from home on business in the service of the Company, long distance home telephone expenses, provided that Employee accounts promptly for such expenses to the Company in the manner reasonably prescribed from time to time by the Company. b. Vacation. During the term of Employee's employment under this Agreement, Employee shall be entitled to take up to two (2) weeks of vacation per year with pay, at such times as shall be mutually convenient to Company and Employee. Vacation time must be used within the applicable employment year and may not be accumulated. c. Professional and Personal Development. During the term of the Employee's employment under this Agreement, Employee shall be entitled to take two weeks per year to attend seminars, professional meetings, conventions, personal development, and educational or recreational courses as he may in his sole discretion elect to utilize. The Company shall pay for that portion of the expenses for such seminars or meetings which are allocable to Company purposes, if any. 5. Confidentiality. Employee hereby agrees to sign the Company's Confidentiality and Inventions Agreement, a copy of which is attached hereto as Exhibit "B" and by this reference incorporated herein. All of Company's trade secrets, and all other confidential information, including, but not limited to, any patents, copyrights, processes, technology, machines, equipment, material, ideas, concepts, techniques, conditions of operation, or customer lists, relating to the business of Company shall be the sole property of Company, and Company shall have exclusive rights to such property, and the Employee acknowledges and agrees that any information or data Employee has received concerning such trade secrets and/or confidential information was received by Employee in confidence and as a fiduciary of Company. Employee shall not divulge to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, or use in any manner, directly or indirectly, for any purpose whatsoever, any of the trade secrets or confidential information of Company, except in Company's best interest. In addition, Employee will use reasonable and prudent care to safeguard, protect and prevent the unauthorized use and disclosure of confidential information. The obligations contained in this paragraph will survive for as long as the Company in its sole judgment considers the information to be confidential information. 6. Return of Proprietary Property. Employee agrees that all property in Employee's possession belonging to Company, including without limitation, all documents, reports, manuals, memoranda, computer print-outs, customer lists, credit cards, keys, identification, products, access cards and all other property relating in any way to the business of the Company are the exclusive property of the Company, even if Employee authored, created or assisted in authoring or creating such property. Employee shall return to the Company all such -5- documents and property immediately upon termination of employment or at such earlier time as the Company may reasonably request. 7. Key-Man Insurance. Employee agrees that Company may add additional "Key-Man" life and/or disability insurance on his life. Company will pay premiums and be the beneficiary. In addition, Employee agrees to submit to the usual and customary medical examination and otherwise to cooperate with Company in connection with the procurement of any such insurance, and any claims thereunder. The Key-Man life insurance policy upon the life of Employee to be procured by the Company shall provide for a Two Hundred Fifty Thousand Dollar ($250,000.00) benefit payable to beneficiaries designated by Employee, with all additional benefits thereunder payable to the Company. 8. Restrictive Covenant. Employee acknowledges that the Company needs to be protected against the potential for unfair competition and impairment of the Company's goodwill by Employee's use of the Company's training, assistance, confidential information and trade secrets in direct competition with the Company. Employee therefore agrees that for the greater of (a) six months, or (b) the period of time that Employee is entitled to receive severance pay from the Company pursuant to paragraph 3(c) of this Agreement, Employee shall not operate, join, control, be employed by or participate in ownership, management, operation or control of, or be connected in any manner as an independent contractor, consultant or otherwise, with any person or organization engaged in any business activity which is the same as, similar to, or competitive with any business of the Company or any successor of the Company as of the expiration or termination date within the states of the United States of America. Employee expressly agrees the provisions of this paragraph 8 shall survive the expiration or the termination of this Agreement, whether such termination be voluntary or involuntary or with or without cause. In the event Company maintains an action, either at law, equity, or both, to enforce this non-competition covenant against Employee, Employee waives any right to maintain any of the following defenses: (a) That this restrictive covenant is not necessary for the protection of the business or the goodwill of Company; (b) That this restrictive covenant is unreasonable, unconscionable, illegal, in restraint of trade, or in violation of any right granted by the state or federal constitution; (c) That there has been no damage to Company; (d) That Company has an adequate remedy at law; or (e) That this restrictive covenant is not supported by adequate consideration. -6- Employee agrees that in addition, but not to the exclusion of any other available remedy, Company shall have the right to enforce the provisions of this non-competition agreement by applying for and obtaining temporary and permanent restraining orders or injunctions from a court of competent jurisdiction without the necessity of filing a bond therefor. In any such court action, the prevailing party shall be entitled to recover its reasonable attorneys' fees and costs from the other party. 9. Covenant Not to Recruit. Employee recognizes that Company's work force constitutes an important and vital aspect of its business. Employee agrees that for a period of two (2) years following the expiration or termination of this Agreement for any reason whatsoever, he shall not solicit, or assist anyone else in the solicitation of, any of the Company's then current employees to terminate their employment with the Company, and to become employed by any business enterprise with which the Employee may then be associated or connected, whether as an owner, employee, partner, agent, investor, consultant, contractor or otherwise. 10. Assignment. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. The Employee may not assign this Agreement nor any rights hereunder. Any purported or attempted assignment or transfer by Employee of this Agreement or any of Employee's duties, responsibilities or obligations hereunder shall be void. 11. Notices. All notices, requests, demands and other communications under this Agreement shall be in writing, shall be deemed to have been duly given on the date of service if personally served on the parties to whom notice is to be given, or on the second day after mailing if mailed to the parties to whom notice is given, by first class mail, postage prepaid, and properly addressed as follows: To Company at: Rochester Software Connection, Inc. 4909 Highway 52 North Rochester, Minnesota 55901 To Employee at: 14009 Frontier Lane Burnsville, Minnesota 55337 Any party may change the address for the purpose of this paragraph by giving the other written notice of the new address in the manner set forth above. 12. Construction and Severability. The validity, interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Minnesota. In the event any provision of this Agreement shall be held illegal or invalid for any reason, said illegality or invalidity shall not in any way affect the legality or validity of any other provision -7- hereof. It is the intention of the parties hereto that Company be given the broadest possible protection respecting its confidential information and trade secrets and respecting competition by Employee following his separation from the Company. 13. Arbitration. Except as provided in sub-paragraph b below, any claims or disputes of any nature between the parties arising from or related to the performance, breach, termination, expiration, application or meaning of this Agreement shall be resolved exclusively by arbitration before the American Arbitration Association in Rochester, Minnesota pursuant to the Association's rules for commercial arbitration. a. The decision of the arbitrator(s) shall be final and binding upon both parties. Judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. In the event of submission of any dispute to arbitration, each party shall, not later than thirty (30) days prior to the date set for hearing, provide to the other party and to the arbitrator(s) a copy of all exhibits upon which the party intends to rely at the hearing and a list of all persons whom each party intends to call as witnesses at the hearing. b. This section shall have no application to claims by the Company asserting violation of or seeking to enforce, by injunction or otherwise, the terms of paragraphs 5, 6, 8 and 9 above. Such claims may be maintained by the Company in a lawsuit subject to the terms of paragraph 14 below. 14. Venue. Any action at law, suit in equity or judicial proceeding arising directly, indirectly or otherwise in connection with, out of, related to or from this Agreement or any provision hereof shall be litigated only in the courts of the State of Minnesota, County of Olmsted. Employee waives any right Employee may have to transfer or change the venue of any litigation brought against Employee by the Company. 15. Entire Agreement. This Agreement sets forth the entire agreement between Company and Employee with respect to his employment by the Company and there are no undertakings, covenants or commitments other than as set forth herein. This Agreement may not be altered or amended, except by a writing executed by the party against whom such alteration or amendment is to be enforced. This Employment Agreement supersedes any and all prior understandings or agreements between the parties. 16. Counterparts. This Agreement may be simultaneously executed in any number of counterparts, and such counterparts executed and delivered, each as an original, shall constitute but one in the same instrument. 17. Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only, and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof. -8- 18. Survival. The parties expressly acknowledge and agree that the provisions of this Agreement which by their express or implied terms extend beyond the expiration of this Agreement or the termination of Employee's employment hereunder, shall continue in full force and effect, notwithstanding Employee's termination of employment hereunder or the expiration of this Agreement. 19. Waivers. No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by any related document or by law. 20. Reliance by Third Parties. This Agreement is intended for the sole and exclusive benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors and permitted assigns, and no other person or entity shall have any right to rely on this Agreement or to claim or derive any benefit therefrom absent the express written consent of the party to be charged with such reliance or benefit. -9- IN WITNESS WHEREOF, the Company has caused this instrument to be executed and the Employee has hereunto set his name as of the day and year first above written. EMPLOYEE ROCHESTER SOFTWARE CONNECTION, INC. - ----------------------------------- By Ken Holec ------------------------------- Its ------------------------------ -10- EX-10.6 13 SERVICE AGREEMENT WITH PATRICK DAUGA EXHIBIT 10.6 SERVICE AGREEMENT THIS AGREEMENT is made this 17th day of March 1998 by and between. SHOWCASE (UK) LIMITED, a limited liability company incorporated under the laws of England, having its principal address at Boundary House, The Pines Business Park, Broad Street, Guildford, Surrey GU3 3BH ("the Company"), and PATRICK DAUGA, a French national residing at 12, old Manon Court 40-42, Abbey Road, London WW8 0AR United Kingdom ("the Executive") IT IS HEREBY AGREED as follows: 1. Appointment The Company hereby engages the Executive and the Executive agrees to serve the Company as its Vice President of European Operations (including Europe, the Middle East and Africa) or in such other capacity that the parties may mutually agree. 2. Term 2.1 This Agreement shall be deemed to have commenced as of October 1, 1997 and shall continue until terminated by the Company or by the Executive as provided for in section 15 hereof. Notwithstanding the foregoing, this Agreement is intended to be for an initial term of less than three years. Prior to September 30, 2000, unless the parties mutually agree to continue this Agreement, the Company shall transfer all its rights and obligations under this Agreement to another Affiliated Company. 2.2 The Executive's continuous employment with the Company for the purposes of the Employment Rights Act 1996 commenced on October 1, 1997. None of the Executive's employment with any previous employer shall count as part of the Executive's continuous period of employment with the Company for the purposes of applicable law. 3. Powers, duties and working hours The Executive shall devote such time as is necessary to perform the duties assigned to him and shall in any event, unless prevented by ill health or accident or holiday, devote a minimum of 8 hours per working day and a minimum of 20 working days per month to carrying out his duties hereunder. For the purpose of this Agreement, "working day" means Monday to Friday inclusive except bank or other public holidays. 3.2 The Executive shall carry out his duties in a proper and efficient manner and use his best endeavours to promote and maintain the interests and reputation of the Company, provided that the Board may at any time require the Executive to cease performing and exercising all or any of his duties; 3.3 The Executive shall exercise such powers and perform such duties in relation to the business of the Company and any Affiliated Company as may from time to time be vested in or assigned to him by the Board; and 3.4 The Executive may be required in pursuance of his duties hereunder: (a) to perform services not only for the Company but also for any Affiliated Company (as defined in Clause 16.1 of this Agreement) whose principal place of business is in or outside the United Kingdom and without further remuneration (except as otherwise agreed) to accept such offices in any such companies as the Company may from time to time reasonably require; (b) to work in connection with the business of such companies in the United Kingdom at such place or places as may be required by the Company and elsewhere in the world as the Company may require; and (c) to travel to such places by such means and on such occasions as the Company may from time to time require. 3.5 In the performance of this duties under this Agreement the Executive shall be required to spend a minimum of 18 working days per month outside the United Kingdom in relation to matters involving Affiliated Companies outside the United Kingdom. 4. Reporting The Executive shall report to the chairman of the Board and shall at all times keep him fully informed of his activities. 5. Remuneration 5.1 During the continuance of his employment hereunder the Executive shall be paid a salary at the rate of US$ 14,500 per month or at such other rate as may be agreed between the parties from time to time. Such salary shall accrue from day to day and be paid in arrears on the last business day of each month or if that is not a working day the immediately preceding working day. 5.2 The Company shall be entitled to deduct from the Executive's remuneration (including salary, pay in lieu of notice, commission, bonus, holiday pay and sick pay) all sums from time to time owing from the Executive to the Company. -2- 5.3 The Executive shall be entitled to receive a commission and bonus upon meeting various targets pursuant to the terms of a bonus and commission plan to be established by the Company no later than April 30 of each year with respect to the next financial year of the Company. During any financial year, the targets and formula for determining the commissions and bonus to be paid pursuant to the plan established for said financial year may adjusted at the discretion of the Company upon providing the Executive with not less than 90 days notice. The commission and bonus plan for the period from the commencement of employment through March 31, 1998, pursuant to which the Executive may earn a total commission and bonus of not less than $35,000 upon achievement of the financial targets set forth therein, is attached hereto as schedule A. 5.4 The Company shall be entitled to consider 10% of all remuneration to be paid to the Executive hereunder as arising from his duties performed in the United Kingdom, which percentage shall be adjusted periodically based on the number of days the Executive actually performs duties within the United Kingdom. The Company shall pay all remuneration due to the Executive for services performed outside the United Kingdom to such bank account of the Executive outside the United Kingdom as indicated by the Executive in writing. 5.5 The Executive agrees that he will indemnify the Company and any Affiliated Company on demand against any liability of the Company or any Affiliated Company arising from any failure by any such company to withhold or deduct income tax or social charges (whether arising in or outside the United Kingdom and including United Kingdom employee national insurance contributions) which may be payable by the Company or any Affiliated Company with respect to the remuneration paid to the Executive outside the United Kingdom, together with any cost or expenses and any penalty, fine or interest accrued or payable by the Company or any Affiliated Company in connection with or in consequence of any such liability. The Company may at its option (whether for itself or on behalf of any Affiliated Company) satisfy such indemnity (in whole or in part) by way of deduction from payments to be made by the Company under this Agreement. 5.6 All amounts to be paid to the Executive for services within the United Kingdom shall be paid in UK pounds sterling using the U.S. dollar/U.K. pound sterling exchange rate in effect on October 1, 1997 as quoted by the Company's bank [and thereafter using the exchange rate in effect on April 1 for the following twelve month period]; all amounts to be paid to the Executive for services outside the United Kingdom shall be paid in US Dollars and/or French francs as indicated by the Executive from time to time in writing. 6. Fringe Benefits 6.1 The Company shall provide to Executive supplemental private medical and hospitalization insurance covering the Executive and his spouse and children as well as a supplemental private pension contract provided that the cost of such supplemental benefits, together with any mandatory employer national insurance contributions or other similar or released charges imposed on the Company with respect to any remuneration paid to the Executive under this agreement, shall not exceed US$50,000 per annum. -3- 6.2 The Executive agrees that he will indemnify the Company on demand against any liability or expense with respect to such supplemental medical and hospitalisation insurance, supplemental pension and mandatory employer national insurance contribution or similar or related charges to the extent that the total of such liabilities and expenses exceeds US$50,000 per annum, and the Company may at its option satisfy such indemnity (in whole or in part) by way of deduction from payments to be made by the Company under this agreement. 7. Expenses The Company shall reimburse to the Executive all reasonable travelling, hotel, entertainment and other out-of-pocket expenses properly incurred by him in the proper performance of his duties subject to his compliance with the Company's then current guidelines relating to expenses, to production of receipts vouchers and reports, and to the overall limitation of such expenses as set forth in the annual budgets of the Company. 8. Company Automobile The Company shall provide to the Executive an automobile for his business and personal use and will pay all road taxes, insurance premiums, maintenance and repairs, lease or rental payments, petrol and oil and other operating expenses thereof. The Executive shall immediately upon suspension or termination or this Employment Agreement return the automobile, its keys and all documents relating to it to the Company. 9. Holidays 9.1 In addition to United Kingdom bank or other public holidays, the Executive shall be entitled to 10 days paid holiday for the remainder of calendar year 1997 and to a total of 25 days paid holiday in every calendar year thereafter. Holiday time shall not be transferrable to the following year, unless agreed on a case-by-case basis with the Board of the Company in view of significant business or personal reasons that any outstanding holiday leave may be taken during the first three months of the following year. The Executive shall not be entitled to compensation for any holiday leave not taken in accordance with this paragraph. 9.2 Holiday entitlement shall accrue pro rata per month. In the event of the determination of his employment hereunder and of the Executive not continuing to be employed thereafter under this Agreement and of the Executive having taken more or less than his holiday entitlement in the year of determination, a proportionate adjustment will be made by way of addition to or deduction from (as appropriate) his final gross pay calculated on a pro rata basis. -4- 10. Sickness and Incapacity 10.1 The Executive shall inform the Company of any sickness and its expected duration as soon as possible. If the Executive is absent from work due to illness or accident duly notified, the Company shall pay to Executive his full remuneration for up to an aggregate of 90 working days absence and half his remuneration for up to a further 90 working days absence in any period of twelve months and thereafter such remuneration (if any) as the Company shall in its discretion approve. 10.2 The remuneration paid under Clause 10.1 shall include any Statutory Sick Pay payable and when this is exhausted shall be reduced by the amount of any Social Security Sickness Benefit or other benefits recoverable by the Executive (whether or not recovered). 10.3 The Company may at its expense at any time whether or not the Executive is then incapacitated require the Executive to submit to such medical examinations and tests by doctor nominated by the Company and the Executive hereby authorises such doctor to disclose to and discuss with the Company and its medical adviser(s) the results of such examinations and tests. 11. Confidentiality 11.1 For the purposes of this Agreement "Confidential Information" means all information relating to the Company and its Affiliated Companies and their business operations which is recorded or stored in any form or media including but not limited to trade secrets, know-how, drawings, techniques, computer programs in human or machine readable code, business and marketing plans, arrangements and agreements with third parties, customer information including names of suppliers, advertisers and customers, formulae, ideas whether reduced to a material form or otherwise, designs, plans and models. 11.2 The Executive agrees not to use, divulge or communicate to any person, without the Company's prior written consent, any Confidential Information and shall not disclose it to any third party unless: 11.2.1 the Executive obtains the prior written consent of the Company; or 11.2.2 it is already in the public domain or comes into the public domain for reasons other than a breach of this Agreement; or 11.2.3 the Executive is required to disclose Confidential Information pursuant to an order of a court; or 11.2.4 the Executive knows the Confidential Information prior to execution of this Agreement and the Executive is able to establish as much by documentary records, provided such -5- Confidential Information had not been provided to the Executive by the Company and any Affiliated Company. 11.3 The Executive warrants and undertakes not to: 11.3.1 use Confidential Information for any purpose other than for the benefit of the Company during or after the term of this Agreement; 11.3.2 appropriate, copy, memorize or in any way reproduce or reverse engineer any Confidential Information. 11.4 The Executive will comply with all and any instructions given to him by the Company during the term of this Agreement concerning the treatment of the Confidential Information. 11.5 The provisions of Clauses 11.2 and 11.3 above shall continue after termination or expiry of this Agreement, however caused. 11.6 On termination of this Agreement, however caused, the Executive will return immediately to the Company any and all Confidential Information including all copies however recorded, stored or embodied (including any magnetic media). 12. Intellectual Property 12.1 All Intellectual Property and all Intellectual Property Rights therein shall to the fullest extent permitted by law belong to, vest in and be the absolute sole and unencumbered property of the Company and the Executive warrants that there are no Intellectual Property Rights made or written at any time by him which are not now wholly legally and beneficially owned by the Company. 12.2 The Executive: (a) acknowledges for the purposes of the Patents Act 1977 that because of the nature of his duties and the particular responsibilities arising from the nature of his duties he has and at all times during his employment will have a special obligation to further the interests of the undertakings of the Company and of any Affiliated Company (as defined in Clause 16.1 of this Agreement); (b) undertakes to notify and disclose to the Company in writing full details of all Intellectual Property forthwith upon the production of the same, and promptly whenever requested by the Company and in any event upon the determination of his employment with the Company deliver up to the Company all correspondence and other documents, papers and records, and all copies thereof in his possession, custody and power relating to any Intellectual Property; -6- (c) undertakes to hold upon trust for the benefit of the Company any Intellectual Property and the Intellectual Property Rights therein to the extent the same may not be and until the same are vested absolutely in the Company; (d) hereby assigns to the Company all of his present and future right title and interest throughout the world in Intellectual Property produced, invented or discovered by the Executive either alone or with any other person at any time now or thereafter during the continuance in force of this Agreement, whether or not in the course of his employment hereunder; (e) acknowledges (for the avoidance of doubt), that in consideration of his rights, responsibilities and remuneration and all inventions, discoveries and designs created during the term of the Agreement shall be deemed to have been created in the course of the Executive's normal duties and to be capable of assignment to the Company under Clause 12.2(d) above; (f) acknowledges that by virtue of the Company's exclusive ownership of the Confidential Information and the Intellectual Property Rights assigned to it pursuant to this Clause 12.2, that the Executive may not now or at any time in the future use or exploit the Confidentiality Information or the Intellectual Property without the written permission of the Company, except in the performance of his obligations under this Agreement; (g) acknowledges that save as provided by law no further remuneration or compensation other than that provided for herein is or may become due to the Executive in respect of the performance of his obligations under this Clause; and (h) undertakes at the expense of the Company to execute all such documents, make such applications, give such assistance and do such acts and things as may in the opinion of the Company be necessary or desirable to vest in the Company the ownership and registration of all Intellectual Property Rights and otherwise to protect and maintain the Intellectual Property and the Industrial Property Rights therein. 12.3 The assignment of Intellectual Property Rights pursuant to Clause 12.2 shall be deemed and construed to include the right to sue for any infringement or threatened infringement of any Intellectual Property Right, whether or not such infringement or threatened infringement occurs prior to or after the execution of this Agreement. 12.4 The provisions of Clauses 12.2(f), 12.2(g), 12.2(h) and 12.3 above shall survive termination or expiry of this Agreement, however caused. 12.5 For purposes of this section 12, the following words and expressions shall have the following meanings: (a) "Intellectual Property" includes inventions, discoveries and designs (whether or not registrable as designs or patents), processes, formulae, notation, improvements, know-how, -7- goodwill, reputation, moulds, get up, logos, devices, plans, models and all or any Copyright Works as defined in the Copyright Designs and Patents Act 1988 (and all like rights throughout the world) of the kind produced by the Company or any Affiliated Company (as defined in Clause 17.1 of this Agreement) or related directly or indirectly to the business of the Company or which may in the opinion of the Company be capable of being used or adapted for use therein or in connection therewith; (b) "Intellectual Property Rights": all or any rights in the Intellectual Property, including patents, registered and unregistered design right, trademarks, tradenames, goodwill, copyrights, and all other forms of industrial or intellectual property and all applications for registration thereof; (c) "Production": (and consonant expressions) used in relation to Intellectual Property includes the invention, creation, discovery, design, research, development and manufacture thereof. 13. Restrictions during Employment For the duration of his employment, the Executive shall not, without the prior consent in writing of the Company, either alone or jointly with or on behalf of others and whether directly or indirectly and whether as principal, partner, agent, shareholder, director, Executive or otherwise howsoever engage in, carry on or be interested or concerned in any business which competes with the Company PROVIDED THAT nothing in this Clause shall preclude the Executive from holding or acquiring directly or indirectly not more than 5% in nominal value of the issued shares or other securities of any class of any other company which are listed or dealt in on any recognized stock exchange by way of bona fide investment only. 14. Post-Termination Obligation 14.1 In this Clause 14 the following expressions have the following meanings: "Critical Person" means (i) any person who was an employee, agent, director, consultant or independent contractor employed, appointed or engaged by the Company or any Relevant Affiliated Company (as defined below) at any time within twelve months immediately before the Termination Date (other than ex-employees of ComShare Limited or any affiliated company of ComShare Limited who became employees of the Company or any Affiliated Company in Europe between August 1, 1997 and March 31, 1998) who by reason of such employment, appointment or engagement and in particular his/her seniority and expertise or knowledge of trade secrets or confidential information of the Company or any of its Affiliated Companies or knowledge of or influence over the customers or suppliers of the Company or any of its Affiliated Companies is likely to be able to assist or benefit a business in or proposing to be in competition with the Company or any Relevant Affiliated Company with whom the Executive was directly concerned or connected during the period of twelve months preceding the Terminate Date in the course of his employment hereunder; -8- "Relevant Affiliated Company" means any Affiliated Company (as defined in Clause 17.1 of this Agreement) of the Company (other than the Company) for which the Executive has performed services under this Agreement or for which he has had management responsibility at any time during the twelve month period immediately preceding the Termination Date. "Termination Date" means the date on which the Executive's employment under this Agreement terminates and references to "from the Termination Date" mean from and including the date of termination; 14.2 The Executive will not without the prior written consent of the Company directly or indirectly and whether alone or in conjunction with or on behalf of any other person and whether as a principal, shareholder, director, employee, agent, consultant, partner or otherwise for a period of twelve months from the Termination Date solicit, induce or entice away from the Company or any Relevant Affiliated Company or, in connection with any business in or proposing to be in competition with the Company or any Relevant Affiliated Company, employ, engage or appoint or in any way cause to be employed, engaged or appointed a Critical Person whether or not such person would commit any breach of his or her contract of employment or engagement by leaving the service of the Company or any Relevant Affiliated Company; 14.3 If the restriction set forth in clause 14.2 is held to be unreasonably wide but would be valid if part of the wording (including in particular but without limitation the defined expressions referred to in Clause 14.1) were deleted, such restriction will apply with so much of the wording deleted as may be necessary to make it valid. 14.4 The Company reserves the right to apply to any court for injunctive relief in order to compell the Executive to comply with the provisions of this Clause 14 and to seek damages. 14.5 For the purpose of this Clause 14 and Clause 11 the Company has entered into this Agreement as agent for and trustee of all Relevant Affiliated Companies. 14.6 If the Executive applies for or is offered a new employment, appointment or engagement, before entering into any related contract the Executive will bring the terms of this Clause 14 and Clauses 2, 3, 11 and 12 to the attention of a third party proposing directly or indirectly to employ, appoint or engage him. 15. Grievance Procedure If the Executive wishes to seek redress of any grievance relating to his employment he should refer such grievance to the chairman of the Board and if the grievance is not resolved by discussion with him, it will be referred for resolution to the Board of Directors of the Company. 16. Termination -9- 16.1 This Agreement may be terminated by the Company or the Executive giving the other party at least three months' notice in writing; however, until August 31, 1998 the Company shall provide the Executive twelve months' notice in writing if the Company terminates this Agreement as a direct result of (a) the sale of the Company or the Company's parent company ShowCase Corporation, (b) a change in Chief Executive Officer of ShowCase Corporation or (c) the expense budget for the Company and all Affiliated Companies in Europe, the Middle East and Africa being reduced to less than US$ 1,500,000 in any calendar quarter. After August 31, 1998, this Agreement may be terminated by the Company only upon giving twelve months' notice in writing unless the Company terminates due to the Executive committing any act of dishonesty whether relating to the Company, any Affiliated Company or otherwise; or the Executive being guilty of substantial and persistent failure to perform services on a daily basis at the normal level of activity reasonably required of an employee at Executive's level of responsibility. 16.2 The Company shall be entitled to terminate this Agreement immediately and pay to the Executive base salary, and targeted commissions and bonus and fringe benefits (as defined in clause 6.1) in lieu of the notice required in Clause 16.1 above. 16.3 Notwithstanding Clause 2.1 above, if the Executive is or becomes incapacitated from any cause whatsoever from efficiently performing his duties pursuant to this agreement, for 180 working days in aggregate in any period of twelve months, THEN the Company shall be entitled to terminate his employment under this Agreement without notice whereupon the Executive shall have no claim against the Company for damages or otherwise by reason of such determination. 16.4 Upon the termination of the Executive's employment for whatever reason the Executive shall deliver to the Company without delay all documents (including copies), and all keys, credit cards, books and other property of or relating to the Company or any Affiliated Company (including without limitation all documents prepared by him or which may have come into his possession in the course of his employment hereunder) then in his possession. 16.5 After the termination of the Executive's employment he shall not at any time thereafter represent himself as being in any way connected with or interested in the business of or employed by the Company or any Affiliated Company, or use for trade or other purposes the name of the Company or any Affiliated Company or any name capable of confusion therewith, unless entitled to do so under the terms of a separate employment agreement with an Affiliated Company. 16.6 The termination of the Executive's employment for whatever reason shall not affect those terms of this Agreement which are expressed to have effect thereafter and shall be without prejudice to any accrued rights or remedies of the parties. 17. Miscellaneous -10- 17.1 The term "Affiliated Company" in relation to the Company shall mean another company which is a subsidiary of, or a holding company of, or another subsidiary of a holding company of, the Company. 17.2 This Agreement is the entire agreement between the Parties in relation to its subject matters and supercedes all previous agreements which may have been executed by the Company or any Affiliated Company and the Executive. Additional agreements regarding the subject matter of this Agreement do not exist. Changes and additions to this Agreement, including this Clause, must be made in writing in order to be legally binding on the parties. 17.3 If any provision of this Agreement is determined to be invalid, the validity of the remainder of this Agreement shall remain unaffected. The parties agree to replace, to the extent possible, any invalid provision with a valid provision that comes as close as possible to the parties' original economic intent. 17.4 This Agreement shall be governed by and construed in accordance with English law and the parties agree to submit to the non-exclusive jurisdiction of English courts as regards any claim or matter arising in respect of this Agreement. IN WITNESS WHEREOF this Agreement has been duly executed the day and year first above written. The Company The Executive /s/ Ken Holec /s/ Patrick Dauga - --------------------------- ---------------------------- Ken Holec Patrick Dauga Director Schedule A - Bonus and Commission Plan -11- SCHEDULE A Commission and Bonus Plan Executive: Patrick Dauga Company: ShowCase (UK) Limited Period: October 1, 1997 through March 31, 1998 Territory: Europe, Middle East, Africa and South America Revenue Quota: $3,800,000 in net product, service and maintenance revenue booked from October 1, 1997 thru March 31, 1998 as per the following schedule in thousands: - -------------------------------------------------------------------------------- Oct- March Oct Nov Dec Jan Feb Mar total - -------------------------------------------------------------------------------- Product 360 360 480 495 495 660 2850 - -------------------------------------------------------------------------------- Services 48 48 64 66 66 88 380 - -------------------------------------------------------------------------------- Support 72 72 96 99 99 132 570 - -------------------------------------------------------------------------------- Total 480 480 640 660 660 880 3800 - -------------------------------------------------------------------------------- QTR Total 1600 2200 - -------------------------------------------------------------------------------- Compensation Target: $140,000 for the 6 month period, including base salary Bonus Guarantee: Guaranteed bonus of $8,833 per month through November 30,1997 Gross Margin: Bonus target of $10,000. Fiscal year end bonus paid at the rate of $5,000 if gross margin exceeds 10%, $10,000 if gross margin exceeds 15%, or $15,000 if gross margin exceeds 20%. "Gross margin"' is defined as booked revenue arising from customers in the Territory, less all direct costs and cost of sales inclusive of physical product delivery expense and third party royalties. For the fiscal year ending March 31, 1998, the gross margin definition excludes costs for Corporate and European marketing, European client support and European finance & administration. -12- Commission: Target of $25,334 based on December 1997 through March 1998 revenues in the Territory of $2,840,000. This commission plan will apply effective with the close of business in November 1977 with the first payment to occur on December 31, 1997. Commissions paid at the rate of .4% when trailing 3 months quota performance is below 80%, .9% when trailing 3 months quota performance is between 80-120%, and 1.4% when trailing 3 months quota performance is over 120%. Commission shall be determined on a rolling 3 month basis by using the two prior months and the month just completed to determine the commission rate to apply to the just completed month's revenue. For the purpose of calculating the Commission due for the month of November, the actual ShowCase Revenue of $695,000 shall also be used as the quota for the month of September. "Revenue" is defined as net product revenue booked after payment of sales and/or finders fees to third parties, services revenues recognized for work performed by ShowCase personnel plus the net of any third party service revenues invoiced by ShowCase after deducting the third party charges for the services rendered in the generation of such revenues, plus all maintenance/support fees recognized. Miscellaneous: All interpretations of this plan are to be made by the Chairman of the Company. The Company retains the right to change this plan at any time should inaccuracies or errors be discovered that are inconsistent with the intent of the Company to pay bonuses consistent with performance achievement. Bonus payments may be withheld or debited in the event that ShowCase is unable to collect payment from the customer within a reasonable time frame. Similarly, bonus payments may be withheld or debited in the event the Executive fails to apply sound ethical judgement and good business practice in any transaction, including compliance with pre-authorised levels or discount and fair representation of product attributes. -13- EX-10.7 14 OFFER OF EMPLOYMENT TO KEVIN P. POTRZEBA EXHIBIT 10.7 [Letterhead of ShowCase Corporation] August 23, 1996 Mr. Kevin R. Potrzeba 25933 North Arrowhead Drive Mundelein, IL 60060 Dear Kevin, On behalf of the ShowCase Corporation Management Team, it is with great pleasure that I extend to you the following Offer of Employment with ShowCase Corporation (ShowCase). I would like to offer you the position of Vice President of Sales, reporting to Ken Holec, President and CEO of ShowCase Corporation, in our Chicago office. This position shall begin on September 3, 1996. Your starting base salary shall be $5,416.66 per pay period. As the Vice President of Sales for ShowCase Corporation, you will also be entitled to participate in ShowCase's Vice President of Sales Compensation Plan for FY97 as outlined in the attached document. ShowCase employees are paid semi-monthly on the 15th and last day of each month, twenty-four (24) times per year. You will receive your first paycheck on September 15, 1996. For the first ninety (90) days of employment with ShowCase Corporation, all new employees work under a probationary status. At the conclusion of this probationary period, your performance shall be reviewed. Your next performance review shall take place following nine (9) months of completed service with ShowCase and each year on that date thereafter. As a full-time ShowCase employee, you will be entitled to participate in ShowCase's cafeteria style benefits program. You will be eligible for life (required) and, if elected, dental, disability, voluntary term life and health coverage (optional). If selected, your benefits coverage shall begin on October 1, 1996. Currently ShowCase contributes $335 per month towards your selection of health, dental, life and disability insurance coverage(s). Should any sum remain of this contribution after your benefits payment, this may be contributed to ShowCase's 401(k) program. Beginning October 1, 1996, you shall be eligible to participate in ShowCase's 401(k) program. All insurance elections and 401(k) contributions are handled on a full or partial pre-tax basis. In addition, you may elect to have certain other medical, dental, or child care expenses run through the plan on a pre-tax basis. The pre-tax handling of these expenses can result in meaningful tax savings and an increase in take-home pay. August 23, 1996 Kevin R. Potrzeba Page 2 In the event that ShowCase terminates your employment for any reason other than for cause, as defined by ShowCase policy, you will be entitled to receive salary continuance, equal to your base salary, for a period of six (6) months following your date of termination or until you have secured permanent employment elsewhere, which ever occurs first. If, at the conclusion of this six (6) month period, you have been unable to secure employment elsewhere and it is ShowCase's opinion that you have made a good faith effort to do so, ShowCase will continue to provide you with salary continuance for an additional six (6) month period or until you have secured full-time employment elsewhere. You shall not be entitled to salary continuance should you voluntarily terminate your employment with ShowCase Corporation for any reason other than following a "change of control" of ShowCase. "Change of Control" is defined as the acquisition by a person, not currently a shareholder of the Company, of shares of ShowCase stock representing more than 50% of the voting power of the outstanding shares and which results in a substantial change in the scope of your employment responsibilities or job location. Should you accept employment with ShowCase Corporation, Federal law requires you to produce documents establishing your identity and right to work authorization. Our company cannot legally hire you if you do not produce such verification within three (3) days of your start date. Such documentation could include a drivers license plus either an original social security card, a birth certificate, or a passport. Enclosed with this Offer of Employment, you shall find ShowCase Corporations Policy Handbook detailing ShowCase Corporations major policies and standards of employment. Please read this handbook carefully. By signing the enclosed Letter of Acceptance, you are acknowledging your understanding of these policies and standards and agreeing to abide by them. In addition, you will also find enclosed the ShowCase Confidentiality, Inventions and Restrictive Covenant Agreement. Please sign and return these documents with your signed Letter of Acceptance. Should you have any questions regarding ShowCase Corporation or this Offer of Employment, please do not hesitate to contact me. Should you choose to do so, please sign and return the enclosed Letter of Acceptance by August 28, 1996. Sincerely, /s/ Eric Schultz Eric Schultz Director of Human Resources ShowCase Corporation EX-10.8 15 OFFER OF EMPLOYMENT TO ROGER E. BOTTUM EXHIBIT 10.8 [Letterhead of ShowCase Corporation] July 31, 1998 Mr. Roger Bottum 839 Locust Street Winnetka, IL 60093 Dear Roger: On behalf of the ShowCase Corporation Management Team, it is with great pleasure that I extend to you the following Offer of Employment with ShowCase Corporation (ShowCase). Compensation I would like to offer you the position of Vice President of Marketing, reporting to Ken Holec, President and CEO of ShowCase Corporation. You will be based at our ShowCase Corporation office at Rosemont, Illinois. This position shall begin on August 17, 1998. Your annual base salary shall be $175,000.00, plus a targeted bonus of $62,500. ShowCase employees are paid semi-monthly on the 15th and last day of each month, twenty-four (24) times per year. You will receive your first paycheck on August 31, 1998. As the Vice President of Marketing for ShowCase Corporation, you will also be entitled to participate in ShowCase's Executive Compensation Plan as outlined on the attached document. Severance Pay Should ShowCase terminate your employment for any reason other than for cause (as defined by ShowCase policy), you will be entitled to receive salary continuance equal to your base salary for six (6) months, or until you have secured permanent employment elsewhere, whichever occurs first. If the termination occurs during the first six (6) months of employment, the salary continuation shall be increased by an additional six months less the number of months worked. The first month of salary continuance would begin the month following your termination date. To be eligible for the salary continuation you must have made a good faith effort to secure alternate employment. You shall not be entitled to salary continuance should you voluntarily terminate your employment with ShowCase Corporation for any reason other than following a "change of control" of ShowCase. "Change of Control is defined as the acquisition by a person, not currently a shareholder of the Company, of shares of ShowCase stock representing more than 50% of the voting power of the outstanding shares and which results in a substantial change in the scope of your employment responsibilities or job location." Stock Option Plan You will also be eligible to receive 135,000 shares of ShowCase Corporation at the price of $2.00 per share. 90,000 shares will vest at 1/60th per month over five years, and the other 45,000 shares will cliff at 9 years and 11 months, accelerating retroactively to the five year schedule upon either Mr. Roger Bottum July 31, 1998 Page 2 being promoted to COO or achievement of an alternative objective mutually agreed upon by you and the ShowCase Corporation Board or Directors. SSA Bonus If starting with ShowCase Corporation on August 17, 1998 would prevent you from receiving a $11,250 bonus from SSA that is due to you after September 1, ShowCase Corporation will reimburse you for this amount. If SSA does pay you the $11,250 bonus, ShowCase Corporation is under no obligation to pay this amount to you. Insurance Programs As a full-time ShowCase employee, you will be entitled to participate in ShowCase's cafeteria style benefits program. You will receive $50,000 life insurance paid for by ShowCase Corporation and, if elected, medical, disability, voluntary term life and dental coverage. Your insurance benefits coverage shall begin on September 1, 1998, Currently ShowCase contributes $350 per month towards the cafeteria style benefits program. In addition, you may elect to participate in the Non-reimbursed Medical Account and Dependent Care Account on a pre-tax basis. 