-----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, BpzYPslVpcICffL8BNaY56f4KQq4AVRvbS3Vlqa/SY+djyYGumSFA95sc9kBTkLq lX1nlUDBcEIgiVr43vg62Q== 0001012870-99-002046.txt : 19990624 0001012870-99-002046.hdr.sgml : 19990624 ACCESSION NUMBER: 0001012870-99-002046 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19990623 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AGILE SOFTWARE CORP CENTRAL INDEX KEY: 0001088653 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 770397905 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-81387 FILM NUMBER: 99650997 BUSINESS ADDRESS: STREET 1: ONE ALMADEN BOULEVARD CITY: SAN JOSE STATE: CA ZIP: 95113 BUSINESS PHONE: 4089753900 MAIL ADDRESS: STREET 1: ONE ALMADEN BOULEVARD CITY: SAN JOSE STATE: CA ZIP: 95113 S-1 1 FORM S-1 As filed with the Securities and Exchange Commission on June 23, 1999 Registration No. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ---------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- AGILE SOFTWARE CORPORATION (Exact name of Registrant as specified in its charter)
Delaware 7372 77-0397905 (State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Number) Identification No.)
One Almaden Boulevard San Jose, California 95113-2211 (408) 975-3900 (Address and telephone number of principal executive offices) ---------------- Bryan D. Stolle Chairman of the Board and Chief Executive Officer Agile Software Corporation One Almaden Boulevard San Jose, California 95113-2211 (408) 975-3900 (Name, address and telephone number of agent for service) Copies to: Gregory M. Gallo, Esq. Jeffrey R. Vetter, Esq. Peter M. Astiz, Esq. Scott J. Leichtner, Esq. Sally J. Rau, Esq. Cynthia E. Garabedian, Esq. Paul K. Lauher, Esq. Fenwick & West LLP Gray Cary Ware & Freidenrich LLP Two Palo Alto Square 400 Hamilton Avenue Palo Alto, California 94306 Palo Alto, California 94301-1825 (650) 494-0600 (650) 328-6561
---------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. ---------------- If the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933, please 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 of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [_] ---------------- CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------
Proposed Maximum Title of Each Class of Aggregate Amount of Securities to be Registered Offering Price(1) Registration Fee - ------------------------------------------------------------------------------ Common Stock ($0.001 par value)........ $58,650,000 $16,305 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------
(1) Estimated solely for the purposes of determining the registration fee pursuant to Rule 457(o) promulgated under the Securities Act. ---------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange 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 we are not soliciting an offer to buy + +these securities in any state where the offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PROSPECTUS (Subject to Completion) Issued June 23, 1999 Shares [LOGO OF AGILE SOFTWARE APPEARS HERE] COMMON STOCK ----------- Agile Software Corporation is offering shares of its common stock. This is our initial public offering and no public market currently exists for our shares. We anticipate that the initial public offering price will be between $ and $ per share. ----------- We have applied to list our common stock for quotation on the Nasdaq National Market under the symbol "AGIL." ----------- Investing in the common stock involves risks. See "Risk Factors" beginning on page 5. ----------- PRICE $ A SHARE -----------
Underwriting Price to Discounts and Proceeds to Public Commissions Agile -------- ------------- ----------- Per Share....................... $ $ $ Total........................... $ $ $
The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Agile has granted the underwriters the right to purchase up to an additional shares to cover over-allotments. Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on , 1999. ----------- MORGAN STANLEY DEAN WITTER DEUTSCHE BANC ALEX. BROWN HAMBRECHT & QUIST ,1999 TABLE OF CONTENTS
Page ---- Prospectus Summary.................. 3 Risk Factors........................ 5 Use of Proceeds..................... 18 Dividend Policy..................... 18 Capitalization...................... 19 Dilution............................ 20 Selected Consolidated Financial Data............................... 21 Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 22 Business............................ 33
Page ---- Management....................... 44 Certain Transactions............. 50 Principal Stockholders........... 52 Description of Capital Stock..... 55 Shares Eligible for Future Sale.. 58 Underwriters..................... 60 Legal Matters.................... 62 Experts.......................... 62 Where to Find Additional Information About Agile......... 62 Index to Consolidated Financial Statements...................... F-1
---------------- We originally incorporated in California on March 13, 1995 and will reincorporate in Delaware prior to the completion of this offering. Our principal executive offices are located at One Almaden Boulevard, San Jose, California 95113, and our telephone number is (408) 975-3900. Our principal web site is located at www.agilesoft.com. Information contained on our web site does not constitute a part of this prospectus. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of our common stock only in those jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. In this prospectus, "Agile," "we," "us" and "our" refer to Agile Software Corporation. Unless otherwise specifically stated, the information in this prospectus: . gives effect to the conversion of each outstanding share of preferred stock into one share of common stock effective upon the closing of the offering; . assumes no exercise of the underwriters' over-allotment option; and . assumes the exercise of a warrant to purchase 60,000 shares of our common stock which was outstanding on April 30, 1999. Until , 1999, 25 days after commencement of this offering, all dealers that buy, sell or trade our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. Agile(TM), Agile Workplace(TM), Agile Anywhere(TM), Agile eHub(TM), Agile iCM(TM), My Agile(TM), Agile eXpress Viewer(TM), Agile ChangeCAST(TM), Agile Product Definition Services(TM), Agile Product Change Services(TM), Agile AML Services(TM), Agile Administrator(TM), Agile Scan(TM), Agile Import(TM), Agile Export(TM) and the Agile logo are trademarks of Agile Software Corporation. All other trademarks or tradenames referred to in this prospectus are the property of their respective owners. 2 PROSPECTUS SUMMARY You should read this summary together with the more detailed information regarding our company and the common stock being sold in this offering and our consolidated financial statements and notes to the consolidated financial statements appearing elsewhere in this prospectus. AGILE SOFTWARE CORPORATION Agile is a leading supplier of web-centric product content management software for use within and among enterprises in a manufacturing supply chain. Our suite of products is designed to improve the ability of supply chain members to communicate and collaborate with one another about new or changing product content. We believe that our products are well-suited for participants in web-connected outsourced supply chains, as well as those managing multi-site engineering, manufacturing, sales and distribution. Since June 1996, when we shipped our first product, we have licensed our products to approximately 300 customers in the computers and peripherals, components, consumer electronics, data networking and telecommunications equipment, electronics manufacturing, medical equipment and semiconductor equipment markets. Agile customers include Gateway, Texas Instruments, Philips Mobile Computing, Lucent Technologies, Solectron, GE Marquette Medical Systems and FSI International. The competitive environment for enterprises has intensified dramatically and expanded globally in recent years. Many enterprises are re-engineering their organizations by shifting from traditional vertically-integrated manufacturing approaches, in which a manufacturer controls most phases of the manufacturing process from raw materials to finished goods, to a more horizontally-integrated manufacturing process with much or all of the manufacturing process outsourced to multiple companies as part of a supply chain. According to Technology Forecasters, Inc., the outsourcing market in electronics alone exceeded $89 billion in 1998 and is expected to grow to $178 billion in 2001. Outsourcing production is geared toward creating supply chains that are more efficient, dynamic and flexible than vertically-integrated manufacturing operations. A critical aspect of managing the horizontally-integrated outsourced supply chain is finding effective ways to store, access and share information within the enterprise as well as with all supply chain partners during each stage of the production process. The Internet has created new and evolving ways for conducting commerce. According to Forrester Research, business-to-business electronic commerce is expected to grow to $1.3 trillion in 2003, accounting for more than 90% of the dollar value of electronic commerce in the United States. The market for applications that enable business-to-business electronic commerce is expected to reach $1.5 billion by 2002, according to Dataquest. Enterprises that have successfully implemented web-enabled customer interfaces now face the challenge of utilizing the Internet and intranets to gain the same level of increased efficiencies in their supply chain. The Agile solution is designed to facilitate communication and collaboration within and among supply chain members without requiring substantial investments in additional technology infrastructure. The Agile solution enables enterprises and their supply chain partners to have more effective revenue capture by accelerating time-to-market, more cost-effective production by increasing throughput, reducing inventory and compressing cycle times, and more rapid return on investment by facilitating rapid implementation. Our growth strategy is to be the leading provider of business-to-business collaborative supply chain applications to global enterprises. We will focus on providing superior customer satisfaction to continue to build a highly referenceable customer base of market leaders in targeted manufacturing industry vertical markets. We seek to capitalize on network effects created through deployment of our solution across the supply chains of our customers, which allows non-customer participants in the supply chain to experience some of the benefits from our solutions first hand. We will also build upon our technology leadership position and extend our supply chain collaboration features and functionality. 3 THE OFFERING Common stock offered................................ shares Common stock to be outstanding after this offering.. shares Over-allotment option............................... shares Use of proceeds..................................... For general corporate purposes, including working capital, capital expenditures and repayment of debt. See "Use of Proceeds." Proposed Nasdaq National Market symbol.............. AGIL