401 (k) Plan Beginning October 1, 1998, you shall be eligible to participate in ShowCase's 401(k) Plan. All insurance elections and 401(k) contributions are handled on a full or partial pre-tax basis Acceptance acknowledgment Enclosed with this offer to Employment, you shall find ShowCase Corporations Policy Handbook detailing ShowCase Corporation's major policies and standards of employment. Please read this handbook carefully. By signing the enclosed Letter of Acceptance, you are acknowledging your understanding of these policies and standards and agreeing to abide by them. In addition, you will also find enclosed the ShowCase Confidentiality, Inventions and Restrictive Covenant Agreement. Please sign and return these documents with your signed letter of acceptance. Should you have any questions regarding ShowCase Corporation or this Offer of Employment, please do not hesitate to contact me. Should you choose to do so, please sign and return the enclosed Letter of Acceptance by July 31, 1998. Sincerely, /s/ Ken Holec Ken Holec President and CEO KH:pw EX-10.9 16 LICENSE AGREEMENT WITH ARBOR SOFTWARE EXHIBIT 10.9 LICENSE AGREEMENT This License Agreement (the "Agreement") entered into effective as of April 1, 1998, by and between Arbor Software Corporation ("Arbor") and ShowCase Corporation ("ShowCase"), and supersedes the Arbor/ShowCase License Agreement dated December 19, 1995. The parties hereto agree as follows: 1. DEFINITIONS For purposes of this Agreement, the following terms shall have the meanings specified below: 1.1 "Authorized Partner" is defined as (a) a software reseller with a contractual relationship with Arbor or ShowCase which adds value by providing its own or third party applications in addition to the Essbase Software or the ShowCase AS/400 Port respectively, or (b) a systems integrator (service companies such EDS and Andersen Consulting), OEM, or other entity approved in writing by the other party. Under no circumstance may IBM be an Arbor Authorized Partner for the ShowCase AS/400 Port without the written approval of ShowCase, while ShowCase retains exclusive distribution rights to the ShowCase AS/400 Port in accordance with section 2.1. 1.2 "Essbase Software" is defined as the Essbase Server, the Essbase Application Manager, the Spreadsheet Client, the Essbase Application Tools existing as of the effective date of this Agreement, and any future releases of such products developed or distributed by Arbor. Arbor agrees to negotiate in good faith to expand the definition of Essbase Software to include other software products not specified above that are either developed or distributed by Arbor after the effective date of this agreement. 1.3 "First Level Support" is defined as the service provided in response to a customer's initial contact reporting a software problem. 1.4 "Second Level Support" is defined as the service provided to reproduce and correct a software problem. 1.5 "Third Level Support" is defined as the service provided to isolate a software problem at the software component level and to furnish a correction or circumvention of the software problem. 2. SHOWCASE DISTRIBUTION RIGHTS 2.1 Grant of License to Distribute Essbase Software on AS/400 Platform. Subject to the terms and conditions of this Agreement, Arbor grants to ShowCase an exclusive, non-transferable, non-sublicensable license to use certain technical information, including, without limitation, all algorithms, ideas, structure, organization , source code and other technical information, about the Essbase Software that are portable to the AS/400 platform (collectively, the "Technical Information") but only as a part of, and for the sole purpose of, permitting ShowCase to port the Essbase Software to the IBM AS/400 platform or any direct successor platform (such ported product to be referred to as the "ShowCase AS/400 Port"). Arbor also grants to ShowCase a worldwide license to distribute and sublicense through Authorized Partners and directly to end users executable versions (and only executable versions) of the ShowCase AS/400 Port. Except as provided in Section 3.1 below, Arbor will not distribute the ShowCase AS/400 Port or grant any other party a license to do so, provided ShowCase fully meets all of its minimum royalty obligations set forth in Section 5.6 below. Notwithstanding anything to the contrary, this Agreement does not restrict Arbor's right to use or permit others to use the Technical Information for any purpose other than developing and distributing Essbase Software on the IBM AS/400 platform or any direct successor platform. The exclusive license described above shall become a nonexclusive license (subject to Sections 2.8 and 4.2) upon the exercise by Arbor of its Buy-Back Right described in Section 2.7 below or by operation of the provisions of Section 5.6 or upon the expiration of this agreement pursuant to Section 4.1. Page 1 of 17 2.2 Grant of License to Distribute Essbase Software on Non-AS/400 Platforms. Arbor hereby grants to ShowCase a non-exclusive, worldwide license (subject to Sections 2.8 and 4.2) to distribute and sublicense the Essbase Software (i.e., all Essbase Software not ported to the AS/400 platform) to end users directly and through its Authorized Partners, subject to the terms of this Agreement. However, any distribution by systems integrators must be approved in writing in advance by Arbor, which approval will not be unreasonably withheld. The end user customer shall execute a software license agreement containing terms no less restrictive than, and at least as protective of Arbor's intellectual property rights as, those contained in Arbor's Software License Agreement attached to this Agreement. ShowCase's right to distribute and sublicense Essbase Software on non-AS/400 Platforms, both directly and through its Authorized Partners, shall be subject to the following conditions: a. The end users must also license the ShowCase Warehouse Manager and Warehouse Builder products or replacement versions of such products and data must reside on or originate from an IBM AS/400; or b. The end users must license a ShowCase business application built upon the Essbase Software and that adds significant value to the Essbase Software. 2.3 Closing Responsibilities. ShowCase will be responsible for closing sales without substantial field sales support from Arbor. ShowCase will furnish customer contact information regarding each transaction to Arbor within 30 days after execution of the contract with the customer. 2.4 Port Development. Arbor agrees to make available to ShowCase new releases of the Essbase Software for the purpose of port development no later than the earliest date on which Arbor makes such new releases available to its beta test customers. New releases of the Essbase Software are considered Technical Information and are subject to the confidentiality provisions contained in Section 9. ShowCase shall use its best efforts to develop and produce versions of the ShowCase AS/400 Essbase Server, the Essbase Application Manager and the Spreadsheet Client which are compatible with such new releases of the Essbase Software in a timely manner, so that the new version of the ShowCase AS/400 Port is available for general release no later than 180 days after the date of general release by Arbor of the new release of the Essbase Software on all platforms currently supported by Arbor. Porting the Essbase Application Tools and affiliated modules shall be at ShowCase's discretion. Distribution of new versions of the ShowCase AS/400 Port shall be subject to the same terms as are applicable to current versions of the ShowCase AS/400 Port. 2.5 Trademark License. a. License. Subject to the terms and conditions of this Agreement, Arbor hereby grants to ShowCase a non-exclusive, non-transferable license to use the name "Essbase" (the "Trademark") but only in connection with its marketing and distribution of the ShowCase AS/400 Port or the Essbase Software and any derivative works thereof expressly authorized under this Agreement. Every copy of the ShowCase AS/400 Port shall clearly and prominently display the Trademark and shall attribute authorship of the Technical Information to Arbor. b. Quality Control. ShowCase shall (1) upon Arbor's request from time to time, supply to Arbor fully documented sample copies of the ShowCase AS/400 Port (in both source code and object code form) and any advertising and marketing materials, for Arbor's review and approval, which will not be unreasonably withheld; (2) modify the ShowCase AS/400 Port and any such advertising and marketing materials as may be requested by Arbor to give full attribution to Arbor, ensuring that the Arbor corporate and product names are noticeably and prominently identified and displayed in connection with the marketing and distribution of the ShowCase AS/400 Port. ShowCase's failure to substantially comply with the terms of this provision shall constitute a material default subject to Section 4.2 below. Page 2 of 17 2.6 Internal Use. Arbor hereby grants to ShowCase a non-exclusive, non-transferable license to use (*) ports of the ShowCase AS/400 Port and related modules for its internal business purposes at no additional charge or royalty. Arbor will not provide any support and maintenance services in connection with this license. 2.7 Buy-Back Right. Arbor has the right at any time during the term of this Agreement to buy back (the "Buy-Back Right"), upon 12 months advance written notice, all rights to use and distribute the Technical Information granted hereunder, and all rights, title and interest in and to the ShowCase AS/400 Port (except for a non-exclusive, non-transferable, royalty bearing, worldwide license to distribute the ShowCase AS/400 Port, which shall be retained by ShowCase subject to the terms of this Agreement), and all items (including software and documentation) in which the Technical Information resides, or for which the Technical Information is or was used, including, without limitation to, all algorithms, ideas, structure, organization, source code and executables, and compilers incorporated into the ShowCase AS/400 Port by ShowCase. Exercise of the Buy-Back Right will not, by itself, affect the right of an authorized end user of the ShowCase AS/400 Port to exercise the rights properly granted such end user by ShowCase. The terms of the buy-back shall be as follows: a. Amount. The amount to be paid for the Buy-Back Right shall be the greater of (1) $(*) , or (2) an amount equal to (a)(*), plus (b) (*) . In addition, at such time each party shall deliver to the other a report documenting gross license fees for the preceding 12 months. At either party's request, the other party shall permit the requesting party and its auditors to audit and review the other party's books and records (which shall be deemed to be Proprietary Information) to confirm the accuracy of the report. b. Payment. Arbor shall pay to ShowCase a first payment of $(*) at the time it delivers its 12-month notice. ShowCase shall make delivery of technical information, source and object code, and documentation within 30 days of payment so that Arbor can begin to prepare for the support and sales of the ShowCase AS/400 Port product following the completion of the 12 month notice period. Arbor shall pay the balance of the Buy-Back Right price no later than 12 months after the date of the Buy-Back notice, provided that ShowCase shall have delivered to Arbor all technical information, source code, object code, and documentation for the ShowCase AS/400 Port prior thereto. c. Technical Information. Within 30 days after receipt of Arbor's notice of the Buy-Back Right, ShowCase will deliver to Arbor a copy of the ShowCase AS/400 Port source code and of the Essbase source code that ShowCase currently has in its possession, and 12 months thereafter, ShowCase shall return to Arbor all copies of all Technical Information. Beginning 12 months after the exercise of the Buy-Back Right, Arbor shall assume responsibility for support of the ShowCase AS/400 Port. 2.8 Nonexclusive License and Distribution Rights a. Minimums for Nonexclusive License. ShowCase's nonexclusive license and distribution rights shall continue so long as the annual royalty payments received by Arbor from ShowCase are at least $(*) beginning as of the date the exclusive license converts to a nonexclusive license; provided that the $(*) shall increase at the rate of (*) percent per year (on a compounded basis). If Arbor fails to receive its minimum nonexclusive royalty payments specified above for any given year, ShowCase shall have the option to pay Arbor the remaining balance of the commitment for that year within 30 days after the end of that year, thereby meeting its commitment and protecting its nonexclusive distribution rights for the subsequent year. Any such payment will be treated as a credit towards royalty payments due to Arbor from ShowCase in the subsequent year, but shall not (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 3 of 17 be a credit towards meeting the next year's annual royalty minimum. Notwithstanding the foregoing, ShowCase's nonexclusive license and distribution rights shall in any event terminate if this Agreement is terminated in accordance with Section 4.2. b. Nonexclusive License Royalty Rate. The royalty to be paid to Arbor by ShowCase for the nonexclusive license shall be as set forth in Section 5, except that if Arbor gives written notice of its Buy-Back Right, the royalty shall be as set forth in Section 5 for the 36-month period following the notice, and the royalty shall be (*) percent of the Arbor published list price thereafter, if applicable. c. Maintenance Fees. During the period when ShowCase has nonexclusive rights, ShowCase or its Authorized Partners shall offer to their new customers two alternatives for maintenance. First, ShowCase can pay to Arbor an annual maintenance fee equal to (*) percent of the then-current Arbor local country list price for the ShowCase AS/400 Port, and then Arbor will provide First, Second and Third Level support directly to such customers. Such maintenance fee shall be payable in advance. After the first year of maintenance for a customer, Arbor will handle all renewals and will extend its maintenance contract to the customers at Arbor's then-current rates. Alternatively, ShowCase or its Authorized Partner can provide First and Second Level support and Arbor will provide Third Level support, and ShowCase will pay Arbor an annual maintenance fee equal to (*) percent of the then-current Arbor local country list price for the initial and additional renewal years. 2.9 Development Copies. ShowCase shall have the right to provide copies of the ShowCase AS/400 Port to its Authorized Partners at (*) , provided that such copies are used by such Authorized Partners only for purposes of application development, customer hot-line support, and on-site demonstration. For any and all revenue-generating use of the ShowCase AS/400 Port, such as consulting and training, ShowCase will apply the effective royalty rate against Arbor's established discounted pricing for such uses. 3. ARBOR DISTRIBUTION RIGHTS 3.1 Grant of License to Distribute ShowCase AS/400 Port. Notwithstanding the grant to ShowCase of the exclusive license set forth in Section 2.1, Arbor hereby reserves to itself the right to distribute and sublicense the ShowCase AS/400 Port directly and through Arbor's Authorized Partners. The end user customer shall execute a software license agreement containing terms no less restrictive than, and at least as protective of ShowCase's intellectual property rights as, those contained in ShowCase's Software License Agreement attached to this Agreement. ShowCase acknowledges that Arbor's Software License Agreement attached to this Agreement satisfies the foregoing requirement. ShowCase shall be responsible for the delivery of the ShowCase AS/400 Port to such end users. For sales of full use licenses of the ShowCase AS/400 Port by Authorized Partners, any additional sales to that particular end user (whether to a different department division or location of the end user) shall be made by the Authorized Partner or ShowCase, and not Arbor or its Authorized Partners. Arbor's right to distribute and sublicense the ShowCase AS/400 Port in a given transaction through its own direct field sales force shall be subject to the following conditions (which conditions shall not apply to Authorized Partners): a. Limited to end user sales in countries where Arbor has direct sales; and b. Arbor's total revenue from the transaction must exceed $(*) and at least (*) percent of the established gross revenue before royalties and discounts of the Essbase Software must be on platforms other than the AS/400 or its direct successor; or (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 4 of 17 c. The end user must be an Arbor substantial customer. An Arbor substantial customer is an existing Arbor customer who has purchased software licenses and services from Arbor totaling at least $(*) during the 12 months immediately preceding the transaction in question; or d. ShowCase declines to participate in the transaction after being notified of it in writing. 3.2 Closing Responsibilities. Arbor will be responsible for closing sales without substantial field sales support from ShowCase. Arbor will furnish customer contact information regarding each transaction to ShowCase within 30 days after execution of the contract with the customer. 3.3 Trademark License. a. License. Subject to the terms and conditions of this Agreement, ShowCase hereby grants to Arbor a non-exclusive, non-transferable license to use the name "ShowCase" (the "Trademark"), but only in connection with its marketing and distribution of ShowCase AS/400 Port. Every copy of the ShowCase AS/400 Port shall clearly and prominently display the Trademark. b. Quality Control. Arbor shall promptly: (1) upon ShowCase's request from time to time, supply to ShowCase fully documented sample copies of any advertising and marketing materials relating to the ShowCase AS/400 Port, for ShowCase's review and approval, which will not be unreasonably withheld; (2) modify any such advertising and marketing materials as may be requested by ShowCase. Arbor agrees to give full attribution to ShowCase, ensuring that ShowCase corporate and product names are noticeably and prominently identified and displayed in connection with the marketing and distribution of the ShowCase AS/400 Port. Arbor's failure to substantially comply with the terms of this provision shall constitute a material default subject to Section 4.3 below. 4. TERM AND TERMINATION 4.1 Term. The term of this Agreement shall commence on the Effective Date and shall continue unless terminated in accordance with the provisions of this Agreement. 4.2. Termination by Arbor. This Agreement may be terminated by Arbor upon any one of the following events: a. If ShowCase materially breaches any material provision of this Agreement and fails to fully cure such breach within 30 days of written notice describing the breach. b. If ShowCase shall seek protection under any bankruptcy, receivership, trust deed, creditor arrangement, composition or comparable proceeding, or if any such proceeding is instituted against ShowCase and not dismissed within 120 days. c. If there is a "change of control" in the ownership of ShowCase (whether through acquisition, merger, consolidation, or reorganization) unless Arbor elects to waive such condition, which waiver shall not be unreasonably withheld. By way of clarification, ShowCase acknowledges that it shall not be unreasonable for Arbor to withhold such waiver if Arbor in good faith determines that the acquiring or surviving entity (1) is not financially sound, (2) is a significant competitor, (3) does not or is not likely to possess the technical know-how and expertise properly to maintain and support the ShowCase AS/400 Port, (4) does not or is not likely to allocate sufficient resources to the maintenance and support of the ShowCase AS/400 (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 5 of 17 Port, or (5) is not able or willing to provide the necessary security for the protection of the Technical Information, the Arbor trademarks, or the Arbor Proprietary Information. For purposes of this Section 4.2.c, Arbor agrees that it will waive this condition if ShowCase is acquired by or merges with (*) provided that (*) is then a reseller of the Essbase Software. If (*) is not a reseller of the Essbase Software, then Arbor will, within 30 days after ShowCase's request, determine whether it will waive this condition for the succeeding 6 month period if ShowCase is acquired by or merges with (*) during such 6 month period. There is no limit to the number of times that this process may be repeated. A "change of control" shall mean any change in the actual or beneficial ownership of more than 50 percent (or, with respect to a then-existing holder of equity rights, such lesser amount as would be required for such holder directly or indirectly to hold more than 50 percent of the voting stock) of its voting stock in one or more related transactions. 4.3 Termination by ShowCase. This Agreement may be terminated by ShowCase upon any of the following events: a. If ShowCase gives written notice to Arbor of its desire to terminate the Agreement, which termination shall be effective 12 months after delivery of such notice. b. If Arbor materially breaches any material provision of this Agreement and fails to fully cure such breach within 30 days of written notice describing the breach. 4.4 Liabilities. Neither party shall incur any liability whatsoever for any damage, loss or expenses of any kind suffered or incurred by the other (or for any compensation to the other) arising from or incident to any termination of this Agreement by such party which complies with the terms of the Agreement whether or not such party is aware of any such damage, loss or expenses. This section is not intended to preclude an action for damages against a party that commits a breach. 4.5 Obligations on Termination. Upon termination of this Agreement by either party or naturally at the end of the term (a) all exclusive rights and licenses of ShowCase and restrictions on Arbor hereunder shall terminate; (b) ShowCase will immediately return to Arbor all Arbor Proprietary Information including the Technical Information, catalogues and literature in its possession, custody or control in whichever form held (including all copies or embodiments thereof) and will cease using any trademarks, service marks and other designations of Arbor, and (c) in the event of a termination of this Agreement in accordance with Section 4.2, ShowCase's nonexclusive license set forth in Section 2.8 shall terminate and ShowCase shall, without additional consideration, assign, convey and transfer to Arbor all right, title and interest in and to the ShowCase AS/400 Port. 4.6 Remedies. Termination is not the sole remedy under this Agreement and, whether or not termination is effected, all other remedies will remain available. 4.7 After Termination. Upon the termination of this Agreement for any reason, the licenses granted by ShowCase and its Authorized Partners to its end user customers will remain in full force and effect, and Arbor will honor each such end user license, provided that the end user customer is not in default thereof. ShowCase will make good faith efforts to have each end user license agreement assigned to Arbor so that Arbor shall be the licensor. Arbor agrees that it will provide software maintenance and support services to all such end user customers, who are not in default of the terms of their license agreements, in accordance with its then-current terms, conditions, and prices. Arbor agrees to indemnify and hold harmless ShowCase from any liability to an end user customer arising from maintenance and support services provided by Arbor after the date on which Arbor agrees to provide such services to the end user customer in question. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 6 of 17 5. ROYALTIES 5.1 ShowCase Royalty Payment to Arbor. Except as provided in Sections 5.3, 5.4, and 5.5 below, ShowCase will pay Arbor a royalty for each copy of the ShowCase AS/400 Port and the non-ported Essbase Software distributed by ShowCase or its Authorized Partners. ShowCase will pay Arbor (*) percent of Arbor's then-current local country list price for the ShowCase AS/400 Port and (*) percent of Arbor's then-current local country list price for the non-ported Essbase Software, whether the sale is directly by ShowCase or by a ShowCase Authorized Partner. For those non-ported Essbase Software products for which Arbor pays royalties to a third party, the royalty for such products shall increase by (*) percent of the net royalties paid to the third party. ShowCase need not pay any royalties to Arbor with respect to the (*) running on the AS/400 platform when used for the direct loading of (*) via the ShowCase Warehouse Manager and Warehouse Builder products. Arbor agrees to provide ShowCase with 90 days prior written notice of any change in its relevant list prices. If Arbor offers any promotions with respect to the ShowCase AS/400 Port or the non-ported Essbase Software, Arbor agrees to notify ShowCase of such promotion and ShowCase's royalty payment to Arbor for sales during the promotion period shall be (*) . The royalties due Arbor hereunder shall be reduced as specified in Exhibit A for large transactions with a single customer. (*) . The parties agree to negotiate in good faith regarding discounts for large transactions not covered in Exhibit A. 5.2 ShowCase Royalty Payment for Essbase Restricted Use Licenses. ShowCase shall be entitled to license restricted use licenses of the Essbase Software through its Authorized Partners. Restricted use licensing arrangements include programs under which Essbase may only be used for a specific application, or for a number of ports not to exceed (*) ports, and where the end user customer would be required to license a full use license to use the Essbase Software beyond these restrictions. For restricted use sales made by ShowCase's Authorized Partners of the Essbase Software, ShowCase shall pay Arbor a royalty of (*) percent of Arbor's then-current local country list price. These terms apply so long as the business terms to ShowCase's Authorized Partner are the same for both the ShowCase AS/400 Port and non-ported version of the Essbase Software. 5.3 Royalties for IBM sales of the Essbase Software. For sales made by IBM or its channels of the ShowCase AS/400 Port, ShowCase shall pay Arbor a royalty of (*) percent of Arbor's then-current local country list price. 5.4 Royalties for sales of the IBM AS/400 DB2/OLAP version of the Essbase Software. For sales made by (*) or its channels of the IBM AS/400 DB2/OLAP version of the Essbase Software, ShowCase shall pay Arbor a royalty of (*) percent of Arbor's local country list price in effect as of the effective date of this Agreement. For sales made by ShowCase or its Authorized Partners of the IBM DB2/OLAP server, ShowCase shall pay Arbor a royalty of (*) percent of Arbor's then-current local country list price for the ShowCase AS/400 Port, less any royalties paid to (*) , but the minimum royalty shall be (*) percent of Arbor's local country list price in effect as of the effective date of this Agreement. For purposes of this Section 5.4, the Arbor local country list price shall be adjusted to the then-current local country list price on or after the date (*) months from the effective date of the agreement between ShowCase and (*) , but in any case no later than (*). However, if, during the period between the effective date of this Agreement and the date referred to in the preceding sentence, Arbor's local country list price decreases, then the applicable Arbor local country list price as of the effective date of this Agreement shall immediately be decreased accordingly. 5.5 Migrations. If any licensee of the Essbase Software on a non-AS/400 platform, licensed directly by Arbor, desires to convert to an AS/400, then such licensee shall license the ShowCase AS/400 Port from ShowCase or its Authorized Partner, and ShowCase shall pay royalties to Arbor with respect to such (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 7 of 17 license equal to (*) . However, if the licensee of the Essbase Software on a non-AS/400 platform has a restricted use license, then ShowCase or its Authorized Partner may license the ShowCase AS/400 Port and pay Arbor a royalty of (*) percent of Arbor's then current local country list price. 5.6 Minimum Royalty Payments. In order for ShowCase to maintain the exclusive right to distribute the ShowCase AS/400 Port, subject to the reservation of rights granted to Arbor in Section 3.1, and subject to Arbor's Buy-Back Right set forth in Section 2.7, Arbor must receive the minimum royalty payments specified in (a) through (f) below. If Arbor fails to receive its minimum royalty payments specified below for any given Agreement Year (as defined in (a) through (f) below), ShowCase shall have the option to pay Arbor the remaining balance of the commitment for that Agreement Year within 30 days after the end of that Agreement Year, thereby meeting its commitment and protecting its distribution rights for the subsequent Agreement Year. Any such payment will be treated as a credit towards royalty payments due to Arbor from ShowCase in the subsequent year, but shall not be a credit towards meeting the next year's annual royalty minimum. If Arbor fails to receive its minimum royalty payment outlined below for a particular Agreement Year and ShowCase elects not to pay Arbor the remaining balance of the commitment for that Agreement Year, the exclusive distribution rights granted to ShowCase shall, as of such date, automatically become non-exclusive. a. During the 12 months ending on March 31, 1998, the cumulative royalty and license payments to Arbor by ShowCase and by end users, respectively, of the ShowCase AS/400 Port (net of any royalties Arbor pays to ShowCase) shall equal at least $(*) . If ShowCase achieves this level, the period of exclusivity shall be extended through March 31, 1999. If ShowCase fails to achieve the stated level of cumulative royalty payments, the period of exclusivity shall end on March 31, 1998. b. During the 12 months ending March 31, 1999, the cumulative royalty and license payments to Arbor by ShowCase and by end users, respectively, of the ShowCase AS/400 Port (net of any royalties Arbor pays to ShowCase) shall equal at least $(*) . If ShowCase achieves this level, the period of exclusivity shall be extended through March 31, 2000. If ShowCase fails to achieve the stated level of cumulative royalty payments, the period of exclusivity shall end on March 31, 1999. c. During the 12 months ending on March 31, 2000, the cumulative royalty and license payments to Arbor by ShowCase and by end users, respectively, of the ShowCase AS/400 Port (net of any royalties Arbor pays to ShowCase) shall equal at least $(*) . If ShowCase achieves this level, the period of exclusivity shall be extended through March 31, 2001. If ShowCase fails to achieve the stated level of cumulative royalty payments, the period of exclusivity shall end on March 31, 2000. d. During the 12 months ending on March 31, 2001, the cumulative royalty and license payments to Arbor by ShowCase and by end users, respectively, of the ShowCase AS/400 Port (net of any royalties Arbor pays to ShowCase) shall equal at least $(*) . If ShowCase achieves this level, the period of exclusivity shall be extended through March 31, 2002. If ShowCase fails to achieve the stated level of cumulative royalty payments, the period of exclusivity shall end on March 31, 2001. e. If the term of the Agreement has been extended as provided above, then during the 12 months ending on March 31, 2002, the cumulative royalty and license payments to Arbor by ShowCase and by end users, respectively, of the ShowCase AS/400 Port (net of any royalties Arbor pays to ShowCase) shall equal at least $(*) . If ShowCase achieves this level, the period of exclusivity shall be extended through March 31, 2003. If ShowCase fails to achieve the stated level of cumulative royalty payments, the period of exclusivity shall end on March 31, 2002. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 8 of 17 f. If the term of the Agreement has been extended as provided above, then during the 12 months ending on March 31, 2003, the cumulative royalty and license payments to Arbor by ShowCase and by end users, respectively, of the ShowCase AS/400 Port (net of any royalties Arbor pays to ShowCase) shall equal at least $(*) . If ShowCase achieves this level, the period of exclusivity shall be extended through March l, 2004. If ShowCase fails to achieve the stated level of cumulative royalty payments, the period of exclusivity shall end on March 31, 2003. 5.7 Payment Terms to Arbor. All payments due Arbor under this Agreement shall be paid to Arbor thirty days after the end of the calendar month in which they are accrued. Amounts not paid within such thirty day period shall bear a late fee equal to (*) percent per month on the outstanding amount or the maximum rate permitted by applicable law, whichever is less. No part of any amount payable to Arbor hereunder may be reduced due to any counterclaim, set-off, adjustment or other right which ShowCase might have against Arbor, any other party or otherwise. 5.8 Arbor Royalty Payment to ShowCase. Arbor shall pay ShowCase a royalty for each copy of the ShowCase AS/400 Port distributed by Arbor or its Authorized Partners. Such royalty shall be equal to (*) percent of ShowCase's then-current local country list price, but not to exceed (*) percent of (*) percent of the then-current Arbor local country list price for a similar software product running on a UNIX platform, whether the sale is made directly by Arbor or by an Authorized Partner. The parties agree to negotiate in good faith regarding discounts for large transactions. ShowCase agrees to provide Arbor with 90 days' prior written notice of any change in its relevant list price. 5.9 Arbor Royalty Payment to ShowCase For Restricted Use Licenses. Arbor shall be entitled to license restricted use licenses of the ShowCase AS/400 Port through its Authorized Partners. Restricted use licensing arrangements include programs under which the ShowCase AS/400 Port may only be used for a specific application, or for a number of ports not to exceed (*) ports, and where the end user customer would be required to license a full use license to use the Essbase Software beyond these restrictions. For restricted use sales made by Arbor's Authorized Partners of the ShowCase AS/400 Port, Arbor shall pay ShowCase a royalty of (*) percent of the ShowCase then-current local country list price. These terms apply so long as the business terms to Arbor's Authorized Partner are the same for both the ShowCase AS/400 Port and non-ported version of the Essbase Software. 5.10 Payment Terms to ShowCase. All payments due ShowCase under this Agreement shall be due no later than 30 days after the end of the calendar month in which they are accrued. Amounts not paid within such 30-day period shall bear a late fee equal to (*) percent per month on the outstanding amount or the maximum rate permitted by applicable law, whichever is less. No part of any amount payable to ShowCase hereunder may be reduced due to any counterclaim, set-off, adjustment or other right which Arbor might have against ShowCase, any other party, or otherwise. 6. MAINTENANCE 6.1 Maintenance for ShowCase Customers. ShowCase shall provide First Level Support and Second Level Support (as well as Third Level support for the ShowCase AS/400 Port) to those customers who have purchased the ShowCase AS/400 Port or the Essbase Software from ShowCase or its Authorized Partners. Arbor will provide First Level Support, Second Level Support and Third Level Support directly to ShowCase (and not to its distributors or end users) with respect to all such sales. Arbor will also provide maintenance releases and/or software upgrades. For such support, ShowCase shall pay Arbor (a) (*) percent of the cumulative prior years' royalties from all customers, or (b) $(*) per agreement year, whichever is higher; provided, however, that royalties from end users that have canceled their licenses of the ShowCase AS/400 Port or the Essbase Software shall not be included. Application and product support through Arbor's Application Field Support Group ("AFSG") will be made available to ShowCase (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 9 of 17 at a rate equal to (*) percent of the rate set forth on Arbor's published AFSG consulting services fee schedule at the time such services are to be rendered. 6.2 Maintenance for ShowCase AS/400 Port Sales by Arbor. Arbor and its Authorized Partners shall offer to their customers of the ShowCase AS/400 Port two alternatives for maintenance. First, Arbor or its Authorized Partner can collect or cause to be collected and promptly pay to ShowCase an annual maintenance fee equal to (*) percent of the then-current ShowCase local country list price for the ShowCase AS/400 Port, and then ShowCase will provide First, Second and Third Level support directly to such customers. After the first year of maintenance for a customer, ShowCase will handle all renewals and will extend its maintenance contract to the customers at ShowCase's then current rates. Alternatively, Arbor or its Authorized Partner can provide First and Second Level support and ShowCase will provide Third Level support, and Arbor or its Authorized Partner will pay ShowCase an annual maintenance fee equal to (*) percent of the then current ShowCase local country list price. 6.3 Maintenance After Arbor Buy-Back. For the first 12 months after Arbor has exercised its Buy-Back Right, the maintenance obligations described above will remain the same. Thereafter, Arbor will be responsible for maintaining the ShowCase AS/400 Port. ShowCase maintenance payment terms will remain as described in Section 6.1 for 12 months following the exercise of the Buy-Back Right. 7. PRODUCT AND PORTING ShowCase will own the ShowCase AS/400 Port, but will not own (and hereby quitclaims and assigns to Arbor any rights or interests in or to) any of the Technical Information licensed hereunder and any derivative works thereof. ShowCase will own any attachments or add on products or modules to the ShowCase AS/400 Port, which have been or are developed by or for ShowCase without use of any source code of the ShowCase AS/400 Port. 8. MARKETING SUPPORT 8.1 Support Assistance. Arbor will provide the following marketing, sales and support assistance (outlined below) at no charge. a. ShowCase may access Arbor's Service Partners (where Arbor has the right to grant such access) to outsource ShowCase AS/400 Port related service requirements. b. ShowCase and Arbor will jointly develop a plan for their respective technical support organizations for problem resolution. c. ShowCase may deliver evaluation copies of the ShowCase AS/400 Port to prospects for trial use for a period not to exceed (*) . d. ShowCase has the right to make copies of the ShowCase AS/400 Port for demonstration purposes. e. ShowCase and Arbor will make commercially reasonable efforts to develop integrated marketing programs. f. ShowCase and Arbor will develop marketing communications positioning detailing ShowCase as Arbor's recommended solution for the AS/400 market. g. Arbor agrees to provide ShowCase with copies of the Essbase Software running under the Windows NT or Windows 95 operating systems, in numbers as requested by ShowCase to (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 10 of 17 meet the needs of its sales force and that of its Authorized Partners. Such copies are strictly and exclusively for purposes of conducting demonstrations for customers and prospects. These licensed demonstration copies may not be copied, distributed, or used for any other purpose including but not limited to test, evaluation, and internal use by ShowCase or its customers. Arbor will not provide any support and maintenance services in connection with this license, other than to provide updates whenever they are generally released to customers. 8.2 Marketing Assistance Fees (MAF). Arbor may contact ShowCase whenever it becomes aware of an opportunity to license the ShowCase AS/400 Port and ShowCase may contact Arbor whenever it becomes aware of an opportunity to license the Essbase software. Such referrals will be handled as provided below. a. A Marketing Assistance Fee ("MAF") is a fee paid to the party who supplies the other with a qualified referral for a previously unidentified ShowCase AS/400 Port or Essbase software license sales opportunity ("Opportunity"). MAFs apply only to specific Opportunities and require the other party to be actively involved. b. A party officially registers an Opportunity with the other party by using the Qualifying Order Form which is attached to this Agreement. This form must be completed in full by the requesting party in order to uniquely identify the Opportunity. The management of the party fulfilling the order approves the MAF request by signing and dating the form and forwarding the original to the Channel Program Administrator in Sunnyvale (Arbor) or Rochester (ShowCase) for approval by the Vice President of Sales. After approval, copies will be distributed to the appropriate organizations in both parties. The original will be filed at the party fulfilling the order. MAF requests must be submitted and approved before the order is submitted. If the business closes, the party fulfilling the order will make payment to the requesting party thirty (30) days after receipt of payment from the customer. If for any reason funds need to be returned to the customer, the requesting party which received the MAF will refund the appropriate amount of the MAF received, upon proper billing from the other party. c. A MAF request is valid for 90 days from the date of approval. If the Opportunity does not close during the 90 days, the term may be extended at the discretion of the party fulfilling the order for an additional 90 days. To approve this change the previously approved Qualifying Order Form must be resubmitted, signed and dated again. No opportunity may be extended more than 90 additional days. d. The MAF is (*) percent of the net software license revenue received by the party fulfilling the order and will be paid for each qualified referral. The maximum MAF for each specific new referral is $(*). The maximum cumulative MAF amount paid for referrals within a single account is $(*). 9. CONFIDENTIALITY ShowCase will keep the terms of this Agreement, and any letter of intent, negotiations, and all technical or commercial information, including, without limitation, all Technical Information, received from Arbor, confidential (collectively, the "Arbor Proprietary Information"). Similarly, Arbor will keep the terms of this Agreement and any letter of intent, negotiations, and all technical or commercial information received from ShowCase, confidential (collectively, the "ShowCase Proprietary Information"; the ShowCase Proprietary Information and the Arbor Proprietary Information together may be referred to as the "Proprietary Information"). Each party shall only use the other party's Proprietary Information as expressly and unambiguously provided in this Agreement, and each party shall maintain and not disclose to any third party (and shall similarly bind its employees in writing) any such Proprietary Information of the other party without the other party's prior written consent. However, a party shall (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 11 of 17 not be obliged to maintain the confidentiality of any Proprietary Information of the other party that the receiving party can document: a. is or has become readily publicly available without restriction through no fault of the receiving party or its employees or agents; or b. is received without restriction from a third party lawfully in possession of such information and lawfully empowered to disclose such information; or c. was rightfully in possession of the receiving party without restriction prior to its disclosure by the other party; or d. was independently developed by employees or consultants of the receiving party without access to such Proprietary Information; or e. is required to be disclosed by court or government order, provided that the other party has been given notice of and all opportunities to contest or limit the scope of such order. 10. ADDITIONAL SHOWCASE COVENANTS AND REPRESENTATIONS Except as expressly and unambiguously provided herein and as conditions of ShowCase's license hereunder, ShowCase represents, warrants and agrees: a. Not to delete, alter, add to or fail to reproduce in and on any copy of the ShowCase AS/400 Port or any media the Arbor name and any copyright or other notices appearing in or on any copy, media or master or package materials provided by Arbor or which may be required by Arbor at any time. b. To use its best efforts to comply with good business practices and all laws and regulations relevant to this Agreement or the subject matter hereof. ShowCase will not contest the use by or authorized by Arbor of any trademark (other than an existing ShowCase trademark or a trademark confusingly similar thereto) or application or registration therefor, whether during or after the term of this Agreement. c. To maintain a file of all persons and entities to which it distributes a copy of ShowCase AS/400 Port, including the name and address of such person or entity, the serial number designation of the copy of the ShowCase AS/400 Port, the date of delivery of the copy of the ShowCase AS/400 Port and the license agreement therefor, and to permit Arbor or a representative to examine and audit such records, records relevant to license fees and any related records (which shall be deemed to be ShowCase Proprietary Information) during reasonable business hours. If such an audit uncovers a deficiency in reporting or payments greater than 5 percent, ShowCase shall bear the audit expenses. d. To comply with all export laws and regulations of the Department of Commerce or other United States or foreign agency or authority, and not to export, or allow the export or re-export of any Arbor Proprietary Information, ShowCase AS/400 Port, Essbase Software or any copy of any direct product thereof in violation of any such laws and regulations. ShowCase shall obtain and bear all expenses relating to any necessary licenses and/or exemptions with respect to the export from the U.S. of all material or items deliverable by Arbor to any location and shall demonstrate to Arbor compliance with all applicable laws and regulations prior to delivery thereof by Arbor. e. In addition to and without in any way limiting ShowCase's other obligations hereunder, to use all methods to protect Arbor's rights with respect to the Arbor Proprietary Information as it uses to protect its own or any third party's software, confidential information or rights of similar nature. Page 12 of 17 11. MISCELLANEOUS 11.1 Warranty Disclaimer. THE TECHNICAL INFORMATION AND SERVICES PROVIDED TO SHOWCASE HEREUNDER ARE PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND INCLUDING WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT. FURTHER, ARBOR DOES NOT WARRANT, GUARANTEE, OR MAKE ANY REPRESENTATIONS REGARDING THE USE, OR THE RESULTS OF THE USE, OF THE TECHNICAL INFORMATION OR WRITTEN MATERIALS IN TERMS OF CORRECTNESS, ACCURACY, RELIABILITY, OR OTHERWISE. 11.2 Limitation on Liability. NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, (A) EXCEPT WITH RESPECT TO A BREACH OF SECTION 5 OR ACTIONS OF SHOWCASE BEYOND THE SCOPE OF THE LICENSE GRANTED IN SECTION 2 ABOVE, NEITHER PARTY SHALL BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST DATA, AND (B) NEITHER PARTY WILL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY (I) FOR ANY AMOUNTS IN EXCESS IN THE AGGREGATE OF THE LICENSE FEES PAID TO ARBOR HEREUNDER DURING THE TWELVE MONTH PERIOD PRIOR TO THE DATE THE CAUSE OF ACTION AROSE OR (II) FOR COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES. 11.3 Infringement. While Arbor has conducted no investigation, it is not aware of any infringement that will result from distribution of the Technical Information in accordance with the terms hereof. If ShowCase becomes aware of a potential infringement or claim thereof, it will immediately notify Arbor and will, if requested by Arbor, cease distribution (and for the period of time during which such authorized distribution has ceased, ShowCase's royalty obligations shall be suspended). Arbor shall, at its cost, defend or, at its sole option, settle any claim or suit brought against ShowCase on the issue that the Technical Information infringes a copyright or U.S. patent, or violates a trade secret of any third party, provided that ShowCase (a) notifies Arbor promptly in writing of any such claim or suit; (b) gives Arbor full information and assistance in settling and/or defending the suit; and (c) gives Arbor full authority and control of the defense and/or settlement of any such action. Arbor shall not be liable for any costs or expenses incurred (1) by ShowCase without Arbor's prior written authorization; (2) for any claim based on the use or combination of the Technical Information with any other item not provided by Arbor, (3) for any claim based on ShowCase's modification of the Technical Information; (4) from use of other than the latest available version of the Technical Information, or (5) any transaction entered into by ShowCase relating to the Technical Information without Arbor's prior written consent which will not be unreasonably withheld. 11.4 Remedies. If the Technical Information becomes subject to a claim of infringement for which Arbor may become liable, Arbor may at its option (a) obtain the right to continue using the Technical Information; (b) replace or modify the Technical Information to make it non-infringing so long as the replacement or modification meets substantially similar specifications; or (c) terminate the licenses. EXCEPT FOR THESE REMEDIES, ARBOR SHALL HAVE NO LIABILITY TO SHOWCASE OR ITS CUSTOMERS FOR VIOLATION OF ANY THIRD PARTY INTELLECTUAL PROPERTY RIGHTS, AND SHALL IN NO INSTANCE HAVE ANY LIABILITY TO SHOWCASE FOR INDIRECT OR CONSEQUENTIAL DAMAGES FROM INFRINGEMENT OTHER THAN AS SET FORTH IN THIS SECTION. 11.5 Exports. Arbor agrees to comply with all export laws and regulations of the Department of Commerce or other United States or foreign agency or authority, and not to export, or allow the export or re-export of any ShowCase Proprietary Information, the ShowCase AS/400 Port, or any copy of any direct product thereof in violation of any such laws and regulations. Arbor shall obtain and bear all expenses relating to any necessary licenses and/or exemptions with respect to the export from the U.S. of all material or items deliverable by Arbor to any location and shall demonstrate to ShowCase compliance with all applicable laws and regulations prior to delivery thereof. Page 13 of 17 11.6 Relationship of Parties. The parties hereto expressly understand and agree that ShowCase is an independent contractor in the performance of each and every part of this Agreement, is solely responsible for all of its employees and agents and its labor costs and expenses arising in connection therewith and is responsible for and will indemnify Arbor from any and all claims, liabilities, damages, debts, settlements, costs, attorneys' fees, expenses and liabilities of any type whatsoever that may arise on account of ShowCase's activities (including, without limitation, direct and indirect distributors), including without limitation, providing unauthorized representations or warranties (or failing to effectively disclaim all warranties and liabilities on behalf of Arbor) to its customers or breaching any term, representation or warranty of this Agreement. 11.7 Amendment and Waiver. Except as otherwise expressly provided herein, any provision of this Agreement may be amended and the observance of any provision of this Agreement may be waived (either generally or in any particular instance and either retroactively or prospectively) only with the written consent of the parties. However, it is the intention of the parties that this Agreement be controlling over additional or different terms of any purchase order, confirmation, invoice or similar document, even if accepted in writing by both parties, and that waivers and amendments shall be effective only if made by non-pre-printed agreements clearly understood by both parties to be an amendment or waiver. 11.8 Governing Law and Legal Actions. This Agreement shall be governed by and construed under the laws of the State of California and the United States without regard to conflicts of laws provisions thereof and without regard to the United Nations Convention on Contracts for the International Sale of Goods. Unless otherwise elected by Arbor in writing for a particular instance (which Arbor may do at its option), the sole jurisdiction and venue for actions related to the subject matter hereof shall be the state and U.S. Federal courts in the County of Santa Clara, California. In any action or preceding to enforce rights under this Agreement, the prevailing party shall be entitled to recover costs and attorneys' fees. 11.9 Headings. Headings and captions are for convenience only and are not to be used in the interpretation of this Agreement. 11.10 Notices. Notices under this Agreement shall be sufficient only if personally delivered, delivered by a major commercial rapid delivery courier service or mailed by certified or registered mail, return receipt requested to a party at its address as first set forth herein or as amended by notice pursuant to this subsection. If not received sooner, notice by mail shall be deemed received five days after deposit in the U.S. mail. 11.11 Entire Agreement. This Agreement amends and restates the Arbor/ShowCase License Agreement between Arbor and ShowCase dated December 19, 1995, which is hereby superseded, and supersedes all proposals, oral or written, all negotiations, conversations, or discussions between or among parties related to the subject matter of this Agreement and all past dealing or industry custom. This Agreement does not amend or supersede ShowCase's Agreement with AppSource Corporation dated January 4, 1996, as amended. 11.12 Severability. If any provision of this Agreement is held to be illegal or unenforceable, that provision shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable. 11.13 Basis of Bargain. Each party recognizes and agrees that the warranty disclaimers and liability and remedy limitations in this Agreement are material bargained for bases of this Agreement and that they have been taken into account and reflected in determining the consideration to be given by each party under this Agreement and in the decision by each party to enter into this Agreement. 11.14 Non-solicitation of Employees. Throughout the term of this Agreement and for a period of 12 months after any termination or expiration of this Agreement, neither party shall solicit or recruit for employment as an employee or agent, whether full-time or part-time, by contract or by direct hire, any then-current employee or individual consultant of the other party without the prior written consent of the party Page 14 of 17 employing such an individual. The foregoing is not to be construed as a prohibition against conducting general advertisement campaigns or other recruiting activities not aimed specifically at the other party or its employees, nor hiring an employee or individual consultant of the other party, provided that the hiring party has not in any way solicited or recruited the other party's employee or individual consultant and that the employment relationship was initiated by the employee or individual consultant. 11.15 Assignment. ShowCase may assign this Agreement to any party that acquires all or substantially all of the assets of ShowCase only upon the prior written consent of Arbor, which consent shall not be unreasonably withheld. By way of clarification, ShowCase acknowledges that it shall not be unreasonable for Arbor to withhold such consent if Arbor in good faith determines that the acquiring or surviving entity (1) is not financially sound, (2) is a significant competitor, (3) does not or is not likely to possess the technical know-how and expertise properly to maintain and support the ShowCase AS/400 Port, (4) does not or is not likely to allocate sufficient resources to the maintenance and support of the ShowCase AS/400 Port, or (5) is not able or willing to provide the necessary security for the protection of the Technical Information, the Arbor trademarks, or the Arbor Proprietary Information. For purposes of this Section 11.15 Arbor agrees that it will give its consent if ShowCase is acquired by or merges with (*) provided that (*) is then a reseller of the Essbase Software. If (*) is not a reseller of the Essbase Software, then Arbor will, within 30 days after ShowCase's request, determine whether it will give its consent for the succeeding 6 month period if ShowCase is acquired by or merges with (*) during such 6 month period. There is no limit to the number of times that this process may be repeated. 11.16 Survival of Provisions. The provisions of this Agreement which by their terms ought to survive termination of the Agreement shall survive such termination. Executed as of the effective date by the authorized representatives of the parties. SHOWCASE CORPORATION ARBOR SOFTWARE CORPORATION By /s/ Ken Holec By /s/ Stephen Imbler ---------------------------------- ---------------------------------- Name Ken Holec Name Stephen Imbler --------------------------------- --------------------------------- Title President and CEO Title Chief Financial Officer -------------------------------- -------------------------------- (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 15 of 17 QUALIFYING ORDER FORM Prospect Company Name --------------------------------------- Prospect Address/Phone/Fax --------------------------------------- Prospect Primary Contact Name --------------------------------------- Date of Initial Prospect Contact --------------------------------------- Date of Intro. to Fulfiller Party --------------------------------------- Requester Contact/Location --------------------------------------- Anticipated Purchase Amount --------------------------------------- Description of Opportunity --------------------------------------- --------------------------------------- Anticipated Purchase Date --------------------------------------- Sales Manager Approval --------------------------------------- Extension Date (if approved) --------------------------------------- Accepted by: - --------------------------------- ----------------------------------- Authorized Signature Authorized Signature Name:______________________________ Name:______________________________ Title:_____________________________ Title:_____________________________ Date:_____________________________ Date:_____________________________ Page 16 of 17 EXHIBIT A VOLUME DISCOUNTS For single transactions where the license fees charged by ShowCase are in the ranges specified below, the royalty payable by ShowCase to Arbor will be adjusted as shown below: For sales of the ShowCase AS/400 Port: License Fees Adjusted Royalty Rate (*) (*) For sales of non-ported Essbase Software: License Fees Adjusted Royalty Rate (*) (*) Notes: Transaction prices above $(*) will be handled on a case-by-case basis. To qualify for the volume discounts, the sale must represent a single transaction to one customer. Payment terms offered to end user customer do not affect royalty payments. Maintenance price calculation for sales that qualify for the volume discount schedule will be based on net royalty received. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 17 of 17 EX-10.10 17 AMENDMENT TO LICENSE AGMT. WITH HYPERION SOLUTIONS EXHIBIT 10.10 AMENDMENT NUMBER 1 TO LICENSE AGREEMENT This amendment Number 1 is entered into effective as of September 14, 1998 by and between ShowCase Corporation and Hyperion Solutions Corporation (formerly Hyperion Software Corporation) for the purpose of modifying the License Agreement between the parties dated effective April 1, 1998 (the "Agreement"). 1. The name of Hyperion Software Corporation has been changed to Hyperion Solutions Corporation. 2. Unless otherwise defined in this Amendment 1, each capitalized term used herein has the same meaning as that given to it in the Agreement. 3. Section 1.1 of the Agreement is replaced in its entirety with the following: "1.1 "Authorized Partner" is defined as (a) a software reseller with a contractual relationship with Hyperion or ShowCase which adds value by providing its own or third party applications in addition to the Essbase Software or other Hyperion software products, or the ShowCase AS/400 Port, respectively, or (b) a systems integrator (service companies such EDS and Andersen Consulting), OEM, or other entity approved in writing by the other party. Under no circumstance may (*) be a Hyperion Authorized Partner for the ShowCase AS/400 Port without the written approval of ShowCase, while ShowCase retains exclusive distribution rights to the ShowCase AS/400 Port in accordance with section 2.1." 4. Section 1.2 of the Agreement is replaced in its entirety with the following: "l.2 "Essbase Software" is defined as the Essbase Server, the Essbase Application Manager, the Spreadsheet Client, the Essbase Application Tools, Wired for OLAP, and Wired for the Web, existing as of the effective date of this Agreement, and any future releases of such products developed or distributed by Hyperion. Hyperion agrees to negotiate in good faith to expand the definition of Essbase Software to include other software products not specified above that are either developed or distributed by Hyperion after the effective date of this agreement." 5. New Sections 1.6 through 1.8 are added to the Agreement as follow: "1.6 "IBM AS/400 DB2/OLAP" is defined as a customized version of the ShowCase AS/400 Port, which is intended for use by end users using IBM's DB2 relational storage and/or IBM's direct successor to DB2 and excludes Wired for OLAP and Wired for the (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Web. Unless the context indicates otherwise, all references in this Agreement to the ShowCase AS/400 Port include IBM AS/400 DB2/OLAP." "1.7 "Moral Rights" is defined as personal rights associated with authorship of a work under applicable law. These include the right to approve modifications and to require authorship identification." "1.8 "Harmful Code" is defined as any code, programming instruction or set of instructions that is intentionally constructed with the ability to damage, interfere with or otherwise adversely affect computer programs, data files, or hardware without the consent or intent of the computer user. It is expressly understood and agreed that license management devices such as license keys, limitation of the number of concurrent users to the maximum number authorized, and time-out devices in evaluation versions of any software shall not be considered to be Harmful Code." 6. Section 2.2 of the Agreement is replaced in its entirety with the following: "2.2 Grant of License to Distribute Essbase Software on Non-AS/400 Platforms. Hyperion hereby grants to ShowCase a non-exclusive, worldwide license (subject to Sections 2.8 and 4.2) to distribute and sublicense the Essbase Software (i.e., all Essbase Software not ported to the AS/400 platform) to end users directly and through its Authorized Partners, subject to the terms of this Agreement. ShowCase may not use an Authorized Partner for the distribution of Essbase Software not ported to the AS/400 platform, if such Authorized Partner was an existing partner of Hyperion as of April 1, 1998, without the prior written consent of Hyperion, which consent will not be unreasonably withheld. Any distribution by systems integrators and other independent software vendors must be approved in writing in advance by Hyperion, which approval will not be unreasonably withheld. The end user customer shall execute a software license agreement containing terms no less restrictive than, and at least as protective of Hyperion's intellectual property rights as, those contained in Hyperion's Software License Agreement attached to this Agreement. ShowCase's right to distribute and sublicense Essbase Software on non-AS/400 Platforms, both directly and through its Authorized Partners, shall be subject to the following conditions: "a. The end users must also license the ShowCase Warehouse Manager and Warehouse Builder products or replacement versions of such products and data must reside on or originate from an IBM AS/400; or "b. The end users must license a ShowCase business application built upon the Essbase Software and that adds significant value to the Essbase Software." 7. Section 3.1 of the Agreement is replaced in its entirety with the following: "3.1 Grant of License to Distribute ShowCase AS/400 Port. Notwithstanding the grant to ShowCase of the exclusive license set forth in Section 2.1, Hyperion hereby reserves to itself the right to distribute and sublicense the ShowCase AS/400 Port directly and through Hyperion's Authorized Partners. Hyperion may not use an Authorized Partner for the distribution of the ShowCase AS/400 Port, if such Authorized Partner was an existing partner of ShowCase as of April 1, 1998, without the prior written consent of ShowCase, which consent will not be unreasonably withheld. Any distribution by systems integrators and other independent software vendors must be approved in writing in advance by ShowCase, which approval will not be unreasonably withheld. The end user customer shall execute a software license agreement containing terms no less restrictive than, and at least as protective of ShowCase's intellectual property rights as, those contained in ShowCase's Software License Agreement attached to this Agreement. ShowCase acknowledges that Hyperion's Software License Agreement attached to this Agreement satisfies the foregoing requirement. ShowCase shall be responsible for the delivery of the ShowCase AS/400 Port to such end users. For sales of full use licenses of the ShowCase AS/400 Port by Authorized Partners, any additional sales to that particular end user (whether to a different department, division or location of the end user) shall be made by the Authorized Partner or ShowCase, and not Hyperion or its Authorized Partners. Hyperion's right to distribute and sublicense the ShowCase AS/400 Port in a given transaction through its own direct field sales force shall be subject to the following conditions (which conditions shall not apply to Authorized Partners): "a. Limited to end user sales in countries where Hyperion has direct sales; and "b. Hyperion's total revenue from the transaction must exceed $ (*) and at least (*) percent of the established gross revenue before royalties and discounts of the Essbase Software must be on platforms other than the AS/400 or its direct successor; or "c. The end user must be an Hyperion substantial customer. An Hyperion substantial customer is an existing Hyperion customer who has purchased software licenses and services from Hyperion totaling at least $ (*) during the 12 months immediately preceding the transaction in question; or "d. ShowCase declines to participate in the transaction after being notified of it in writing." 8. The second sentence of Section 5.1 of the Agreement is deleted in its entirety and replaced by the following: "ShowCase will pay Hyperion (*) percent of Hyperion's then-current local country list price for the ShowCase AS/400 Port (excluding the ported Wired for OLAP and Wired for the Web products) and (*) percent of Hyperion's then-current local country list price for the non-ported Essbase Software (including the Wired for OLAP and Wired for the (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Web products), whether the sale is directly by ShowCase or by a ShowCase Authorized Partner. In addition, for any sales recorded after January 31, 1999, ShowCase will pay Hyperion (*) percent of Hyperion's then-current local country list price for the ported Wired for OLAP and Wired for the Web products (with both the client and server portions being distributed together to a particular customer), whether the sale is directly by ShowCase or by a ShowCase Authorized Partner. ShowCase's rights and obligations with respect to Wired for OLAP and Wired for the Web products prior to January 31, 1999 are governed by that certain agreement between ShowCase and AppSource Corporation (a wholly-owned subsidiary of Hyperion)." 9. The third sentence of Section 5.2 of the License Agreement is deleted in its entirety and replaced by the following: "For restricted use license sales of the ShowCase AS/400 Port (excluding the Wired for OLAP and Wired for the Web products) made by ShowCase's Authorized Partners, ShowCase shall pay Hyperion a royalty of (*) percent of Hyperion's then-current local country list price." 10. Section 5.3 of the License Agreement is hereby deleted in its entirety and replaced by the following: "For sales made by (*) or its channels of the ShowCase AS/400 Port (excluding the ported Wired for OLAP and Wired for the Web product), ShowCase shall pay Hyperion a royalty of (*) percent of Hyperion's then-current local list price. In addition, ShowCase will pay Hyperion (*) percent of the net royalty from (*) or its channels (with a floor of (*)% of Hyperion's local country list price in effect as of the effective date of this Agreement) for the Wired for OLAP and Wired for the Web products (with both the client and server portions being distributed together to a particular customer)." 11. A new Section 11.0 is added to the Agreement as follows: "1.0 Hyperion Warranties "(a) Hyperion warrants that it has full legal rights to grant the rights granted to ShowCase herein. Hyperion's sole obligation in the event of a breach of this warranty is stated in Sections 11.3 and 11.4 of the Agreement. "(b) Hyperion warrants that it is not under, and will not assume, any obligation that conflicts with Hyperion's obligations or the rights and licenses granted in this Agreement. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. "(c) Hyperion warrants that there are no proceedings or claims pending or threatened against Hyperion that relate to the Essbase Software or the Technical Information. "(d) Hyperion warrants that neither the Essbase Software nor the Technical Information infringes any patent, copyright, trademark or other intellectual property rights of a third party. Further, Hyperion warrants that the Essbase Software and Technical Information have not been the basis of a claim of infringement threatened or asserted against Hyperion or, to the best of Hyperion's knowledge, anyone else. "(e) Hyperion warrants that it has the right to modify the Essbase Software and the Technical Information, and that no attribution other than to Hyperion is required in connection therewith. "(f) Hyperion warrants that the source code that Hyperion delivers as part of the Technical Information under this Agreement corresponds to the current release or version of the Essbase Software on the date of such delivery, Hyperion's sole obligation in the event of a breach of this warranty is to deliver the appropriate version of the source code. "(g) Hyperion warrants that the Essbase Software and applicable Technical Information delivered to Licensee hereunder will record, store, process and present calendar dates falling on or after January 1, 2000, in the same manner, and with substantially similar functionality, as such Software records, stores, process and presents calendar dates on or before December 31, 1999. Hyperion's sole obligation in the event of a breach of this warranty is to repair or replace the non conforming Essbase Software or Technical Information. "(h) Hyperion warrants that any person or entity having Moral Rights with respect to any materials assigned, delivered or licensed by Hyperion to ShowCase hereunder shall not assert any Moral Rights with respect to those materials. Hyperion acknowledges that ShowCase's exercise of rights and licenses hereunder shall not violate any Moral Rights of Hyperion, and Hyperion agrees not to assert any Moral Rights Hyperion has or may have in the Essbase Software against ShowCase in its exercise of rights and licenses hereunder. "(i) Hyperion warrants that, to the best of its knowledge, the Essbase Software and Technical Information, as delivered by Hyperion to ShowCase hereunder, is not contaminated by Harmful Code, and that Hyperion has implemented a process designed to help prevent any such contamination by Harmful Code. Hyperion will promptly provide ShowCase notice if Hyperion suspects any contamination." 12. The first sentence in Section 11.1 of the Agreement is hereby deleted in its entirety and replaced by the following: "EXCEPT FOR THE EXPRESS WARRANTIES STATED IN SECTION 11.0, THE TECHNICAL INFORMATION AND SERVICES PROVIDED TO SHOWCASE HEREUNDER ARE PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND INCLUDING WITHOUT LIMITATION, ANY WARRANTIES OR MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT." 13. Hyperion acknowledges and agrees that ShowCase and International Business Machines Corporation ("IBM") will be entering into certain development and license agreements (collectively, the "IBM Agreements") to develop and license for distribution by IBM and its agents certain ShowCase software products that include the ShowCase AS/400 Port. Hyperion hereby consents to ShowCase's disclosure of information related to the License Agreement including the Hyperion test suite, solely to the extent required for ShowCase to perform its obligations under the IBM Agreements, provided that any such disclosures are subject to an appropriate nondisclosure agreement between IBM and ShowCase, which contains terms that are as protective of Hyperion's confidential information as those set forth in Section 9 of the Agreement. Hyperion further agrees that, subject to the same confidentiality provisions stated above, including Section 9 of the Agreement, Hyperion will make available to ShowCase for delivery to IBM, if required by IBM, a copy of the Certificate of Originality that Hyperion submitted to IBM in connection with (*) in effect between IBM and Hyperion. 14. Hyperion consents to ShowCase establishing an escrow account with an independent third party escrow agent in order to place into escrow the source code for the ShowCase products licensed to IBM under the IBM Agreements which will include the source code for the ShowCase AS/400 Port, provided however, that the terms governing release of the source code and subsequent use by IBM thereof shall be materially the same as those set forth in (*) dated September 27, 1996 by and between Hyperion and IBM. Hyperion understands that IBM will have the right to obtain this source code for certain ShowCase software products (including, for example, the IBM AS/400 DB2/OLAP product) then- currently escrowed with such escrow agent if one of certain stated release conditions occurs; provided, however, that prior to any such release of the source code for the ShowCase AS/400 Port, IBM shall inform Hyperion in writing of such impending release and Hyperion shall have 30 days after its receipt of a copy of the IBM Agreements and of notice from IBM to elect in writing one of the following options: (a) Hyperion may modify the (*) in order to add the ShowCase AS/400 Port as a licensed work under the (*), provided that IBM also assumes the obligation to support any IBM-owned code or products included in the ShowCase AS/400 Port products, and provided further that with respect to the ShowCase AS/400 Port, any reference in the (*) to list price or a similar term with respect to the calculation of royalties, shall refer to ShowCase's applicable list price; or (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. (b) Hyperion may have assigned to it, and assume on behalf of ShowCase, all royalties, and all obligations of ShowCase under the IBM Agreements related only to the ShowCase AS/400 Port product. Upon Hyperion's election of either of the above options, ShowCase, IBM and Hyperion will all cooperate in good faith to transfer all source code and other information reasonably needed in order for Hyperion to assume such obligations. ShowCase shall have no obligation under the License Agreement to pay any royalties to Hyperion for any copies of the ShowCase AS/400 Port product subsequently distributed by IBM and ShowCase shall not be entitled to any royalties for any copies of the ShowCase AS/400 Port product subsequently distributed by IBM. 15. Hyperion grants to ShowCase a non-exclusive license to market, distribute, and sublicense Wired subject to the terms and conditions contained in this Amendment and in the Agreement. ShowCase may change the name of Wired, add functionality to Wired, and change the appearance of Wired packaging and display screens. However, ShowCase shall preserve Hyperion's copyright notices and other proprietary markings on the Wired software media, documentation, and display screens. 16. Notwithstanding Section 2.5(a) of the License Agreement, Hyperion acknowledges and agrees that except for copyright and patent information displayed in the "About Box"; the IBM AS/400 DB2/OLAP product will not include an attribution to Hyperion. 17. Except as expressly modified herein, all terms and conditions of the Agreement remain unaltered and in full force and effect. 18. This Amendment I may be executed in counterparts, each of which shall be considered an original, and all of which taken together shall constitute one instrument. Executed as of the effective date by the authorized representatives of the parties SHOWCASE CORPORATION HYPERION SOLUTIONS CORPORATION By /s/ Ken Holec By /s/ William B. Binch ---------------------------------- ---------------------------------- Name Ken Holec Name William B. Binch --------------------------------- --------------------------------- Title President and CEO Title SVP -------------------------------- -------------------------------- EX-10.11 18 SOFTWARE LICENSE & MKTG. AGMT. WITH APPSOURCE EXHIBIT 10.11 SOFTWARE LICENSE AND MARKETING AGREEMENT THIS AGREEMENT is made effective January 4th, 1996 (the "Effective Date") by and between SHOWCASE CORPORATION, a Minnesota Corporation having a principal place of business at 4131 Highway 52 North, Rochester, MN 55901 USA (hereinafter "Licensee") and AppSource, a Florida corporation, having a principal place of business at Lakeside Center, 4751 Rosewood Drive, Orlando, FL 32806, U SA(hereinafter "AppSource"). 1. PRODUCT DESCRIPTION a. WIRED FOR OLAP. The Product, Documentation and Licensee Product which relate to this agreement are in Exhibit A attached to this Agreement. 2. PRODUCT FEATURES Licensee agrees that the Product meets the specifications set forth in Exhibit A. 3. DELIVERY AppSource agrees to deliver to Licensee a complete copy of the Product no later than the date specified in the Delivery Schedule set forth in Exhibit A attached hereto. A "complete copy" shall include five (5) diskettes comprising a complete working copy of the Product in executable form which satisfies the functional specifications set forth in the Documentation. A complete copy shall also include the Documentation in its existing printed form. AppSource shall deliver the Product and Documentation to a common carrier selected by Licensee. 4. RIGHTS GRANTED a. Rights In Product. Subject to the terms and conditions set forth herein, AppSource hereby grants to Licensee a license to market, use internally and distribute the Product and Documentation, for use in Licensee Product, marketed and/or distributed by Licensee as listed in Exhibit A of this agreement on a world wide basis. Licensee shall maintain exclusive rights to market the product in conjunction with the IBM AS/400 midrange computer. b. Ownership. Subject to the rights and licenses granted to Licensee hereunder, AppSource shall retain all right, title and interest in and to the Product including all copyrights. Licensee shall have the right any time after the First Agreement Year, as defined in section 8h below, to purchase the source code for the Product -1- for use only in conjunction with the IBM AS/400 midrange computer for a price equal to (*). Licensee will own the rights to the source code at no fee in the event of insolvency or bankruptcy. c. AppSource Marks. Licensee agrees to honor and use AppSource trademarks, copyrights and trade names belonging to AppSource ("AppSource Marks"}. Licensee may not use AppSource Marks for other purposes without the express written permission from AppSource. d. Third Party and License Terms. AppSource acknowledges that Licensee's Software License Terms attached hereto as Exhibit C provide AppSource with adequate protection of its intellectual property with respect to Licensee's end- users (AppSource may require different license terms for different countries or may refuse to allow licensing in certain countries if it deems its intellectual property cannot be adequately protected, including a government restricted rights clause). Licensee may not enter into a Licensing Agreement with any end-user whereby the Product is sold, marketed or distributed separate from the Licensee's Product or whereby the Product is sold, marketed or distributed under separate identity from that of Licensee Product. Licensee's Software License Agreement must include a clause that stipulates end-users may not re-license the Product. Licensee may sublicense the Product to subdistributors who, in turn, sublicense the Product to end-users. e. Competition. Licensee must market, sell or distribute the Product with Licensee Product. At no time shall Licensee be entitled to enter into direct competition with AppSource marketing efforts of the Product outside of the AS/400 marketplace or sell, market or distribute the Product separate from Licensee Product. f. Internal Use. AppSource grants to Licensee a (*) license to use and reproduce the Product for use with Licensee Product specified in Exhibit A. g. Independent Software Resellers. Licensee will market and distribute the Product and related services for the AS/400 to independent software vendors (ISV). AppSource will market and distribute the Product and related services for ISVs for all non-AS/400 environments. In the event an ISV desires the rights to distribute the Product on multiple platforms, the ISV will negotiate separately with AppSource and Licensee for those rights. AppSource and Licensee will exercise good faith efforts to ensure that their respective ISV arrangements, with mutual third parties, are compatible. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. -2- 5. MANUFACTURING a. All manufacturing of the required media for distribution of the Product including PC diskettes and AS/400 tapes and documentation will be the responsibility of the Licensee. b. Product Translation. Licensee will pay (*) of any costs associated with the translation of the Product. AppSource will have the rights to these translated versions on non-AS/400 platforms. 6. PRODUCT MARKETING a. Marketing Rights. Licensee shall have the authority to market or not market the Product as it deems appropriate provided Licensee does not violate AppSource's Rights (as in paragraph 4 above) in the Product. In the event Licensee rejects an enhanced or modified Product, Licensee shall be entitled to continue to distribute the previous version of that Product. b. Non-Restrictive Relationship. Except as provided in Section 4a, this Agreement shall not preclude AppSource from entering into the same or similar agreement with third parties for distribution of the Product. c. Escrow. AppSource agrees to maintain current versions of all code for the System in deposit with a mutually agreed on code escrow service, and to register, and maintain as registered, Licensee as a party that may have access to such code under certain "release conditions". Such "release conditions" shall consist of any one or more of the following circumstances remaining uncorrected for more than thirty (30) days: filing for relief under any section of the United States Bankruptcy Code, the making by AppSource of a general assignment for the benefit of creditors, the appointment of a receiver or trustee of AppSource's business property or any other action by AppSource under any insolvency or similar law for the purpose of its bankruptcy, reorganization or liquidation. AppSource shall deliver promptly after the date hereof to escrow agent the source code and related documentation and at the same time notify Licensee of such delivery. AppSource shall bear the fees charged by the escrow agent for such registration of the System code. 7. PRODUCT MAINTENANCE AND SUPPORT a. General. The parties anticipate that Licensee will make best efforts to provide direct, primary support for the Product to end-user customers. Licensee will be (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. -3- responsible for supporting Licensee Product and the Product as it relates to Licensee Product. AppSource will provide at no charge support to Licensee with respect to the Product, including on-line support as further set forth below. b. AppSource Support to Licensee. AppSource will provide Licensee with ongoing maintenance and technical support for the Product. Maintenance and support shall include: (i) Receiving defect reports from Licensee and fixing defects or providing workarounds. (ii) Maintaining a telephone number of Licensee to call during normal business hours to report problems and receive assistance. (iii) Providing a knowledgeable support contact for providing technical support. c. Response to Defects. AppSource shall make any necessary changes to the Product so that the Product functions and performs substantially in accordance with its published documentation. If Licensee believes a bug exists, Licensee will notify AppSource of the bug, at which time it will be categorized as follows: (i) Severity Level 1 Bug. An error which causes the system or a major component of it to stop or renders it otherwise unusable, or data corruption bug. (ii) Severity Level 2 Bug. All other errors whereby the user can continue to operate. The Licensee will provide information in writing as to how the bug was created, and if possible, printouts showing the problem. AppSource shall respond to Severity Level 1 bugs within (*) hours of notice by Licensee. AppSource shall use the best efforts to promptly correct any Product errors of Severity Level 1. Severity Level 2 bugs will be corrected and released to Licensee during subsequent Product maintenance releases. AppSource agrees to continue support upon expiration or termination of this Agreement at it's generally available commercial rates. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. -4- d. Support of Previous Versions of Product. Support of previous Product versions will be limited to two previous versions and standard telephone support to the users and will not include corrective action as set forth in Section 7.c above. e. Product Upgrades. AppSource will promptly provide Licensee with a master copy of any upgrade to the Product, which is made generally available during the term of this agreement, for distribution to Licensee customers. f. Support & Maintenance Fees. The support and maintenance fee will be priced at (*) of the cumulative prior months royalties. Licensee will pay $(*) in prepaid maintenance expenses. This prepaid maintenance will be offset against monthly maintenance accrued during the term of this agreement. Maintenance fees will be due within fifteen (15) days of reporting monthly royalties as specified in section 8b below. 8. PAYMENT a. Royalty Payments. Licensee will pay a fee equal to (*) of the current list price of the Product on the UNIX platform. AppSource may change it's list price at it's sole discretion upon 90 days written notice to Licensee. All fees are calculated in US Dollars. b. Payment of Royalties. Licensee will report per unit royalties on or before the 30th of the month following the month in which they were sold. Per unit royalty payments will be due within fifteen (15) days of reporting monthly sales. Any other fees associated with this Agreement will be due and payable on a net 30 basis. d. AppSource Audit Rights. Licensee shall keep true and accurate records of all Products distributed, in accordance with generally accepted accounting principles, consistently applied. No more frequently than once a year and during regular business hours, AppSource shall have the right (upon two business days prior notice) to have a certified public accountant selected by AppSource audit the books of Licensee. AppSource shall pay the cost of such audit unless such audit should reveal an underpayment by Licensee of 5% or greater at which such time as audit costs would be the responsibility of Licensee. e. To ensure that Licensee maintains the exclusive right to distribute the Product, Licensee must meet it's minimum royalty payment commitments outlined in Sections 8.h below. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. -5- f. If Licensee fails to meet its minimum royalty payment commitments specified below for any given Agreement Year (as defined below), Licensee has the option to pay AppSource the remaining balance of the commitment for that Agreement Year within thirty (30) days after the end of that Agreement Year, thereby meeting it's commitment and protecting it's exclusive distribution rights for the subsequent Agreement Year period. g. If Licensee fails to meet it's minimum royalty payment commitments outlined below for a particular Agreement Year and elects not to pay AppSource the remaining balance of the commitment for that Agreement year, the exclusive distribution rights granted Licensee shall terminate and AppSource shall have the right to grant third parties non-exclusive licenses to prepare and distribute the Product on the AS/400 platform. Licensee shall continue to have non-exclusive marketing rights for the Product. h. The first Agreement Year (i.e. Year One, and each anniversary of the Ship Date thereafter shall be referred to as Year "X") will commence on the earlier of (I) the production release date for the Licensee Product, or (II) six (6) months from the Effective Date of this agreement ("Ship Date") and end of the day immediately preceding the first anniversary of the Ship Date. This will require twelve (12) month cumulative royalty payment to AppSource of (*) during Year One. i. Year Two will start twelve (12) months following the Ship Date and will require a twelve (12) month cumulative royalty payment to AppSource of (*). j. Year Three will start twenty four (24) months following the Ship Date and will require a twelve (12) month cumulative royalty payment to AppSource of (*). k. Year Four will start thirty six (36) months following the Ship Date and will require a twelve (12) month cumulative royalty payment to AppSource of (*). l. Year Five will start forty eight (48) months following the Ship Date and will require a twelve (12) month cumulative royalty payment to AppSource of (*). 9. CONFIDENTIAL INFORMATION Neither party desires the confidential information of the other and each agrees to pass on such non confidential information as may be necessary to resolve an issue. However, if during the term of this Agreement, either party requires access to information which the other party considers to be confidential or proprietary ("Confidential Information"), the (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. -6- information may be exchanged in confidence, but each party must first agree to disclose and receive the information in confidence in accordance with the terms of the Non Disclosure Agreement as indicated in Exhibit F. Confidential Information shall not include that which: a) is in the public domain prior to the disclosure to the receiving party; b) is lawfully in the receiving party's possession prior to the disclosure; c) becomes part of the public domain by publication or otherwise through no unauthorized act or omission on the part of the receiving party; or d) is developed by the receiving party independent of any Confidential Information of the disclosing party. The burden of proving that informations is excepted under sections 9a-d shall be on the receiving party. 10. WARRANTY a. Warranty of Software. AppSource warrants that the Product will conform to its Documentation at the time the master disk is delivered to Licensee and for a period of ninety (90) days thereafter. AppSource makes no warranty to the end- users, any such warrant to be made and honored by Licensee. NO OTHER WARRANTY OR CONDITION, EXPRESSED OR IMPLIED, INCLUDING WARRANTIES OR CONDITIONS RELATED TO FITNESS FOR PURPOSE OR MERCHANTABILITY, ARE GRANTED TO LICENSEE OR END-USERS, AND ALL SUCH WARRANTIES AND CONDITIONS ARE EXPRESSLY AND SPECIFICALLY EXCLUDED. b. Defective Software. Should the Product fail to meet the warranty set forth above, Licensee should return the Product within the ninety day period. AppSource will then, at is sole option, either terminate this Agreement (in writing) or correct the problem such that the Product conforms with its documentation. If AppSource elects to terminate this Agreement pursuant to this Paragraph 10.b in the first 90 days, AppSource shall refund to Licensee any royalties paid for returned products as of date of termination. 11. LIABILITY AND INDEMNIFICATION a. Limitations on Liability. AppSource shall not be responsible for any damages or expenses resulting from alterations or unauthorized use of the Product, or from the -7- unintended and unforeseen results obtained by Licensee resulting from such use. Termination of the Agreement pursuant to its various termination terms shall not result in liability of AppSource to Licensee for damage, loss or expense, and Licensee expressly waives such claims. Should any law under which this Agreement be interpreted to prohibit exclusion of certain conditions or warranties, the required conditions or warranties shall be deemed included. The liability of AppSource for any breach of such term, condition or warranty shall be limited, at the option of AppSource, to any one or more of the following: (a) replacement of the Product with equivalent software; (b) repair of the Product; (c) payment of the cost of replacing the Product or of acquiring equivalent software; (d) payment of the cost of having the Product repaired. AppSource or Licensee shall not be liable for any loss of earnings, profits or goodwill or other consequential, special or incidental damage suffered by any person including Licensee's Clients caused directly or indirectly by the furnishing of the Product or Licensee Product pursuant to this Agreement, or for any other loss of business or damage arising under this Agreement except for such loss or damages caused by the gross negligence or willful misconduct on the part of Licensee or AppSource, its agents, employees, independent contractors or persons acting under his direction or control. b. Copyright & Patent Infringement. AppSource shall, at its cost, defend or, at its sole option, settle any claim or suit brought against Licensee on the issue that the Product infringes a copyright, patent or other proprietary right of any third party provided that Licensee (a) notifies AppSource promptly in writing of any such claim or suit; (b) gives AppSource full information and assistance in settling and/or defending the suit; and (c) gives AppSource full authority and control of the defense and/or settlement of any such action. AppSource shall not be liable for any costs or expenses incurred (a) by Licensee without AppSource's prior written authorization; (b) for any claim based on the use of combination of the Product with any other software not provided by AppSource; (c) for any claim based on Licensee's modification of the Product; (d) from use of other than the latest available version of the Product, or (e) any transaction entered into by Licensee relating to the Product without AppSource's prior written consent which will not be unreasonably withheld. If the Product becomes subject to a claim of infringement for which AppSource may become liable, AppSource may at its option (a) obtain the right to continue using the Product; (b) replace or modify the Product to make it non-infringing so long as the replacement or modification meets substantially similar specifications; or (c) terminate the licenses. EXCEPT FOR THESE REMEDIES, APPSOURCE -8- SHALL HAVE NO LIABILITY TO LICENSEE OR ITS CUSTOMERS FOR COPYRIGHT INFRINGEMENT, AND SHALL IN NO INSTANCE HAVE ANY LIABILITY TO LICENSEE FOR DIRECT, INDIRECT OR CONSEQUENTIAL DAMAGES FROM INFRINGEMENT OTHER THAN AS SET FORTH IN THIS SECTION 11.b. 12. PROTECTION OF INTELLECTUAL PROPERTY Copyrights. Licensee acknowledges AppSource's representation that the Product and Documentation are protected under the copyright laws of the United States and certain other countries that have entered into treaties with the United States, in either registered or unregistered form. Licensee acknowledges that AppSource owns these copyrights and has the following exclusive rights with regard to the Product: to reproduce the Product and documentation in any and all forms; to adapt, transform or rearrange the Product and documentation; to prepare derivative software; and to control the distribution of the Product and documentation. Licensee agrees, and shall have its customers who are not end-users agree, not to act in contravention of any of AppSource's rights or to assist others in doing so. Licensee agrees and shall have its customers agree to preserve all copyright notices in the Product and documentation. Licensee shall do all things necessary to preserve AppSource's copyright protection in any country where Licensee licenses Licensee Products. In the event the Product is licensed in a country which does not authorize protection of the Product by copyright, Licensee shall take whatever actions are necessary to preserve AppSource's rights in the Product under the law of such country. 13. TERM AND TERMINATION a. Term. This Agreement shall have an initial term from the effective date and shall expire five (5) years from the effective date of the Agreement unless terminated earlier as permitted below. b. Termination for Cause. AppSource may terminate this Agreement upon the happening of any of the following events if Licensee fails to cure the problem within thirty (30) days of notice of an intent to cancel if not cured: (i) Licensee fails to make any payment when due; or (ii) Licensee materially breaches any representation, warranty, or any material term of this Agreement or fails to perform any duty required hereunder; or (iii) Licensee fails to comply with any legal prerequisites, formalities and/or material government regulations; or -9- (iv) Licensee ceased to conduct its business in a normal manner; or (v) Licensee sells, markets or distributes the Product without Licensee Product. c. Termination by Licensee. Licensee may terminate this Agreement upon the happening of one of the following events if AppSource fails to cure the problem within thirty (30) days of notice of any intent to cancel if not cured: (i) AppSource breaches any warranty or material term of this Agreement or fails to perform any duty required hereunder; or (ii) AppSource fails to comply with any legal prerequisites, formalities, and/or material government regulation. (iii) AppSource ceases to conduct its business in a normal manner, provided that it shall not be grounds for termination if AppSource merges into another company and the surviving company continues to conduct AppSource's business. d. Effect of Termination. Licensee agrees that upon expiration or termination of this Agreement under this Paragraph 13, AppSource is discharged from any further obligations under this Agreement and Licensee's rights to distribute and license Software and to use AppSource's trade name and trademarks shall cease as of the date of such expiration or termination except as follows: Within thirty (30) days of the delivery by AppSource or receipt by AppSource of a notice of termination at the end of any term or expiration, or within thirty (30) days after automatic termination or termination for cause, Licensee shall: (1) return to AppSource the master disk(s); (2) destroy all copies of the Product in whatever form they exist, including deleting all copies from any electronic memories; and (3) remove the Product from all Licensee Product not yet shipped; provided, however, that Licensee shall be permitted to ship Licensee Product (containing the Product) to all end users with which it has a contractual obligation to do so, whether through subdistributors or otherwise (as of the termination or expiration date). All licenses for the Product previously given to end-users by or through Licensee, provided they were in accordance with the terms of this Agreement, shall continue in effect after termination or expiration of the Agreement. Licensee may not license any inventory of Licensee Product containing the Product after the termination date unless a prior written agreement has been reached with AppSource. All requirements of indemnification, payment, and terms related to use or protection of intellectual property or confidential information, and provisions -10- related to venue and choice of laws, shall survive termination or expiration of this Agreement. AppSource shall be entitled to pursue all available remedies against Licensee for breach of the Agreement or damages caused by Licensee. f. Continuing Interest. Licensee warrants and acknowledges that Licensee does not now have, nor shall have after termination or expiration, any continuing interest or rights to the good will, assets or proceeds of AppSource, and that AppSource's sole responsibilities and liabilities are as set forth herein. AppSource's right to terminate is absolute, and Licensee acknowledges it has considered the term of the Agreement and the termination provisions in making expenditures of money and time in preparing for the performance of this Agreement and has further considered the possible loss or damage on account of the loss of prospective profits or anticipated sales or on account of expenditures, investments, leases, property improvements or commitments in connection with the good will or business of Licensee resulting from the ending of this Agreement. AppSource shall have no liability to Licensee as a result of termination or expiration of this Agreement in accordance with its terms, including without limitation claims relating to loss of profit, goodwill, creation of clientele, advertising costs, costs of samples or supplies, termination of employees, employee's salaries or any other items. 14. MISCELLANEOUS PROVISIONS a. Notices. Unless otherwise stated, all notices required under this Agreement shall be in writing and shall be considered given upon personal delivery of the written notice or within forty-eight (48) hours after deposit in the U.S. mail, certified or registered, and appropriately addressed to AppSource or Licensee. b. Governing Law. This Agreement is made under and shall be construed in accordance with the laws of the State of Florida, USA. c. No Publication. Each party agrees not to publicize or disclose the terms of this Agreement to any third party without the consent of the other; provided, however, that the parties have agreed to the release set forth in Exhibit E attached hereto. In particular, no press releases shall be made without the mutual consent of each party. e. Severability. The terms of this Agreement shall be applicable severally to each Product and any dispute affecting either party's rights or obligations as to one or more Product(s) shall not affect the rights granted hereunder as to any other Licensed Software. -11- f. Heading. The captions of Sections of the Agreement are for reference only and are not to be construed in any way as terms. g. No Assignment. Licensee may not assign or transfer any of the rights or responsibilities set forth herein without the express written consent of the other party which shall not be unreasonably withheld and any purported attempt to do so shall be deemed void. h. Dispute Resolutions. Any and all disputes in connection with or arising out of this Agreement shall, insofar as possible, be settled amicably by the parties. The parties agree to negotiate in good faith to settle any such disputes. The parties further agree to escalate any such disputes to progressively higher levels of management in their respective organizations in order to settle such disputes. i. No Waiver. Neither party's failure to exercise any of its rights hereunder shall constitute or be deemed a waiver or forfeiture of any such rights. j. Exhibits. Each Exhibit referred to herein is hereby incorporated in full within this Agreement wherever reference to such Exhibit is made. k. Modifications. This Agreement may only be modified by a writing signed by an authorized representative of both AppSource and Licensee. l. Entire Agreement. This document represents the entire agreement between the parties as to the matters set forth and integrates all prior discussion or understanding between them. -12- IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their duly authorized representatives on the date first written above. AppSource Licensee By: /s/ Richard Daley By: /s/ John Freund ----------------------------- ----------------------------------- Typed Name: Richard Daley Typed Name: John Freund --------------------- --------------------------- Title: President Title: Vice President, Marketing -------------------------- -------------------------------- -13- EXHIBIT A SOFTWARE PRODUCTS 1. PRODUCT WIRED for OLAP for Windows 2. DOCUMENTATION Documentation. As used in this agreement, "Documentation" shall mean such user and technical manuals and other documentation that AppSource ordinarily makes available with the Product. Documentation will describe all features of the Product and consist of: a. WIRED for OLAP Manual in its existing form. 3. LICENSEE PRODUCTS ShowCase Analyzer for Microsoft Windows which incorporates the Product 4. DELIVERY SCHEDULE All items in 1 and 2 to be delivered within ten (10) working days of any order placed. 