The above information is based on 16,133,298 shares outstanding as of April 30, 1999. This information does not include 1,159,725 shares of common stock subject to outstanding options under our 1995 Stock Option Plan as of April 30, 1999 and 98,301 shares of common stock issuable upon exercise of outstanding warrants. After April 30, 1999, we granted options to purchase an additional 534,700 shares of common stock. See "Capitalization" and "Management--Stock Plans." SUMMARY CONSOLIDATED FINANCIAL DATA (in thousands, except per share data)
March 13, 1995 Fiscal Year Ended April (Inception) to 30, April 30, -------------------------- 1996 1997 1998 1999 -------------- ------- ------- -------- Consolidated Statement of Operations Data: Total revenues..................... $ 38 $ 1,352 $ 8,003 $ 16,807 Gross profit....................... 32 1,086 5,835 10,822 Loss from operations............... (1,399) (4,906) (8,874) (11,606) Net loss........................... (1,327) (4,836) (8,942) (11,428) Net loss per share: Basic and diluted................ $ (1.94) $ (3.72) $ (4.20) $ (3.87) Weighted average shares.......... 684 1,300 2,129 2,952 Unaudited pro forma net loss per share: Basic and diluted................ $ (.78) Weighted average shares.......... 14,668
As of April 30, 1999 ------------------- Actual As Adjusted ------- ----------- Consolidated Balance Sheet Data: Cash and cash equivalents................................... $10,003 $ Working capital............................................. 4,174 Total assets................................................ 17,948 Long-term obligations, noncurrent........................... 3,224 Stockholders' equity........................................ 3,291
Shares used in computing unaudited pro forma basic and diluted net loss per share include the shares used in computing basic and diluted net loss per share adjusted for the conversion of preferred stock to common stock, as if the conversion occurred at the date of original issuance. The as adjusted information above reflects the application of the estimated net proceeds from the sale of the shares of common stock that we are offering at an assumed initial public offering price of $ per share, after deducting estimated underwriting discounts and commissions and our estimated offering expenses, and gives effect to the exercise of a warrant to purchase 60,000 shares of our common stock. See "Capitalization." 4 RISK FACTORS You should carefully consider the following risks before you decide to buy our common stock. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties may also seriously harm our business. If any of the following risks actually occur, our business could be harmed. If our business is harmed, the trading price of our common stock could decline, and you could lose all or part of your investment. Risks Related to Our Operations Because We Have a Limited Operating History, It Is Difficult to Evaluate Our Business and Prospects We are still in the early stages of our development, so evaluating our business operations and our prospects is difficult. We incorporated in 1995 and began shipping our first product in June 1996. The revenues and income potential of our business and market are unproven. We will encounter risks and difficulties frequently encountered by early-stage companies in new and rapidly evolving markets. These risks include our: . substantial dependence on our current suite of products; . need to successfully introduce new products and enhance existing products, particularly the new version of our product suite, Agile Anywhere, which is scheduled to be shipped beginning in the quarter ending October 31, 1999; . need to sell additional licenses and software products to our existing customers; . need to expand our sales and marketing, customer support and professional services organizations; . need to expand our customer base outside of the electronics and medical device industries; . need to build strategic partnerships and relationships; . need to effectively manage growth; . need to expand our international operations and customer base; and . need to attract and retain key personnel. We may not be able to successfully address these risks, and the failure to do so could seriously harm our business and operating results. In addition, because of our limited operating history, we have limited insight into trends that may emerge and affect our business. We Have a History of Losses and Expect to Incur Losses in the Future We incurred net losses of approximately $4.8 million for fiscal 1997, $8.9 million for fiscal 1998, and $11.4 million for fiscal 1999. As of April 30, 1999, we had an accumulated deficit of approximately $26.5 million. Moreover, we expect to continue to incur significant sales and marketing, research and development and general and administrative expenses. We have incurred and expect to continue to incur substantial non-cash costs relating to the amortization of deferred compensation which will contribute to our net losses. We expect to incur losses for the foreseeable future. We will need to generate significant increases in revenues to achieve and maintain profitability, and we may not be able to do so. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis in the future. If our revenues grow more slowly than we anticipate or if our operating expenses exceed our expectations, our business and operating results could be harmed. See "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" for more detailed information. 5 Our Quarterly Operating Results Fluctuate and Are Difficult to Predict, and if Our Future Results are Below the Expectations of Public Market Analysts or Investors, the Price of Our Common Stock May Decline Our quarterly operating results have varied significantly in the past and are likely to vary significantly in the future, which makes it difficult for us to predict our future operating results. This quarter-to-quarter fluctuation is due to a number of factors, any of which could harm our business and operating results, including the following: . demand for our products; . size and timing of sales and installations of our products; . product and price competition; . our unpredictable sales cycle; . our ability to successfully expand our direct sales force; . our ability to develop and market new and enhanced products on a timely basis; . deferral of customer orders in anticipation of product enhancements or new products; . continued purchases by our existing customers, including additional licenses and maintenance contracts; . delays in our customers' orders due to their year 2000 priorities; . variability in the mix of our license and professional service revenues; . our ability to accurately price fixed-priced professional services projects; . variability in the mix of professional services that we perform versus those performed for our customers by others; . software defects; . technological changes in our market; . our ability to establish and maintain relationships with our third-party implementation partners; . changes in our sales force incentives; . expansion of our international sales organization and increase in international sales; . the loss of any key employees and timing of our new hires; and . general economic factors. License revenues in any quarter can be difficult to forecast because they depend on orders shipped or installed in that quarter. Moreover, we typically recognize a substantial percentage of revenues in the last month of each quarter. A high percentage of our operating expenses are essentially fixed in the short term. As a result, if we experience delays in recognizing revenue, we could experience significant variations in operating results from quarter to quarter. In addition, we expect our operating expenses to increase as we expand our engineering and sales and marketing operations, broaden our customer support capabilities, develop new distribution channels and strategic alliances, fund increased levels of research and development and build our operational infrastructure. If our revenues do not grow faster than the increase in these expenses, our business and operating results could be harmed. We have experienced, and expect to continue to experience, seasonality in our license revenues and results of operations, with a disproportionately greater amount of our license revenues for any fiscal year 6 being recognized in our fourth fiscal quarter. As a result, our first quarter revenues can be less than those of the preceding quarter. If we introduce products that are sold in a manner different from how we currently market our products, we could recognize revenue differently than under our current accounting policies. Depending on the manner in which we sell future products, this could have the effect of extending the length of time over which we recognize revenues. Furthermore, our quarterly revenues could be significantly affected based on how applicable accounting standards are amended or interpreted over time. Due to these and other factors, we believe that period-to-period comparisons of our results of operations are not meaningful and should not be relied upon as indicators of our future performance. It is possible that in some future periods our results of operations may be below the expectations of public market analysts and investors. If this occurs, the price of our common stock may decline. We Will Depend on the Commercial Success of Our Product Suite, Which Has Not Yet Been Shipped We have generated substantially all of our revenues from licenses and services related to current and prior versions of our product suite. Agile Anywhere, the latest version of our product suite, was announced in June 1999 and is scheduled to ship in the quarter ending October 31, 1999. We believe that revenues from this suite of products will account for a substantial portion of our revenues for the foreseeable future. Our future financial performance will depend on the successful introduction and customer acceptance of Agile Anywhere, and any upgrades to these products. Our business could be harmed if we are unable to ship or implement Agile Anywhere or any upgrades when planned. In addition, to the extent their introduction of Agile Anywhere causes customers to defer orders for our existing products, we may not achieve anticipated revenues and our business may be harmed. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Year 2000 Considerations Among Our Customers and Potential Customers May Reduce Our Sales We may experience reduced sales of products as customers and potential customers put a priority on correcting year 2000 problems and therefore defer purchase decisions for software products until later in 2000. Accordingly, demand for our products may be particularly volatile and unpredictable for the remainder of 1999 and early 2000. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Implementation of Our Products By Large Customers May Be Complex and May Create Customer Dissatisfaction with Our Products It takes many computer systems to run an enterprise, particularly for a business that depends on an integrated supply chain. Our products must integrate with existing computer systems and software programs used by our customers. Integrating with many other computer systems and software programs can be complex, time consuming and expensive and cause delays in the deployment of our products. Because we are one of the first companies to offer products designed for product content management, many customers will be facing these integration issues for the first time in the context of collaborating with supply chain partners. Customers could become dissatisfied with our products if implementations prove to be difficult, costly or time- consuming. We Currently Perform Most of Our Implementations on a Fixed-Price Basis, Which Could Cause Us to Incur More Costs Than We Expect When we install our products or when we have a third party install them, we typically charge customers a fixed fee for these services. At the time of a product sale and prior to agreeing to an installation price, we estimate the amount of work involved for a particular installation project. We have at times in the past underestimated and may in the future underestimate the amount of time or resources required to install our products. If we do not correctly estimate the amount of time or resources required for a large number of installations, our gross margins could be adversely affected. 7 Due to the Relatively Small Size of Initial Orders, We Depend on Customer Acceptance of Our Products and Future Upgrades The size of a new customer's initial order is relatively small. Therefore, in order to grow revenues, we depend on both sales to new customers and on sales to our existing customers of additional user licenses and enhanced versions of, and upgrades to, our products. Many of our current customers implement our products on a limited basis or buy products that provide only a portion of the features offered by our product family. Therefore, it is important that our customers are satisfied with their initial product implementations and that they believe that our other products or expanded use of the product they purchased will provide them with additional benefits. Customers could choose not to purchase any additional products or expand the use of our products. If we do not increase sales to existing customers, we may not be able to achieve revenue growth. We Need to Establish and Maintain Relationships With Key Partners to Market and Implement Our Products We rely heavily on our relationships with consulting and integration partners to implement our software, provide customer support services and endorse our products during the evaluation stage of the sales cycle. Currently, only three companies provide implementation services for our products in North America. We expect to increasingly rely on these types of partners in the future. These companies are not contractually obligated to continue to provide implementation services for us or to otherwise promote our products. Although we seek to develop and maintain relationships with these types of service providers, they may have similar or more established relationships with our competitors. If these service providers do not increase this segment of their business, or reduce or discontinue their relationships with us or their support of our products, our business could be harmed. We will need to develop new third party relationships if sales of our products increase and our current partners cannot fulfill the need for implementation and customer support services. Without these third parties we would have to expand our services organization to increase the consulting and professional services that we provide to our customers and divert resources from other areas of our business. If we are required to expand our professional services capabilities, we may not be able to do so on a timely basis. To meet customer demand, we might have to outsource services to more costly independent contractors and other third parties. In addition, if our implementation partners do not adequately perform implementation services, our customers could become dissatisfied with our products. In order to avoid dissatisfaction, we may need to provide supplemental implementation services at no additional cost to the customer. Although we could experience an increase in services revenues if our service partners are not successful, services revenues have lower gross margins than license revenues. We could also experience delays in revenue recognition if customer implementation projects fall behind schedule. The Ability of Our Products to Scale to Operate in an Enterprise-Wide Environment is Important to Our Future Success Our strategy requires that our software be highly scalable, or able to accommodate substantial increases in the number of users concurrently using the product. To date, however, only a limited number of our customers have deployed our software to manage the manufacturing process on an enterprise wide-basis. While we have performed product testing on the scalability of our products, these products have not been tested in the context of a customer implementation. If our customers cannot successfully implement large-scale deployments, or if they determine that our products cannot accommodate large- scale deployments, we could experience customer dissatisfaction and find it more difficult to obtain new customers or to sell additional products to our existing customers. We Rely Significantly On and Need to Expand Our Direct Sales Organization We sell our products primarily through our direct sales force. Our ability to increase our sales will depend on our ability to recruit, train and retain top quality sales people with the advanced sales skills and technical 8 knowledge we need. There is a shortage of the sales personnel we need, and competition for qualified personnel is intense in our industry. In addition, it takes time for our new sales personnel to become productive, particularly our senior sales and services personnel, who could take up to nine months to become fully productive. If we are unable to hire or retain qualified sales personnel, or if newly hired personnel fail to develop the necessary skills or reach productivity more slowly than anticipated, it would be more difficult for us to sell our products and, therefore, our business could be harmed. Our Future Operating Results Are Uncertain Because We Have an Unpredictable Sales Cycle Our products have an unpredictable sales cycle that contributes to the uncertainty of our future operating results. Historically, our sales cycle has ranged from approximately four to seven months. The sale of our products may be subject to delays due to the lengthy internal budgeting, approval and evaluation processes of our customers. Many customers initially purchase a small number of user licenses for our products before deciding whether to deploy our products more broadly in their organization or across their entire supply chain. Customers may also defer orders as a result of anticipated releases of new products or enhancements by us. As a result, we have only a limited ability to forecast the timing and size of sales of our products. The Success of Our Business Depends on Our Key Personnel Our success depends largely on the continued contributions of our key senior management, particularly Bryan D. Stolle, our Chief Executive Officer, who is not bound by an employment agreement, as well as of our key engineering and sales and marketing personnel. If one or more members of our senior management or any of our key employees were to resign, the loss of personnel would harm our business. See "Management" for additional information on our key personnel. To Be Successful, We Must Attract and Retain Additional Qualified Personnel Our success depends on our ability to attract and retain qualified, experienced employees. We currently are seeking to hire a Vice President of Sales. There is substantial competition for experienced engineering, sales and marketing personnel in our industry. If we are unable to retain our existing key personnel, or attract and retain additional qualified personnel, we may from time to time experience inadequate levels of staffing to perform services for our customers. In addition, if we are unable to hire a qualified Vice President of Sales, we may experience delays in the expansion of our sales organization. As a result, our growth could be limited due to our lack of capacity to develop and market our products to our customers, or we could experience deterioration in service levels or decreased customer satisfaction, any of which could harm our business. Our Efforts to Expand Sales of Our Products to Other Industries May Not Succeed We have historically sold our products primarily to companies in the electronics and medical device manufacturing industries. We intend to market products to customers in additional industries. Although we have targeted enterprises in other markets as potential customers, these