5. SPECIFICATIONS WIRED For OLAP Version 1.0 for Windows Runs under Windows 3.1 or Higher Compatible with DOS 3.1 or higher Minimum 8 MB RAM Minimum 486 based processor -14- EXHIBIT B AppSource MARKS 1. AppSource MARKS Manual and software copyright 1995 by AppSource. All rights reserved. 2. STANDARDS OF QUALITY a. Software containing any of AppSource's Marks shall be designed, manufacture and reproduced to exceed or meet the quality of comparable products manufactured or reproduced by AppSource, and will meet any additional specifications defined by AppSource (in consultation with Licensee) to be necessary in view of conditions relating to the availability of materials, processes, labor and the like. b. AppSource Marks may only be reproduced in accordance with the standards supplied by AppSource. c. Upon request by AppSource, Licensee will promptly submit to AppSource (or AppSource's designated representative) samples of any Software containing AppSource's Marks for inspection and testing. d. In the event that AppSource determines that any Software fails to meet these Standards of Quality, AppSource may give notice of breach. Upon notice of breach, Licensee shall immediately cease the use of AppSource's Marks on or in relation to those Licensed Software products identified in the notice of breach which fail to meet the Standard of Quality. Licensee shall remove all labels or other indications of AppSource's Marks already placed on such products or packages thereof in its possession or control prior to shipping or transferring these products to a third party. -15- EX-10.12 19 AMENDMENT TO APPSOURCE AGMT. EXHIBIT 10.12 Amendment to AppSource/ShowCase License Agreement This amendment is entered into by and between ShowCase Corporation ("Licensee") and AppSource Corporation ("AppSource") sometimes collectively referred to as "the Parties", effective as of March 7, 1997. In consideration of the ongoing beneficial business relationship between the parties, Licensee and AppSource hereby agree that the agreement between the parties dated January 4, 1996 as amended to date (the "Agreement") shall be further amended as follows: 1. Add Section 1.b to read as follows: Wired for the WEB. The product, documentation and Licensee product which relate to this Agreement are in Exhibit A attached to this Agreement. 2. Section 3 first paragraph to be labeled 3.a. 3. Add Section 3.b to read as follows: AppSource agrees to deliver to Licensee with a copy of WIRED for the WEB under the following schedule: - ------------------------- --------------- ------------------------------------ Deliverable Date Due Description - ------------------------- --------------- ------------------------------------ Based Wired Server Code (*) Base 8000 lines of code written in Borland Delphi used to construct the foundation layer of the wired Server. - ------------------------- --------------- ------------------------------------ Completed Wired Server (*) All code associated with the Code-Beta Version Wired Server written in Borland Delphi against the Microsoft NT Operating System - ------------------------- --------------- ------------------------------------ Completed Wired for The (*) Completed front end code Web capable for running in either - - Java Beta Version Microsoft Internet Explorer v3.0 or greater or Netscape Navigator v3.0 or greater. Additional enhancements will be made in April-May. - ------------------------- --------------- ------------------------------------ 4. Add Section 3.c to read as follows: User interface for Wired For The Web will include the following capabilities: (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. o The ability to work with views already built using Wired For OLAP client/server addition. Views supported will initially include Reports and Charts, but not Forms or Pinboards. Any functions available in a completed Wired For OLAP view built using the client/server version, will be supported in the Wired For The Web software with the exception of fonts. The ability to modify existing views or build new views will be supported. o The ability to graph existing views will be supported. Graphics will be a sub- set of the current charting capabilities in Wired For OLAP including: changing chart types, legends, titles, drill-down aware and swap-pivot. 5. Add Section 4.a-1 to read as follows: Licensee shall maintain non-exclusive rights to market WIRED for the WEB in conjunction with IBM AS/400 midrange computers. 6. 4.b-1 to read as follows: Licensee shall have the right anytime after a one (1) year period commencing on the GA date of the Product to purchase the source code for the Product for use only in conjunction with IBM AS/400 midrange computer for a price equal to (*). In the event that AppSource is acquired, Licensee may purchase the source code for the Product for a price equal to (*). Licensee will own the rights to the source code at no fee in the event of insolvency or bankruptcy. 7. Add Section 5.c to read as follows: Licensee shall translate the WIRED Server code to C++ for use only in conjunction with the AS/400. AppSource still owns the rights to this code and will have the right at any time to purchase the C++ code back from Licensee for (*) 8. Add Section 8.a-1 to read as follows: Licensee will pay a fee equal to (*) as specified in Section 8.b-1 below for an unlimited distribution right of WIRED for the WEB for a period of one year following the general availability of the product by Licensee or eighteen (18) months after delivery of the code, as specified in section 3.b above, by AppSource to Licensee whichever comes first. Licensee may renew the unlimited distribution right of WIRED for the Web on an annual basis according to the following payment schedule: Year 2 $(*); Year 3 $(*); Year 4 $(*); Year 5 $(*). Licensee has the option to pay (*) of AppSource's list price of the Product and not pay the annual licensee fee in years two through five. 9. Add Section 8.b-1 to read as follows: Royalty payments for WIRED for the WEB will be made in four (4) installments in the following order: (*) upon the signing of this agreement by both parties, (*) sixty (60) days after delivery of the product to Licensee or when Licensee makes the product general available whichever is earlier, (*) three (3) months after the second payment, (*) six (6) months after the previous payment, for a total royalty payment of (*). (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. 10. Add Section 8.b-2 to read as follows: A $(*) late delivery fee will be assessed for each 30 day period in which AppSource fails to deliver the product as specified in Section 3.b above. Said late fee will come in the form of the reduction of the royalty due AppSource under section 8.b-1 above. 11. Exhibit A will be modified as follows: o Underneath Section 1 - Product, add WIRED for the WEB. o Add Section 2.B to read WIRED for the WEB manual in its existing form as delivered to AppSource clients. o Change Section 3 to Section 3.A to read ShowCase Analyzer for Microsoft Windows which incorporates the product. o Section 3. B to read Analyzer for the WEB for Microsoft Windows which incorporates the product. o Change Section 5 - Specifications, to 5.A to read WIRED for OLAP runs under Windows 3.1 or higher minimum 8mb of RAM, minimum 486 based processor. o Add Section 5.B to read as follows: WIRED for the WEB runs under Windows '95 or higher minimum 8mb of RAM, minimum 486 based processor. 12. Add Section 14m to read as follows: AppSource acknowledges that Licensee may develop software relating to the Internet and that nothing in this Agreement shall prevent Licensee from developing or marketing such software so long as such software does not infringe the copyrights on the Product. IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their duly authorized representatives on the date first written above. AppSource Licensee By: /s/ Richard Daley By: /s/ John Freund ---------------------- ------------------------------- Richard Daley John Freund President Vice President, Marketing March 7, 1997 March 7, 1997 (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. EX-10.13 20 SHOWCASE LICENSE AGREEMENT WITH IBM EXHIBIT 10.13 SHOWCASE LICENSE AGREEMENT Agreement Number: STL97307 STL Reference No. 4997ST1740 This Agreement dated as of December 9, 1998 ("Effective Date") is between ShowCase Corporation ("SHOWCASE") with an address at 4131 Highway 52 North, Suite G111, Rochester, MN 55901-3144, and International Business Machines Corporation ("IBM") with an address at 555 Bailey Avenue, San Jose, CA 95141. Under this agreement, SHOWCASE will port IBM's Relational Storage Interface (RSI) to the OS/400 platform and integrate it with the SHOWCASE Essbase/400 calculation engine, and will license the result to IBM. Also, IBM will license certain software from SHOWCASE for distribution as an IBM logo'd product. By signing below, the parties agree to the terms of this Agreement. The complete Agreement between the parties regarding this transaction consists of this License Agreement and the following Attachments: 1. "Description of Licensed Work Number 001;" 2. "Description of Licensed Work Number 002;" 3. "Schedule;" 4. "Acceptance Criteria;" 5. "Testing, Maintenance and Support;" 6. "Royalties;" 7. "Certificate of Originality;" 8. "Source Code Custody Agreement;" and, 9. "Description of Escrowed Work." Agreements which are related to this Agreement are: 10. "Agreement for the Exchange of Confidential Information Number M96-2547," as supplemented; and 11. "Outbound License Agreement Number STL98095." This Agreement replaces all prior oral or written communications between the parties relating to the subject matter. Once signed, any reproduction of this Agreement made by reliable means (for example, photocopy, or facsimile) is considered an original, unless prohibited by local law. ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO: INTERNATIONAL BUSINESS SHOWCASE CORPORATION MACHINES CORPORATION By: /s/ Roy J. Maharaj By: /s/ Ken Holec -------------------------------- ------------------------------ Authorized Signature Authorized Signature Print Print Name: Roy J. Maharaj Name: Ken Holec ------------------------------- Date: 1/6/99 Date: December 23, 1998 ---------------------------- ----------------------------- Page 1 December 9, 1998 License Agreement 1.0 DEFINITIONS Capitalized terms in the Agreement have the following meanings. 1.01 Code is a computer programming code, including both Object Code and Source Code. a. Object Code is Code substantially in binary form, and includes header files of the type necessary for use or inter operation with other computer programs. It is directly executable by a computer after processing or linking, but without compilation or assembly. Object Code is all Code other than Source Code. b. Source Code is Code in a form which when printed out or displayed is readable and understandable by programmer of ordinary skills. It includes related source code level system documentation, comments and procedural code. Source Code does not include Object Code. 1.02 Deliverable is any item that SHOWCASE provides under this Agreement. 1.03 Derivative Work is a work that is based on an underlying work and that would be a copyright infringement if prepared without the authorization of the copyright owners of the underlying work. Derivative Works are subject to the ownership rights and licenses of a party or of others in the underlying work. 1.04 Distributors are those authorized or licensed by IBM, IBM Subsidiaries or IBM Distributors to license or distribute Products. 1.05 Enhancements are changes or additions other than Error Corrections, to the Licensed Work. a. Basic Enhancements are all Enhancements, other than Major Enhancements, including those that support new releases of operating systems and devices. b. Major Enhancements provide substantial additional value and are offered to customers for an additional charge. 1.06 Error Corrections are revisions that correct errors and deficiencies (collectively referred to as "errors") in the Licensed Work. 1.07 Externals are (1) any pictorial, graphic, and audiovisual works (such as icons, screens, sounds, and characters) generated by execution of Code, and (2) any programming interfaces, languages or protocols implemented in Code to enable interaction with other computer programs or the end user. Externals do not include the Code that implements them. 1.08 Licensed Work is (1) any material described in or that conforms to the description in the Attachments entitled "Description of Licensed Work," or that is delivered to IBM as the Licensed Work, including (but not limited to) Code, associated documentation, and Externals, and (2) Error Corrections and Enhancements to be provided to IBM pursuant to this Agreement. 1.09 Product is an offering to customers or other users, whether or not branded by IBM or its Subsidiaries, that includes all or any portion of the Licensed Work. a. OLAP Product is a Product that includes the Licensed Work described in the Attachment entitled "Description of Licensed Work #001" or a Derivative Work of such Licensed Work. b. VW Product is a Product that includes the Licensed Work described in the Attachment entitled "Description of Licensed Work #002" or a Derivative Work of such Licensed Work. 1.010 Moral Rights are personal rights associated with authorship of a work under applicable law. They include the rights to approve modifications and to require authorship identification. Page 2 December 9, 1998 License Agreement 1.011 SHOWCASE Tag-Line is the following statement for inclusion by IBM on a Product start-up splash screen and marketing deliverables as appropriate: "Developed by ShowCase Corporation." 1.012 Subsidiary is an entity during the time that more than 50% of its voting stock is owned or controlled, directly or indirectly, by another entity. If there is not voting stock, a Subsidiary is an entity during the time that more than 50% of its decision-making power is controlled, directly or indirectly, by another entity. 1.013 Tools include devices, compilers, programming, documentation, media and other items required for the development, maintenance or implementation of a Deliverable that are not commercially available. 2.0 RESPONSIBILITIES OF SHOWCASE 2.01 SHOWCASE will port IBM's Relational Storage Interface (RSI), provided to SHOWCASE pursuant to Outbound License Agreement Number STL98095, to the OS/400 platform and integrate it with the SHOWCASE Essbase/400 calculation engine. The resulting integrated combination by SHOWCASE will become a Licensed Work which SHOWCASE licenses to IBM under this Agreement and as specified in DLW # 001. SHOWCASE will continue to ensure the compatibility of the Licensed Work with the OS/400 operating system and the current version of Essbase by making all needed modifications or Enhancements to the Licensed Work. SHOWCASE will also license certain software to IBM as identified in DLW #002 for distribution as an IBM logo'd product. 2.02 SHOWCASE will provide the following Deliverables to IBM according to the schedule in the Attachment entitled "Schedule" and in accordance with the Attachment entitled "Acceptance Criteria": a. one complete set of the Licensed Works described in the Attachments entitled "Description of Licensed Work." The Licensed Work includes Object Code deposited on any media delivered to IBM. b. Tools for the Licensed Works as identified in the form specified in the Attachment entitled "Tools and Commercially Available Materials." c. any updates to the list identifying any commercially available devices, compilers, programming, documentation, media and other items required for the development, maintenance or implementation of a Deliverable. The commercially available items are identified in the form specified in the Attachment entitled "Tools and Commercially Available Materials." d. completed certificate of originality with the Licensed Work, and with each Enhancement to the Licensed Work, in the form specified in the Attachment entitled "Certificate of Originality." IBM acknowledges that it has received from Arbor Software now known as Hyperion Solutions Corporation (hereinafter "Hyperion"), an appropriate Certificate of Originality for the Essbase Software owned by Hyperion, which is ported to the AS/400 by SHOWCASE and included in the OLAP Product. IBM may suspend payments to SHOWCASE for the Licensed Work if SHOWCASE does not provide a properly completed certificate. Payment will resume after IBM receives and accepts the certificate. 2.03 For the term of this Agreement, SHOWCASE will provide to IBM testing, maintenance and support for the Licensed Works, as described in this Agreement, including the Attachment entitled "Testing, Maintenance and Support." After IBM receives the initial contact from the customer (level 0), SHOWCASE will provide Levels 1, 2, and 3 maintenance and support. Page 3 December 9, 1998 License Agreement 2.04 SHOWCASE will provide to IBM (*), Enhancements and Error Corrections for the Licensed Work beginning when IBM accepts the Licensed Work including corrections for any problems found during any beta tests. Beta test Object Code for Enhancements will be made available to IBM no later than the earliest date on which SHOWCASE provides such beta test Object Code to any other entity. SHOWCASE will provide IBM a golden master for Enhancements on the same day on which SHOWCASE delivers a golden master for manufacturing of the SHOWCASE logo'd version of the Licensed Work. 2.05 SHOWCASE will implement the License Use Management (LUM) support in a tactical and strategic fashion. 1. The tactical implementation includes the implementation of code from the DB2 OLAP code base for LUM support in both the Strategy 2.0 products licensed to IBM as well as the IBM DB2 OLAP port of the RSI code. This code will support the IBM trusted user concept for IBM Licensed Program Products -- the code will ask the customer for products / users installed and the output will generate the Hyperion/SHOWCASE key needed to operate the code in question. 2. The strategic implementation of LUM support is to implement the SLM/400 security features of OS/400 with specifications as documented in the IBM publication, "AS/400 License Management Guideline Document for Software Vendors, Version 1.2." This SLM publication was provided by IBM to SHOWCASE during the week ended November 13, 1998. This should be implemented at a minimum by June 1, 2000 in a major release of the products. There may be additional requirements for LUM support coming from SLM/400 covering User management. This would be implemented as the support is available; but such additional requirements will be assessed by both parties and jointly agreed upon, including any appropriate funding. 2.06 SHOWCASE will provide, (*) up to (*) "Instructor days"((*) world wide, staffed by (*) SHOWCASE instructors.) of education to the IBM sales team and IBM partners concerning the Licensed Works, on mutually agreed upon dates, but no later than thirty (30) days prior to the date on which IBM plans to make a Product generally available to customers. Relevant points concerning these sessions are as follows: a. The education includes topics such as feature/function/benefit education, competitive positioning, demonstration training, and in-depth sales support and technical training. b. Multiple IBM students may attend the classes (Up to 25 students per class). c. Following such sessions SHOWCASE will provide education updates to IBM in Rochester, Minnesota on new releases at such time as SHOWCASE makes them available to any others. d. Further formal education will be provided as jointly agreed. e. For classes not held in Rochester, Minnesota, IBM will reimburse SHOWCASE for the instructors' reasonable travel and living expenses for the desired classes. Charge and payment information will be provided by the group requesting the sessions. f. IBM reserves the right to develop its own education offerings. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 4 December 9, 1998 License Agreement 2.07 SHOWCASE will: a. participate in a reasonable number of progress reviews, as requested by IBM, to demonstrate SHOWCASE's performance of SHOWCASE's obligations; b. provide on-site assistance of no more than (*) days as required for the first customer participating in the IBM beta programs. c. implement a process designed to help prevent any such contamination by Harmful Code. SHOWCASE will promptly provide IBM notice if SHOWCASE suspects any contamination; d. have agreements with SHOWCASE's personnel and third parties to perform obligations and to grant or assign rights to IBM as required by this Agreement. On request, SHOWCASE will provide IBM with evidence of these agreements; e. acknowledge that IBM's exercise of rights and licenses hereunder shall not violate any Moral Rights of SHOWCASE, and SHOWCASE will agree not to assert any Moral Rights SHOWCASE has or may have in the Licensed Work against IBM in its exercise of rights and licenses hereunder; f. obtain all necessary consents of individuals or entities required for the use of names, likeness, voices, and the like in the Licensed Work; g. maintain records to verify authorship of the Licensed Work for 4 years after the termination or expiration of this Agreement. On request, SHOWCASE will deliver or otherwise make available this information in a form specified by IBM; h. not assign or transfer this Agreement or SHOWCASE's rights under it, or delegate or subcontract SHOWCASE's obligations, without IBM's prior written consent, such consent will not be unreasonably withheld. Any attempt to do so without such written consent is void; i. not provide any information or the fact that SHOWCASE has licensed the Licensed Work to IBM, to the media, or issue any press releases or other publicity, regarding this Agreement or the parties' relationship under it, without IBM's prior written consent (excluded from this restriction is that information which is now or hereafter becomes generally known or available through no act or failure to act on the part of SHOWCASE); and j. not disclose to a third party the terms of this Agreement without IBM's prior written consent except as expressly permitted hereunder. SHOWCASE may, however, make such disclosures (i) to its accountants, lawyers or other professional advisors provided that any such advisor is under a confidentiality obligation and (ii) as required by law provided SHOWCASE obtains any confidentiality treatment for it which is available. k. be allowed to provide customer installation information pertaining to this Agreement to (*) solely to fulfill SHOWCASE's contractual obligations to Hyperion providing that Hyperion is subject to the same confidentiality restrictions specified within this Agreement and the Agreement for Exchange of Confidential Information Number M96-2547, as supplemented. 2.08 SHOWCASE will execute and meet the deposit requirements of the Source Code Custody Agreement in the Attachment entitled "Source Code Custody Agreement." (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 5 December 9, 1998 License Agreement 2.09 SHOWCASE will enable the Licensed Works for National Language Support (NLS) and Double Byte Character Set (DBCS) and provide all foreign language versions of Licensed Works to IBM as, and to the extent, they become available. Currently, English, French, German, Italian, and Japanese are available. SHOWCASE will provide IBM with an acceptable plan to provide a Spanish language version of the Licensed Works; and given a justified business case by IBM which SHOWCASE and IBM jointly agree upon, including any appropriate funding, SHOWCASE will provide NLS enablement for additional language versions of the Licensed Works in six (6) months. To assist SHOWCASE, IBM will provide any of those modules or MRI's which have previously been translated and which IBM has the right to share. 2.010 IBM acknowledges and understands that the Licensed Work included in the OLAP Product (the "Essbase AS/400 Port") is based on Code owned by Hyperion and licensed by SHOWCASE. Prior to any release of Source Code for such Licensed Work pursuant to the terms of the Source Code Custody Agreement, IBM hereby agrees to inform Hyperion in writing of such impending release and that Hyperion shall have thirty (30) days to elect in writing one of the following options: 1. modify, in agreement with IBM, that certain (*) by adding the Essbase AS/400 Port as a Licensed Work under the (*). Provided that SHOWCASE provides to IBM the Source Code needed for support and assigns to IBM copyright ownership in the Code ported to OS/400 by SHOWCASE which was based on the code licensed to SHOWCASE pursuant to the Outbound License Agreement Number STL98095 (including Derivative Works thereof - all referred to as "RSI Code"), IBM hereby consents to assuming the obligation to support all portions of the OLAP Product that runs on OS/400 (excluding the Essbase AS/400 Port and any Enhancements and Maintenance Modifications thereto), including any version of RSI Code. And IBM agrees to pay royalties to Hyperion (*) for the Licensed Works thereunder licensed on other platforms, with a minimum OTC royalty established by (*); or 2. have assigned to it, and assume on behalf of SHOWCASE, all obligations of SHOWCASE under this Agreement, Source Code Custody Agreement, and the Outbound License Agreement Number STL98095 with respect to the OLAP Product, including, without limitation, all necessary development and support thereof, and IBM hereby agrees to give its written consent to such assignments. In the event that IBM assumes support of the RSI Code, then SHOWCASE shall deliver to IBM all available Source Code necessary for IBM to support it, and SHOWCASE hereby grants and assigns to IBM, its successors and assigns, all right, title and interest whatsoever, throughout the world, in and under copyright in the Derivative Work of the RSI Code (the Code ported to the OS/400 operating system by SHOWCASE pursuant to the Outbound License Agreement Number STL98095, for the full duration of all such rights and any renewals or extensions thereof. SHOWCASE agrees to cooperate with IBM and execute documents reasonably required to support such assignment and allow IBM to exercise its rights to the Code. Notwithstanding anything to the contrary in this Agreement (including all of its Attachments) or the Agreement for the Exchange of Confidential Information Number M96-2547, as supplemented, upon the occurrence of any of the foregoing events, IBM consents and agrees a. to cooperate with SHOWCASE and Hyperion in good faith to transfer all Source Code and other information reasonably needed in order for Hyperion to assume such obligations, (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 6 December 9, 1998 License Agreement b. in the event a release condition for the release of the Source Code for the OLAP Product (pursuant to the Source Code Custody Agreement) occurs, to SHOWCASE's disclosure of information related to the Outbound License Agreement, this License Agreement and the Source Code Custody Agreement, solely to the extent required to permit Hyperion to perform SHOWCASE's obligations hereunder with respect to the Licensed Works, including the Essbase Software, provided that any such disclosures are subject to an appropriate nondisclosure agreement between Hyperion and SHOWCASE, which contains terms that are as protective of IBM's confidential information as those set forth in the Agreement for the Exchange of Confidential Information Number M96-2547, as supplemented, and c. In the case of Hyperion electing option number 2 above, IBM shall pay to Hyperion (*); and (*) shall be due to SHOWCASE. The parties agree that upon any release of the source code for the OLAP Product pursuant to this Agreement, (a) SHOWCASE shall have no continued obligations under the Outbound License Agreement, this Agreement or the Source Code Custody Agreement to support or maintain any existing Licensed Work included in the OLAP Product, or to create any new Derivative Works of the Licensed Work for inclusion in the OLAP Product; (b) the mere occurrence by itself of such release or termination shall not constitute a breach (although such release may be triggered by a breach) by SHOWCASE of its obligations under this Agreement, the Outbound License Agreement, the Source Code Custody Agreement or any other related agreements between the parties, and this Agreement shall otherwise remain in full force and effect pursuant to its terms; and (c) SHOWCASE shall continue to be obligated to fulfill its obligations hereunder with respect to all Licensed Works included in Products, other than the OLAP Product. If Hyperion does not elect in writing one of the above options within thirty (30) days of receipt of IBM's notice, then IBM may obtain the escrowed Materials in accordance with the SCCA. 3.0 IBM'S RESPONSIBILITIES 3.01 IBM will perform reviews and testing of the Licensed Works in accordance with the Attachment entitled "Acceptance Criteria." 3.02 IBM will perform beta test programs to ensure that the Products are ready for general availability. IBM will report problems found during the beta test programs to SHOWCASE. 3.03 IBM will make payments for SHOWCASE's porting activity in accordance with Section 5.0, "Payments." 3.04 IBM will pay royalties to SHOWCASE pursuant to Section 6.0, "Royalties." 3.05 IBM will include the SHOWCASE Tag-Line as defined in Section 1.011 and retain all patent and copyright information displayed in the "About Box" of the OLAP Product. 3.06 IBM will provide SHOWCASE, as specified in the Attachment entitled Testing, Maintenance and Support (Section 3.0) with reasonable access to IBM's RETAIN system (IBM's system used to manage and process PMRs and APARs) as necessary for SHOWCASE to perform its Maintenance and Support obligations as required in this Agreement. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 7 December 9, 1998 License Agreement 3.07 IBM will provide SHOWCASE with RSI Server Source Code solely for the purpose of porting such Code and maintaining the Licensed Works as described in this Agreement, and for distribution as part of SHOWCASE's products in accordance with the Outbound License Agreement Number STL98095. The provision of the RSI Server Source Code will be subject to the terms of AECI Agreement Number M96-2547, and its Supplement Number STL001. 3.08 IBM will not execute an agreement with Hyperion Solutions Corporation (or its successors or assigns) to be the provider of an OLAP Product for the OS/400 platform which uses the specific technology defined in DLW #001 for (*) years from the date of the execution of this Agreement, unless this Agreement is terminated prior to that time in accordance with Section 10, TERM AND TERMINATION, or pursuant to Section 2.010 of this Agreement, in which case this restriction shall not apply. 4.0 OWNERSHIP AND LICENSE 4.01 SHOWCASE will own the changes it develops to the RSI (the initial Code ported to the OS/400 operating system and any and all revisions, releases or new versions of the initial Code) which SHOWCASE will develop and deliver to IBM as part of DLW #001, subject to IBM's continued ownership of the underlying RSI Code. 4.02 SHOWCASE grants IBM a nonexclusive, worldwide, irrevocable license to prepare Derivative Works of the Licensed Work and to use, execute, reproduce, display, perform, transfer, distribute and sublicense the License Work and such Derivative Works, in any medium or distribution technology whatsoever, whether known or unknown. SHOWCASE grants IBM the right to authorize or sublicense others to exercise any of the rights granted to IBM in this Section. 4.03 SHOWCASE grants IBM a nonexclusive, worldwide, irrevocable, paid-up license to prepare Derivative Works of Tools, and to use, execute, reproduce, display, perform, and distribute internally the Tools and such Derivative Works, in any medium or distribution technology whatsoever, whether known or unknown. The rights and licenses granted by SHOWCASE to IBM hereunder include the right of IBM to authorize or sublicense its Subsidiaries, contractors, and consultants to exercise any of the rights granted to IBM in this Section. 4.04 The grant of rights and licenses to the Licensed Work and Tools includes a nonexclusive, worldwide, irrevocable, paid-up license under any patents and patent applications that are owned or licensable by SHOWCASE now or in the future and are (1) required to make, have made, use and have used the Licensed Work or its Derivative Works or (2) required to license or transfer the Licensed Work or its Derivative Works. This license applies to the Licensed Work and its Derivative Works operating alone or in combination with equipment or Code. The license scope is to make, have made, use, have used, sell, license or transfer items, and to practice and have practiced methods, to the extent required to exercise the rights granted hereunder to the Licensed Work and Tools. 4.05 Subject to SHOWCASE's ownership of the Licensed Work and Tools, IBM will own any changes it creates to produce Derivative Works. 4.06 SHOWCASE grants IBM a nonexclusive, worldwide, irrevocable, paid-up license to use the names and trademarks SHOWCASE uses to identify the Licensed Work for IBM's marketing of the Licensed Work and its Derivative Works. SHOWCASE grants IBM the right to authorize or sublicense others to exercise any of the rights granted to IBM in this Section. If IBM's use of SHOWCASE's names and trademarks is improper and SHOWCASE provides IBM notice that SHOWCASE objects to it, IBM will take all reasonable steps necessary to resolve SHOWCASE's objections. SHOWCASE may reasonably monitor the quality of products bearing its trademark under this license. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 8 December 9, 1998 License Agreement 4.07 Any goodwill attaching to IBM's trademarks, service marks, or trade names belongs to IBM and this Agreement does not grant SHOWCASE any right to use them. IBM may state that SHOWCASE has provided the Licensed Work. 5.0 PAYMENT IBM will pay SHOWCASE (*) within thirty days of receipt of a SHOWCASE invoice submitted upon or after the execution of this Agreement. 6.0 ROYALTIES 6.01 For OLAP Products: IBM will pay SHOWCASE (*) of the SHOWCASE list price in effect on the date of the execution of this Agreement, by geography, for each authorized copy of the OLAP Product licensed to an end user by IBM, IBM Subsidiaries or Distributors as specified in the Attachment titled "Royalties." Should SHOWCASE decrease its list price for the SHOWCASE Strategy 2.0 OLAP Server for OS/400 which comprises the Licensed Work under DLW 001, such decreased list price shall apply to calculate amounts due under this Agreement. Any increase in list price shall not affect amounts due under this Agreement, but royalties may be increased as provided in Section 10.04 below. 6.02 For VW Products: IBM will pay SHOWCASE (*) the SHOWCASE list price in effect on the date of the execution of this Agreement, by geography, for each authorized copy of the VW Product licensed to an end user by IBM, IBM Subsidiaries or Distributors as specified in the Attachment titled "Royalties." Should SHOWCASE decrease its list price for the SHOWCASE Products for OS/400 which comprise the Licensed Work under DLW 002 such decreased list price shall apply to calculate amounts due under this Agreement. Any increase in list price shall not affect amounts due under this Agreement, but royalties may be increased as provided in Section 10.04 below. 6.03 In the event that IBM wishes to distribute any other Product, the parties must first negotiate and agree in writing to an appropriate royalty to be paid to SHOWCASE. 6.04 For Major Enhancements not included as part of the Products in Sections 6.01 and 6.02 above, but licensed as a separate priced feature, IBM will pay SHOWCASE (*) of the SHOWCASE initial list price on the date the Major Enhancement is offered, by geography, for each authorized copy of the Major Enhancement licensed to an end user by IBM, IBM Subsidiaries or Distributors. An Amendment to the Attachment titled "Royalties" will be made at that time to reflect the inclusion of the Major Enhancement. Should SHOWCASE decrease its list price for the SHOWCASE Products for OS/400 which comprise a Major Enhancement, such decreased list price shall apply to calculate amounts due under this Agreement. Any increase in list price shall not affect amounts due under this Agreement, but royalties may be increased as provided in Section 10.04 below. 6.05 Under IBM's Software Subscription offering (however named in the future), customers pay a fee, for which they receive all program (version/release) upgrades for a fixed period of time. Such upgrade protection may be offered for the Products and any Major Enhancements which are separately priced features (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 9 December 9, 1998 License Agreement covered in Section 6.03 above. SHOWCASE royalties specified in Sections 6.01, 6.02, and 6.03 (*) to upgrade copies of the (i) Products and (ii) Major Enhancements licensed as separately priced features pursuant to Section 6.03 above, which are provided to Customers who have licensed a Product and/or such a separately priced feature and purchased upgrade protection. IBM will (*) for upgrade copies received by customers under such Software Subscription offering. SHOWCASE (*) for the initial Product or Major Enhancement as a separately priced feature as specified in Sections 6.01, 6.02, or 6.03 above. SHOWCASE shall also receive (*). (*). If a new version of the Licensed Work is made generally available within the covered period of time, the customer who bought the offering receives the new version of the Product or Major Enhancement (*). 6.06 IBM has (*) for: a. the Licensed Work or its Derivative Works used for: 1.) IBM's and IBM Subsidiaries' (including third parties under contract) development, maintenance or support activities; 2.) marketing demonstrations, customer testing or trial periods (including early support, prerelease, or other similar programs up to a maximum of forty five (45) days), Product training or education (the royalty exclusion in this case applies only to Product training and education which is not generating revenue for IBM and IBM Subsidiaries); or 3.) off-line backup and archival purposes; b. the Licensed Work (or functionally equivalent work) that becomes available generally to third parties without a payment obligation through no action or fault of IBM; c. documentation provided with, contained in, or derived from the Licensed Work; d. Error Corrections or Basic Enhancements; e. warranty replacement copies of the Product; or f. Externals. 6.07 IBM, IBM Subsidiaries, and Distributors may, (*), copy the Product and distribute it on a CD-ROM, or other media or distribution technology on or through which the Product is secured (e.g., "encrypted" or "locked") to limit a customer's access to or use of the Product. IBM may allow the customer, under a limited license, a limited preview, trial or demonstration use of the Product up to a maximum of forty five (45) days. IBM will (*) to SHOWCASE unless IBM, IBM Subsidiaries, or Distributors license the Product to such customer for full productive use. 6.08 IBM may request (*) for the Licensed Work (*). If SHOWCASE agrees, both parties will sign a letter specifying the licensing transaction and (*). The SHOWCASE Chief Financial Officer is authorized to sign such letters on SHOWCASE's behalf. 6.09 Royalties are paid against revenue recorded by IBM in a royalty payment quarter. In the US, a royalty payment quarter ends on the last business day of the calendar quarter. Outside of the US, a royalty payment quarter is defined according to IBM's current administrative practices. Payment will be made by the last day of the second calendar month following the royalty payment quarter. Royalties will be paid less adjustments and refunds due to IBM. IBM will provide with each payment the standard royalty accounting report which IBM provides to its suppliers; the current report at the time of execution of this Agreement (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 10 December 9, 1998 License Agreement provides information by part number, country code, and royalty rate. All payments will be made in US dollars. Payments based on foreign revenue will be converted to US dollars on a monthly basis at the rate of exchange published by Reuters Financial Service on approximately the same day each month. 6.010 Each party will be solely responsible for any taxes incurred by the party, directly or indirectly, associated with its performance of this Agreement. 6.011 SHOWCASE is responsible for making any payments or royalties due to third parties for Code or materials included in the Licensed Work or its Derivative Works; 6.012 The payments defined in this Section fully compensate SHOWCASE for its performance under, and for the rights and licenses granted in, this Agreement. 7.0 TESTING 7.01 SHOWCASE will perform the following tests prior to each delivery of the Licensed Work: a. component testing; b. functional verification testing; c. system testing; and d. compatibility testing. Upon IBM's request, the details of such testing will be mutually agreed to by the parties. 7.02 SHOWCASE will provide to IBM concurrent with each delivery of the Licensed Work and Tools all test results, test scenarios, test cases, and test reports associated with the pre-delivery testing. 7.03 Upon receipt of the Licensed Work by IBM, IBM may evaluate the Licensed Work for a period of forty five (45) days and perform such tests as indicated in the Attachment entitled "Acceptance Criteria" and as IBM deems appropriate to determine if: a. the Licensed Work meets the specifications described in the Attachments entitled "Description of Licensed Work;" b. the Licensed Work executes repetitively within the system environment described in the Attachments entitled "Description of Licensed Work;" and c. IBM can successfully execute to completion all functional and system test scenarios developed by IBM. IBM's testing does not relieve SHOWCASE of its obligations under this Agreement. IBM has no obligation to identify errors. IBM will accept or reject the Licensed Works within sixty (60) business days from receipt of the Licensed Works. This time period begins the business day following IBM's receipt of the Licensed Works. If IBM does not accept or reject a Licensed Works in writing within sixty (60) business days of receipt, that Licensed Works will be considered accepted by IBM. IBM will clearly state the reason(s) for rejection. Within ten (10) business days of the notice of rejection, SHOWCASE will present a corrective action plan to IBM which is accepted and approved by IBM. SHOWCASE will then make the corrections and resubmit the Licensed Works to IBM. IBM may withhold any further payments until Licensed Works conform to the acceptance criteria. Page 11 December 9, 1998 License Agreement 8.0 REPRESENTATIONS AND WARRANTIES 8.01 SHOWCASE makes the following ongoing representations and warranties: a. SHOWCASE warrants that it has full legal rights to grant the rights granted herein; b. SHOWCASE is not under, and will not assume, any contractual obligation that prevents SHOWCASE from performing its obligations or conflicts with the rights and licenses granted in this Agreement; c. there are no liens, encumbrances or claims pending or threatened against SHOWCASE, or to SHOWCASE's knowledge, anyone else, that relate to the rights and licenses granted to this Agreement; d. SHOWCASE warrants that neither the Licensed Work or Tools infringes any intellectual property rights of a third party including, to the best of SHOWCASE's knowledge, any patents or patent applications. The Deliverables have not been the basis of a claim of infringement threatened or asserted against SHOWCASE or, to the best of SHOWCASE's knowledge, anyone else. SHOWCASE's sole obligation, and IBM's sole remedy, in the event of a breach of this warranty is stated in Sections 9.01, 9.02 and 9.03 below, subject to the limitation in Section 9.05; e. SHOWCASE warrants that the Licensed Work and Tools will perform in material conformance with the requirements set forth in this Agreement, including the Attachment entitled "Description of Licensed Work", and will materially conform to SHOWCASE's user documentation, and any sales and marketing materials provided by SHOWCASE; f. the fully commented Source Code that SHOWCASE provides under the Source Code Custody Agreement corresponds to the current release or version of the Licensed Work provided by SHOWCASE under this Agreement; g. the Licensed Work supports the Year 2000; it is capable of correctly providing and receiving date data, as well as properly exchanging accurate date data with all products (for example, hardware, software and firmware) with which the Licensed Work is designed to be used; h. SHOWCASE warrants that, to the best of its knowledge, the Licensed Work provided to IBM under this License Agreement is not contaminated by Harmful Code, and that SHOWCASE has implemented a process designed to help prevent any such contamination by Harmful Code. SHOWCASE will promptly provide IBM notice if SHOWCASE suspects any contamination, and will remain liable for any damages resulting from Harmful Code provided by SHOWCASE; and i. SHOWCASE warrants that all SHOWCASE personnel, and to the best of SHOWCASE'S knowledge, authors of third party materials, have waived their Moral Rights in the Licensed Work to the extent permitted by law. SHOWCASE acknowledges that IBM's exercise of rights and licenses hereunder shall not violate any Moral Rights of SHOWCASE, and SHOWCASE agrees not to assert any Moral Rights SHOWCASE has or may have in the Licensed Work against IBM in its exercise of rights and licenses hereunder. SHOWCASE will immediately provide IBM written notice of any change that may affect its representations and warranties. 8.02 Except as provided above, anything either party provides to the other related to this Agreement is "AS IS", without warranty of any kind. 9.0 INDEMNIFICATION AND LIABILITY Page 12 December 9, 1998 License Agreement 9.01 SHOWCASE will defend and indemnify IBM and IBM's Subsidiaries if a third party makes a claim against IBM or its Subsidiaries based on an actual or alleged: a. material failure by SHOWCASE, to the extent not caused by IBM, to perform SHOWCASE's obligations under this Agreement; b. material breach of SHOWCASE's representations and warranties; c. material failure by SHOWCASE to comply with government laws and regulations; d. material infringement by SHOWCASE, the Licensed Work or Tools of patents, copyrights, trademarks, trade secrets, publicity, privacy, and other intellectual property rights; or e. inclusion or misuse of the patent notices and markings that SHOWCASE includes in the "About Box" of the OLAP Product or which are placed in the OLAP Product by SHOWCASE or at SHOWCASE's request. 9.02 IBM will: a. promptly provide SHOWCASE notice of any such claim; and b. allow SHOWCASE to control, and will cooperate with SHOWCASE in the defense of, the claim and settlement negotiations. IBM may participate in the proceedings at its option and expense. 9.03 In addition, if an infringement claim appears likely or is made, SHOWCASE will: a. obtain the necessary rights for IBM, IBM subsidiaries and Distributors and their respective customers to continue to distribute, license, otherwise transfer and use the Licensed Work on an uninterrupted basis and exercise all rights granted in the Licensed Work and Tools; or b. modify the Licensed Work and Tools at SHOWCASE's expense to resolve the claim. This modified Licensed Work will comply with the Attachment entitled "Description of Licensed Work." If SHOWCASE is not able to do either within a reasonable period of time, IBM may terminate this Agreement for SHOWCASE's breach. 9.04 Unless otherwise expressly provided herein, IBM may pursue any other remedy it may have in law or in equity in addition to any remedies specified in this Agreement. 9.05 Regardless of the type of claim, neither party is liable to the other for indirect, incidental, special, or consequential damages, including, but not limited to, lost profits or revenues, under any part of this Agreement, even if informed that they may occur. This limitation does not apply to (a) SHOWCASE's liabilities for indemnity to the extent that damages claimed by a third party might be characterized as damages of the type listed above or (b) any obligations of either party to make a payment which is due under this Agreement. However, with regard to the obligations of indemnification of SHOWCASE under Section 9.01 a. above, the liability of SHOWCASE shall be limited to a total aggregate amount of (*). IBM's total liability is limited to payments due to SHOWCASE under this Agreement unless there is infringement of SHOWCASE's intellectual property rights or confidential information by IBM or IBM infringement of the intellectual property rights of any ShowCase licensor which falls outside of the license grants herein. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 13 December 9, 1998 License Agreement 10.0 TERM AND TERMINATION 10.01 This Agreement begins on the Effective Date and will remain in effect for seven (7) years, with automatic one (1) year renewal terms, unless terminated sooner under the terms of this Agreement. After the sixth (6th) year, SHOWCASE may terminate the Agreement by providing notice of intent to not renew twelve (12) months prior to any term expiration date. 10.02 Either party may terminate this Agreement for the other's material breach by providing the breaching party with a written notice that describes the breach. The termination will become effective 90 days after receipt of the notice unless the breach is cured within that 90 day period. 10.03 IBM may terminate this Agreement without cause on twelve (12) months written notice to SHOWCASE, provided that the effective date of any such termination may only be on a date which is at least twelve (12) months after the sixth (6th) anniversary of the date on which a Product has been made generally available. 10.04 If, at the end of four (4) years six (6) months from the Effective Date of this Agreement, (i) SHOWCASE notifies IBM, in writing, that its cost structure based on the distribution of the Licensed Works hereunder has increased significantly, or (ii) if IBM notifies SHOWCASE that it has determined that it needs to renegotiate the royalties due hereunder, both parties agree to renegotiate the list price used for calculation of royalties in Section 6.0 above. If no agreement has been reached within ninety (90) days of IBM's receipt of the notification, either party may give notice of termination of this Agreement which will be effective six (6) months from receipt by the other party of such notice of termination. This process may be invoked a maximum of one (1) time per calendar year thereafter if required. 10.05 Notwithstanding any expiration or termination of this Agreement, SHOWCASE's obligations of maintenance and support for Products, pursuant to Section 2.03 of this Agreement and Attachment, "Testing, Maintenance, and Support," shall continue (*) (subject to payment of Royalties associated with upgrade protection purchased by the customer) until the effective date which IBM has announced, in good faith, as the end of Product maintenance and support to customers. 10.06 Expiration or termination of this Agreement does not affect any end-user licenses granted in this Agreement for the Licensed Work or Tools. Termination of this Agreement does not affect any end-user licenses granted in this Agreement for the Licensed Work or Tools delivered or due to IBM prior to the effective date of termination. In the event of termination by IBM for breach by SHOWCASE, IBM will not be obligated to make any payments that would have become due under this Agreement on or after the effective date of termination, other than royalty payments. 10.07 Subject to Subsection 10.06, any provisions of this Agreement that by their nature extend beyond termination or expiration will survive in accordance with their terms. These include Ownership and License, Representations and Warranties, Indemnification and Liability, and General. These terms will apply to either party's successors and assigns. 