potential customers may not be as willing to purchase product content management software as have other technology-based industries such as the electronics and medical device manufacturing industries. The Market For Our Products Is Newly Emerging and Customers May Not Accept Our Products The market for product content management software is newly emerging. Enterprises have not traditionally automated the product content management processes throughout the supply chain. We cannot be certain that this market will continue to develop and grow or that enterprises will elect to utilize our products rather than attempt to develop applications internally or through other sources. In addition, the use of the Internet, as well as corporate intranets, has not been widely adopted for sharing product content management information as well as for collaboration among supply chain participants. Enterprises that have already invested substantial resources in 9 other methods of product content management may be reluctant to adopt a new approach that may replace, limit or compete with their existing systems or methods. We expect that we will continue to need to pursue intensive marketing and sales efforts to educate prospective customers about the uses and benefits of our products. Therefore, demand for and market acceptance of our products will be subject to a high level of uncertainty. Increasing Competition Among Product Content Management Software Providers Could Harm Our Business The market for product content management software is new, highly fragmented, rapidly changing and increasingly competitive. We expect competition to intensify, which could result in price reductions, reduced gross margins and loss of market share, any one of which could seriously harm our business. Competitors vary in size and in the scope and breadth of the products and services offered. We face potential competition from in-house development efforts by potential customers or partners, vendors of engineering information management software, and developers of general purpose groupware software addressing only limited technology components of engineering change management. We also face potential competition from providers of enterprise software. Many of our actual or potential competitors have a number of significant advantages over us, including: . longer operating histories; . significantly greater financial, technical, marketing and other resources; . significantly greater name recognition and a larger installed base of customers; and . well-established relationships with our actual and potential customers as well as with systems integrators and other vendors and service providers. These competitors may also be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion and sale of their products, than we can. Some of our actual or potential competitors may also bundle their products in a manner that may discourage potential customers from purchasing our products. See "Business--Competition." We May Experience Difficulties in Introducing New Products and Upgrades Our future financial performance depends on our successful and timely development, introduction and market acceptance of new and enhanced products. The life cycles of our products are difficult to predict because the market for our products is new and emerging, and is characterized by rapid technological change, changing customer needs and evolving industry standards. The introduction of products or computer systems employing new technologies and emerging industry standards could render our existing products obsolete and unmarketable. For example, portions of our software are written in the Java computer programming language. If a new software language becomes standard in our industry or is considered more robust than Java, we may need to rewrite portions of our products in another computer language in order to remain competitive. The introduction of enhancements to our suite of products may also cause customers to defer orders for our existing products. We may experience difficulties that could delay or prevent the successful development, introduction or marketing of new or enhanced products in the future. In addition, those products may not meet the requirements of the marketplace and achieve market acceptance. We expect to add new products to our supply chain applications by acquisition or internal development and by developing enhancements to our existing applications. We have in the past experienced delays in the planned release dates of our software products and upgrades, and we have discovered software defects in new products after their introduction. New products or upgrades may not be released according to schedule, or may contain defects when released. Either situation could result in negative publicity, loss of sales, delay in market acceptance of our products or customer claims against us, any of which could harm our business. 10 Our Products Might Not Be Compatible With All Major Platforms, Which Could Inhibit Sales We must continually modify and enhance our products to keep pace with changes in hardware and software platforms and database technology, as well as emerging technical standards in the software industry. For example, we have designed our products to work with databases and servers such as Oracle and Microsoft SQL Server. Any changes to these platforms could require us to modify our products, and could cause us to delay releasing a product until the updated version of that platform has been released. Furthermore, third parties develop adapters to integrate our products with other design, manufacture, finance and supply chain systems used by our customers. We rely on these third parties to update the adapters to reflect changes to our products as well as to the targeted platform in order to maintain the functionality provided by our products. As a result, uncertainties related to the timing and nature of new product announcements, introductions or modifications by vendors of operating systems, back-office applications and browsers and other Internet- related applications could hurt our business, as customers may not be certain as to how our product will operate with their existing systems. In addition, although portions of our products are based upon the Java programming language, the Java language does not offer all of the features available in Windows. Accordingly, certain features available to products that run on Windows may not be available in the non-Windows version of our products, and this could result in reduced customer demand. Furthermore, some of our products do not run on certain types of popular server computers, such as those that utilize the UNIX operating system. If another platform becomes more widely used, we could be required to convert, or "port," our product to that platform. We may not succeed in these efforts and even if we do, potential customers may not choose our product. We Face Risks From Expansion of Our International Operations We believe that expansion of our international operations will be necessary for our future success. Therefore, we believe that we will need to commit significant resources to expand our international operations. A key aspect to our strategy is to expand our sales and support organizations internationally. We employ sales professionals in Europe and are in the early stages of expanding into the Asia Pacific market. If we are unable to successfully enter into and expand these international markets on a timely basis, our business and operating results could be harmed. This expansion may be more difficult or take longer than we anticipate, and we may not be able to successfully market, sell, deliver and support our products internationally. If successful in our international expansion, we will be subject to a number of risks associated with international business activities. These risks include: . difficulty in providing customer support in multiple time zones; . need to develop software in multiple foreign languages; . laws and business practices favoring local competition; . currency fluctuations; . longer sales cycles; . greater difficulty in collecting accounts receivable; . political and economic instability, particularly in Asia; . difficulties in enforcing agreements through foreign legal systems; . unexpected changes in regulatory requirements; . import or export licensing requirements; . reduced protection of our intellectual property rights in some countries; and . multiple conflicting tax laws and regulations. To date, most of our revenues have been denominated in United States dollars. If we experience an increase in the portion of our revenues denominated in foreign currencies, we may incur greater risks in currency 11 fluctuations, particularly since we translate our foreign currency revenues once at the end of each quarter. In the future, our international revenues could be denominated in the Euro, the currency of the European Union. The Euro is an untested currency and may be subject to economic risks that are not currently contemplated. We currently do not engage in foreign exchange hedging activities, and therefore our international revenues and expenses are currently subject to the risks of foreign currency fluctuations. We Depend on Licensed Technology and We May Increase Our Use of Software Licensed to Us By Third Parties We license technology on a non-exclusive basis from several businesses for use with our products, including licenses from Microsoft Corporation and Oracle Corporation for our servers, from RSA Data Security, Inc. for security and encryption technology software, and from Cimmetry Systems Inc. for our viewers. We anticipate that we will continue to license technology from third parties in the future. Some of the software we license from third parties would be difficult to replace. This software may not continue to be available on commercially reasonable terms, if at all. The loss or inability to maintain any of these technology licenses could result in delays in the licensing of our products until equivalent technology, if available, is identified, licensed and integrated. In addition, the effective implementation of our products depends upon the successful operation of third-party licensed products in conjunction with our products, and therefore any undetected errors in these licensed products may prevent the implementation or impair the functionality of products, delay new product introductions and/or injure our reputation. The increased use of third-party software could require us to enter into license agreements with third parties, which could result in higher royalty payments and a loss of product differentiation. Software Defects Could Diminish Demand For Our Products Our software products are complex and may contain errors, including year 2000 related errors, that may be detected at any point in the life of the product. We have in the past discovered software errors in certain of our products and as a result have experienced delays in shipment of products during the period required to correct these errors. We cannot assure you that, despite testing by us, our implementation partners and our current and potential customers, errors will not be found in new products or releases after shipment, resulting in loss of revenue or delay in market acceptance and sales, diversion of development resources, injury to our reputation or increased service and warranty costs. Further, our products are generally used in systems with other vendors' products, and as a result, our products must integrate successfully with these existing systems. System errors, whether caused by our products or those of another vendor, could adversely affect the market acceptance of our products, and any necessary revisions could cause us to incur significant expenses. Product Liability Litigation Could Harm Our Business Since our products are used for mission critical applications in the supply chain, errors, defects or other performance problems could result in financial or other damages to our customers. For example, our products are designed to communicate information relating to changes in product specifications during the manufacturing process. If a supplier or other participant receives inaccurate or erroneous data, it is possible that it could claim it incurred damages based on its reliance on that data. Although our license agreements generally contain provisions designed to limit our exposure to product liability litigation, existing or future laws or unfavorable judicial decisions could negate such limitation of liability provisions. Product liability litigation, even if unsuccessful, would be time-consuming and costly to defend and could harm our business. 12 In Order to Manage Our Growth and Expansion, We Will Need to Improve and Implement New Systems, Procedures and Controls We have recently experienced a period of rapid growth and expansion that has placed a significant strain on our management information systems and resources. For example, we have grown from 65 employees at April 30, 1997 to 156 employees at April 30, 1999. If we are unable to manage our growth and expansion, our business will be seriously harmed. In addition, we have recently hired a significant number of employees and plan to further increase our total headcount. We also plan to expand the geographic scope of our operations. This expansion has resulted and will continue to result in substantial demands on our management resources. To accommodate continued anticipated growth and expansion, we will be required to: . improve existing and implement new operational and financial systems, procedures and controls; . hire, train, manage, retain and motivate qualified personnel; and . enter into relationships with strategic partners. These measures may place additional burdens on our management and our internal resources. If we are unable to manage our growth in an efficient and timely manner or if our current or planned personnel systems, procedures and controls are not adequate to support our future operations, our business could be harmed. We Have Limited Protection of Our Intellectual Property Our success and ability to compete depend upon our proprietary technology. Despite our efforts to protect our intellectual property, a third party could copy or otherwise obtain our software or other proprietary information without authorization, or could develop software competitive to ours. Our means of protecting our proprietary rights may not be adequate and our competitors may independently develop similar technology, duplicate our products or design around patents that may be issued to us or our other intellectual property. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States, and we expect that it will become more difficult to monitor the use of our products if we increase our international presence. We may have to resort to litigation to enforce our intellectual property rights, to protect our trade secrets or know-how or to determine their scope, validity or enforceability. Enforcing or defending our proprietary technology is expensive, could cause the diversion of our resources, and may not prove successful. Our protective measures may prove inadequate to protect our proprietary rights, and any failure to enforce or protect our rights could cause us to lose a valuable asset. Our competitors may independently develop similar technology, duplicate our products or design around any patents that may be issued to us or our other intellectual property. We May Be Subject to Intellectual Property Infringement Claims There has been a substantial amount of litigation in the software and Internet industries regarding intellectual property rights. It is possible that, in the future, third parties may claim that we or our current or potential future products infringe their intellectual property. We expect that software product developers and providers of electronic commerce solutions 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 industry segments overlaps. Any claims, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. If our products were found to infringe a third party's proprietary rights, we could be required to enter into royalty or licensing agreements in order to continue to be able to sell our products. Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could seriously harm our business. 13 We integrate third-party software into our products. This third-party software may not continue to be available on commercially reasonable terms. We depend on third party licenses, including licenses for our servers, encryption and security software. If we cannot maintain licenses to this third-party software at an acceptable cost, shipments of our products could be delayed until equivalent software could be developed or licensed and integrated into our products, which could substantially harm our business, operating results and financial condition. Year 2000 Compliance Costs and Risks Are Difficult to Assess and Could Result in Delay or Loss of Revenue, Diversion of Development Resources, Damage to Our Reputation or Increased Service, Warranty or Litigation Costs Our products are generally integrated into computer systems involving sophisticated hardware and complex software products, which may not be year 2000 compliant. The failure of our customers' systems to be year 2000 compliant could impede the success of applications that we have developed for them. Accordingly, known or unknown defects that affect the operation of our software, including any defects or errors in applications that include our products, could result in delay or loss of revenue, diversion of development resources, damage to our reputation or increased service, warranty or litigation costs, any of which could harm our business. In addition, earlier versions of our products may not be year 2000 compliant, and we do not intend to make them year 2000 compliant. We also need to ensure year 2000 compliance of our own internal computer and other systems, to continue testing our software products, and to audit the year 2000 compliance status of our suppliers and business partners. We have not completed our year 2000 investigation and overall compliance initiative, and the total cost of our year 2000 compliance may be substantial and may harm our business. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Year 2000 Compliance." Future Acquisitions May Present Risks to Our Business As part of our business strategy, we may seek to acquire or invest in businesses, products or technologies that we feel could complement or expand our business, augment our market coverage, enhance our technical capabilities or that may otherwise offer growth opportunities. Acquisitions could create risks for us, including: . difficulties in assimilation of acquired personnel, operations, technologies or products; . unanticipated costs associated with the acquisition; . diversion of management's attention from other business concerns; . adverse effects on existing business relationships with suppliers and customers; and . use of substantial portions of our available cash, including the proceeds of this offering, to consummate the acquisition. In addition, if we consummate acquisitions through an exchange of our securities, our stockholders could suffer significant dilution. We cannot assure you that any particular acquisition, even if successfully completed, will generate any additional revenue or provide any benefit to our business. Provisions Contained in Our Charter Documents May Delay or Prevent a Change in Our Control We intend to reincorporate in Delaware prior to the completion of this offering. Provisions of our Delaware certificate of incorporation and bylaws and of Delaware law could make it more difficult for a third party to acquire us, even if a change in control would be beneficial to our stockholders. These provisions also may prevent changes in our management. See "Description of Capital Stock--Antitakeover Effect of Delaware Law and Provisions of Our Certificate of Incorporation and Bylaws." 