11.0 COORDINATORS 11.01 Any notice required or permitted to be made by either party to this Agreement must be in writing. Notices are effective when received by the appropriate coordinator as demonstrated by reliable written confirmation (for example, certified mail receipt or facsimile receipt confirmation sheet). (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 14 December 9, 1998 License Agreement 11.02 The Contract Coordinators responsible to receive all notices and administer this Agreement are: For IBM: For SHOWCASE: Name: Robert L. Elliott Name: Tom Rydz Title: Contract Manager Title: Director of Business Alliances Address: 555 Bailey Ave. Address: 9700 Higgins Road W, Suite 1100 San Jose, CA 95141 Rosemont, IL 60018 Phone: (408) 463-2232 Phone: (847) 685-6505 Fax: (408) 463-5605 Fax: (847) 685-6570 The Technical Coordinators responsible to accept all Deliverables, coordinate all exchanges of confidential information, and administer and coordinate the technical matters associated with this Agreement are: For IBM: For SHOWCASE: Name: Shokey Ansari Name: Jon Otterstatter Title: Mgr., STL Business Intelligence Title: Vice President of Development Solutions Development Address: 555 Bailey Ave. Address: 4131 Highway 52 North San Jose, CA 95141 Rochester, MN 55901-3144 Phone: (408) 463-4469 Phone: (507) 287-2865 Fax: (408) 463-3181 Fax: (507) 287-2803 Technical Coordinators may propose, accept (by signature or initial), and implement technical changes to this Agreement that do not change dollar amounts or materially change Deliverables or the schedules of this Agreement. 11.03 A party will provide written notice to the other when its coordinators change. 12.0 GENERAL 12.01 Independent Contractor. Each party is an independent contractor. Neither party is, nor will claim to be, a legal representative, partner, franchisee, agent or employee of the other except as specifically stated in the Subsection entitled "Copyright" below. Neither party will assume or create obligations for the other. Each party is responsible for the direction and compensation of it employees. 12.02 Freedom of Action. Each party may have similar agreements with others. Each party may design, develop, manufacture, acquire or market competitive products and services, and conduct its business in whatever way it chooses. IBM is not obligated to announce or market any products or services. IBM does not guarantee the success of its marketing efforts. IBM will independently establish prices for its products and services. 12.03 Reliance. Neither party relies on any promises, inducements or representations made by the other or expectations of more business dealings, except as expressly provided in this Agreement. This Agreement accurately states the parties' agreement. 12.04 Compliance With Applicable Laws. Each party will comply with all applicable laws and regulations at its expense including, to the extent applicable, Executive Order 11246 on Equal Employment Opportunity, as amended, the Occupational Safety and Health Act of 1970, as amended, and the Americans with Disabilities Act of 1990, as amended. This also includes all applicable government export and import laws and regulation. 12.05 Confidential Information. The parties agree that information exchanged under this Agreement that is considered by either party to be confidential information will be subject to the terms of the AECI Agreement No. M96-2547 referenced on the first page of this Agreement and its Supplements. In addition, Page 15 December 9, 1998 License Agreement SHOWCASE will not provide IBM with any information which may be considered confidential information of any third party unless provided under the AECI. The obligations set forth in the AECI with regard to confidential information will not limit or preclude the exercise of the licenses granted in this Agreement. 12.06 Copyright. Any publication by IBM of the Licensed Work or a Derivative Work thereof may contain an appropriate copyright notice, as determined by IBM. SHOWCASE will enforce and maintain its copyright protection in the Licensed Work. IBM is not responsible for enforcing and maintaining such copyright protection. However, SHOWCASE authorizes IBM to act as SHOWCASE's agent in the copyright registration of the Licensed Work. At IBM's request, SHOWCASE agrees to provide IBM reasonable assistance in registering any Product. 12.07 Order of Precedence. If there is a conflict among the terms of this base License Agreement and its Attachments, the terms of this base License Agreement prevail over those of the Attachments, unless the parties expressly indicate in the Attachments that particular terms within the Attachments prevail. Terms in IBM's purchase orders and SHOWCASE's invoices or acknowledgments, if any, are void. 12.08 Headings. The headings of this Agreement are for reference only. They will not affect the meaning or interpretation of this Agreement. 12.09 Counterparts. This Agreement may be signed in one or more counterparts, each of which will be considered an original, but all of which together form one and the same instrument. 12.010 Amendment and Waivers. For a change to this Agreement to be valid, both parties must sign it. No approval, consent or waiver will be enforceable unless signed by the granting party. Failure to insist on strict performance or to exercise a right when entitled does not prevent a party from doing so later for that breach or a future one. 12.011 Actions. Neither party will bring legal action relating to the subject matter of this Agreement, against the other more than 2 years after the cause of action rose, except in the case of indemnification for infringement, in which case this period runs for 2 years after the award or settlement was made. 12.012 Dispute Resolution. Both parties will act in good faith to resolve disputes prior to instituting litigation. Each party waives its rights to a jury trial in any resulting litigation. Litigation will only be commenced in the State of New York. 12.013 Governing Law. This Agreement will be governed by the substantive law of the State of New York applicable to contracts executed in and performed entirely within that State. The United Nations Convention on Contracts for International Sale of Goods does not apply. SHOWCASE will, upon written notice from IBM, submit to personal jurisdiction in any forum where IBM is sued for claims related to this Agreement. Page 16 December 9, 1998 License Agreement DESCRIPTION OF LICENSED WORK #001 1.0 GENERAL DESCRIPTION OF LICENSED WORK: STRATEGY OLAP PRODUCT WITH RST PORTED TO OS/400 The Licensed Works to be part of the OLAP Product include the following, all as modified to work with and through the RSI. a. SHOWCASE STRATEGY DB2 OLAP Server 1.) General description: STRATEGY DB2 OLAP Server is an enterprise-scale on-line analytical processing system designed for a wide-range of multidimensional reporting and analysis applications. The STRATEGY DB2/ OLAP server is based on the Hyperion Essbase OLAP server with the integrated multidimensional data store of Hyperion Essbase replaced with IBM's Relational Storage Interface (RSI). The relational storage interface enables the STRATEGY DB2 OLAP Server to store data directly in IBM DB2 and other relational databases. The STRATEGY DB2 OLAP Server utilizes the Hyperion Essbase OLAP engine for data access, navigation, application programming interfaces (APIs), application design and management and data calculation. However, while Hyperion Essbase stores data in a specialized multidimensional data store, STRATEGY DB2 OLAP Server stores data in a relational database management system using a star schema data structure. Thus, STRATEGY DB2 OLAP Server provides the capacity of industry leading relational databases, and can be managed by familiar RDBMS systems management, backup, and recovery tools. It also offers the advantage of providing access to data in the star schema using standard SQL. The requirement for an underlying relational database also means that the STRATEGY DB2 OLAP Server leverages the existing skills of information technology professionals. 2.) Documentation: Softcopy 3.) Format: Object Code 4.) Documentation: on-line documentation, and related printed documentation. Note: Online documentation and the printed Essbase documentation set are provided and maintained by Hyperion (AppSource) . b. SHOWCASE STRATEGY DB2 OLAP Server Partitioning 1.) General description: Strategy DB2 OLAP Server Partitioning is a collection of features that makes it easy to design and administer databases that span Strategy DB2 OLAP Server applications or servers. Partitioning can affect the performance and scalability of Essbase/400 applications and provides more effective response to organizational demands, reduced calculation time, increased reliability and availability and incorporation of detail and dimensionality. Partitioning can help users to: a.) Synchronize the data in multiple partitioned databases. Strategy DB2 OLAP Server tracks changes made to values in a partition and provides tools for updating the data values in related partitions. b.) Synchronize the outlines of multiple partitioned databases. Strategy DB2 OLAP Server tracks changes made to the outlines of partitioned databases and provides tools for updating related outlines. c.) Allow users to navigate between databases with differing dimensionality. When users drill across to the new database, they can drill down to more detailed data. 2.) Documentation: Soft copy and hard copy Page 17 December 9, 1998 License Agreement 3.) Format: Object Code 4.) Documentation: Online documentation printed Essbase documentation set, and related printed documentation created with Microsoft Word 97. Note: Online documentation and the printed Essbase documentation set are provided and maintained by Hyperion (AppSource) . c. SHOWCASE STRATEGY DB2 OLAP Server Currency Conversion 1.) General description: Strategy DB2 OLAP Server Currency Conversion is an option designed to help multinational companies that conduct business in the local currency of the countries in which they operate. Strategy DB2 OLAP Server Currency Conversion enables such companies to convert data entered in the local currency of various countries to a common currency that is used by the world and regional headquarters for consolidation and analysis. Any exchange rate scenario can be modeled and users can even perform ad hoc currency conversions of data directly from their spreadsheets. 2.) Documentation: Soft copy and hard copy 3.) Format: Object Code 4.) Documentation: Online documentation, printed Essbase documentation set and related printed documentation created with Microsoft Word 97. Note: Online documentation and the printed Essbase documentation set are provided and maintained by Hyperion (AppSource) . d. SHOWCASE STRATEGY DB2 OLAP Server SQL Drill Through 1.) General description - Strategy DB2 OLAP Server SQL Drill Through provides right linking between summary data residing in an Essbase/400 multidimensional database and detail data residing in the relational store for either the OLTP or data warehouse repository. Using SQL Drill Through, users can automatically create an SQL query that retrieves the detail data that corresponds to a specific data call residing in the Strategy DB2 OLAP Server. The combination yields a powerful and full-featured analytical environment. 2.) Documentation: Soft copy and hard copy 3.) Format: Object Code 4.) Documentation: Online documentation, printed Essbase documentation set and related printed documentation created with Microsoft Word 97. Note: Online documentation and the printed Essbase documentation set are provided and maintained by Hyperion (AppSource) . e. SHOWCASE STRATEGY DB2 OLAP Server Spreadsheet Toolkit 1.) General description: The Strategy DB2 OLAP Sever Spreadsheet Toolkit includes more than 20 macro and VBA functions that let users build customized Microsoft Excel or Lotus 1-2-3 applications that incorporate Essbase/400 commands. Commands such as EssCascade, EssConnect, and EssDisconnect provide all of the functionality of their corresponding Essbase/400 menu commands and allow companies to easily customize the Strategy DB2 OLAP Server to meet their particular business needs. 2.) Documentation: Softcopy and hardcopy 3.) Format: Object Code Page 18 December 9, 1998 License Agreement 4.) Documentation: Online documentation, printed Essbase documentation set, and related printed documentation created with Microsoft Word 97. Note: Online documentation and the printed Essbase documentation set are provided and maintained by Hyperion (AppSource) f. OLAP Server Application Programming Interface (API) 1.) General description - Hyperion Essbase API lets you use standard tools to create custom Hyperion Essbase application that take advantage of the robust data storage, retrieval, and analytical capabilities of the DB2 OLAP Server. The API supports C, C++, and other application development environments. 2.) Documentation: Soft copy and hard copy 3.) Format: Object Code 4.) Documentation: Online documentation, printed Essbase documentation set, and related printed documentation created with Microsoft Word 97. Note: Online documentation and the printed Essbase documentation set are provided and maintained by Hyperion (AppSource) . Page 19 December 9, 1998 License Agreement DESCRIPTION OF LICENSED WORK #002 1.0GENERAL DESCRIPTION OF LICENSED WORK: STRATEGY VW PRODUCT The Licensed Works to be part of the VW Product include the following: a. SHOWCASE STRATEGY Warehouse Manager 1.) General description: Warehouse Manager is the integrated solution to controlling and managing a data warehouse. It consists of both AS/400 server and PC client software. Warehouse Manager provides the following software for managing a data warehouse: a.) Warehouse Manager server is the foundation of SHOWCASE STRATEGY and includes patented technology for managing SHOWCASE STRATEGY's data warehousing environment on the AS/400. It provides APPC and TCP/IP support and the interface to many OS/400 features. Specifically, Warehouse Manager server allows end users to work with unique AS/400 data structures such as date fields, edit codes, IDDU files, or other DDS structures found in a database, and also allows users to import existing Query/400 applications into various SHOWCASE STRATEGY products. Warehouse Manager also provides support for third party data dictionaries such as the classic J.D. Edwards interactive data dictionary. In addition, Warehouse Manager goes beyond other ODBC connections to the AS/400 in choosing how a query is processed on the AS/400, thus optimizing query performance. b.) Alias Manager allows administrators to assign metadata (alias names) to DB2/400 objects, making it easier for users to understand and find data in complicated AS/400 databases. c.) License Manager enables administrators to authorize who can use SHOWCASE STRATEGY desktop applications and to administer passwords for SHOWCASE STRATEGY. While SHOWCASE STRATEGY products can be installed on any desktop, License Manager is the tool that gives administrators control over who can use the products to access or manage databases. d.) Resource Manager enables administrators to control AS/400 usage. It provides administrators with the capability to administer which users or groups of users can run against the system interactively or who must use the AS/400 batch subsystem when accessing the database. Additionally, it provides the capability to prevent runaway query jobs on the AS/400. e.) Security Manager enables administrators to enhance existing AS/400 security. It enables administrators to secure data at the collection, table/view, column, and row level by user or by groups of users without affecting applications already using AS/400 security. 2.) documentation: Softcopy 3.) format: Object Code 4.) documentation: Online documentation created with Microsoft Word 95 and RoboHelp 5.0, related printed documentation created with Microsoft Word 97. b. SHOWCASE STRATEGY Data View Manager 1.) General description: Data View Manager enables administrators or business analysts to create a simplified view of any AS/400 database, whether it's used for transaction processing or analysis. The simplified view is saved on the AS/400 as a data view and insulates end users from complex query tasks such as defining table join criteria, building frequently used result columns, and summarizing detail data. In fact, administrators or business analysts can use data views to remove unnecessary columns of data from view, build frequently-used Sub-SELECT support, and define understandable column names. Once created, a data view can be used in several SHOWCASE STRATEGY products, including Warehouse Builder, Query, Report Writer, and Analyzer Data Modeler. A data view can even be used in Data View Manager as the basis for another data view. The net result is that administrators and/or business analysts can create an easy-to-use relational data warehouse and potentially improve query and reporting performance by ensuring that data is accessed correctly. 2.) documentation: Softcopy Page 20 December 9, 1998 License Agreement 3.) format: Object Code 4.) documentation: Online documentation created with Microsoft Word 95 and RoboHelp 5.0, related printed documentation created with Microsoft Word 97. c. SHOWCASE STRATEGY Warehouse Builder 1.) General description: Warehouse Builder is a powerful data transformation product that allows users to convert data into meaningful information within a relational data warehouse. Specifically, Warehouse Builder has the power to transform and simplify data as it is being moved. It can cleanse data to make it more understandable to end users, summarize data at the time of transfer, and track transaction history information. Additionally, Warehouse Builder can automatically populate Essbase/400 multidimensional databases, apply load rules, initiate calculations, and run Essbase/400 routines such as SQL data loads and dimension builds. These direct links to Essbase/400 simplify and speed up the creation of the multidimensional portion of a data warehouse. 2.) Documentation: Softcopy 3.) Format: Object Code 4.) Documentation: Online documentation created with Microsoft Word 95 and RoboHelp 5.0, related printed documentation created with Microsoft Word 97. d. SHOWCASE STRATEGY Analyzer 1.) General description: Analyzer is a powerful tool that provides seamless access to Essbase/400 databases and the ability to drill through the consolidated information in an Essbase/400 database to underlying detail data stored in relational databases. Analyzer's various analysis functions include the ability to pivot, rank, filter, sort, and apply traffic lighting to information. Users can view data in a spreadsheet or a chart, and link numerous spreadsheets and charts together to provide a logical, speed-of-thought path through corporate information. In addition, Analyzer provides the tools necessary to create pinboards and forms in which to display data. Its advanced features include the ability to update data in Essbase/400 databases (if users have the proper authority), thereby allowing users to conduct "what if" analysis and work with budgeting applications. The result is an application that uniquely empowers businesses to leverage the wealth of information in their data warehouse by spotting opportunities, pinpointing and resolving problems, and more. 2.) Documentation: Softcopy 3.) Format: Object Code 4.) Documentation: Online documentation created with Microsoft Word 95 and RoboHelp 5.0, related printed documentation created with Microsoft Word 97. e. SHOWCASE STRATEGY Analyzer for the Web 1.) General description: Analyzer for the Web is a "thin" version of Analyzer that allows users to conduct basic data analysis tasks via a corporate intranet or extranet. Analyzer for the Web is built in the powerful Java programming language. Therefore, users can run Analyzer for the Web from within inexpensive and popular Java-enabled web browsers such as Microsoft Internet Explorer and Netscape Navigator. This architecture, combined with the fact that Analyzer for the Web features an interface that is very similar to Analyzer's, enables companies to eliminate the overhead of supporting and training users on different software for in-house and remote data analysis. 2.) Documentation: Softcopy 3.) Format: Object Code 4.) Documentation: Online documentation is in the form of HTML pages. Related printed documentation is created with Microsoft Word 97. Note: Source online documentation files are provided and maintained by Hyperion (AppSource) Corp. f. SHOWCASE STRATEGY Analyzer OLAP Server 1.) General description: Analyzer OLAP Server is used for reading and writing Analyzer, Analyzer Designer and Analyzer Data Modeler system database files. All system database files reside on the AS/400 and are administered through SHOWCASE STRATEGY's Warehouse Manager client software. Access to the Analyzer OLAP Server is controlled through AS/400 user profiles defined in Warehouse Manager. Users log in to Analyzer with their AS/400 user ID and password. The same AS/400 user ID and password is automatically passed to the Essbase/400 server when the user logs in to Essbase/400.This simplification means administrators have fewer profiles and user IDs to administer and end users have fewer IDs and passwords to keep track of. Page 21 December 9, 1998 License Agreement 2.) documentation: Softcopy 3.) format: Object Code 4.) documentation: Online documentation created with Microsoft Word 95 and RoboHelp 5.0, related printed documentation created with Microsoft Word 97. g. SHOWCASE STRATEGY Query 1.) General description: Query enables users to quickly and easily access their relational data for simple ad-hoc data analysis. It allows users to incorporate result columns, run-time prompts, and complex expressions into their queries and also provides a performance analyzer that helps users to tune their queries for optimal performance. In addition, Query includes Microsoft Excel and Lotus 1-2-3 add-ins that allow users to bring AS/400 data directly into their formatted spreadsheets. Then, each time users open those spreadsheets, they have the Option of refreshing them with the latest information from their databases. 2.) Documentation: Softcopy 3.) Format: Object Code 4.) Documentation: Online documentation created with Microsoft Word 95 and RoboHelp 5.0, related printed documentation created with Microsoft Word 97. h. SHOWCASE STRATEGY Report Writer 1.) General description: Report Writer takes Query's powerful data-access capabilities and extends them to enable users to convert AS/400 data into powerful reports that include headers, footers, crosstabs, images, graphics, and much more. It offers a powerful macro language that can be used to create complex reports and various report objects, such as derived fields. Additionally, Report Writer provides end users with pre-formatted style sheets to use as standard report templates. This saves the user time in report formatting by enabling them to simply apply a style sheet to selected AS/400 data. 2.) Documentation: Softcopy 3.) Format: Object Code 4.) Documentation: Online documentation created with Microsoft Word 95 and RoboHelp 5.0, related printed documentation created with Microsoft Word 97. i. Other 1.) General description: This category represents miscellaneous SHOWCASE STRATEGY software and documentation that is required to deliver a complete solution. Examples include: a.) client and host installation and setup software and documentation b.) product tutorials and sample files c.) sample database files 2.) Documentation: Softcopy 3.) Format: Object Code 4.) Documentation: Online client documentation created with Microsoft Word 95 and RoboHelp 5.0, online host documentation, and related printed documentation created with Microsoft Word 97. Note: Some sample files and demo database files are provided and maintained by Hyperion (AppSource). j. Metadata integration and VWP processing: 1.) General description: Using the templates provided by Visual Warehouse (VW), construct the business views and source/target definitions that VW can manage. This process includes the reading of the VW templates, filling in the information required with metadata from the SHOWCASE STRATEGY Warehouse Builder. The information required includes: a.) The definition of the source data being manipulated/extracted by SHOWCASE STRATEGY Warehouse Builder (Source Information Resource in VW terms). b.) The definition of the target data being produced by SHOWCASE STRATEGY Warehouse Builder (Target Information Resource in VW terms). c.) The definitions of the process applied to the source data to produce the target data (Business Views in VW terms). Page 22 December 9, 1998 License Agreement d.) The definition of the applications that will execute the SHOWCASE scripts (VWPs in Visual Warehouse terms). e.) The definition of the process flows (business view cascade in VW terms). Creation of the Visual Warehouse programs that will execute the SHOWCASE scripts on the OS platform that the scripts were written for. All of the above must work with Visual Warehouse V5.2 with latest CSD 2.) documentation soft-copy 3.) format: Object Code 4.) documentation: end-user documentation, on-line documentation, and other related written materials Page 23 December 9, 1998 License Agreement ATTACHMENT IBM Acceptance Criteria Prior to IBM's acceptance of SHOWCASE's version of the Licensed Works, the execution of SHOWCASE's tests must have been successfully demonstrated and documented by SHOWCASE. Prior to the start of acceptance test at IBM for each Licensed Work, all SHOWCASE Deliverables for that Licensed Work (including executables, manuals, online help and messages) must be available. IBM's acceptance test of the Licensed Work as documented below initially targets the Visual Warehouse/400 package, followed by DB2 OLAP Server/400 and Visual Warehouse for NT (IBM Product) driving the integration points with Visual Warehouse/400 and the DB2 OLAP Server/400. A. VISUAL WAREHOUSE/400 1.0 Installation and Configuration 1. Installation Installation procedures for the Licensed Works will be followed as provided in the SHOWCASE documentation. Install tests will be performed, by IBM, using all pre-requisite levels of OS/400 and NT operating systems. US English configurations will initially be tested, followed by non-English configurations to demonstrate NLS (SBCS, DBCS) enablement and install. IBM will run installation verification programs (IVP), according to documentation, to demonstrate successful installation of the "Licensed Works" on the AS/400 platform. No network configuration will be involved in the install test. SHOWCASE will provide their regression test to IBM as a foundation for IVP. 2. Configuration Native and network configurations will be tested to demonstrate the operation of Visual Warehouse/400 (native), as well as Visual Warehouse/NT (IPCS card) as enterprise warehouse manager for Visual Warehouse/400. Following the directions in the documentation, Visual Warehouse/400 will be configured for native operation, as well as to interact with Visual Warehouse/NT. TCP/IP will be the protocol used for establishing the connection between the servers. Due to firewall restrictions, configurations with proxy server(s) may not be tested. Execute the IVP to demonstrate successful installation and running of Visual Warehouse/400 Manager, Report Writer, and Analyzer Server. Various installation and configuration error scenarios will be tested to ensure proper operation of exception handling routines, error messages to log, end-user notifications, and documented Help to guide problem resolution. 3. Migration and Coexistence Following the directions in the SHOWCASE supplied documentation, IBM will write and test the documentation (for the enterprise model) that describes how Visual Warehouse/400 can be configured to connect to Visual Warehouse/NT server. (Phase II) Ensure access to local AS/400 Agent can be established from Visual Warehouse/NT. This access will be used for data access and write from/to AS/400 based data sources 4. Removal Verify the "un-install" of Visual Warehouse/400 per supplied documentation. 2.0 Information Visual inspection will be done to ensure the "Licensed Works" information is complete; all program functions are completely described; all ordinary publication component content (such as the table of contents, index, appendices, and so on) exist; all information categories (book, online help, messages) exist in their final form; and that all graphics are provided and do not require re-work. 1. Information usability test Page 24 December 9, 1998 License Agreement Tests will be conducted to evaluate the usability of Visual Warehouse/400 information. Assumption is that there are no cross-platform components (e.g. MVS, OS/2, NT) with the "Licensed Works". Test start: No components installed. Product prerequisites are installed and available. Test end: Visual Warehouse/400 components are installed, configured, and operational. Basic source/target mapping tasks are done, scripts to extract, transform, and copy data (equivalent of Visual Warehouse/NT Business Views) can be created, and a small set of relational (and non-relational in the Enterprise model) can be moved from local and remote data sources to local DB2/400. 2. Information usability test success criteria (5-point rating from 1 (very unsat.) to 5 (very sat.)): a. Success: testers successfully complete all tasks required to get to "test end". b. Satisfactory or very satisfactory ratings for online help. c. Satisfactory or very satisfactory overall ratings for all documentation. d. Satisfactory or very satisfactory ratings for the end-user interface, sample administration and warehousing operation, by testers, using sample data. This rating includes the installation interface. 3.0 National Language Support 1. Run National Language Support (NLS) and localization tests, per supplied documentation and supplied sample data. National language versions of the "Licensed Works" include English, French, German, Italian, Japanese, and other language versions when available. 2. IBM will report any significant deviations from IBM's Designing International Software (6X09-1220) document or guidelines to SHOWCASE for response/resolution. 4.0 Year 2000 Support Licensed Works will be tested for ability to handle date values beyond Year 2000 and dates in and between the 20th and 21st centuries. 5.0 Performance, Scalability, and Reliability It is understood that all statements related to performance, scalability and reliability as provided in this section are reasonably believed estimates that can only be verified after tests are performed at IBM facilities. Reliability is to be demonstrated by running tests without incident from the existing Visual Warehouse/NT testcase stores modified for Visual Warehouse/400. These include but are not limited to: Regression tests that involve single data source to target mappings, multiple data source to target mappings, where data sources include data from DB2, Oracle, and other (enterprise model supported) data sources on AS/400 and non-AS/400 platforms to DB2/400. Testcases will be expanded to include multiple IMS and VSAM data sources on an MVS platform. Visual Warehouse/NT reasonably supports 50 concurrent users, and allows cascading business views up to 35 levels, without catastrophic (e.g., APAR Severity Level 1) incidents. Visual Warehouse/400 needs to meet, or surpass, this level of scalability. Concurrency and code quality are focus acceptance items in this test. This test will be based on the test buckets described above. In order for the above tests to be successful, IBM will obtain a reasonable amount of assistance from SHOWCASE personnel for the configuration and deployment of the Product components. IBM and SHOWCASE will negotiate the required assistance on Product documentation. IBM will provide an environment that has the necessary capacity to perform this test. This includes, but is not limited to: An AS/400 environment that has enough resources to support 50 concurrent users. These resources include enough MIPS, real storage, and virtual storage to support 50 concurrent users. The TCP/IP sub-system must be properly configured to support the expected number of concurrent users. Performance Expectations: Tests will measure both the throughput and elapsed time for the result sets from various warehousing scenarios to be committed in the target DB2/400 database. Session establishment time will not be included in these performance tests. Page 25 December 9, 1998 License Agreement IBM must provide an infrastructure that allows these tests to be successful. Assuming that IBM has provided an environment to support 50 concurrent users and that the code quality test has been completed successfully, the query performance objective may not be met without additional tuning/infrastructure changes. 6.0 New Function The Product must perform to specifications as documented in SHOWCASE documentation supplied to IBM. Tests will be run to test enhancements and new functions. The list below itemizes the areas to be tested, but testing is not necessarily limited to these functions: 1. Multi-user operation as described in scalability section above; 2. Performance related functions to be verified as described in performance section above; 3. Use of any system exit routines for accounting, access validation, debugging, and performance monitoring; and 4. Security and authentication testing of multi-user data servers. 7.0 CUPRIMDSO Measurements 1. Will be measured throughout the Beta program. 2. No Severity-1 problem remains open at Beta Program start. SHOWCASE will also have bypasses available for all Severity-2 problems including a plan to resolve within 2 weeks after Beta start. 3. Satisfaction level at the end of the program must be: Very satisfied or Satisfied. B. DB2 OLAP/400 SERVER 1.0 Installation and Configuration 1. Installation Installation procedures for the Licensed Work will be followed as provided in the SHOWCASE documentation. Install tests will be performed, at the discretion of IBM, using all pre-requisite levels of OS/400 and NT operating systems. US English configurations will initially be tested, followed by non-English configurations to demonstrate NLS (SBCS, DBCS) enablement and install. IBM may, at its discretion, also run installation verification programs (IVP), according to documentation, to demonstrate successful installation of the "Licensed Works" on the AS/400 platform. 2. Configuration Network configurations, using TCP/IP, will be tested to demonstrate the inter-operability of the DB2 OLAP/400 Server with: 1.) the ESSBASE Application Manager and ESSCMD on a non-AS/400 operating platform (IBM prefers that WinNT be used.) 2.) the SQL Interface for loading DB2 relational data from a local DB2/400, remote DB2/400, DB2/390 and DB2/UDB on AIX. Various installation and configuration error scenarios must be tested to ensure proper operation of exception handling routines, error messages to log, end-user notifications, and documented Help to guide problem resolution. 3. Removal Verify the "un-install" of the DB2 OLAP/400 Server per supplied documentation. 2.0 Information SHOWCASE will provide IBM with all SHOWCASE STRATEGY product documentation. Such information to include all program functions completely described; all ordinary publication component content (such as the Page 26 December 9, 1998 License Agreement table of contents, index, appendices, and so on); all information categories (book, on-line help, messages) in their final form; and all graphics which will not require re-work. If IBM needs to create any additional documents, IBM will create this work but may reuse SHOWCASE documentation as necessary. 3.0 National Language Support 1. Run National Language Support (NLS) and localization tests, per supplied documentation and supplied sample data. National language versions of the DB2 OLAP/400 server include English, French, German, Italian, Japanese, and other language versions when available. 2. SHOWCASE must follow IBM's Designing International Software (6XO9-1220) document or guidelines and report to IBM any deviation for follow-up response/resolution. 4.0 Year 2000 Support DB2 OLAP/400 must be shown to have the ability to handle date values beyond Year 2000 and dates in and between the 20th and 21st centuries. 5.0 Performance, Scalability, and Reliability 1. Reliability Expectations: a. Reliability is to be demonstrated by running without incident the existing Hyperion ESSBASE tests suite. These tests can be found on a CD from Hyperion under the directory REGRESS. These tests cover server as well as client testing. Most of the server tests run directly on the server, although there are some client-side tests whose purpose is to test the server. Therefore, in order to do complete server testing, there are tests to be run from both the server and the client. b. The tests include the Basic and Extended Acceptance test suite (SACCEPT) as well as the Basic Regression test suite (CALCS, CONTROL, DATALOAD, DIMLOAD, LOGS, MULTCUBE, OUTLINES, REPORTS, and VIRTUAL). c. Concurrence and code quality are focus acceptance items in this test. This test will be based on the test buckets described above. At IBM's discretion, some or all of the above may also be run by IBM. In such a case, IBM will obtain a reasonable amount of assistance from SHOWCASE personnel for the configuration and deployment of the Product components. IBM and SHOWCASE will negotiate the required assistance on Product documentation. d. The AS/400 version of the Hyperion Test suites will be provided to IBM by SHOWCASE. 2. Performance Expectations: Using the OLAP Council's APB1 Benchmark, APB1 metrics will be collected by SHOWCASE for both the DB2 OLAP/400 Server and Essbase/400. The difference between the performance metrics of the two servers on the AS 400 platform will be a similar ratio as that experienced between the native Essbase and the DB2 OLAP server on other platforms to constitute successful performance exit criteria. 6.0 CUPRIMDSO Measurements 1. Will be measured throughout the Beta program. 2. No Severity-1 problem remains open at Beta Program start. SHOWCASE will also have bypasses available for all Severity-2 problems including a plan to resolve within 2 weeks after Beta start. 3. Satisfaction level at the end of the program must be: Very satisfied or Satisfied. Page 27 December 9, 1998 License Agreement ATTACHMENT ROYALTIES Royalty ------- US EMEA AP LA -- ---- -- -- Analyzer (*) (*) DB2 OLAP for OS/400 (*) (*) Warehouse Builder (*) (*) Warehouse Manager (*) (*) Report Writer (*) (*) Entry Level (*) (*) (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 28 December 9, 1998 License Agreement Royalty on Software Subscription --------------------- --------------------------- 1 year 2 years --------------------- --------------------------- US EMEA AP LA US EMEA AP LA Analyzer - ------------------------------------------- --------------------------- (*) (*) (*) DB2 OLAP for OS/400 (*) (*) (*) Warehouse Builder (*) (*) (*) Warehouse Manager (*) (*) (*) Report Writer (*) (*) (*) Entry Level - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- (*) (*) (*) - ----------------------------------------------------------------------- (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 29 December 9, 1998 License Agreement ATTACHMENT Schedule Milestones Date ---------- ---- a. Execution of this Agreement (*) b. SHOWCASE's delivery of the RSI OS/400 ported Source Code (*) c. SHOWCASE's delivery of the Licensed Works in DLW (*) #001 which substantially complies with its specifications d. SHOWCASE's delivery of the Licensed Works in DLW (*) #002 which substantially complies with its specifications e. Successful completion of IBM's testing of the Licensed Work (*) for DLW # 001 f. Successful completion of IBM's testing of the Licensed Work (*) for DLW #002 g. Receipt of the completed Certificate of Originality for the (*) Licensed Work for DLW #001 h. Receipt of the completed Certificate of Originality for the (*) Licensed Work for DLW #002 Planned start of beta customer test for DLW #001 Planned start of beta customer test for DLW #002 NOTE: SHOWCASE will need up to (*) business days to prepare and deliver the code for the port of RSI to the OLAP server product from the date IBM delivers RSI Source Code - this could impact b, c, e, g, and i above. This schedule is for planning purposes and may be changed upon mutual agreement of the parties. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 30 December 9, 1998 License Agreement ATTACHMENT TESTING, MAINTENANCE AND SUPPORT 1.0 Definitions Capitalized terms in this Attachment have the following meanings. 1.1 APAR is the completed form entitled "Authorized Program Analysis Report" that is used to report suspected Code or documentation errors, and to request their correction. 1.2 APAR Closing Codes are the established set of codes used to denote the final resolution of an APAR. IBM will identify APAR Closing Codes prior to the start of the maintenance obligations. 1.3 APAR Severity Levels are designations assigned by IBM to errors to indicate the seriousness of the error based on the impact that the error has on the customer's operation: a. Severity 1 is a critical problem. The customer cannot use the Product or there is a critical impact on the customer's operations which requires an immediate solution; b. Severity 2 is a major problem. The customer can use the Product, but an important function is not available or the customer's operations are severely impacted; c. Severity 3 is a non-critical problem. The customer can use the Product with some functional restrictions, but it does not have a severe or critical impact on the customer's operations; d. Severity 4 is a minor problem that is not significant to the customer's operations. The customer may be able to circumvent the problem. 1.4 APAR Correction Times are the objectives that SHOWCASE must achieve for the resolution of errors and distribution of the correction to IBM. a. "Severity 1" requires maximum effort support until an emergency fix or bypass is developed and available for shipment to IBM. Critical situations may require customer, IBM and SHOWCASE personnel to be at their respective work locations or available on an around- the-clock basis. The objective will be to provide relief to the customer within 24 hours and provide a final solution or fix within 7 days; b. "Severity 2" on a best effort basis, be resolved (i.e. fixed or bypassed) within ten (10) calendar days; c. "Severity 3" on a best effort basis, be resolved (i.e. fixed or bypassed) within fifteen (15) calendar days; d. "Severity 4" on a best effort basis, be resolved (i.e. fixed or bypassed) within twenty eight (28) calendar days. The calendar days begin when SHOWCASE creates the APAR and supporting documentation and end when the Error Correction or other resolution is shipped to IBM. IBM will consider exceptions from these objectives when warranted by technical or business considerations. 1.5 Developer Test Systems are an appropriate configuration of installed hardware and software that SHOWCASE maintains which is representative of typical customer installations for the Product. These Developer Test Systems will contain, at a minimum, the following: a. the current and current minus 1 level of the Product; b. the current and current minus 1 level of the prerequisite/co-requisite hardware and software that IBM specifies to SHOWCASE; and c. specific fix-packs as required. The Developer Test Systems will consist of the appropriate configured workstations only unless IBM specifies and provides SHOWCASE other equipment at no charge. 1.6 IBM Test Systems are an appropriate configuration of installed hardware and software that IBM maintains which is representative of typical IBM customer installations using the Product. These test systems will contain, at a minimum, a level of prerequisite/co-requisite hardware and software that is correspondent with that of the Developer Test Systems. 1.7 Maintenance Level Service is the service provided when a customer identifies an error. a. Level 0 is the service provided on the phone with a customer when the customer first reports a problem or issue. Page 31 December 9, 1998 License Agreement b. Level 1 is the service provided in response to the customer's initial phone call identifying an error. c. Level 2 is the service provided to reproduce an attempt to correct the error or to find that the service provider cannot reproduce the error. d. Level 3 is the service provided to isolate the error at the component level of the Code. The service provider distributes the Error Correction or circumvention or gives notice if no Error Correction or circumvention is found. 1.8 Problem Determination is the process of determining whether a problem is being caused by hardware, software or documentation. 1.9 Problem Management Record ("PMR") is a record created when a customer makes the initial support request. This record becomes a part of the Problem Management System database and records the essential information about the customer question or problem. 1.10 Problem Management System ("PMS") is an internal IBM developed software system used to record customer demographic information and encode data about the reported question or problem. The PMS will contain call records and document call activity, including the recording and tracking of all questions and problems to final resolution. The PMS can be used to verify that each customer is "entitled" to program support. 1.11 Problem Source Identification is the process of determining which software or documentation component is failing or attributing the failure to some external cause such as a customer error or no trouble found. 1.12 Reader Comment Form ("RCF") is the form which is used to record errors and comments on the documentation. The RCF is generally the last page of a manual or brochure. The customer completes it and mails it to the address specified. 2.0 Maintenance and Support Responsibilities 2.1 The parties will agree to the specific details of the process flow each will follow to resolve customer calls for requests for support 30 days prior to the general availability of the Product. 2.2 SHOWCASE will provide IBM electronic (soft copy) information on any known problems in the Licensed Work and the work arounds and solutions, if available, within 30 days of the Effective Date of this Agreement. 2.3 Product customers will initiate requests for support by contacting IBM. IBM will perform the following maintenance Level 0 support responsibilities, as described below. IBM will: a. ensure customer entitlement; b. create the PMR; and c. obtain from the customer a description of the problem. SHOWCASE will perform the following Level 1 support responsibilities to verify its severity:. d. search the IBM and SHOWCASE databases for known problems; e. provide the available resolution to the customer if the problem is known; f. recommend local IBM assistance as required; g. If no resolution, pass the PMR to Level 2; and h. update the PMR, documenting Level 1 actions. IBM will be the initial customer contact point for questions, problems and assistance concerning the Product. IBM may use a third party to perform its obligations. 2.4 Thirty days prior to general availability of the Product, SHOWCASE will establish a process to check incoming electronic requests for Level 1, Level 2, and Level 3 support at least twice daily. 2.5 SHOWCASE will perform the following Level 2 and Level 3 support responsibilities. a. Level 2 SHOWCASE will: 1.) receive the PMR from Level 1; 2.) analyze problem symptoms and gather additional data from the customer as required; 3.) recreate the problem on the Developer Test System; 4.) determine if the error is due to improper installation of the Product by the customer; Page 32 December 9, 1998 License Agreement 5.) determine if the suspected error is due to prerequisite or operationally related equipment or software at the customer location; 6.) attempt a bypass or circumvention for high impact problems, i.e., Severity 1 and 2; 7.) if no resolution and the problem appears to be a newly discovered Code or documentation error, create an APAR record; and 8.) update the PMR, documenting Level 2 actions. b. Level 3 SHOWCASE will: 1.) receive the APAR/PMR and supporting documentation and materials; 2.) analyze the problem symptoms and diagnose the suspected error; 3.) notify Level 2 if additional information, materials or documentation are required; 4.) attempt to recreate the problem on the Developer Test System, if required; 5.) assist in Level 2 in attempting to develop a bypass or circumvention for high impact problems, e.g., Severity 1 and 2; 6.) determine if Error Corrections are required to the Licensed Work; 7.) if Error Corrections are required to the Licensed Work, provide Error Corrections to IBM in the format specified by IBM; 8.) return all APARs to IBM with one of the defined APAR Closing Codes assigned, including text describing the resolution of the error. In the event a Code error was found, provide the rationale for the closing of the APAR; 9.) provide resolution to APARs according to the assigned APAR Severity Level and within the defined APAR Correction Time. The APAR Correction Times include building, testing, certifying successful tests of Error Corrections, and packaging for shipment to IBM any applicable Error Corrections in the format specified by IBM; 10.) receive technical questions, and supporting documentation and materials; 11.) analyze the technical questions and provide answers to IBM; 12.) provide technical backup support to IBM on the Product as provided above. In addition, SHOWCASE will provide assistance in answering questions that may arise concerning the operation and use of the Licensed Work that cannot be resolved by IBM; and 13.) close out the problem record with the customer. 2.6 At least twice a year, SHOWCASE will provide a corrected version of the Licensed Work that includes all Error Corrections to the Licensed Work. Additional corrected versions of the Licensed Work will be provided as determined and mutually agreed to by IBM and SHOWCASE in the event they become necessary due to the frequency or severity of newly discovered defects. In order to provide Error Corrections, SHOWCASE will maintain a current copy of the Product. 2.7 SHOWCASE will maintain procedures to ensure that new Error Corrections are compatible with previous Error Corrections. 2.8 Packaging of Error Corrections and migration Code will be done as mutually agreed to by IBM and SHOWCASE. 3.0 RETAIN Access and APAR Management 3.1 IBM will provide SHOWCASE with access to IBM's RETAIN system (IBM's system used to manage and process PMRs and APARs) as necessary for SHOWCASE to perform its Maintenance and Support obligations as required in this Agreement. Thirty (30) days prior to general availability of the Licensed Works, SHOWCASE will establish a process to check PMR activity on the IBM RETAIN system during normal business hours and provide IBM with a number to call for offshift hours. IBM will provide sign-on IDs for the IBM RETAIN system. SHOWCASE will be responsible for the connection to the IBM network and all hardware and software used to connect and communicate with the IBM RETAIN system. SHOWCASE will be responsible for any charges or expenses relating to the hookup and network charges for accessing the system. 3.2 Generally, APARs will originate from IBM customers reporting problems or sending in Reader Comment Forms. SHOWCASE will also report to IBM as APARs all valid errors discovered by SHOWCASE Page 33 December 9, 1998 License Agreement or SHOWCASE's customers. After receiving an APAR, IBM will assign an APAR number and Severity Level, and forward the APAR to SHOWCASE for action. 3.3 For verified APARs for the Licensed Work, SHOWCASE will provide Error Corrections as set out below within the applicable APAR Correction Times: a. the fix to the Object Code in machine-readable form including a hard copy description of the Error Corrections (which may include a paper submission of the Error Corrections); b. the Error Corrections to the Source Code in machine-readable form that corresponds to the Object Code Error Corrections; and c. for a procedural workaround, the corrected procedure in machine-readable form. 3.4 Reader Comment Forms received by IBM that do not form the basis of an APAR will be forwarded to SHOWCASE for proper and prompt handling as appropriate. 