14 Risks Related to the Internet on Our Business and Prospects If Use of the Internet Does Not Grow, Our Business Would Be Harmed Our success depends upon continued growth in the use of the Internet as a medium of commerce. Although the Internet is experiencing rapid growth in the number of users, this growth is a recent phenomenon and may not continue. Furthermore, despite this growth in usage, the use of the Internet for commerce is relatively new. As a result, a sufficiently broad base of enterprises and their supply chain partners may not adopt or continue to use the Internet as a medium of commerce. Our business would be seriously harmed if: .use of the Internet does not continue to increase or increases more slowly than expected; .the infrastructure for the Internet does not effectively support enterprises and their supply chain partners; .the Internet does not create a viable commercial marketplace, inhibiting the development of electronic commerce and reducing the demand for our products; or . concerns over the secure transmission of confidential information over public networks inhibit the growth of the Internet as a means of conducting commercial transactions. Capacity Restraints May Restrict the Use of the Internet as a Commercial Marketplace The Internet infrastructure may not be able to support the demands placed on it by increased usage and bandwidth requirements. Other risks associated with commercial use of the Internet could slow its growth, including: .inadequate reliability of the network infrastructure; .slow development of enabling technologies and complementary products; and .limited availability of cost-effective, high-speed access. Delays in the development or adoption of new equipment standards or protocols required to handle increased levels of Internet activity, or increased governmental regulation, could cause the Internet to lose its viability as a means of communication between enterprises and their supply claim partners. If these or any other factors cause use of the Internet for commerce to slow or decline, our business could be harmed. Increasing Governmental Regulation of the Internet Could Limit the Market for Our Products As Internet commerce continues to evolve, we expect that federal, state and foreign governments will adopt laws and regulations covering issues such as user privacy, taxation of goods and services provided over the Internet, pricing, content and quality of products and services. It is possible that legislation could expose companies involved in electronic commerce to liability, taxation or other increased costs, any of which could limit the growth of electronic commerce generally. Legislation could dampen the growth in Internet usage and decrease its acceptance as a communications and commercial medium. If enacted, these laws and regulations could limit the market for our products. Risks Related to This Offering Our Executive Officers, Directors and Major Stockholders Will Retain Significant Control Over Us After This Offering, Which May Lead to Conflicts With Other Stockholders Over Corporate Governance Matters After this offering, executive officers, directors and holders of 5% or more of our outstanding common stock will, in the aggregate, own approximately % of our outstanding common stock. These stockholders would be able to significantly influence all matters requiring approval by our stockholders, including the election of 15 directors and the approval of significant corporate transactions. This concentration of ownership may also delay, deter or prevent a change in our control and may make some transactions more difficult or impossible to complete without the support of these stockholders. Our Stock Price May Be Volatile, Which May Lead to Losses By Investors and to Securities Litigation Prior to this offering, you could not buy or sell our common stock publicly. An active public market for our common stock may not develop or be sustained after the offering. We will negotiate and determine the initial public offering price with the representatives of the underwriters based on several factors. This price may vary from the market price of the common stock after the offering. The stock market has experienced significant price and volume fluctuations and the market prices of securities of technology companies, particularly Internet-related companies, have been highly volatile. Investors may not be able to resell their shares at or above the initial public offering price. See "Plan of Distribution." In the past, securities class action litigation has often been instituted against a company following periods of volatility in the company's stock price. This type of litigation could result in substantial costs and could divert our management's attention and resources. Our Management Will Retain Broad Discretion in the Use of Proceeds From This Offering Our management has complete discretion as to how to spend the proceeds from this offering. They may spend these proceeds in ways with which our stockholders may not agree. We cannot predict that investment of the proceeds will yield a favorable return. See "Use of Proceeds." Substantial Sales of Our Common Stock Could Adversely Affect Our Stock Price Sales of a substantial number of shares of our common stock after this offering could cause the market price of our common stock to decline by potentially introducing a large number of sellers of our common stock into a market in which our common stock price is already volatile. In addition, the sale of these shares could impair our ability to raise capital through the sale of additional equity securities. Based on shares outstanding as of April 30, 1999, we will have shares of our common stock outstanding, or shares if the underwriters' overallotment is exercised in full. Our directors, executive officers and current stockholders have executed lock-up agreements that limit their ability to sell shares of our common stock. These stockholders have agreed, subject to limited exceptions, not to sell or otherwise dispose of any shares of our common stock for a period of 180 days after the date of this prospectus without the prior written approval of Morgan Stanley & Co. Incorporated. When these lock-up agreements expire, these shares and the shares of the common stock underlying any options held by these individuals will become eligible for sale, in some cases subject only to the volume, manner of sale and notice requirements of Rule 144 of the Securities Act of 1933. See "Management--Stock Plans" and "Shares Eligible for Future Sale." Investors in This Offering Will Suffer Immediate Dilution We expect that the initial public offering price of our common stock will be substantially higher than the pro forma net tangible book value per share of our outstanding common stock. Accordingly, purchasers of common stock in this offering will experience immediate and substantial dilution of approximately $ in net tangible book value per share, or approximately % of the assumed offering price of $ per share. In contrast, our existing stockholders paid an average price of $1.66 per share. Investors will incur additional dilution upon the exercise of outstanding stock options and warrants. See "Dilution." Special Note Regarding Forward-Looking Statements Some of the information in this prospectus contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by words such as "expects," "anticipates," "intends," 16 "plans," "believes," "seeks," "estimates" and similar expressions. Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements for a number of reasons, including those discussed under "Risk Factors" and elsewhere in this prospectus. You should read statements that contain these words carefully because they discuss our expectations about our future performance, contain projections of our future operating results or our future financial condition, or state other "forward-looking" information. Before you invest in our common stock, you should be aware that the occurrence of any of the events described in these risk factors and elsewhere in this prospectus could substantially harm our business, results of operations and financial condition and that upon the occurrence of any of these events, the trading price of our common stock could decline and you could lose all or part of your investment. 17 USE OF PROCEEDS We estimate that we will receive net proceeds of $ million from the sale of the shares of common stock in this offering, assuming an initial public offering price of $ per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses of $ . If the underwriters' over-allotment option is exercised in full, we estimate that our net proceeds will be $ million. We intend to use the net proceeds of the offering primarily for general corporate purposes, including working capital, sales and marketing activities, product development and support, capital expenditures and repayment of approximately $3.0 million of indebtedness under our subordinated notes payable. We may, if appropriate opportunities arise, use an undetermined portion of the net proceeds to acquire or invest in complementary companies, product lines, products or technologies. We do not currently have any agreements or commitments with respect to any acquisition or investment and we are not currently involved in any negotiations with respect to any such transaction. Pending these uses, the net proceeds of the offering will be invested in short-term, interest-bearing investments or accounts. Borrowings under our subordinated notes payable, due through fiscal 2002, bear interest at an annual rate of 11.75%. DIVIDEND POLICY We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. We currently intend to retain any future earnings to develop and expand our business. Under the terms of our line of credit facilities, we may not declare or pay any dividends without the prior consent of the lenders under these facilities. 18 CAPITALIZATION The following table sets forth our capitalization as of April 30, 1999: . on an actual basis; . on a pro forma basis to reflect the assumed exercise of a warrant to purchase 60,000 shares of convertible preferred stock at an exercise price of $6.75 per share and the conversion of all outstanding shares of preferred stock, including the shares issued upon the exercise of the warrant, into 11,933,273 shares of common stock; and . on a pro forma as adjusted basis to reflect the application of the estimated net proceeds from the sale of shares of common stock in this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses. The outstanding share information excludes 1,159,725 shares of common stock reserved for issuance upon exercise of outstanding options granted under our 1995 Stock Option Plan with a weighted average exercise price of $2.12 per share; 2,245,025 shares of common stock available for issuance under our 1995 Stock Option Plan; 500,000 shares of common stock reserved for issuance under our 1999 Employee Stock Purchase Plan; and 98,301 shares of common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $1.22 per share, which will remain outstanding after this offering. Of the total shares outstanding, 963,606 shares are subject to our right of repurchase. You should read this table in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the related notes to the consolidated financial statements.
April 30, 1999 ------------------------------- Pro Pro Forma Actual Forma As Adjusted -------- -------- ----------- (in thousands, except share data) Capital lease obligations and notes payable, less current portion.......................... $ 3,224 $ 3,224 $ 871 -------- -------- -------- Stockholders' equity: Convertible preferred stock, $.001 par value; 21,175,556 shares authorized, 11,873,273 shares issued and outstanding actual; 10,000,000 shares authorized, no shares issued or outstanding pro forma and pro forma as adjusted........................... 12 -- -- Common stock, $.001 par value; 29,000,000 shares authorized, 4,200,025 shares issued and outstanding actual; 100,000,000 shares authorized, 16,133,298 shares issued and outstanding pro forma; 100,000,000 shares authorized, shares issued and outstanding pro forma as adjusted........... 4 16 Additional paid-in capital................... 34,814 35,219 Notes receivable from stockholders........... (748) (748) (748) Unearned stock compensation.................. (4,258) (4,258) (4,258) Accumulated deficit.......................... (26,533) (26,533) (26,533) -------- -------- -------- Total stockholders' equity................. 3,291 3,696 -------- -------- -------- Total capitalization..................... $ 6,515 $ 6,920 $ ======== ======== ========
19 DILUTION Our pro forma net tangible book value at April 30, 1999 was approximately $3.7 million or approximately $.23 per share. Pro forma net tangible book value per share represents total assets less total liabilities, divided by the number of shares outstanding as of April 30, 1999, after giving effect to the conversion into common stock of all of our outstanding shares of preferred stock. After giving effect to our sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, and after deducting the estimated underwriters discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value as of April 30, 1999 would have been approximately $ million, or $ per share. This represents an immediate increase in net tangible book value of $ per share to existing stockholders and an immediate dilution in net tangible book value of $ per share to new investors purchasing shares in this offering. The following table illustrates this per share dilution: Assumed initial public offering price per share....................... $ Pro forma net tangible book value per share as of April 30, 1999.... $.23 Increase per share attributable to new investors.................... ---- Pro forma net tangible book value per share after this offering....... --- Dilution per share to new investors in this offering.................. $ ===
The following table sets forth, on a pro forma basis, as of April 30, 1999, assuming conversion into common stock of all of our outstanding shares of preferred stock, the difference between the existing stockholders and the purchasers of shares in this offering, at the assumed initial public offering price of $ per share, with respect to 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 stockholders and by new investors, before deduction of the estimated underwriting discounts and commissions and estimated offering expenses payable by us:
Shares Purchased Total Consideration Average ------------------ ------------------- Price Per Number Percent Amount Percent Share ---------- ------- ----------- ------- --------- Existing stockholders.......... 16,133,298 % $26,801,000 % $1.66 New stockholders............... ---------- ----- ----------- ----- Totals....................... 100.0% $ 100.0% ========== ===== =========== =====
As of April 30, 1999, there were options outstanding to purchase a total of 1,160,800 shares of common stock at a weighted average exercise price of $2.12 per share under our 1995 Stock Option Plan. In addition, as of April 30, 1999, there were 98,301 shares of common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $1.22 per share. To the extent outstanding options or warrants are exercised, there will be further dilution to new investors. 20 SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data should be read in conjunction with, and are qualified by reference to, our consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The selected consolidated statement of operations data for each of the three years in the period ended April 30, 1999 and the selected consolidated balance sheet data at April 30, 1998 and April 30, 1999, are derived from, and are qualified by reference to, our consolidated financial statements included elsewhere in this prospectus. The selected consolidated statement of operations data for the period from inception on March 13, 1995 to April 30, 1996 and the selected consolidated balance sheet data as of April 30, 1996 and April 30, 1997 are derived from consolidated financial statements not included in this prospectus. The historical results are not necessarily indicative of results to be expected in any future period.
Fiscal Year Ended April Period from March 31, 30, 1995 (Inception) to -------------------------- April 30, 1996 1997 1998 1999 --------------------- ------- ------- -------- (in thousands, except per share data) Consolidated Statement of Operations Data: Revenues: License................... $ 24 $ 1,143 $ 6,102 $ 10,859 Professional services..... 14 187 1,385 3,665 Maintenance............... -- 22 516 2,283 ------- ------- ------- -------- Total revenues.......... 38 1,352 8,003 16,807 ------- ------- ------- -------- Cost of revenues: License................... 2 113 543 819 Professional services..... 4 88 1,347 3,823 Maintenance............... -- 65 278 1,343 ------- ------- ------- -------- Total cost of revenues.. 6 266 2,168 5,985 ------- ------- ------- -------- Gross profit................ 32 1,086 5,835 10,822 ------- ------- ------- -------- Operating expenses: Sales and marketing....... 198 2,149 8,070 13,495 Research and development.. 852 2,510 3,788 4,742 General and administrative........... 381 1,333 1,995 1,938 Amortization of stock compensation............. -- -- 856 2,253 ------- ------- ------- -------- Total operating expenses............... 1,431 5,992 14,709 22,428 ------- ------- ------- -------- Loss from operations........ (1,399) (4,906) (8,874) (11,606) Interest income (expense), net........................ 72 70 (68) 178 ------- ------- ------- -------- Net loss.................... $(1,327) $(4,836) $(8,942) $(11,428) ======= ======= ======= ======== Net loss per share: Basic and diluted......... $ (1.94) $ (3.72) $ (4.20) $ (3.87) ======= ======= ======= ======== Weighted average shares... 684 1,300 2,129 2,952 ======= ======= ======= ======== Unaudited pro forma net loss per share: Basic and diluted......... $ (.78) ======== Weighted average shares... 14,668 ========
April 30, ----------------------------- 1996 1997 1998 1999 ------ ------ ------ ------- (in thousands) Consolidated Balance Sheet Data: Cash, cash equivalents and short-term investments.................................... $3,829 $3,292 $2,160 $10,003 Working capital (deficit)....................... 3,747 2,617 (930) 4,174 Total assets.................................... 4,219 5,366 7,531 17,948 Long-term obligations........................... 152 626 782 3,224 Stockholders' equity............................ 3,867 3,154 177 3,291
21 MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Selected Consolidated Financial Data" and our consolidated financial statements and related notes included elsewhere in this prospectus. In addition to historical information, the discussion in this prospectus contains certain forward- looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated by these forward-looking statements due to factors, including, but not limited to, those set forth under "Risk Factors" and elsewhere in this prospectus. Overview We are a leading supplier of web-centric content management software for the use within and among enterprises in a manufacturing supply chain. Our suite of products is designed to improve the ability of supply chain members to communicate and collaborate with one another about new or changing product content. We were founded in March 1995 and in June 1996 we began selling our first products and delivering related services. We currently license our products in the United States through our direct sales force, and in Europe through our direct sales force and distributors. To date, revenues from international sales have not been material. We have derived our revenues principally from the licenses of our products, the delivery of professional services and from maintenance contracts. Customers who license our software products receive a license for our application servers, one or more user licenses, and third-party provided adapters to connect with the customer's other existing enterprise systems. Our customers generally purchase a limited number of licenses for concurrent users at the time of the initial license of the software products and may purchase additional licenses for concurrent users as needed. Customers may purchase implementation services from us. These professional services are generally provided on a fixed-price basis and are often provided by third-party consulting organizations. We also offer fee-based training services to our customers. Customers who license our products usually purchase maintenance contracts, which provide software upgrades and technical support over a stated term, which is generally a twelve-month period. We recognize revenue under Statement of Position, or SOP, 97-2, Software Revenue Recognition, which requires revenues earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair values of the elements. Software licenses sold to new customers are recognized upon installation and acceptance by the customer. Software licenses sold to existing customers, or add-on sales, are recognized upon shipment of the software product. Our professional services revenues consist of implementation services which are recognized upon customer acceptance and training revenues which are recognized as the services are performed. Our maintenance revenues are recognized ratably over the contract period, generally twelve months. Our cost of license revenues include royalties due to third