4.0 General 4.1 SHOWCASE will provide to IBM the name and phone numbers of SHOWCASE's personnel to contact when high priority problems are encountered outside of normal working hours that require immediate assistance. SHOWCASE's normal working hours are defined as 8:30 AM to 5:00 PM, Monday through Friday, Central Time. 4.2 SHOWCASE will provide to IBM, on request, information regarding the status of reported APARs related to the Licensed Work. 4.3 It is desirable that IBM report APARs and status requests to SHOWCASE via an electronic interface and that SHOWCASE send APAR Error Corrections, status updates and requests for additional documentation to IBM via the same interface. IBM and SHOWCASE will jointly plan the electronic system. Each party is responsible for funding the costs of this interface at its location. 4.4 Critical situations may require the parties to use the telephone for immediate communications. The parties will follow such communications via the electronic interface for tracking and recording purposes. Each party is responsible for funding the costs of this communication at its location. 4.5 In circumstances where materials have to be exchanged using facsimile or courier services, each party is responsible for funding the costs of these exchanges via facsimile or courier services at its location. 4.6 SHOWCASE will participate in monthly telephone conference calls with IBM to review the status and performance of the parties' obligations. These calls may be scheduled more or less frequently as agreed to by the Technical Coordinators. Each party is responsible for funding the costs of these conference calls at its location. Page 34 EX-10.14 21 OUTBOUND LICENSE AGREEMENT WITH IBM EXHIBIT 10.14 OUTBOUND LICENSE AGREEMENT Agreement Number: STL98095 STL Reference No. 4997ST2609 This Agreement dated as of December 9, 1998 ("Effective Date") is between International Business Machines Corporation ("IBM") with an address at 555 Bailey Avenue, San Jose CA 95141, and ShowCase Corporation ("SHOWCASE") with an address at 4131 Highway 52 North, Suite G111, Rochester, MN 55901-3144. Under this Agreement, SHOWCASE licenses from IBM program Code known as Relational Storage Interface ("RSI") which enables SHOWCASE to prepare a Derivative Work for incorporation into a Product which will be marketed under a SHOWCASE logo for which SHOWCASE will pay royalties to IBM. By signing below, the parties agree to the terms of this Agreement. The complete Agreement between the parties regarding this transaction consists of this License Agreement and the following Attachments: 1. "Description of Licensed Work;" 2. "Schedule;" 3. "IBM Trademark Guidelines"; and 4. "Certificate of Originality." The following are related agreements between IBM and SHOWCASE: 1. Agreement for the Exchange of Confidential Information ("AECI") No. M96-2547, as supplemented; and 2. License Agreement No. STL97307. This Agreement replaces all prior oral or written communications between the parties relating to the subject matter. Once signed, any reproduction of this Agreement made by reliable means (for example, photocopy or facsimile) is considered an original, unless prohibited by local law. ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO: INTERNATIONAL BUSINESS SHOWCASE CORPORATION MACHINES CORPORATION By: /s/ Roy J. Maharaj By: /s/ Ken Holec - ----------------------------------------- --------------------------------- Authorized Signature Authorized Signature Name: Roy J. Maharaj Name: Ken Holec ------------------------------------ ------------------------------- Type or Print Type or Print Title: STL Mgr. Business Alliances and Contract Management Title: President and CEO ----------------------------------- ------------------------------ Date: 1/6/99 Date: December 23, 1998 ----------------------------------- ------------------------------ December 9, 1998 Outbound License Agreement 1. DEFINITIONS Capitalized terms in the Agreement have the following meanings. 1.1 Code is computer programming code, including both Object Code and Source Code. a. Object Code is Code substantially in binary form, and includes header files of the type necessary for use or inter-operation with other computer programs. It is directly executable by a computer after processing or linking, but without compilation or assembly. Object Code is all Code other than Source Code. b. Source Code is Code in a form which when printed out or displayed is readable and understandable by a programmer of ordinary skills. It includes related source code level system documentation, comments and procedural code. Source Code does not include Object Code. 1.2 Deliverable is any item that IBM provides under this Agreement. 1.3 Derivative Work is a work that is based on an underlying work and that would be a copyright infringement if prepared without the authorization of the copyright owners of the underlying work. Derivative Works are subject to the ownership rights and licenses of a party or of others in the underlying work. 1.4 Distributors are those authorized or licensed by SHOWCASE, SHOWCASE Subsidiaries or SHOWCASE Distributors to license or distribute Products. 1.5 Enhancements are changes or additions, other than Error Corrections, to the Licensed Work. a. Basic Enhancements are all Enhancements, other than Major Enhancements, including those that support new releases of operating systems and devices. b. Major Enhancements provide substantial additional value and are offered to customers for an additional charge. 1.6 Error Corrections are revisions that correct errors and deficiencies (collectively referred to as "errors") in the Licensed Work. 1.7 Externals are (1) any pictorial, graphic, and audiovisual works (such as icons, screens, sounds, and characters) generated by execution of Code, and (2) any programming interfaces, languages or protocols implemented in Code to enable interaction with other computer programs or the end user. Externals do not include the Code that implements them. 1.8 Licensed Work is (1) any material described in or that conforms to the description in the Attachment entitled "Description of Licensed Work," or that is delivered to SHOWCASE as the Licensed Work, including (but not limited to) Code, associated documentation, and Externals, and (2) Error Corrections and Enhancements provided to SHOWCASE pursuant to this Agreement. 1.9 Moral Rights are personal rights associated with authorship of a work under applicable law. They include the rights to approve modifications and to require authorship identification. Page 2 December 9, 1998 Outbound License Agreement 1.10 Product is an offering to customers or other users, branded by SHOWCASE or its Subsidiaries, that includes a Derivative Work of the Licensed Work along with Essbase technology, all ported to the OS/400 platform. 1.11 SHOWCASE TAG-LINE is the following statement for inclusion by SHOWCASE on Product media, packaging, installation splash screen, and documentation, for Products: "Storage Interface Powered by IBM* DB2*Relational Technology." And the following attribution which must be proximate to the highlighted trademarks: "IBM and DB2 are registered trademarks of International Business Machines Corporation, used under license therefrom." o Such Tag-Line shall be included in Derivative Works in accordance with Attachment "IBM Trademark Guidelines" 1.12 Subsidiary is an entity during the time that more than 50% of its voting stock is owned or controlled, directly or indirectly, by another entity. If there is no voting stock, a Subsidiary is an entity during the time that more than 50% of its decision-making power is controlled, directly or indirectly, by another entity. 1.13 Tools include devices, compilers, programming, documentation, media and other items required for the development, maintenance or implementation of a Deliverable that are not commercially available. 2 RESPONSIBILITIES OF PARTIES 2.1 IBM will provide the following Deliverables to SHOWCASE according to the schedule set forth in the Attachment entitled "Schedule": a. one complete set of the Licensed Work described in the Attachment entitled "Description of Licensed Work." The Licensed Work includes Code either delivered on CD-ROM or via an ftp site. b. a completed Certificate of Originality with the Licensed Work, and with each Enhancement to the Licensed Work, in the form specified in the Attachment entitled "Certificate of Originality." SHOWCASE may suspend payments to IBM for the Licensed Work if IBM does not provide a properly completed certificate. Payment will resume after SHOWCASE receives and accepts the certificate. 2.2 IBM will provide SHOWCASE, during the porting exercise, with reasonable software engineering technical support pertaining to the RSI. 2.3 IBM will provide to SHOWCASE, at no charge, Enhancements and Error Corrections for the Licensed Work which IBM implements beginning when SHOWCASE accepts the Licensed Work and continuing for the term of this Agreement. IBM has no maintenance or support obligations for the Product. 2.4 IBM will: a. participate in progress reviews, as requested by SHOWCASE, to demonstrate IBM's performance of IBM's obligations; Page 3 December 9, 1998 Outbound License Agreement b. implement a process designed to help prevent contamination by harmful Code. IBM will promptly provide SHOWCASE notice if IBM suspects contamination; c. have agreements with IBM's personnel and third parties to perform obligations and to grant or assign rights to SHOWCASE as required by this Agreement; d. obtain a written agreement not to assert any Moral Rights from any person or entity having Moral Rights in the Licensed Work. IBM agrees not to assert any Moral Rights in the Licensed Work; e. obtain all necessary consents of individuals or entities required for the use of names, likenesses, voices, and the like in the Licensed Work; f. maintain records to verify authorship of the Licensed Work for 4 years after the termination or expiration of this Agreement. On request, IBM will deliver or otherwise make available this information in a form specified by SHOWCASE; g. not assign or transfer this Agreement or IBM's rights under it, or delegate or subcontract IBM's obligations, without SHOWCASE's prior written consent provided, however, that IBM can without SHOWCASE consent, assign and/or delegate any and all rights and obligations to any IBM Subsidiary and can assign or transfer its rights under this Agreement without advice or consent. Any attempt to do so is void; h. not provide any information to the media, or issue any press releases or other publicity, regarding this Agreement or the parties' relationship under it, without SHOWCASE's prior written consent; and i. not disclose to a third party the terms of this Agreement or the fact that SHOWCASE has licensed the Licensed Work, without SHOWCASE's prior written consent. IBM may, however, make such disclosures (i) to its accountants, lawyers or other professional advisors provided that any such advisor is under a confidentiality obligation and (ii) as required by law provided IBM obtains any confidentiality treatment for it which is available. 2.5 SHOWCASE will: a. prepare a Derivative Work of the Licensed Work by porting the Licensed Work to the OS/400 operating system, and b. perform all maintenance and support for the Licensed Work as part of Products. 2.6 IBM acknowledges that pursuant to License Agreement No. STL97307 ("License Agreement") and the related Source Code Custody Agreement ("SCCA") of even date herewith between the parties, it has the right to obtain release of certain Source Code (including the right to use such Source Code as specified in the SCCA) for the Product then-currently escrowed with such escrow agent if one of the release conditions in the SCCA occurs. In addition, IBM acknowledges that the OLAP Product (which is defined in the License Agreement) contains the Essbase Software, which is licensed by SHOWCASE from Hyperion Solutions Corporation ("Hyperion"), and ported by SHOWCASE to the AS/400 operating system (the "Essbase AS/400 Port"). Accordingly, prior to any release of the Source Code for such Essbase AS/400 Port pursuant to the terms of the SCCA, IBM hereby agrees to inform Hyperion in writing of such impending release and Hyperion shall have thirty (30) days to elect in writing, one of the following options: Page 4 December 9, 1998 Outbound License Agreement a. modify, in agreement with IBM, that certain (*) by adding the Essbase AS/400 Port as a Licensed Work under the (*). Provided that SHOWCASE provides to IBM the Source Code needed for support and assigns to IBM copyright ownership in the Code ported to OS/400 by SHOWCASE and which was based on the code licensed to SHOWCASE pursuant to this Outbound License Agreement Number STL98095 (including any Derivative Works thereof - all referred to as the "RSI Code"), IBM hereby consents to assuming the obligation to support all portions of the OLAP Product that operates on OS/400 (excluding the Essbase AS/400 Port and Enhancements and Maintenance Modifications thereto). And IBM agrees to pay any royalties to Hyperion (*) for the Licensed Works thereunder licensed on other platforms, with a minimum OTC royalty established by (*); or b. have assigned to it, and assume on behalf of SHOWCASE, all obligations of SHOWCASE under the License Agreement Number STL97307, this Outbound License Agreement Number STL98095, and SCCA of STL97307 with respect to the OLAP Product, including, without limitation, all necessary development and support thereof, and IBM hereby agrees to give its written consent to such assignments. In the event that IBM assumes support of the RSI Code, then SHOWCASE shall deliver to IBM all available Source Code necessary for IBM to support it, and SHOWCASE hereby grants and assigns to IBM, its successors and assigns, all right, title and interest whatsoever, throughout the world, in and under copyright in the RSI Code (the Derivative Work of the Code licensed from IBM and ported to the OS/400 operating system by SHOWCASE pursuant to the Outbound License Agreement Number STL98095), for the full duration of all such rights and any renewals or extensions thereof. SHOWCASE agrees to cooperate with IBM and execute documents reasonably required to support such assignment and allow IBM to exercise its rights to the Code. The parties agree that should Hyperion elect option a above, then, (a) IBM shall do all things reasonably necessary, including, without limitation, permit SHOWCASE to transfer Source Code and all other necessary information related to the RSI Code and Essbase AS/400 Port, in order for Hyperion to assume such obligations with respect to the OLAP Product; (b) SHOWCASE shall have no continued obligations under Section 2.5 of this Agreement to support or maintain any existing Derivative Works of the Licensed Work included in the OLAP Product, or to create any new Derivative Works of the Licensed Work for inclusion in the OLAP Product; (c) the mere occurrence by itself of such release or termination shall not constitute a breach (although such release may be triggered by a breach) by SHOWCASE of its obligations under this Agreement, and this Agreement shall otherwise remain in full force and effect pursuant to its terms; and (d) (*) shall be due to SHOWCASE for licensing by IBM of the OLAP Product. If Hyperion does not elect in writing one of the above options within thirty (30) days of receipt of IBM's notice, then IBM may obtain the escrowed Materials in accordance with the SCCA. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 5 December 9, 1998 Outbound License Agreement 3 LICENSE 3.1 IBM grants SHOWCASE a nonexclusive, worldwide, irrevocable license to (a) prepare a Derivative Work of the Licensed Work solely in order to adapt it to run on the OS/400 operating system, and to use, execute, reproduce, display, perform such Derivative Work, and (b), in Object Code form only, transfer, distribute and sublicense such Derivative Work in Products to end user customers, in any medium or distribution technology whatsoever, whether known or unknown. IBM grants SHOWCASE the right to authorize or sublicense others to exercise any of the rights granted to SHOWCASE in subsection (b) of this Section. 3.2 The grant of rights and licenses to the Licensed Work includes a nonexclusive, worldwide, irrevocable, paid-up license under any patents and patent applications that are owned or licensable by IBM now or in the future and are (1) required to make and use the Licensed Work or its Derivative Work or (2) required to license or transfer the Licensed Work or its Derivative Work within the scope of the licenses granted above. This license applies to the Licensed Work and its Derivative Works operating alone or in combination with equipment or Code. The license scope is to make, use, sell, license or transfer items, and to practice and have practiced methods, to the extent required to exercise the rights granted hereunder to the Licensed Work. 3.3 Subject to IBM's ownership of the Licensed Work, SHOWCASE will own the Derivative Work it creates. 3.4 IBM grants SHOWCASE the right to use, and requires SHOWCASE to use, the SHOWCASE Tag-Line solely for inclusion on software media, an installation splash screen, packaging, and documentation for Products subject to the guidelines specified in Attachment, "IBM Trademark Guidelines." 3.5 Any goodwill attaching to SHOWCASE's trademarks, service marks, or trade names belongs to SHOWCASE and this Agreement does not grant IBM any right to use them. SHOWCASE may state that IBM has provided the Licensed Work. 4 PAYMENT 4.1 SHOWCASE will pay IBM royalties as follows: SHOWCASE will pay IBM royalties of (*) for each authorized copy of a Product licensed to an end user by SHOWCASE, SHOWCASE Subsidiaries or Distributors. 4.2 SHOWCASE has (*) for: a. the Licensed Work or its Derivative Works used for: (1) SHOWCASE's and SHOWCASE Subsidiaries' internal use; (2) SHOWCASE's and SHOWCASE Subsidiaries' (including third parties under contract) development, maintenance or support activities; (3) marketing demonstrations, customer testing or trial periods (including early support, pre-release, or other similar programs), Product training or education; or (4) backup and archival purposes; (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 6 December 9, 1998 Outbound License Agreement b. a copy of the Product used by a licensed end user at home or on travel when such Product is stored on both the user's primary machine as well as another machine, provided that the end user is not authorized to actively use the Product on both machines at the same time; c. the Licensed Work (or a functionally equivalent work) that becomes available generally to third parties without a payment obligation through no action or fault of SHOWCASE; d. documentation provided with, contained in, or derived from the Licensed Work; e. Error Corrections or Enhancements; f. warranty replacement copies of the Product; or g. Externals. 4.3 SHOWCASE, SHOWCASE Subsidiaries, and Distributors may, (*), copy the Product and distribute it on a CD-ROM, or other media or distribution technology on or through which the Product is secured (e.g., "encrypted" or "locked") to limit a customer's access to or use of the Product. SHOWCASE may allow the customer, under a limited license, a limited preview, trial or demonstration use of the Product. SHOWCASE will (*) to IBM unless SHOWCASE, SHOWCASE Subsidiaries, or Distributors license the Product to such customer for full productive use. 4.4 SHOWCASE may request (*) for the Licensed Work (*). If IBM agrees, both parties will sign a letter specifying the licensing transaction and (*). 4.5 Royalties are paid against revenue recorded by SHOWCASE in a royalty payment quarter. In the U.S., a royalty payment quarter ends on the last business day of the calendar quarter. Outside of the U.S., a royalty payment quarter is defined according to SHOWCASE's current administrative practices. Payment will be made by the last day of the second calendar month following the royalty payment quarter. Royalties will be paid less adjustments and refunds due to SHOWCASE. SHOWCASE will provide a statement summarizing the royalty calculation with each payment. All payments will be made in U.S. dollars. Payments based on foreign revenue will be converted to U.S. dollars on a monthly basis at the rate of exchange published by Reuters Financial Service on approximately the same day each month. 4.6 Each party will be solely responsible for any taxes incurred by the party, directly or indirectly, associated with its performance of this Agreement. 4.7 All payments due and payable by SHOWCASE to IBM under this DLW shall be in U.S. dollars. Such transfer(s) shall be coordinated through IBM's Account Administrator, Lynn Kelderhouse at the following address: International Business Machines Corporation Branch Office JWQ Accounts Receivable Internal Zip 306 150 Kettletown Road Southbury, CT 06488 Phone: 203-262-5621 Fax: 203-262-2141 (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 7 December 9, 1998 Outbound License Agreement 4.8 SHOWCASE shall maintain complete and accurate accounting records, in accordance with sound and prudent accounting practices, to support and document royalties payable in connection with an Offering. Such records shall be retained for a period of at least three (3) years after the royalties to which such records relate have accrued and been paid. SHOWCASE shall, upon written request and sixty (60) days notice, during normal business hours, but not more frequently than once each calendar year, provide access, for such period as may reasonably be required, and at such locations where the appropriate records are located, to such records for the immediately preceding three (3) year period to an independent accounting firm chosen and compensated by IBM for purposes of audit. Such accounting firm shall be required to sign an agreement with SHOWCASE protecting SHOWCASE's confidential information and shall be authorized by SHOWCASE to report to IBM only the amount of royalties due and payable for the period examined, along with such related information as is reasonably necessary to provide IBM with a proper understanding of the basis for its conclusions, subject to the accounting firm's obligations of confidentiality. 4.9 The payments defined in this Section fully compensate IBM for its performance under, and for the rights and licenses granted in, this Agreement. 5 TESTING 5.1 IBM will perform the following tests prior to each delivery of the Licensed Work: a. component testing; b. functional verification testing; and c. system testing. Upon SHOWCASE's request, the details of such testing will be mutually agreed to by the parties. 5.2 IBM will provide to SHOWCASE at SHOWCASE's request, concurrent with each delivery of the Licensed Work, all test results, test scenarios, test cases, and test reports associated with the pre-delivery testing. 5.3 Upon receipt of the Licensed Work by SHOWCASE, SHOWCASE may evaluate the Licensed Work for a period of 30 days and perform such tests as SHOWCASE deems appropriate to determine if: a. the Licensed Work meets the specifications described in the Attachment entitled "Description of Licensed Work;" b. the Licensed Work executes repetitively within the system environment described in the Attachment entitled "Description of Licensed Work;" and c. SHOWCASE can successfully execute to completion all functional and system test scenarios developed by SHOWCASE. SHOWCASE's testing does not relieve IBM of its obligations under this Agreement. 6 REPRESENTATIONS AND WARRANTIES 6.1 IBM makes the following ongoing representations and warranties: Page 8 December 9, 1998 Outbound License Agreement a. IBM has full legal rights to grant the rights granted herein; b. IBM is not under, and will not assume, any contractual obligation that prevents IBM from performing its obligations or conflicts with the rights and licenses granted in this Agreement; c. there are no liens, encumbrances or claims pending or threatened against IBM, or to IBM's knowledge, anyone else, that relate to the rights and licenses granted in this Agreement; d. the Licensed Work does not contain libelous matters nor does it directly or indirectly infringe any publicity, privacy or intellectual property rights of a third party including, to IBM's knowledge, any patents or patent applications; e. the Licensed Work and the Tools will perform in accordance with the requirements set forth in this Agreement, including the Attachment entitled "Description of Licensed Work", and will conform to IBM's user documentation, and any sales and marketing materials provided by IBM; f. the fully commented Source Code that IBM provides corresponds to the current release or version of the Licensed Work provided by IBM under this Agreement; g. the Licensed Work supports the Year 2000; h. the Licensed Work is not contaminated by harmful code; and i. all authors have waived their Moral Rights in the Licensed Work to the extent permitted by law. IBM will immediately provide SHOWCASE written notice of any change that may affect its representations and warranties. 6.2 Except as provided above, anything either party provides to the other related to this Agreement is "AS IS", without warranty of any kind. 7 INDEMNIFICATION AND LIABILITY 7.1 IBM will defend and indemnify SHOWCASE and SHOWCASE's Subsidiaries if a third party makes a claim against SHOWCASE or its Subsidiaries based on an actual or alleged: a. failure by IBM, to the extent not caused by SHOWCASE, to perform IBM's obligations under this Agreement; b. breach of IBM's representations and warranties; c. failure by IBM to comply with government laws and regulations; or d. infringement by IBM, the Licensed Work or Tools of patents, copyrights, trademarks, trade secrets, and other intellectual property rights. 7.2 SHOWCASE will: a. promptly provide IBM notice of any such claim; and Page 9 December 9, 1998 Outbound License Agreement b. allow IBM to control, and will cooperate with IBM in the defense of, the claim and settlement negotiations. SHOWCASE may participate in the proceedings at its option and expense. 7.3 In addition, if an infringement claim appears likely or is made, IBM will: a. obtain the necessary rights for SHOWCASE, SHOWCASE Subsidiaries and Distributors and their respective customers to continue to distribute, license, otherwise transfer and use the Licensed Work on an uninterrupted basis and exercise all rights granted in the Licensed Work and Tools; or b. modify the Licensed Work and Tools at IBM's expense to resolve the claim. This modified Licensed Work will comply with the Attachment entitled "Description of Licensed Work." If IBM is not able to do either within a reasonable period of time, SHOWCASE may terminate this Agreement for IBM's breach. 7.4 In addition to any remedies specified in this Agreement, SHOWCASE may pursue any other remedy it may have in law or in equity. 7.5 Regardless of the type of claim, neither party is liable to the other for indirect, incidental, special, or consequential damages including, but not limited to, lost profits or revenues, under any part of this Agreement, even if informed that they may occur. This limitation does not apply to (a) IBM's liabilities for indemnity to the extent that damages claimed by a third party might be characterized as damages of the type listed above or (b) any obligations of either party to make a payment which is due under this Agreement. SHOWCASE's total liability is limited to payments due to IBM under this Agreement. 8 TERM AND TERMINATION 8.1 This Agreement begins on the Effective Date and will remain in effect for ten (10) years with automatic one (1) year renewal terms, unless terminated sooner under the terms of this Agreement. After the ninth (9) year, IBM may terminate the Agreement by providing notice of intent to not renew twelve (12) months prior to any term expiration date. 8.2 Either party may terminate this Agreement for the other's material breach by providing the breaching party with a written notice that describes the breach. The termination will become effective 90 days after receipt of the notice unless the breach is cured within that 90 day period. 8.3 SHOWCASE may terminate this Agreement without cause on 12 months written notice to IBM, provided that the effective date of any such termination may only be on a date which is at least twelve (12) months after the fourth (4th) anniversary of the date on which a Product has been made generally available; provided, however, that SHOWCASE may terminate without cause at any time on ninety (90) days written notice in the event that IBM does not satisfactorily meet its obligations under Section 2.0 of this Agreement. 8.4 IBM may terminate this Agreement without cause on ninety (90) days written notice in the event that IBM's license to the SHOWCASE licensed work licensed under License Agreement STL97307 is (i) terminated by SHOWCASE for any reason other than IBM's material breach of the contract or (ii) terminated by either party pursuant to section 10.04 of STL97307. Page 10 December 9, 1998 Outbound License Agreement 8.5 If, at the end of four (4) years and six (6) months from the Effective Date of this Agreement, IBM notifies SHOWCASE, in writing, that the business parameters supporting distribution of the Licensed Works hereunder has changed significantly, both parties agree to renegotiate royalties in Section 4.0 above. If no agreement has been reached within ninety (90) days of SHOWCASE's receipt of the notification, either party may give notice of termination of this Agreement which will be effective six (6) months from receipt by the other party of such notice of termination. This process may be invoked a maximum of one (1) time per year thereafter if required. 8.6 Expiration or termination of this Agreement does not affect any Product licenses granted to end user customers pursuant to rights under this Agreement for the Licensed Work. In the event of termination by SHOWCASE for breach by IBM, SHOWCASE will not be obligated to make any payments that would have become due under this Agreement on or after the effective date of termination, other than per copy royalty payments incurred, if any. 8.7 Subject to Subsection 8.5, any provisions of this Agreement that by their nature extend beyond termination or expiration will survive in accordance with their terms. These include License, Representations and Warranties, Indemnification and Liability, and General. These terms will apply to either party's successors and assigns. 9 COORDINATORS 9.1 Any notice required or permitted to be made by either party to this Agreement must be in writing. Notices are effective when received by the appropriate coordinator as demonstrated by reliable written confirmation (for example, certified mail receipt or facsimile receipt confirmation sheet). 9.2 The Contract Coordinators responsible to receive ail notices and administer this Agreement are: For For SHOWCASE: IBM: Name: Tom Rydz Name: Robert L. Elliott Title: Director of Business Alliances Title: Contract Manager Address: ShowCase Corporation Address: IBM Corporation 9700 W. Higgins Rd, Ste 1100 555 Bailey Ave. Rosemont, IL 60018-4796 San Jose, CA 95141 Phone: (847) 685-6505 Phone: (408) 463-2232 Fax: (847) 685-6570 Fax: (408) 463-5605 Page 11 December 9, 1998 Outbound License Agreement 9.3 The Technical Coordinators responsible to accept all Deliverables, coordinate all exchanges of confidential information, and administer and coordinate the technical matters associated with this Agreement are: For For SHOWCASE: IBM: Name: Jon Otterstatter Name: Ms. Cathy Grape Title: Vice President, Title: DB2 OLAP Server Development Product Manager Address: ShowCase Corporation Address: IBM Corporation 4131 Highway 52 North 555 Bailey Ave. Rochester, MN San Jose, CA 95141 55901-3144 Phone: (507) 287-2865 Phone: (408) 463-2156 Fax: (507) 287-2803 Fax: (408) 463-4763 Technical Coordinators may propose, accept (by signature or initial), and implement technical changes to this Agreement that do not change dollar amounts or materially change Deliverables or the schedules of this Agreement. 9.4 A party will provide written notice to the other when its coordinators change. 10 GENERAL 10.1 Independent Contractor. Each party is an independent contractor. Neither party is, nor will claim to be, a legal representative, partner, franchisee, agent or employee of the other except as specifically stated in the Subsection entitled "Copyright" below. Neither party will assume or create obligations for the other. Each party is responsible for the direction and compensation of its employees. 10.2 Freedom of Action. Each party may have similar agreements with others. Each party may design, develop, manufacture, acquire or market competitive products and services, and conduct its business in whatever way it chooses. SHOWCASE is not obligated to announce or market any products or services. SHOWCASE does not guarantee the success of its marketing efforts. SHOWCASE will independently establish prices for its products and services. 10.3 Reliance. Neither party relies on any promises, inducements or representations made by the other or expectations of more business dealings, except as expressly provided in this Agreement. This Agreement accurately states the parties' agreement. 10.4 Compliance With Applicable Laws. Each party will comply with all applicable laws and regulations at its expense including, to the extent applicable, Executive Order 11246 on Equal Employment Opportunity, as amended, the Occupational Safety and Health Act of 1970, as amended, and the Americans With Disabilities Act of 1990, as amended. This also includes all applicable government export and import laws and regulations. Page 12 December 9, 1998 Outbound License Agreement 10.5 Confidential Information. The parties agree that information exchanged under this Agreement that is considered by either party to be confidential information will be subject to the terms of the AECI, referenced on the first page of this Agreement, and its Supplements. In addition, IBM will not provide SHOWCASE with any information which may be considered confidential information of any third party unless provided under the AECI. The obligations set forth in the AECI with regard to confidential information will not limit or preclude the exercise of the licenses granted in this Agreement. 10.6 Copyright. Any publication by SHOWCASE of the Licensed Work or the Derivative Work thereof may contain an appropriate copyright notice, as determined by SHOWCASE. IBM will enforce and maintain its copyright protection in the Licensed Work. SHOWCASE is not responsible for enforcing and maintaining such copyright protection. 10.7 Order of Precedence. If there is a conflict among the terms of this base License Agreement and its Attachments, the terms of this base License Agreement prevail over those of the Attachments, unless the parties expressly indicate in the Attachments that particular terms within the Attachments prevail. Terms in SHOWCASE's purchase orders and IBM's invoices or acknowledgments, if any, are void. 10.8 Headings. The headings of this Agreement are for reference only. They will not affect the meaning or interpretation of this Agreement. 10.9 Counterparts. This Agreement may be signed in one or more counterparts, each of which will be considered an original, but all of which together form one and the same instrument. 10.10 Amendment and Waivers. For a change to this Agreement to be valid, both parties must sign it. No approval, consent or waiver will be enforceable unless signed by the granting party. Failure to insist on strict performance or to exercise a right when entitled does not prevent a party from doing so later for that breach or a future one. 10.11 Actions. Neither party will bring a legal action relating to the subject matter of this Agreement, against the other more than 2 years after the cause of action arose, except in the case of indemnification for infringement, in which case this period runs for 2 years after the award or settlement was made. 10.12 Dispute Resolution. Both parties will act in good faith to resolve disputes prior to instituting litigation. Each party waives its rights to a jury trial in any resulting litigation. Litigation will only be commenced in the State of New York. 10.13 Governing Law. This Agreement will be governed by the substantive law of the State of New York applicable to contracts executed in and performed entirely within that State. The United Nations Convention on Contracts for the International Sale of Goods does not apply. IBM will, upon written notice from SHOWCASE, submit to personal jurisdiction in any forum where SHOWCASE is sued for claims related to IBM's indemnification obligations. Page 13 December 9, 1998 Outbound License Agreement Description of Licensed Work 1.0 General description of Licensed Work: Relational Storage Interface 1. Relational Data Store Component ("RDSC") version consistent with the version of Essbase which SHOWCASE has ported to the OS/400 operating system 2. Education Materials Source (soft-copy) for IBM's RDSC introductory education classes 2.0 Specific description of Licensed Work: Relational Data Store Component ("RDSC") version consistent with all versions 5.0 of Essbase which SHOWCASE has ported to the OS/400 operating system, and all future modifications to and Derivative Works of RDSC applicable to the OS/400 operating system. * format ( Source Code, either on CD-ROM or via ftp site). * RDSC Functions - The purpose of the RDSC is to replace the Essbase multidimensional data store with a relational data store. Generally, the RDSC is intended to be functionally equivalent to the then current Essbase multidimensional store. In particular, index (.ind) and page (.pag) data files will be replaced by a number of relational tables. When implemented, the relational schema is intended to serve as an efficient multidimensional store. The outline file (.otl) lists the data elements (members and dimensions) of an Essbase database and defines their relationships (e.g., hierarchical and mathematical). Although the RDSC will not replace the outline file with relational tables, the outline data will be mirrored as read-only reference data in relational tables that are part of the relational store. All other Essbase database elements are intended to be unaffected by the implementation of the RDSC. Although the objective of the RDSC is to be substantially similar in function to the Essbase multidimensional store, there will be some architectural and operational differences. The key differences (known at this time) are listed below. As design and implementation proceed other significant differences may arise. o In order to provide an efficient and natural relational representation of an Essbase database, the RDSC must ensure that one dimension is defined as the measures dimension. The measures dimension generally corresponds to the accounts dimension in an Essbase database. While Essbase currently provides for some special handling of dimensions labeled as accounts dimensions, it does not require one. In the vast majority of business models, this additional restriction should not pose a problem. o Relational databases generally limit the number of columns permitted in tables and views; this may have an impact on the number of members allowed in the measures dimension. o Whenever possible, the RDSC will use dimension and measures member names as view and column names in the appropriate elements of the relational schema. However, differences in naming rules between Essbase and a given RDBMS will not always permit this simple mapping. For example, Essbase member names can be up to eighty characters in length, whereas DB2 column names are limited Page 14 December 9, 1998 Outbound License Agreement to eighteen characters. A given RDBMS may not allow some characters in table and column names that Essbase does permit in dimension and member names. When a conflict arises the RDSC must construct a valid view or column name. Essbase applications will be generally unaffected by this problem. SQL applications may have to use dimension tables to look-up the derived table or column name. o Performance of the RDSC is expected to be similar to the Essbase multidimensional store, but it will be slower. In terms of response time, the target is to complete queries in no more than three (3) times the amount of time required by the Essbase multidimensional store. Furthermore, the RDSC will generally not be able to support the same number of active client connections that the Essbase server can support on a given hardware and software platform. * documentation: * internal (i.e., if requested by SHOWCASE, development documentation, Source Code documentation, etc.) * external (i.e., end-user documentation, on-line documentation, etc.) * other materials (as requested): * test results * test cases * maintenance and support reports (including information required and format) * education/training material Page 15 December 9, 1998 Outbound License Agreement Attachment Schedule Page 1 of 1 Milestones ---------- Date ---- a. Execution of this Agreement (*) b IBM's delivery of the Licensed Work which (*) substantially complies with its specifications c. Successful completion of SHOWCASE's testing of the (*) Licensed Work d. Receipt of the completed Certificate of Originality for (*) the Licensed Work (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 16 December 9, 1998 Outbound License Agreement Attachment Maintenance and Support Page 1 of 1 1.0 IBM has no maintenance or support obligations Page 17 December 9, 1998 Outbound License Agreement Attachment Attachment - IBM Trademark Guidelines Page 1 of 1 IBM (R) is a registered trademark of the IBM Corporation. These guidelines were developed to help you use them consistently and appropriately on advertising, packaging, documentation, and products. Following these guidelines will build an identity for the product in the marketplace and establish an image of quality. It will also protect and maintain these valuable trademark assets. Legal rights for the trademarks are owned by IBM and licensed to others. Usage is encouraged, as long as it conforms to licensing agreements and these guidelines. 1. Usage Basics a. You are not authorized to use the eight-bar IBM logotype. b. IBM (R) is a registered trademark available to you for use under your license grant from IBM. c. The registered trademark designator (R) must appear in readable form with the most prominent usage of the trademark. The designator may be superscripted. Outside the U.S., an asterisk may replace the trademark designator, and in some countries a translation of the attribution may be required. Check with your legal department about local laws and customs. d. Never attempt to translate the IBM trademark into other languages. The English characters create a unique symbol and, therefor, constitute the only acceptable version. e. Do not create plural or possessive forms of the IBM trademark. f. The IBM trademark should be sufficiently spaced apart from your product logo and should have sufficient clear space around it - minimally the height of one capital letter. Do not pair the trademark with any type, such as a tag line, or combine it with another logo or symbol. g. The IBM trademark should appear in a single color, preferably black, that provides sufficient contrast to any background colors to be clearly visible. h. You may not use the IBM trademark on promotional items without express authorization. i. Usage of the IBM trademark requires the following attribution: "IBM is a registered trademark of International Business Machines Corporation, used under license therefrom." j. IBM retains the right to review and approve all uses of the IBM trademark, and to require reasonable modification thereof. Improper application may result in loss of the right to use this trademark. Page 18 EX-10.15 22 MARKETING RELATIONSHIP AGMT. WITH IBM EXHIBIT 10.15 IBM Software Vendor Marketing Partnerships - -------------------------------------------------------------------------------- Marketing Relationship Agreement This is a Marketing Relationship Agreement ("MRA") between ShowCase Corporation ("You") and International Business Machines Corporation ("IBM"). The complete Agreement between the parties consists of this MRA and the following Attachments and Exhibits: a) Attachment - Reseller b) Attachment - Cooperative Marketing c) Attachment -- Public Sector Terms d) Attachment - Certificate of Originality e) Exhibit - Your End User License Both parties accept the terms of this Agreement and identified Attachments and Exhibits by signing below. If there is a conflict among the terms of this MRA and any of its Attachments, the terms of the MRA prevail unless the Attachment expressly indicates that particular terms within the Attachment prevail. This Agreement supersedes and terminates Software Vendor Marketing Programs Agreement No. VMP-575, dated January 15, 1997, and all other prior oral or written communications between the parties relating to the subject matter hereof. Once signed, any reproduction of this Agreement made by reliable means (for example, photocopy or facsimile) is considered an original, unless prohibited by local law. This Agreement may only be modified by a writing signed by both parties. AGREED TO: AGREED TO: International Business Machines ShowCase Corporation Corporation By: /s/ J. W. Mason By: /s/ Craig W. Allen ---------------------------- ------------------------------ J. W. Mason Craig W. Allen ---------------------------- Print Name General Manager, Solution Developer Marketing CFO - ------------------------------- --------------------------------- Title 5/28/97 5/23/97 - ------------------------------- --------------------------------- Date Date =============================================================================== 1. Definitions Capitalized terms in this Agreement have the following meanings: Affiliates are Subsidiaries, wholesalers, dealers, distributors, agents and other entities either party separately uses to perform its obligations under this Agreement. For IBM, some Affiliates may also be called IBM Business Partners or Business Associates. Application Template(s) are application specific screens created using the Products and do not require any modifications to the Products Code. Code is computer programming code including both Object Code and Source Code: a) Object Code is computer programming code in substantially binary form, and includes header files of the type necessary for use or interoperation with other computer programs. It is directly executable by a computer after processing or linking, but without compilation or assembly. Page 1 b) Source Code is computer programming code that may be displayed in a form readable and understandable by a programmer of ordinary skill. It includes related source code level system documentation, comments and procedural code and all "Error" corrections and "Enhancements". Source Code does not include Object Code. Enhancements are changes or additions to the Products: a) Basic Enhancements are all Enhancements, other than Major Enhancements, including those that support new releases of operating systems and devices, and correct Errors. b) Major Enhancements provide substantial additional value and are normally offered to customers for an additional charge. Error is a) any mistake, problem or defect that causes a Product to malfunction or to fail to meet its specifications; or b) any incorrect or incomplete statement or diagram in the related documentation that causes a Product to be materially inaccurate or inadequate. Maintenance Support is the Service provided when a customer identifies an Error. There are three levels: a) Level 1 is the Service provided in response to the customer's initial contact identifying an Error. b) Level 2 is the Service provided to reproduce and attempt to correct the Error, or to find that the Service provider cannot reproduce the Error. c) Level 3 is the Service provided to isolate the Error at the component level of the Products. The Service provider distributes the Error correction or circumvention, or gives notice if no correction or circumvention is found. Marketing Materials are Product brochures, manuals, technical specification sheets, demonstration presentations, Product education and training materials, Product descriptions used in electronic online services, and other marketing sales literature provided by you to IBM for IBM's use in performance of marketing activities. IBM's use of Marketing Materials may include transmission of them through electronic marketing services. New Products include a) all Major Enhancements to your Products; b) any of your other software products that render your existing Products downlevel or obsolete; and c) any of your other software products you make generally available that perform functions similar to your existing Products. Preload is the installation of a single copy of the Product(s) onto a non-volatile storage device which is functionally integrated into a computer system and shipped as part of the computer system by IBM. Products are your computer programs in Object Code form, including documentation, related materials, maintenance modifications, Basic Enhancements and any security devices or "locks" that are listed in this Agreement. Services are activities associated with the Products, such as Maintenance Support. Services includes all three levels of Maintenance Support unless stated otherwise. Subsidiary is an entity that is owned or controlled directly or indirectly (by more than 50% of its voting stock, or if not voting stock, decision-making power) by you or IBM. 2. Product Marketing 2.1 IBM may, at its sole discretion, elect to either: a) acquire your Products from you at the IBM Rate established herein and market and resell such Products for licensing to customers (directly or through distribution channels) and at prices established by IBM (the terms of the Reseller Attachment shall apply to all such transactions); or b) request to assist you, for a fee, in the marketing of your Products to customers at prices established by you (the terms of the Cooperative Marketing Attachment shall apply to all such transactions). 2.2 IBM customers may include agencies or other units of the Federal Government, or third parties under contract with the Federal Government ("Public Sector"). In the event IBM desires to market your Products to Public Sector customers, the "Public Sector Attachment" (attached) shall be considered part of this Agreement. Page 2 2.3 IN NO EVENT SHALL IBM BOTH RESELL AND COOPERATIVELY MARKET YOUR PRODUCTS TO A SPECIFIC CUSTOMER AT THE SAME TIME; THEREFORE, EITHER THE TERMS OF THE RESELLER ATTACHMENT OR THE COOPERATIVE MARKETING ATTACHMENT SHALL GOVERN AND IN NO EVENT SHALL BOTH BE IN EFFECT AT THE SAME TIME FOR A SPECIFIC CUSTOMER. 3. Territory The territory for this Agreement shall consist of the United States and Puerto Rico. 4. License Grant 4.1 To enable IBM to effectively market your Products and Services to customers, you grant IBM certain non-exclusive rights and licenses. These rights and licenses include the ability for IBM to use, copy, translate, reproduce, display, perform, Preload, market and distribute, in any medium or distribution technology whatsoever, whether known or unknown, the Products, trade marks and tradenames, and associated Marketing Materials internally and to customers for purposes of promoting the products, training IBM employees and IBM Affiliates on the Products, and in some cases, providing additional services for the Products to customers, including but not limited to the manufacturing or having manufactured copies of your Products on separate media or Preloading them onto computer systems. 4.2 IBM customers may include agencies or other units of a federal government, or third parties under contract with a federal government ("Public Sector"). In the event IBM desires to market your Products to Public Sector customers, the terms and conditions contained in the "Public Sector Attachment" (attached) shall be considered part of this Agreement. 4.3 You authorize us to use Your trademarks, trade names and copyrighted materials for the Products solely for marketing them under this Agreement. Except as provided for in section 3 of the Cooperative Marketing Attachment, entitled "IBM Business Partner Emblem," you will not use our trademarks or trade names without our prior written approval. 4.4 To further enhance IBM's ability to market the Products and Services, you hereby grant to IBM a worldwide, non-exclusive right and license to use the Products for creation of Application Templates. This right and license includes the ability for IBM to make, have made, use, have used, execute, reproduce, display, perform, prepare and distribute Application Templates in any medium or distribution technology whatsoever, whether known or unknown. IBM has all right, title and interest (including ownership of copyright) in such Application Templates prepared by or on behalf of IBM. IBM will not owe you any additional payments for this Application Templates license or for Application Templates IBM markets and distributes to its customers in conjunction with the marketing of the Products. You are not responsible for support of the Application Templates or their associated maintenance. 4.5 These license grants include the right for IBM to authorize its Affiliates to do some or all of the foregoing. This Agreement does not grant IBM any ownership to any of the copyright rights in the Products. 5. End User License: Except in sublicensing situations as set forth in the Reseller Attachment, IBM will license the Products to customers under the terms of your End User License. You will include a copy of your End User License with each Product before you ship it to IBM's customer. It must be packaged so the customer has the opportunity to review your End User License before use of the Product. IBM will obtain the customer's signature on the End User License, if their signature is required. IBM is not a party to the End User License and does not assume any obligation for violations of it. You agree to modify your End User License, if necessary, to comply with the terms and conditions of this agreement. The terms of this Agreement, including its Attachments, and your End User License provide specific legal rights; however, other rights may apply or may vary from jurisdiction to jurisdiction. You agree to modify your End User License as appropriate to comply with the law of each country(s) in the territory in which IBM or an IBM Affiliate is actively marketing your Products. You further agree to provide a reasonable number of copies of your End User License to IBM at no additional charge, written in the local language(s) of each country in the territory in which IBM or an IBM Affiliate is actively marketing your Products. 6. New Products/Withdrawal from Marketing You represent that the Products available to IBM under this Agreement are always the most current release or version that is available to your customers. If you make New Products available to your customers, IBM may offer such New Products to its customers under the terms of this Agreement. You will give IBM at least six months notice prior to withdrawing any Product (including any version) from marketing or support. Page 3 7. Market Support: You agree to provide the following market support activities to IBM and its Affiliates at no additional charge during the term of this Agreement. All of your personnel providing market support will have sufficient Product knowledge and skills to adequately perform the support Services requested. Such personnel will have at least the same level of Product knowledge and skills as your personnel providing similar Services to your customers. o Marketing Events: You agree to participate in trade shows, executive conferences, and other marketing events, on dates and at locations mutually agreed to by the parties. o Telephone Support: You agree to provide telephone consulting services during your normal business hours to address technical questions related to demonstration, marketing, operation, use and installation of the Products. o Pre-sales Support: You agree to provide pre-sales technical support services and demonstration assistance for the Products to IBM on dates and at locations mutually agreed to by the parties. o On-Line Services: IBM often markets software products via an online service provider. In the event IBM decides to market your Products electronically, you agree, if requested by IBM, to obtain a user id (at your expense) from the on-line service provider for purposes of participating in interactive areas wherein actual and potential IBM customers of your Products may seek to exchange information and ask questions relative to your Products. While IBM may also participate in such interactive areas and respond to inquiries, there may be inquiries to which we cannot appropriately respond. Therefore, within two (2) business days of IBM's request, you agree to use your best efforts to furnish IBM with an appropriate response. 8. Training: You agree to provide the following training at no charge to IBM or its Affiliates. All training shall be conducted on dates and at locations mutually agreed to by the parties: o During each 12-month period during the term of this Agreement, you shall conduct (*) marketing training classes related to the demonstration and marketing of the Products. o During each 12-month period during the term of this Agreement, you shall conduct (*) technical training classes related to the installation and use of the Products. For any additional training classes IBM may request, you agree to provide such training on dates and at locations mutually agreed to by the parties. For any additional training classes that the parties may agree to, IBM will reimburse your travel & living expenses in accordance with IBM's standard reimbursement policy, a copy of which will be provided to you on request. 9. Billable Services: "Billable Services" are other services above and beyond those specified in this Agreement. If the parties agree that you will provide Billable Services to IBM, you will furnish such services in a workmanlike manner in accordance with the terms and conditions of a separate IBM Agreement to be negotiated in good faith by the parties. Payment by IBM for Billable Services will be made to you in accordance with the separate IBM Agreement or IBM purchase order authorizing such Billable Services. 10. Most Favored Customer If, during the term of this Agreement you enter into an agreement with a third party for a relationship similar to the one set forth herein with terms that are more advantageous to such third party than those specified in this Agreement, then you shall promptly notify IBM in writing. IBM shall have the right within 30 days after receiving your notification to substitute such different terms for those specified in this Agreement, effective as of the date of availability of such terms to the third party. You shall return to IBM any payments IBM made subsequent to such date which are in excess of the payments required under the substituted terms. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 4 11. Warranty 11.1 Each party warrants to the other that it has the resources to perform its obligations under this Agreement, and that it will comply with any applicable laws, rules or regulations. 11.2 You represent and warrant on an ongoing basis that: (1) you have sufficient rights to the Products (including associated marks and names) to grant IBM the rights specified in this Agreement, and to grant customers the rights specified in your End User License or IBM's license agreement; (2) the Products conform to their specifications and any representations made by you to IBM or customers; (3) the Products (including but not limited to Marketing Materials) do not infringe any patent, copyright, trademark or trade secret or any other intellectual property rights of any third party, and do not contain any virus or other harmful code; (4) all information you supply regarding the Products and Services, including the information you provide in the Marketing Materials, is accurate; and (5) the Products, when used in accordance with their associated documentation, are capable of correctly processing, providing and/or receiving date data within and between the twentieth and twenty-first centuries, provided that all products (for example, hardware, software and firmware) used with the Products properly exchange accurate date data with the Products. 12. Indemnification You will defend and indemnify IBM, its Affiliates, customers and its and their end users, if a third party makes a claim against them, whether actual or alleged, based on your breach of any of the warranties contained in the Section entitled "Warranty." If an infringement claim of any type appears likely or is made against IBM, its Affiliates or customers, about a Product, you will obtain the necessary rights for IBM, its Affiliates and customers to continue exercising all rights granted under this Agreement, or you will modify the Product or its name so that it is non-infringing, or replace it with a Product that is functionally equivalent. In addition to any remedies specified in this Agreement, IBM may pursue any other remedy it may have in law or in equity. You will pay any settlement amounts you authorize and all costs, damages and attorneys' fees that a court finally awards if IBM promptly provides you notice of the claim, and allows you to control and cooperates with you in the defense of the claim and settlement negotiations. IBM may participate in the proceedings at its option and expense. 13. Limitation of Liability Except for claims arising under the Section entitled "Indemnification," neither party shall be liable to the other for any economic consequential damages (including lost profits or savings) or incidental damages, even if advised that they may occur. IBM's total liability is limited to payments due to you under this Agreement. 14. Term and Termination 14.1 This Agreement shall be effective when signed by both parties and shall remain in effect unless terminated as set forth below. 14.2 IBM may terminate this Agreement for convenience on 90 days prior written notice to you. In recognition of the initial costs associated with IBM's marketing efforts for your Products, you may not terminate this Agreement for convenience during the first 12 months after its execution. After the first 12 months you may terminate this Agreement for convenience with 90 days prior written notice to IBM. The effective date of termination will be specified in such prior written notice. 14.3 Either party may terminate this Agreement if the other materially breaches its obligations. The termination must be by written notice specifically identifying the breach upon which it is based and will become effective 90 days after the notice, unless the breach is corrected during the 90 days. 14.4 At the end of the Agreement IBM will either pay you for, return to you, or destroy, any copies of the Products which IBM has in its inventory. IBM may continue marketing any Products in its inventory and distribution channels at the time of termination. Any terms of this Agreement which by their nature extend beyond the day this Agreement ends remain in effect until fulfilled, and apply to respective successors and assignees. Except as otherwise provided in a related agreement, upon termination of this Agreement, all rights and licenses granted by you to IBM shall cease, except IBM shall continue to have all necessary rights and licenses to perform the following activities: (a) IBM and its Affiliates may sell, lease, license and distribute any inventory of Products, (b) IBM and its Affiliates may continue to exercise the rights and licenses granted under this Agreement for up to six months after termination to fill Page 5 customer orders IBM receives before the termination date, (c) for as long as necessary to provide maintenance and support to IBM customers. Any payment obligations by either party shall survive and continue. All rights and licenses granted to IBM's customers and to IBM for internal use shall survive and continue and shall in no way be affected by the termination of this Agreement. 15. Information All information exchanged under this Agreement is non-confidential. Neither party shall disclose the terms of this Agreement to any third party without the other party's prior written consent, except to the extent necessary to establish each party's rights hereunder, or, as required by applicable law or regulations. You agree not to issue press releases or other publicity regarding this Agreement or the relationship under it without IBM's prior written approval. 16. Taxes Each party is responsible for complying with the collection, payment, and reporting of all taxes imposed by any governmental authority applicable to its activities in connection with the sale, lease, delivery or license of the Products under this Agreement. Neither party is responsible for taxes that may be imposed n the other party. Situations may arise where governmental authorities require IBM to withhold from amounts payable to you. In such cases, IBM may withhold the amount of taxes due from payments to be made to you under this Agreement and remit the taxes withheld to the governmental authority. 17. Notice Any notice required or permitted under this Agreement will be sent to the representative named below, and shall be effective upon receipt as demonstrated by reliable written confirmation (for example, certified mail receipt, courier receipt br facsimile receipt confirmation sheet.) Each party will notify the other if their coordinator changes. For IBM: For you: International Business Machines Corporation ShowCase Corporation 3200 Windy Hill Road - WG9A 4131 Highway 52 North, Ste. G111 Atlanta, GA 30339 Rochester, MN 55901 Attention: Robert A. Kramich Attention: John Freund (770) 835-9349 (507) 288-5922 18. General 18.1 Neither party guarantees the success of any marketing effort it engages in for the Products. IBM may independently develop, acquire, and market materials, equipment, or programs that may be competitive with (despite any similarity to) the Products or Services. Each party is responsible for its own costs, including all business, travel and living expenses incurred by the performance of this Agreement. 18.2 Neither party has relied on any promises, inducements or representations by the other, except those expressly stated in this Agreement. This Agreement is not to be construed as a commitment or obligation, express or implied, on the part of IBM that IBM will market, sell, purchase, license or sublicense any Products under this Agreement. 18.3 You may not assign, sell, transfer or subcontract any obligations under this Agreement without IBM's permission. Any act to do so is considered null and void. You will promptly notify IBM of any significant change to your business structure or operating environment. Upon such notification, IBM may terminate this Agreement immediately. 18.4 Neither party will bring a legal action against the other more than two years after the cause of action arose. Each party waives a jury trial in any dispute. Failure by either party to demand strict performance or to exercise a right does not prevent either party from doing so later. 18.5 The parties are independent contractors. Personnel you supply are deemed your employees and are not for any purpose considered employees or agents of IBM. Each party assumes full responsibility for the actions of its personnel while performing its obligations under this Agreement and is solely responsible for their direction and compensation. The parties agree that use of the Products by IBM does not create any obligations for IBM in any way limiting or restricting the assignment of its employees. IBM and its employees are free to use any information, processing ideas, concepts or techniques disclosed in the Products for any purpose whatsoever, subject to your statutory patent and copyright riqhts. Page 6 18.6 The laws of New York govern this Agreement. The United Nations' Convention on the International Sale of Goods does not apply. Page 7 IBM Reseller Attachment - -------------------------------------------------------------------------------- This Reseller Attachment sets forth the additional terms under which we may acquire the Products at the IBM Rate set forth herein and market and license such Products to our customers at prices to the customer established by IBM. This Reseller Attachment is invoked when IBM makes the unilateral election to market and license Your Products to a customer. IBM will notify you of our election to act as a reseller of your Products to a specific customer by sending you an IBM order as set forth in the Section below entitled, "Delivery," by mail, fax, or electronic means. 1. Additional License Grants To enable IBM to market and license your Products and Services to customers, you grant to IBM the non-exclusive rights and licenses set forth in this Section 1 in addition to the rights and licenses granted in the Agreement. 1.1 You grant IBM a non-exclusive right and license to use, copy, translate, reproduce, display, perform, market and distribute, in any medium or distribution technology whatsoever, whether known or unknown, the Products and Services to customers. Each time IBM provides a Product to a customer for productive use, IBM will pay you a royalty in accordance with the terms stated in this Agreement. 1.2 The license grant in 1.1 above allows IBM to resell and distribute your Products and Services to customers either alone or in combination with other IBM and/or non-IBM machines and/or software programs for the purpose of manufacturing or having manufactured copies of your Products on separate media or Preloading them onto computer systems, license the Products to customers under the terms of your end user license agreement ("End User License"), allow customers to evaluate them free of charge (limited to 60 days of trial use), and in some cases provide maintenance and support or additional services for the Products. 1.3 In certain situations or in certain geographies it may be advantageous to allow IBM to provide the Products and Services to customers under an IBM end user license agreement. Therefore, you hereby authorize IBM and its Affiliates to sublicense the Products to customers under the terms of an IBM end user license agreement. IBM is responsible for all licensing terms offered to its customers when IBM sublicenses the Products under its end user license. Hereafter, every reference in this Agreement regarding IBM's right to license the Products shall also include IBM's right to sublicense the Products. You warrant the accuracy of all statements in the attached completed Certificate of Originality. You agree to complete a new Certificate of Originality before adding any New Products to this Agreement. 1.4 These license grants include the right for IBM to authorize its Affiliates to do some or all of the foregoing. This Agreement does not grant IBM any ownership to any of the copyright rights in the Products. 2. Your Responsibilities 2.1 Delivery You agree to deliver the Products specified by IBM in an order, and will use your best efforts to meet IBM's requested delivery dates and quantities. You will notify IBM within 5 working days of IBM's order if you can not meet IBM's request, and will include a proposed delivery schedule that you agree to meet. IBM can accept your proposed delivery schedule or cancel the order without liability. If requested by IBM, you agree to electronically confirm to IBM within one working day the date your Product shipped to IBM's customer. You will pay all transportation charges required for the shipment of the Products to the location IBM specifies. 2.2 Support: You agree to offer warranty, maintenance, and end user support Services to IBM customers that are at least as favorable as those you generally offer to your own customers for the Products. This offer shall be available to IBM customers during the term of this Agreement and for at least one year after delivery of each Product licensed to an IBM customer under your End User License. If a Product does not comply with its warranties, you agree to correct the problem without charge and in a timely manner. 2.3 Product Masters: You will provide IBM two (2) complete machine readable master copies of each of the Products listed in Section 4.0 of this Attachment, entitled "Royalties," in magnetic or optical media in a form suitable for use in manufacturing or preloading of such Products on computer systems. You agree to deliver such items within fifteen (15) days after the effective date of this Agreement. 2.4 Returns: You agree to give IBM a refund for any monies it paid for Products that contain an Error that, in IBM's reasonable judgement, render the Product unsuitable for marketing. Page 8 2.5 Error Correction: You will use commercially reasonable efforts to correct reproducible Errors in the Products and associated documentation. If you are unable after such efforts to correct the Errors, you agree to replace the Products not meeting your warranty. IBM will either return the defective Products to you, or destroy them, at your direction. 2.6 Marketing Materials: You agree to provide to IBM and its Affiliates at no additional charge: 1) a mutually agreed to number copies on an annual basis; and 2) camera ready artwork, suitable for use in manufacturing, of the Marketing Materials related to the Products in the local language of each country in the territory in which IBM or an IBM Affiliate is actively marketing your Products. IBM and its Affiliates may make unlimited copies of the Marketing Materials to provide to potential or actual customers. You authorize IBM to alter the Marketing Materials to indicate that IBM has the authority to market, price, license and provide services for the Products. IBM shall submit for your prior written approval all Marketing Materials which IBM prepares for marketing your Products to customers. Your consent to use all information included in such Marketing Materials, including but not limited to, content, descriptions, technical information and usage of trademarks, trade names and copyrighted materials shall not be unreasonably withheld. You shall respond in a timely manner to IBM for all such submissions. You also agree to provide to IBM a reasonable number of copies of your Products for demonstration purposes, as provided for in this Agreement. 3. IBM's Responsibilities 3.1 Marketing Activities: IBM will use reasonable efforts to develop and implement a market support plan for the Products. The market support plan may include, at IBM's sole discretion, the following marketing activities for the Products: o identify and qualify customers for the Products; o as appropriate, demonstrate the Products to customers; o develop sales proposals; o advertise your Products in various trade magazines and other publications; o include your Products in trade shows, executive conferences, and other marketing events; o implement telemarketing or direct mail campaigns; o electronically publish information about your Products. 3.2 Activities: IBM is responsible for ordering, billing and accounts receivable activities related to the Products it licenses to customers. 4. Royalties 4.1 IBM will pay you the royalty amount set forth in the following table ("IBM Rate") for each Product IBM or its Affiliates licenses to a customer. The formula used to calculate the IBM Rate for Products shall be the same formula used to calculate the IBM Rate for New Products. You agree not to charge IBM higher rates than those you charge to others who have a similar relationship with you. IBM is not obligated to license any minimum quantities. IBM payments to you will be at the IBM Rate subject to any withholding tax requirement and/or any applicable transaction based taxes (including, without limitation, sales and value-add taxes), and shall be net of refunds and adjustments granted to customers. With the exception of the IBM Rate (subject to any withholding requirements plus any applicable transaction based taxes), IBM will not pay you any other payments related to the Products (for example, under any IBM Business Partner Agreement). IBM shall have full freedom and flexibility in pricing your Products and in establishing the terms and conditions under which they are offered to customers. IBM is not required to pay you, and you agree not to charge IBM for, taxes for the Products which are licensed by IBM in the United States and Puerto Rico. Page 9
- -------------------------------------------------------------------------------------------------------------------- Product Type Product Name IBM Rate - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Strategy Promotion #1((*) workstations)(1) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Strategy Promotion #2 ((*) workstations)(2) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Server/Query ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Server/Query ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Server/Query ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Server/Query ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Server/Query ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Server/Query ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Server/Query ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- (*) - ------------------------------------------------------------------------------------------------------------------- Products ShowCase Report Writer(3) ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Report Writer(3) ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Report Writer(3) ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Report Writer(3) ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Report Writer(3) ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Report Writer(3) ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Report Writer(3) ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Analyzer(4) ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Analyzer(4) ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Analyzer(4) ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Analyzer(4) ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Analyzer(4) ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Analyzer(4) ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Analyzer(4) ((*) workstations) (*) - -------------------------------------------------------------------------------------------------------------------- (*) - -------------------------------------------------------------------------------------------------------------------- Products ShowCase Distributor(5) (*) - -------------------------------------------------------------------------------------------------------------------- Products Essbase/400 Server (*) - -------------------------------------------------------------------------------------------------------------------- Products Essbase/400 Port(6) (concurrent Ports) (*) - --------------------------------------------------------------------------------------------------------------------
(1) ShowCase Strategy Promotion #1 is good through 7/31/97 and includes ShowCase Server/Query, ShowCase Report Writer and ShowCase Distributor. (2) ShowCase Strategy Promotion #2 is good through 7/31/97 and includes ShowCase Server/Query, ShowCase Report Writer, ShowCase Analyzer, ShowCase Distributor, Essbase/400 Server and Essbase/400 Port. (3) Report Writer requires Server. (4) Analyzer will support Essbase/400 only. (5) Distributor connection shall mean a line between two or more AS/400's. (6) Minimum initial order of 5 ports required. 4.2 In the event IBM finds it necessary to offer a customer a special discount, then on a case by case basis IBM may request a lower IBM Rate for such transaction. If you agree to such lower IBM Rate, the parties will sign an amendment specifying the lower amount. 4.3 IBM has no royalty obligation for Products used for the following purposes: o for manufacturing copies of your Products on separate media or Preloading them onto computer systems; o preparation of Application Templates by IBM (including third parties under contract with IBM); o marketing, demonstrations, customer evaluations and trial use; o Product training and education of IBM and IBM Affiliate employees; o Product maintenance and support; (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 10 o backup and archival purposes; o Basic Enhancements and Error corrections, or o warranty replacement copies of the Products 4.4 Royalties are paid against revenue recorded by IBM in a royalty payment quarter. In the U.S., a royalty payment quarter ends on the last business day of the calendar quarter. Outside the U.S., a royalty payment quarter is defined according to IBM's current administration practices. IBM shall make payments to you 30 days following the close of the royalty payment quarter in which IBM invoices a customer for a Product. All payments to you shall be net of refunds, adjustments, and if applicable, taxes. Payment will be accompanied by a summary of the basis for determining its amount. IBM will maintain records to support the payment amount. Payment will be made by either electronic funds transfer, or by mail. Payment is deemed to be made on the date of electronic funds transfer, or on the date of mailing, as applicable. All payments will be made in U.S. dollars. Payments based on foreign revenue will be converted to U.S. dollars at the rate of exchange published by Reuters Financial Service on approximately the same day each quarter. Page 11 IBM Cooperative Marketing Attachment - -------------------------------------------------------------------------------- In the event IBM makes the unilateral election to assist you, for a fee, in marketing of your Products to customers in the United States and Puerto Rico and under the terms of your End User License and at prices to the customer established by you, the provisions set forth in this Cooperative Marketing Attachment shall apply to all such transactions. IBM will notify you of its election to provide marketing assistance by sending to you a prospect registration letter. 1. Appointment You agree to accept or reject the prospect registration letter and sign and return it to IBM within ten (10) business days of receipt. Any rejection of the prospect registration letter by you must be accompanied by a statement indicating the basis of rejection. By accepting the prospect registration letter, you thereby designate and appoint IBM to act as your non-exclusive representative for the marketing of your Products to the customer identified therein for a period of six months following its effective date unless extended by mutual agreement. In such event, you will inform your personnel that IBM has elected to cooperatively market the Products to this customer. 2. Expiration/Termination of the prospect registration letter IBM may immediately commence reselling activities for a customer upon the earlier of expiration of the term of the prospect registration letter or upon notifying you that the customer identified therein has acquired the Products as a result of cooperative marketing activities. IBM may terminate a prospect registration letter for a customer by providing written notification to you. You agree to confirm in writing to IBM your receipt of any such notification and your understanding that IBM is prohibited from commencing reselling activities to that specific customer for a period of six months. IBM may commence reselling activities for the customer for which IBM is terminating the prospect registration letter. 1) immediately, if IBM has not commenced cooperative marketing activities or if you have rejected the prospect registration letter, or 2) six months after IBM's notice of termination in the event IBM has commenced cooperative-marketing activities. In the event of your rejection of a prospect registration letter, IBM may immediately commence reselling activities for the customer identified therein. 3. IBM Business Partner Emblem IBM hereby grants you the use of the IBM Business Partner emblem ("Emblem") in your advertising and promotional materials for the Products in the United States and Puerto Rico. You shall not use the Emblem prior to IBM's initial announcement of the availability of the Products. Any use must comply with the instructions set forth in guidelines issued by IBM from time to time entitled "IBM Advertising and Promotion Guidelines" ("Guidelines"). A copy of the Guidelines shall be provided to you and is incorporated herein by reference. You may not use the IBM logotype other than as part of the Emblem. Except for your press releases and as otherwise specified in the Guidelines, you do not need to provide to IBM for IBM's prior review and approval your advertising materials incorporating trademarks or trade names of IBM or that which refers to you as a participant in the IBM Software Vendor Marketing Program if such use complies with the Guidelines. You must provide to IBM for IBM's prior review and approval your press releases if such release makes any reference to the IBM Software Vendor Marketing Program. You shall make no reference to IBM, IBM equipment and IBM products that may be misleading. You agree to change, at your expense, any advertising materials which IBM, in its sole judgment, determines to be inaccurate, objectionable, misleading, or a misuse of IBM trademarks or trade names. You, on written demand by IBM, shall immediately cease the use of any materials that IBM deems to be in violation of this section. The authorization granted in this section shall terminate immediately upon the termination or expiration of this Agreement. IBM reserves the right to modify or revoke the authorization granted to you hereunder effective upon thirty (30) days written notice. Such revocation shall be effective immediately upon written notice in the event of any violation by you of the Guidelines or breach of this Agreement. Upon revocation of the rights granted in this section or upon termination or expiration of this Agreement, you shall cease using the Emblem, and shall destroy any and all advertising materials. 4. Your Additional Responsibilities 4.1 Pricing - Notwithstanding anything contained herein, you shall retain full and absolute freedom and flexibility in pricing your Products, and in establishing the terms and conditions under which they may be offered to customers under the terms of this Cooperative Marketing Attachment. Page 12 4.2 Marketing Package - "Marketing Package" means materials provided by you to IBM for use in performing cooperative marketing activities. You agree to provide a Marketing Package to the IBM marketing representative identified in each prospect registration letter accepted by you. The Marketing Package shall include the following: o Software Vendor Marketing Programs Notice - an IBM supplied description of IBM's responsibilities to prospects with respect to the Product(s); o Marketing Materials; o Order Form - an IBM supplied form on which orders for the Product(s) may be taken for you; o Price Schedule - a written statement supplied by you of your retail prices for the Product(s), including discounts offered, if any; o System Requirements Statement - a written statement supplied by you that identifies each Product's software and hardware dependencies and prerequisites; o Your End User License. IBM shall have the right to review the materials supplied by you in the Marketing Package and, except for your Price Schedule, to request reasonable modifications. You shall give IBM forty-five (45) days prior written notice should you elect to change any materials supplied by you in the Marketing Package and shall provide IBM with a complete copy of the revised Marketing Package at least thirty days prior to the effective date of the changes. IBM shall have the right to review all changes to the Marketing Package and, except for your Price Schedule, to request reasonable modifications. You shall at all times during the term of this Agreement ensure that the Marketing Package completely and accurately represents the Products and shall provide reasonable quantities of the most current Marketing Package to IBM upon request. 4.3 Marketing Support - You shall cooperate with IBM in the marketing of the Products. Such cooperation shall include the reasonable provision of technical support services and training to IBM (including, but not limited to, telephone support), and reasonable participation and assistance with sales calls to prospects, trade shows and conferences. In addition, you shall, in a manner reasonably consistent with industry practice, promote the Products through national and local advertising. 4.4 Customer Qualification - You shall promptly review the qualifications of each customer that has signed your End User License. If you determine that you are unwilling to accept an End User License, you shall so notify IBM in writing prior to notifying the customer. Your notice to IBM shall identify the reason for such rejection. 4.5 Shipment - You shall ship or deliver the Products no later than the requested shipment date contained in the order confirmation notice, as described herein, or within 7 days of receipt said notice, unless a different date is specified on your End User License. If such shipment date is not reasonably possible, you shall promptly notify the customer and IBM of your projected shipment date and shall ship, deliver or provide the Products at the earliest possible date. 4.6 Invoicing and Payment - You shall invoice and use reasonable efforts to collect all amounts payable under each End User License accepted by you. You shall pay to IBM the compensation set forth in the Section entitled, "Payment to IBM," and shall provide IBM with documentation and maintain records as provided therein. You shall timely notify IBM when a customer's signature on an End User License is independently obtained by you and payment is due IBM. 4.7 Order Confirmation - IBM may provide you with order confirmation notices identifying Products licensed by customers. You shall confirm in writing within ten (10) working days from date of receipt, the Products licensed by a customer, the dollar value of the related End User License(s) and the estimated date you will pay to IBM the associated fees as described in the Section entitled, "Payment to IBM." 5. IBM'S Additional Responsibilities 5.1 Marketing Support Activities - IBM will, at its sole cost, undertake the following Marketing Support Activities for the Products: Page 13 o provide to you the Emblem as described in the Section entitled, "IBM Business Partner Emblem" of this Agreement; and o issue an availability notice to the marketing force that describes the Products and announces that the marketing force may solicit and obtain orders for the Products on your behalf, o make available to you a registration process whereby you may accept or reject a customer; and o include Your Products (identified as Software Vendor Marketing Programs offerings) in IBM National Solution Center database. 5.2 Marketing Activities - In addition, IBM may at its sole discretion and cost, undertake some or all of the following Marketing Activities for the Products: o identify a customer for the Products; o qualify the customer; o participate in joint sales calls with you, including marketing presentations and/or Product demonstrations; o proposal support; o solicit and obtain orders from customers on the Order Form and obtain the customer's signature on your End User License and forward or facilitate the forwarding of the same to you; o in a manner and amount that IBM deems appropriate, compensate the marketing force based upon fees received by IBM from you under this Agreement. 6. PAYMENT TO IBM 6.1 IBM FEE - in consideration for the Marketing Support Activities and Marketing Activities provided by IBM as described herein, you shall owe IBM a fee ("IBM Fee"), listed in the table below, equal to the applicable percentage of the total revenue received by you for Products under: o (a) Your End User License agreements with customers obtained as a result of Marketing Activities (with or without an order confirmation notice and/or with or without a prospect registration); and o (b) Your End User License agreements with customers rejected by you under the Subsection entitled "Customer Qualification": provided, however, that you subsequently accept a signed End User License agreement for the Products from such customers during the term of this Agreement and for six (6) months after IBM's withdrawal of the Products from marketing; and o (c) Additional End User License agreements for Products issued to customers by you during the term of this Agreement and six (6) months after IBM's withdrawal of the Products from marketing which are a direct or follow-on result of IBM's Marketing Activities; and o (d) Your End User License agreements with customers obtained as a result of IBM's Marketing Activities initiated before IBM's withdrawal of the Products from marketing and three (3) months following said withdrawal. - ------------------------------------------------------------------------------- Product Type Product Name IBM Fee - ------------------------------------------------------------------------------- Products Showcase Strategy (*) of Your Revenue for Products - ------------------------------------------------------------------------------- 6.2 Payment Obligation - The IBM Fee for Marketing Activities shall accrue when the customer's license fee for the Products becomes payable to you. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. Page 14 6.3 Remittance - Your payment of the IBM Fee shall be made to IBM within thirty (30) days after the close of each calendar month in which you receive payment from a customer for Products. Your payment of the IBM Fee shall be accompanied by an activity report summarizing the basis for the payment to IBM, and shall include: the name, quantity, and unit price of each Product licensed by each customer, the order confirmation control number, the IBM feature and/or program number, the total due you from each customer, the total customer payments received by you, the total fee due to IBM, the total fees paid to date to IBM under each of your End User License(s), and the fee amount due for the reporting month. For months in which no payment is due IBM, you will send an activity report so stating. In addition, in the event: (a) you reject a customer-signed End User License agreement; (b) a customer cancels its order prior to making payment to you; or (c) you grant a customer a refund, the activity report shall contain detailed information identifying the reasons for and amounts of any resulting adjustment in payment due IBM. 6.4 Payments - Any payments due IBM under this Agreement shall be separate from, and in addition to, any due IBM under any other agreement between the parties. Your payments to IBM under this Agreement shall be sent to: IBM Corporation Vendor Marketing Programs Control Desk Department BAR (WG09A) 3200 Windy Hill Road Atlanta, GA 30339 6.5 IBM Fee Dispute - In the event IBM determines that additional payment is due, IBM will issue an invoice for such additional amount with supporting documentation. Except for disputed fees, you agree to pay such invoice within 30 days of receipt. In the event a dispute arises over fees due to IBM, IBM and you agree to work in good faith toward a mutually agreeable resolution of the dispute. Page 15 IBM Public Sector Attachment - -------------------------------------------------------------------------------- This Public Sector Attachment is considered part of the Agreement. It establishes additional terms and conditions under which IBM may, at its sole discretion, market and/or license your Products and Services to Public Sector customers under your End User License. Public Sector customers include federal government, federal government owned or affiliated (or sponsored) corporations or other organizations involved in federal government procurement activities, including but not limited to organizations that are authorized to procure using IBM's General Services Agreement (GSA) Schedule Contract, or equivalent documentation, and prime contractors and subcontractors who are engaged in federal government procurement opportunities. Though actual usage of the Products may occur outside the geographical boundaries of the Public Sector customer's home country, such as embassies, the end user will be bound by the end user license agreed to by the Public Sector's home country. If the terms of this Attachment conflict with any terms of the MRA, the terms of this Attachment will prevail. 1. Cooperative Marketing When IBM elects to assist you for a fee in marketing your Products and Services to Public Sector customers as set forth in the Cooperative Marketing Attachment, you will contract directly with the Public Sector customer. You shall 1) promptly disclose to all Public Sector customers the existence of this Agreement, including the existence of the contingent fee payment arrangement in effect with IBM that would apply to the Public Sector customer's acquisition of the Product(s), 2) promptly, completely, and accurately execute any certifications, representations, and disclosure documents that may be required by any Public Sector customers to comply with federal regulations requiring certification and disclosure of contingent fee arrangements applicable to the acquisition of the Product(s). 2. Product Reselling When IBM resells your Products for licensing to Public Sector customers, the following additional terms apply: 1. Any limited license, limited preview, trial or demonstration use of the Product(s) may be offered to Public Sector customers under the terms of the IBM Agreement for Trial or Loan - Federal, or a similar IBM agreement, rather than your End User License or your Trial License Agreement. 2. Once the Public Sector customer decides to procure your Products, IBM will attempt to have the Public Sector customer directly execute your End User License. In the event the Public Sector customer insists on one contracting party, you authorize IBM to offer your End User License to the Public Sector customer such that IBM and the customer will be the parties to the license. In such cases, you agree that the license terms are inapplicable to IBM, but rather govern the Public Sector customer's use of your Product(s). 3. You agree that your End User License terms may be modified as directed by the procurement rules and regulations of the Public Sector customer or as otherwise appropriate. 4. Specifically for Public Sector customers in the United States whose procurement is governed by the Federal Acquisition Regulation ("FAR"), you agree: o (a) the minimum rights granted to such customers is that specified in the Restricted Rights Notice (JUN 1987); Page 16 o (b) the Products IBM is authorized to market and license to Public Sector customers are published copyrighted commercial computer software meeting the definition of "restricted computer software" as defined in FAR 52.227-14 (JUN 1987). Such Products also meet the definition of Commercial item as defined in FAR 2.101 (AUG 1996). o (c) you agree to the following clauses which must be contained in all IBM subcontracts: - (i) FAR 52.226-26, Equal Opportunity - (ii) FAR 52.222-36, Affirmative Action for Handicapped Workers; - (iii) FAR 52.222-35, Affirmative Action for Special Disabled and Vietnam Era Veterans; and - (iv) FAR 52.247-64, Preference for Privately Owned U.S. Flagged Commercial Vessels. o (d) You agree to accurately notify IBM whether your Products are domestic end products for purposes of the Buy American Act (BAA), the Trade Agreements Act (TAA) and related Public Sector statutes and regulations. For purposes of this subparagraph, a domestic end product which is software consists of Products as to which the country of media replication, the country of printing of publications for such Products, and the final assembly of such media and related publications into the Products, completely occurs in the United States. 5. Insofar as disputes are concerned, you agree that IBM may resolve disputes with Public Sector customers in accordance with those customers' own disputes resolution procedures. 6. In addition to the warranties set forth in this Agreement, you hereby represent and warrant that you have all the rights to allow IBM to market and license your Products to Public Sector customers. You warrant that you are not suspended or debarred from doing business with any Public Sector customer. 7. To the extent required by regulation or statute, you agree to provide supporting data including that with respect to your Product(s)' pricing, location of manufacture, and commerciality. EX-10.16 23 AMDMT. NO. 1 TO MKTG. AGMT. WITH IBM EXHIBIT 10.16 IBM Software Vendor Marketing Partnerships - -------------------------------------------------------------------------------- Amendment 01 to MIRA #T97074-00 T97074-01 AMENDMENT NUMBER 01 TO MRA #T97074-00 This is Amendment Number 01 to our Marketing Relationship Agreement No. T97074-00 dated May 22, 1997 (hereinafter called "Agreement") between IBM Corporation ("IBM") and ShowCase Corporation ("You"). Whereas the parties have entered into the Agreement that sets forth the terms and conditions whereby IBM may remarket or cooperatively market Your Products in the United States; and Whereas You've notified IBM in writing of: 1) changes to Your Products names, licensing structure and current list prices; and 2) additional new available Products; and Whereas the parties have agreed to 1) expand only the remarketing relationship of this Agreement to include Canada; and 2) incorporate Your new Product's, Product names, licensing structure and list prices under this Agreement; NOW THEREFORE, the parties agree to modify the Agreement, its Attachments and Amendments as follows: 1. Section 1 entitled "Definitions" of the Agreement, is hereby modified by superseding and replacing the definition of "Products" with the following: Products are your computer programs, and any third party computer programs included with your Products under your End User License, in Object Code form, including documentation, related materials, maintenance modifications, Basic Enhancements and any security devices or "locks" that are listed in this Agreement. 2. Section 3 entitled "Territory," of the Agreement, is hereby superseded and replaced with the following: 3. Territory 3.1 The territory for this Agreement, applicable for the resale of the Products pursuant to the Reseller Attachment, shall consist of the United States and Puerto Rico (US), and Canada. 3.2 The territory for this Agreement, applicable for the cooperative marketing of the Products pursuant to the Cooperative Marketing Attachment, shall be the United States and Puerto Rico. 3. Section 4.1 of Section 4.0 entitled "Royalties," of the Reseller Attachment of the Agreement is hereby modified by superseding and replacing its text as follows and by adding the new Product/IBM Rate tables: IBM will continue to pay you the current royalty amount set forth in the Agreement's current existing table ("IBM Rate") for each Product IBM or its Affiliates licenses to a customer. Effective upon: 1) the date IBM Announces availability of your Products (listed in the Product Offering List Attachment) in the US or within ninety (90) days from the date the parties execute this Amendment, whichever occurs first; and 2) the date IBM Announces availability of your Products (listed in the Product Offering List Attachment) in Canada; the already existing IBM Rates set forth in the Agreement's current existing table are hereby superseded and replaced with the new IBM Rates, listed in the tables below, that IBM will pay you for each Product IBM or its Affiliates licenses to a customer. The formula used to calculate the IBM Rate for Products shall be the same formula used to calculate the IBM Rate for New Products. You agree (*). IBM payments to you will be at the IBM Rate subject to any withholding tax requirement and/or any applicable transaction based taxes (including, without limitation, sales and value-add taxes), and shall be net of refunds and adjustments granted to customers. You may, (*), increase your Products list prices by giving IBM prior written notice. Any such increase shall become effective ninety (90) days after IBM receives such notice. You agree (*) not yet installed from the date (*) effective. For any such (*), you agree to give IBM forty-five (45) days prior written notice. With respect to any temporary Promotional offers for the Products, IBM's participation in any such offers will be solely at IBM's option. In either case above, a letter amendment specifying your new list prices will be executed by the parties. The new IBM Rate, reflecting such price change, will be paid to you for all Products IBM or its Affiliates licenses to a customer on or after the first day of the affected period stated above. IBM will not pay you any other payments related to the Products (for example, under any IBM Business Partner Agreement). IBM shall have full freedom and flexibility in pricing your Products and in establishing the terms and conditions under which they are offered to customers. IBM is not required to pay you, and you agree not to charge IBM for, taxes for the Products which are licensed by IBM in the Territory.
- ---------------------------------------------------------------------------------------------------------------- Product Type Product Name IBM Rate for US & Canada - ---------------------------------------------------------------------------------------------------------------- Products All Products listed on Product (*) of Your Products US List Prices Offering List Attachment specified in the Product Offering List Attachment - ---------------------------------------------------------------------------------------------------------------- Upgrades All Products listed under Product (*) of Your Products Upgrades US Upgrades section of Product List Prices specified in the Offering List Attachment Product Offering List Attachment - ----------------------------------------------------------------------------------------------------------------
4. Section 4.4 of Section 4.0 entitled "Royalties," of the Reseller Attachment of the Agreement is hereby modified by superseding and replacing its text as follows: 4.4 Royalties are paid against revenue recorded by IBM in a royalty payment quarter. In the U.S., a royalty payment quarter ends on the last business day of the calendar quarter. Outside the U.S., a royalty payment quarter is defined according to IBM's current administration practices. IBM shall make payments to you 30 days following the close of the royalty payment quarter in which IBM records that a customer has acquired a royalty bearing license for a Product, and recognizes revenue for the Product. All payments to you shall be net of refunds, adjustments, and if applicable, taxes. Payment will be accompanied by a summary of the basis for determining its amount. IBM will maintain records to support the payment amount. Payment will be made by either electronic funds transfer, or by mail. Payment is deemed to be made on the date of electronic funds transfer, or on the date of mailing, as applicable. All payments will be made in U.S. dollars. (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. -2- 5. Section 6.1 of Section 6 entitled "Payment to IBM" of the Cooperative Marketing Attachment to this Agreement is hereby modified by superseding and replacing the IBM Fee table with the following: - ------------------------------------------------------------------------------- Product Type Product Name IBM Fee - ------------------------------------------------------------------------------- Products All Products listed in Product (*) of Your Revenue Offering List Attachment for Products - ------------------------------------------------------------------------------- 6. Attached "Product Offering List Attachment" is hereby added to the Agreement as a new Attachment. 7. Exhibit entitled "Your End User License" to the Agreement is hereby superseded and replaced with the attached "Exhibit - Your End User License". 8. Attachment entitled "Certificate of Originality" to the Agreement is hereby superseded and replaced with the attached "Attachment - Certificate of Originality". Except as amended hereby, the Agreement and any Amendments and Attachments thereto shall remain in full force and effect. In WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective authorized representatives. ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO: International Business Machines ShowCase Corporation Corporation /s/ Julie F. Joyce /s/ Ken Holec - -------------------------------- -------------------------------- Julie F. Joyce Print Name: Ken Holec Director, Worldwide Strategy & Title: President and Chief Business Development Executive Officer Date: 10-28-98 Date: 10/26/98 (*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. -3- IBM Software Vendor Marketing Partnerships Product Offering List Attachment T97074-01 PRODUCT OFFERING LIST ATTACHMENT Product Upgrades
- --------------------------------------------------------------------------------------------------- Products Your US List Prices - --------------------------------------------------------------------------------------------------- Analyzer Client Ports (*) - --------------------------------------------------------------------------------------------------- Analyzer for the Web Ports (*) - --------------------------------------------------------------------------------------------------- Analyzer Server, 1 way s-10 or 170 (*) - --------------------------------------------------------------------------------------------------- Analyzer Server, 1 way processor (*) - --------------------------------------------------------------------------------------------------- Analyzer Server, 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Analyzer Server, 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Essbase Personal Desktop (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Currency Conversion 1-way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Currency Conversion 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Currency Conversion 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Development Server, 1-way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Development Server, 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Development Server, 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Ports (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Server, 1-way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Server, 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Server, 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Spreadsheet Toolkit, 1-way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Spreadsheet Toolkit, 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Spreadsheet Toolkit, 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 SQL Drill Through, 1 way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 SQL Drill Through, 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 SQL Drill Through, 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Partitioning 1-way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Partitioning 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Essbase/400 Partitioning 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Strategy Report Writer (*) - --------------------------------------------------------------------------------------------------- Warehouse Builder Server 1 way S-10 or 170 (*) - --------------------------------------------------------------------------------------------------- Warehouse Builder Initial Server 1 way processor (*) - --------------------------------------------------------------------------------------------------- Warehouse Builder Initial Server 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Warehouse Builder Initial Server 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Warehouse Builder Secondary 1 way processor (*) - --------------------------------------------------------------------------------------------------- Warehouse Builder Secondary 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Warehouse Builder Secondary 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Warehouse Builder DB2/AIX Source (*) - --------------------------------------------------------------------------------------------------- Warehouse Builder DB2/MVS Source (*) - --------------------------------------------------------------------------------------------------- Warehouse Builder DB2/NT Source (*) - --------------------------------------------------------------------------------------------------- Warehouse Manager Server 1 way S-10 or 170 (*) - --------------------------------------------------------------------------------------------------- Warehouse Manager Initial Server 1 way processor (*) - --------------------------------------------------------------------------------------------------- Warehouse Manager Initial Server 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Warehouse Manager Initial Server 8-12 way processor (*) - ---------------------------------------------------------------------------------------------------
(*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. IBM Software Vendor Marketing Partnerships Product Offering List Attachment T97074-01 PRODUCT OFFERING LIST ATTACHMENT Product Upgrades
- --------------------------------------------------------------------------------------------------- Warehouse Manager Ports (*) - --------------------------------------------------------------------------------------------------- Warehouse Manager Secondary Server, 1 way processor (*) - --------------------------------------------------------------------------------------------------- Warehouse Manager Secondary Server, 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Warehouse Manager Secondary Server, 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Development Currency Conversion, 1-way processor (*) - --------------------------------------------------------------------------------------------------- Development Currency Conversion, 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Development Currency Conversion, 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Development Partitioning, 1-way processor (*) - --------------------------------------------------------------------------------------------------- Development Partitioning, 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Development Partitioning, 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Development Spreadsheet Toolkit, 1-way processor (*) - --------------------------------------------------------------------------------------------------- Development Spreadsheet Toolkit, 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Development Spreadsheet Toolkit, 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Development SQL Drill Through, 1-way processor (*) - --------------------------------------------------------------------------------------------------- Development SQL Drill Through, 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Development SQL Drill Through, 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Financial Deployment Accelerators JDE, 1-way processor (*) - --------------------------------------------------------------------------------------------------- Financial Deployment Accelerators JDE, 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Financial Deployment Accelerators JDE, 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Sales Analysis Deployment Accelerators JDE, 1-way processor (*) - --------------------------------------------------------------------------------------------------- Sales Analysis Deployment Accelerators JDE, 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Sales Analysis Deployment Accelerators JDE, 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Product Upgrades - --------------------------------------------------------------------------------------------------- Products Your US List Prices - --------------------------------------------------------------------------------------------------- ShowCase Analyzer Server Upgrades: - --------------------------------------------------------------------------------------------------- From Analyzer Server 1 way S-10 or 170 to 1 way processor (*) - --------------------------------------------------------------------------------------------------- From Analyzer Server 1 way S-10 or 170 to 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- From Analyzer Server 1 way S-10 or 170 to 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- From Analyzer Server 1 way processor to 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- From Analyzer Server 1 way processor to 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- From Analyzer Server 2-4 way processor to 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- (*) - --------------------------------------------------------------------------------------------------- ShowCase Essbase/400 Server Upgrades: - --------------------------------------------------------------------------------------------------- 1-way processor to 2-4 processor (*) - --------------------------------------------------------------------------------------------------- Currency Conversion 1 way processor to Currency Con. 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Spreadsheet Toolkit 1-way processor to Spreadsheet Toolkit 2-4 way (*) - --------------------------------------------------------------------------------------------------- SQL Drill Through 1-way processor to SQL Drill Through 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Partitioning 1-way processor to Partitioning 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- 1-way processor to 8-12 processor (*) - --------------------------------------------------------------------------------------------------- Currency Conversion 1 way processor to Currency Con. 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Spreadsheet Toolkit 1-way processor to Spreadsheet Toolkit 8-12 way (*) - --------------------------------------------------------------------------------------------------- SQL Drill Through 1-way processor to SQL Drill Through 8-12 way (*) - ---------------------------------------------------------------------------------------------------
(*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. IBM Software Vendor Marketing Partnerships Product Offering List Attachment T97074-01 PRODUCT OFFERING LIST ATTACHMENT Product Upgrades
- --------------------------------------------------------------------------------------------------- Partitioning 1-way processor to Partitioning 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- 2-4 way processor to 8-12 processor (*) - --------------------------------------------------------------------------------------------------- Currency Con. 2-4 way processor to Currency Conversion 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Spreadsheet Toolkit 2-4 way processor to Spreadsheet Toolkit 8-12 way (*) - --------------------------------------------------------------------------------------------------- SQL Drill Through 2-4 way processor to SQL Drill Through 8-12 way (*) - --------------------------------------------------------------------------------------------------- Partitioning 2-4 way processor to Partitioning 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- ShowCase Essbase/400 Development Server Upgrades: - --------------------------------------------------------------------------------------------------- 1-way processor to 2-4 processor (*) - --------------------------------------------------------------------------------------------------- Currency Conversion 1 way processor to Currency Conversion 2-4 way (*) - --------------------------------------------------------------------------------------------------- Spreadsheet Toolkit 1-way processor to Spreadsheet Toolkit 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- SQL Drill Through 1-way processor to SQL Drill Through 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Partitioning 1-way processor to Partitioning 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- 1-way processor to 8-12 processor (*) - --------------------------------------------------------------------------------------------------- Currency Conversion 1 way processor to Currency Con. 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Spreadsheet Toolkit 1-way processor to Spreadsheet Toolkit 8-12 way (*) - --------------------------------------------------------------------------------------------------- SQL Drill Through 1-way processor to SQL Drill Through 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Partitioning 1-way processor to Partitioning 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- 2-4 way processor to 8-12 processor (*) - --------------------------------------------------------------------------------------------------- Currency Con. 2-4 way processor to Currency Conversion 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Spreadsheet Toolkit 2-4 way processor to Spreadsheet Toolkit 8-12 way (*) - --------------------------------------------------------------------------------------------------- SQL Drill Through 2-4 way processor to SQL Drill Through 8-12 way (*) - --------------------------------------------------------------------------------------------------- Partitioning 2-4 way processor to Partitioning 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- ShowCase Warehouse Builder Upgrades: (*) - --------------------------------------------------------------------------------------------------- Server 1-way S-10 or 170 to Initial Server 1-way processor (*) - --------------------------------------------------------------------------------------------------- Server 1-way S-10 or 170 to Initial Server 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Server 1-way S-10 or 170 to Initial Server 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Initial Server 1 way processor to Initial Server 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Initial Server 1 way processor to Initial Server 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Initial Server 2-4 way processor to Initial Server 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Secondary Server 1 way processor to Secondary Server way 2-4 processor (*) - --------------------------------------------------------------------------------------------------- Secondary Server 1 way processor to Secondary Server 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Secondary Server 2-4 way processor to Secondary Server 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- ShowCase Warehouse Manager Upgrades: - --------------------------------------------------------------------------------------------------- Server 1-way S-10 or 170 to Initial Server 1-way processor (*) - --------------------------------------------------------------------------------------------------- Server 1-way S-10 or 170 to Initial Server 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Server 1-way S-10 or 170 to Initial Server 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Initial Server 1 way processor to Initial Server 2-4 processor (*) - --------------------------------------------------------------------------------------------------- Initial Server 1 way processor to Initial Server 8-12 processor (*) - --------------------------------------------------------------------------------------------------- Initial Server 2-4 way processor to Initial Server 8-12 processor (*) - --------------------------------------------------------------------------------------------------- Secondary Server 1 way processor to Secondary Server 2-4 way processor (*) - ---------------------------------------------------------------------------------------------------
(*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
- --------------------------------------------------------------------------------------------------- Secondary Server 1 way processor to Secondary Server 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Secondary Server 2-4 way processor to Secondary Server 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- ShowCase Deployment Accelerators Upgrades: - --------------------------------------------------------------------------------------------------- Financial Deployment Accelerators JDE 1-way to 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Financial Deployment Accelerators JDE 1-way to 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Financial Deployment Accelerators JDE 2-4 way to 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Sales Analysis Deployment Accelerators JDE 1-way to 2-4 way processor (*) - --------------------------------------------------------------------------------------------------- Sales Analysis Deployment Accelerators JDE 1-way to 8-12 way processor (*) - --------------------------------------------------------------------------------------------------- Sales Analysis Deployment Accelerators JDE 2-4 way to 8-12 way processor (*) - ---------------------------------------------------------------------------------------------------
(*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. EX-10.17 24 AMDMT. NO. 2 TO MKTG. AGMT. WITH IBM EXHIBIT 10.17 IBM Solution Developer Marketing Partnerships - -------------------------------------------------------------------------------- Amendment 02 to MRA #T97074-00 T97074-02 AMENDMENT NUMBER 02 TO MRA #T97074-00 This is Amendment Number 02 to our Marketing Relationship Agreement No. T97074-00 dated May 22, 1997 (hereinafter called "Agreement") between IBM Corporation ("IBM") and ShowCase Corporation ("You"). Whereas the parties have entered into the Agreement that sets forth the terms and conditions whereby IBM may remarket Your Products in the United States and Canada or cooperatively market Your Products in the United States; and Whereas the parties have agreed to: 1) expand only the remarketing relationship of this Agreement to consist of every country in the world in which IBM is conducting business; and 2) terminate the Agreement's cooperative marketing relationship; and Whereas the parties have agreed to add to the Agreement the Maintenance Support (1st Year only) for the Products and your associated list prices for Maintenance Support; NOW THEREFORE, the parties agree to modify the Agreement, its Attachments and Amendments as follows: 1.0 Section 1 entitled "Definitions," of the Agreement, is hereby modified by adding the following new definitions to this Section: Enablement or (Internationalization) shall mean that a Product has the ability to implement national functions and the facility to be translated to other languages. Enablement includes three (3) categories which correspond to characteristics of various languages: (a) single byte character set (SBCS), left-to-right languages (U.S. English, German, Greek, etc.); (b) single byte bi-directional languages (Hebrew, Arabic); and (c) double byte character set (DBCS) or multi-byte character set (MBCS) languages (Japanese, Korean, simplified and traditional Chinese). The Products shall avoid hardcoding language dependent codepages and character sets. National Language Support (NLS) shall mean that the Products have the ability to enter, store, process, retrieve, distribute, display and print character data in the foreign language of choice. NLS includes Internationalization characteristics. 2.0 Section 3.0 entitled "Territory" of the Agreement is hereby superseded and replaced with the following: 3.0 Territory 3.1 The territory for this Agreement, applicable for the resale of the Products pursuant to the Reseller Attachment, shall consist of all countries in the world in which IBM or an IBM Affiliate is conducting business. 3.2 For Agreement management purposes, territory shall be interpreted as the geographic areas of the United States and Puerto Rico (US), Canada, Asia Pacific (AP), Latin America (LA), Europe, Middle East, Africa and the former republics of the USSR (EMEA). 3. Section 8 entitled "Training"of the Agreement, is hereby deleted in its entirety. 4. Section 4.1 of Section 4.0 entitled "Royalties," of the Reseller Attachment of the Agreement is hereby modified by superseding and replacing its text as follows and by adding the new Product/IBM Rate tables: 1 of 11 IBM will continue to pay you the current royalty amount set forth in the Agreement's current existing table ("IBM Rate") for each Product IBM or its Affiliates licenses to a customer. Effective upon: 1) the date IBM Announces availability/withdrawal of your Products (listed in the Product Offering List Attachment) in the US or within ninety (90) days from the date the parties execute this Amendment, whichever occurs first; and 2) the date IBM Announces availability/withdrawal of your Products (listed in the Product Offering List Attachment) in Canada, EMEA, LA and AP; the already existing IBM Rates set forth in the Agreement's current existing table are hereby superseded and replaced with the new IBM Rates, listed in the tables below, that IBM will pay you for each Product IBM or its Affiliates licenses to a customer. The formula used to calculate the IBM Rate for Products shall be the same formula used to calculate the IBM Rate for New Products. You agree (*). IBM payments to you will be at the IBM Rate subject to any withholding tax requirement and/or any applicable transaction based taxes (including, without limitation, sales and value-add taxes), and shall be net of refunds and adjustments granted to customers. You may, (*), increase your Products list prices by giving IBM prior written notice, except that, this restriction shall not apply with respect to your list prices for the Essbase and Analyzer Products which may be increased at any time during a calendar year upon prior written notice to IBM. Any such increase's shall become effective ninety (90) days after IBM receives such notice. You agree (*) not yet installed from the date (*). For any such (*), you agree to give IBM forty-five (45) days prior written notice. With respect to any temporary Promotional offers for the Products, IBM's participation in any such offers will be solely at IBM's option. For any open ended promotions you offer for the Products, you agree to give IBM thirty (30) days prior written notification ( to include either electronic mail or facsimile transmission) of the date the promotion is withdrawn. In either case above, a letter amendment specifying your new list prices will be executed by the parties. The new IBM Rate, reflecting such price change, will be paid to you for all Products IBM or its Affiliates licenses to a customer on or after the first day of the affected period stated above. IBM will not pay you any other payments related to the Products (for example, under any IBM Business Partner Agreement). IBM shall have full freedom and flexibility in pricing your Products and in establishing the terms and conditions under which they are offered to customers. IBM is not required to pay you, and you agree not to charge IBM for, taxes for the Products which are licensed by IBM in the Territory.
- -------------------------------------------------------------------------------------------------------------------- Product Type Product Name IBM Rate for US, Canada &AP (excluding Japan) - -------------------------------------------------------------------------------------------------------------------- Products All Products listed on Product Offering List (*) of Your Products US List Prices Attachment specified in the Product Offering List Attachment - -------------------------------------------------------------------------------------------------------------------- Upgrades All Products listed under Product Upgrades section (*) of Your Products Upgrades US List of Product Offering List Attachment Prices specified in the Product Offering List Attachment - -------------------------------------------------------------------------------------------------------------------- Services Maintenance Support (1st Year only) for all (*) of Your Products/Products Upgrades Products and Product Upgrades listed on Product Maintenance Support US List Prices Offering List Attachment specified in the Product Offering List Attachment - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Product Type Product Name IBM Rate for EMEA, LA & Japan - -------------------------------------------------------------------------------------------------------------------- Upgrades All products listed on Product Offering List (*) of Your Products International List Attachment Prices specified in the Product Offering List Attachment - -------------------------------------------------------------------------------------------------------------------- Upgrades All Products Listed under Product Upgrades Section (*) of Your Products Upgrades of Product Offering List Attachment International List Prices specified in the Product Offering List Attachment - -------------------------------------------------------------------------------------------------------------------- Services Maintenance Support (1st Year only) for all (*) of Your Products/Product Upgrades Products and Product Upgrades listed on Product Maintenance Support International List Offering List Attachment. Prices specified in the Product Offering List Attachment - --------------------------------------------------------------------------------------------------------------------
(*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. 2 of 11 5.0 Section 4.2 of Section 4.0 entitled "Royalties," of the Reseller Attachment of the Agreement is hereby superseded and replaced as follows: 4.2 In the event IBM finds it necessary to offer a customer a special discount, IBM may request a Lower IBM Rate for such transaction. If you agree to such lower IBM Rate, you will provide to IBM in writing (to include either electronic mail or a facsimile transmission) your approval to adjust the IBM Rate. 6.0 Add new Section 5 entitled "Additional Terms and Conditions" to the Reseller Attachment of the Agreement as follows: 5.0 Additional Terms and Conditions: 5.1 National Language Support (NLS) and Double Byte Character Set (DBCS): You will enable the Products for NLS/DBCS and provide all foreign language versions of the Products to IBM as, and to the extent, they become available. Currently English, French, German, Italian and Japanese are available. You will provide IBM with an acceptable plan to provide a Spanish language version of the Products; and given a justified business case by IBM which you and IBM will jointly agree upon, including any appropriate funding, you will provide NLS for additional language versions of the Products in six (6) months. 7.0 Ninety (90) days from the date the parties execute this Amendment No. 02, the "Cooperative Marketing Attachment" to the Agreement is hereby deemed terminated in its entirety, and any and all references to cooperative marketing in the Agreement are hereby eliminated. 8.0 Attached entitled "Product Offering List Attachment" is hereby superseded and replaced with the newly attached "Product Offering List Attachment". Except as amended hereby, the Agreement and any Amendments and Attachments thereto shall remain in full force and effect. In WITNESS WHEREOF, the parties hereto have caused this Amendment 02 to be executed by their respective authorized representatives. ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO: International Business Machines ShowCase Corporation Corporation /s/ Julie F. Joyce /s/ Ken Holec - --------------------------------- ----------------------------------- Julie F. Joyce Name: Ken Holec Director, Worldwide Strategy & Title: President & CEO Business Development Date: 3-15-99 Date: 3/9/99 3 of 11 IBM Solution Developer Marketing Partnerships - -------------------------------------------------------------------------------- Product Offering List Attachment T97074-02 Product Offering List Attachment - Product Upgrades
- -------------------------------------------------------------------------------------------------------------------- Products (English, German, French, Italian and Your US List Prices Your International Japanese versions are available) List Prices - -------------------------------------------------------------------------------------------------------------------- Analyzer Client Ports (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Analyzer for the Web Ports (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Analyzer Server, 1 processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Analyzer Server, 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Analyzer Server, 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase Personal Desktop (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Currency Conversion 1 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Currency Conversion 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Currency Conversion 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Development Server 1 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Development Server 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Development Server 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Ports (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Server 1 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Server 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Server 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Spreadsheet Toolkit, 1 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Spreadsheet Toolkit, 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Spreadsheet Toolkit, 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 SQL Drill Through, 1 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 SQL Drill Through, 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 SQL Drill Through, 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - --------------------------------------------------------------------------------------------------------------------
(*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. 4 of 11 IBM Solution Developer Marketing Partnerships - -------------------------------------------------------------------------------- Product Offering List Attachment T97074-02 Product Offering List Attachment - Product Upgrades
- -------------------------------------------------------------------------------------------------------------------- Products (English, German, French, Italian and Your US List Prices Your International Japanese versions are available) List Prices - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Partitioning 1-way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Partitioning 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 Partitioning 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Strategy Report Writer (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Builder Initial Server 1-way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Builder Initial Server 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Builder Initial Server 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Builder Secondary Server 1-way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Builder Secondary Server 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Builder Secondary Server 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Builder DB2/AIX Source (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Builder DB2/VMS Source (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Builder DB2/NT Source (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Manager Initial Server, 1-way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Manager Initial Server, 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Manager Initial Server, 8-12 way process (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Manager Ports (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Manager Secondary Server, 1-way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Manager Secondary Server, 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Warehouse Manager Secondary Server, 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - --------------------------------------------------------------------------------------------------------------------
(*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. 5 of 11 IBM Solution Developer Marketing Partnerships - -------------------------------------------------------------------------------- Product Offering List Attachment T97074-02 Product Offering List Attachment - Product Upgrades
- -------------------------------------------------------------------------------------------------------------------- Products (English, German, French, Italian and Your US List Prices Your International Japanese versions are available) List Prices - -------------------------------------------------------------------------------------------------------------------- Development Currency Conversion, 1-way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development Currency Conversion, 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development Currency Conversion, 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development Partitioning, 1-way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development Partitioning, 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development Partitioning, 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development Spreadsheet Toolkit, 1-way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development Spreadsheet Toolkit, 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development Spreadsheet Toolkit, 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development SQL Drill Through, 1-way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development SQL Drill Through, 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development SQL Drill Through, 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Financial Deployment Accelerators, 1-way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Financial Deployment Accelerators, 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Financial Deployment Accelerators, 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Sales Analysis Deployment Accelerators, 1-way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Sales Analysis Deployment Accelerators, 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Sales Analysis Deployment Accelerators, 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 API, 1-way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 API, 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 API, 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development Essbase/400 API, 1-way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development Essbase/400 API, 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - --------------------------------------------------------------------------------------------------------------------
(*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. 6 of 11 IBM Solution Developer Marketing Partnerships - -------------------------------------------------------------------------------- Product Offering List Attachment T97074-02 Product Offering List Attachment - Product Upgrades
- -------------------------------------------------------------------------------------------------------------------- Development Essbase/400 API, 8-12 way processors (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Analyzer Server Web Extension, 1-way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Analyzer Server Web Extension, 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Analyzer Server Web Extension, 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - --------------------------------------------------------------------------------------------------------------------
(*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. 7 of 11 IBM Solution Developer Marketing Partnerships - -------------------------------------------------------------------------------- Product Offering List Attachment T97074-02 Product Offering List Attachment - Product Upgrades
- -------------------------------------------------------------------------------------------------------------------- Products (English, German, French, Italian and Your US List Prices Your International Japanese versions are available) List Prices - -------------------------------------------------------------------------------------------------------------------- ShowCase Analyzer Server Upgrades: - -------------------------------------------------------------------------------------------------------------------- From Analyzer Server 1-way to 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- From Analyzer Server 1-way to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- From Analyzer Server 2-4 way to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- ShowCase Essbase/400 Upgrades: - -------------------------------------------------------------------------------------------------------------------- 1-way processor to 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Currency Conversion 1-way processor to Currency Con. 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Spreadsheet Toolkit 1-way processor to Spreadsheet Toolkit 2-4 way (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- SQL Drill Through 1-way processor to SQL Drill Through 2-4 way (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Partitioning 1-way processor to Partitioning 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- 1-way processor to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Currency Conversion 1-way processor to Currency Con. 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Spreadsheet Toolkit 1-way processor to Spreadsheet Toolkit 8-12 way (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- SQL Drill Through 1-way processor to SQL Drill Through 8-12 way (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Partitioning 1-way processor to Partitioning 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- 2-4 way processor to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Currency Con. 2-4 way processor to Currency Conversion 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Spreadsheet Toolkit 2-4 way processor to Spreadsheet Toolkit 8-12 way (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- SQL Drill Through 2-4 way processor to SQL Drill Through 8-12 way (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Partitioning 2-4 way processor to Partitioning 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - --------------------------------------------------------------------------------------------------------------------
(*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. 8 of 11 IBM Solution Developer Marketing Partnerships - -------------------------------------------------------------------------------- Product Offering List Attachment T97074-02 Product Offering List Attachment - Product Upgrades
- -------------------------------------------------------------------------------------------------------------------- Products (English, German, French, Italian and Your US List Prices Your International Japanese versions are available) List Prices - -------------------------------------------------------------------------------------------------------------------- ShowCase Essbase/400 Development Server Upgrades: - -------------------------------------------------------------------------------------------------------------------- 1-way processor to 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Currency Conversion 1-way processor to Currency Conversion 2-4 way (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Spreadsheet Toolkit 1-way processor to Spreadsheet Toolkit 2-4 way (*) (*) processor Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- SQL Drill Through 1-way processor to SQL Drill Through 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Partitioning 1-way processor to Partitioning 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- 1-way processor to 8-12 processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Currency Conversion 1-way processor to Currency Con. 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Spreadsheet Toolkit 1-way processor to Spreadsheet Toolkit 8-12 way (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- SQL Drill Through 1-way processor to SQL Drill Through 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Partitioning 1-way processor to Partitioning 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- 2-4 way processor to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Currency Con. 2-4 way processor to Currency Conversion 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Spreadsheet Toolkit 2-4 way processor to Spreadsheet Toolkit 8-12 way (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- SQL Drill Through 2-4 way processor to SQL Drill Through 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Partitioning 2-4 way processor to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- (*) (*) - -------------------------------------------------------------------------------------------------------------------- ShowCase Warehouse Builder Upgrades: - -------------------------------------------------------------------------------------------------------------------- Initial Server 1-way processor to Initial Server 2-4 processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Initial Server 1-way processor to Initial Server 8-12 processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Initial Server 2-4 way processor to Initial Server 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - --------------------------------------------------------------------------------------------------------------------
(*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. 9 of 11 IBM Solution Developer Marketing Partnerships - -------------------------------------------------------------------------------- Product Offering List Attachment T97074-02 Product Offering List Attachment - Product Upgrades
- -------------------------------------------------------------------------------------------------------------------- Products (English, German, French, Italian and Your US List Prices Your International Japanese versions are available) List Prices - -------------------------------------------------------------------------------------------------------------------- ShowCase Warehouse Builder Upgrades Cont'd: - -------------------------------------------------------------------------------------------------------------------- Secondary Server 1-way processor to Secondary Server 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Secondary Server 1-way processor to Secondary Server 8-12 way (*) (*) processor Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Secondary Server 2-4 way processor to Secondary Server 8-12 way (*) (*) processor Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- ShowCase Warehouse Manager Upgrades: - -------------------------------------------------------------------------------------------------------------------- Initial Server 1-way processor to Initial Server 2-4 processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Initial Server 1-way processor to Initial Server 8-12 processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Initial Server 2-4 way processor to Initial Server 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Secondary Server 1-way processor to Secondary Server 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Secondary Server 1-way processor to Secondary Server 8-12 way (*) (*) processor Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Secondary Server 2-4 way processor to Secondary Server 8-12 way (*) (*) processor Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- ShowCase Deployment Accelerators Upgrades: - -------------------------------------------------------------------------------------------------------------------- Financial Deployment Accelerators 1-way to 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Financial Deployment Accelerators 1-way to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Financial Deployment Accelerators 2-4 way to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Sales Analysis Deployment Accelerators 1-way to 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Sales Analysis Deployment Accelerators 1-way to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Sales Analysis Deployment Accelerators 2-4 way to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - --------------------------------------------------------------------------------------------------------------------
(*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. 10 of 11 IBM Solution Developer Marketing Partnerships - -------------------------------------------------------------------------------- Product Offering List Attachment T97074-02 Product Offering List Attachment - Product Upgrades
- -------------------------------------------------------------------------------------------------------------------- Products (English, German, French, Italian and Your US List Prices Your International Japanese versions are available) List Prices - -------------------------------------------------------------------------------------------------------------------- Essbase/400 API Upgrades: - -------------------------------------------------------------------------------------------------------------------- Essbase/400 API 1-way processor to 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 API 1-way processor to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Essbase/400 API 2-4 way processor to 8-12 way processor (*) (*) Maintenance Support (1st Year Only - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Development Essbase/400 API Upgrades: - -------------------------------------------------------------------------------------------------------------------- Development Essbase/400 API 1-way processor to 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development Essbase/400 API 1-way processor to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Development Essbase/400 API 2-4 way processor to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- ShowCase Analyzer Server Web Extension Upgrades: - -------------------------------------------------------------------------------------------------------------------- Analyzer Server Web Extension 1-way processor to 2-4 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Analyzer Server Web Extension 1-way processor to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - -------------------------------------------------------------------------------------------------------------------- Analyzer Server Web Extension 2-4 way processor to 8-12 way processor (*) (*) Maintenance Support (1st Year Only) - --------------------------------------------------------------------------------------------------------------------
(*) Denotes confidential information that has been omitted and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. 11 of 11 EX-21.1 25 SUBSIDIARIES OF THE COMPANY EXHIBIT 21.1 LIST OF SUBSIDIARIES Name Jurisdiction ---- ------------ ShowCase Benelux N.V. Belgium ShowCase Deutschland GmbH Germany ShowCase France SARL France ShowCase International, Inc. Delaware ShowCase U.K. Limited United Kingdom EX-23.1 26 CONSENT OF AUDITORS AND REPORT ON SCHEDULES Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS AND REPORT ON SCHEDULES The Board of Directors ShowCase Corporation: The audits referred to in our report dated May 15, 1998 included the related consolidated financial statement schedule as of March 31, 1998 and for each of the years in the three-year period ended March 31, 1998 included in the registration statement. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We consent to the use of our reports included herein and to the reference to our firm under the heading "Experts" in the prospectus. /s/ KPMG Peat Marwick LLP Minneapolis, Minnesota April 28, 1999 EX-27.1 27 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS OF SHOWCASE CORPORATION & SUBSIDIARIES AS OF MARCH 31, 1997 AND 1998 AND AS OF DECEMBER 31, 1998 AND THE CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED MARCH 31, 1998 AND FOR THE NINE MONTH PERIODS ENDED DECEMBER 31, 1997 AND 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR YEAR YEAR 9-MOS 9-MOS MAR-31-1996 MAR-31-1997 MAR-31-1998 MAR-31-1998 MAR-31-1999 APR-01-1995 APR-01-1996 APR-01-1997 APR-01-1997 APR-01-1998 MAR-31-1996 MAR-31-1997 MAR-31-1998 DEC-31-1997 DEC-31-1998 0 2,989 5,404 0 7,464 0 0 443 0 173 0 5,191 6,662 0 9,128 0 300 500 0 675 0 0 0 0 0 0 9,176 13,632 0 17,286 0 2,674 3,677 0 3,921 0 1,161 1,486 0 1,972 0 11,400 16,315 0 19,546 0 8,116 12,053 0 16,677 0 682 1,157 0 751 0 0 0 0 0 0 5 14 0 14 0 39 40 0 45 0 2,558 3,051 0 2,059 0 11,400 16,315 0 19,546 13,278 18,027 23,755 16,751 25,262 13,278 18,027 23,755 16,751 25,262 0 0 0 0 0 2,341 3,527 6,222 4,174 6,717 10,111 14,464 21,135 15,197 19,298 0 0 0 0 0 97 97 123 109 139 964 50 (3,059) (2,113) (699) 150 0 175 125 135 814 50 (3,234) (2,238) (834) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 814 50 (3,234) (2,238) (834) .21 .01 (.82) (.57) (.19) .13 .01 (.82) (.57) (.19)
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