parties for integrated technology, the cost of manuals and product documentation, production media used to deliver our products and shipping costs. Our cost of professional services revenues include salaries and related expenses for the implementation and training services organizations, costs of third parties contracted to provide implementation services to customers and an allocation of our overhead expenses. Our cost of maintenance revenues include salaries and related expenses for the customer support organization and an allocation of our overhead expenses. The cost of professional services can fluctuate based on the mix of professional services provided by us compared to professional services provided by third-party service providers. Since we generally provide implementation services on a fixed-price basis, our gross margin from these services may fluctuate based on the actual cost to provide these services. Our overall gross profit can fluctuate based on the mix of license revenues compared to professional services revenues and maintenance revenues. Our operating expenses are classified as sales and marketing, research and development and general and administrative. We classify all charges to these operating expense categories based on the nature of the expenditures. Although each category includes expenses that are unique to the category type, there are common recurring expenditures that are typically included in all operating expenses categories, such as salaries, employee 22 benefits, incentive compensation, bonuses, travel costs, telephone, communication, rent and allocated facilities costs and professional fees. The sales and marketing category of operating expenses includes additional expenditures specific to the marketing group, such as public relations and advertising, trade shows, marketing collateral materials, and customer user group meetings and expenditures specific to the sales group, such as commissions. To date, all software development costs in research and development have been expensed as incurred. Also included in our operating expenses is the amortization of stock compensation described below. In connection with the granting of stock options to our employees, we have recorded unearned stock compensation totaling approximately $7.4 million through April 30, 1999, of which $4.3 million remains to be amortized. This amount represents the difference between the exercise price and the current estimated fair value of our common stock on the date these stock options were granted. This amount is included as a component of stockholders' equity and is being amortized by charges to operations over the vesting period of the options, consistent with the method described in Financial Accounting Standards Board, or FASB, Interpretation No. 28. We recognized amortization of unearned stock compensation of $856,000 for fiscal 1998 and $2.3 million for fiscal 1999. We expect to record additional unearned stock compensation with respect to stock option grants made subsequent to April 30, 1999 of at least $2.5 million. The amortization of the remaining unearned stock compensation at April 30, 1999 will result in additional charges to operations through fiscal 2004. The amortization of stock compensation is classified as a separate component of operating expenses in our consolidated statement of operations. Although our total revenues have increased from quarter to quarter, we have incurred significant costs to develop our products and to recruit and train personnel for our engineering, sales, marketing, professional services and administration departments. As a result, we have incurred significant losses since inception, and, as of April 30, 1999, had an accumulated deficit of $26.5 million. We intend to continue to incur significant sales and marketing, research and development and general and administrative expenses. For example, we had 65 full-time employees as of April 30, 1997 compared to 103 at April 30, 1998 and 156 at April 30, 1999. We will seek to hire additional employees in the future. We expect to continue to incur operating losses for the foreseeable future. In order to achieve profitability, we will need to increase our revenues significantly. Therefore, we cannot assure you that we will ever attain or maintain profitability. Our expansion will also place significant demands on our management and operational resources. To manage this rapid growth and increased demands, we must improve existing and implement new operational and financial systems, procedures and controls. We must also hire, train, manage, retain and motivate qualified personnel. We expect future expansion to continue to challenge our ability to hire, train, manage, retain and motivate our employees. In view of the rapidly changing nature of our market and our limited operating history, we believe that period-to-period comparisons of our revenues and other operating results are not necessarily meaningful and should not be relied upon as indications of future performance. Our historic revenue growth rates are not necessarily sustainable or indicative of our future growth. 23 Results of Operations The following table sets forth selected consolidated financial data for the periods indicated, expressed as a percentage of total revenues:
Fiscal Year Ended April 30, ------------------ 1997 1998 1999 ---- ---- ---- Revenues: License.................................................. 84 % 76 % 65 % Professional services.................................... 14 17 22 Maintenance.............................................. 2 7 13 ---- ---- --- Total revenues......................................... 100 100 100 ---- ---- --- Cost of revenues: License.................................................. 8 7 5 Professional services.................................... 7 17 23 Maintenance.............................................. 5 3 8 ---- ---- --- Total cost of revenues................................. 20 27 36 ---- ---- --- Gross profit............................................... 80 73 64 ---- ---- --- Operating expenses: Sales and marketing...................................... 159 101 80 Research and development................................. 185 47 28 General and administrative............................... 99 25 12 Amortization of stock compensation....................... -- 11 13 ---- ---- --- Total operating expenses............................... 443 184 133 ---- ---- --- Loss from operations....................................... (363) (111) (69) Interest income (expense), net............................. 5 (1) 1 ---- ---- --- Net loss................................................... (358)% (112)% (68)% ==== ==== ===
Revenues Our total revenues were $1.4 million for fiscal 1997, $8.0 million for fiscal 1998 and $16.8 million for fiscal 1999, representing increases of $6.6 million, or 492%, from fiscal 1997 to fiscal 1998 and $8.8 million, or 110%, from fiscal 1998 to fiscal 1999. We had no customer that accounted for more than 10% of our total revenues in fiscal 1997, fiscal 1998 or fiscal 1999. License Revenues. Our license revenues were $1.1 million for fiscal 1997, $6.1 million for fiscal 1998 and $10.9 million for fiscal 1999, representing increases of $5.0 million, or 434%, from fiscal 1997 to fiscal 1998 and $4.8 million, or 78%, from fiscal 1998 to fiscal 1999. License revenues as a percentage of total revenues were 84% for fiscal 1997, 76% for fiscal 1998 and 65% for fiscal 1999. The increase in our license revenues from fiscal 1997 to fiscal 1998 was due primarily to increased market acceptance of our suite of products and increases in both the size and productivity of our sales force. The increase in license revenues from fiscal 1998 to fiscal 1999 was primarily due to the continued impact of those same factors, as well as the release of a new version of our products. Professional Services Revenues. Our professional services revenues were $187,000 for fiscal 1997, $1.4 million for fiscal 1998 and $3.7 million for fiscal 1999, representing increases of $1.2 million, or 640%, from fiscal 1997 to fiscal 1998 and $2.3 million, or 165%, from fiscal 1998 to fiscal 1999. Professional services 24 revenues as a percentage of total revenues were 14% for fiscal 1997, 17% for fiscal 1998 and 22% for fiscal 1999. The increase in professional services revenues from fiscal 1997 to fiscal 1998 and from fiscal 1998 to fiscal 1999 reflects increased license revenues and an increased range of services. The increase in professional services revenues as a percentage of total revenues from fiscal 1997 to fiscal 1998 and from fiscal 1998 to fiscal 1999 was primarily due to the increased range of services. To date, a portion of our professional services revenues relates to our invoicing for services provided by third parties. In the future, we anticipate that an increasing percentage of professional services will be provided by third parties who will invoice the customer directly. As a result, we anticipate that professional services revenues will decline as a percentage of total revenues. Maintenance Revenues. Our maintenance revenues were $22,000 for fiscal 1997, $516,000 for fiscal 1998 and $2.3 million for fiscal 1999, representing increases of $494,000, or 2,245%, from fiscal 1997 to fiscal 1998 and $1.8 million, or 342%, from fiscal 1998 to fiscal 1999. Maintenance revenues as a percentage of total revenues were 2% for fiscal 1997, 7% for fiscal 1998 and 13% for fiscal 1999. The increase in maintenance revenues and maintenance revenues as a percentage of total revenues from fiscal 1997 to fiscal 1998 and from fiscal 1998 to fiscal 1999 is primarily due to increased licenses for our products, as well as renewals of prior period maintenance contracts. Cost of Revenues Cost of License Revenues. Cost of license revenues were $113,000 for fiscal 1997, $543,000 for fiscal 1998 and $819,000 for fiscal 1999, representing increases of $430,000, or 381%, from fiscal 1997 to fiscal 1998 and $276,000, or 51%, from fiscal 1998 to fiscal 1999. Cost of license revenues as a percentage of license revenues were 10% for fiscal 1997, 9% for fiscal 1998 and 8% for fiscal 1999. Cost of license revenues increased from fiscal 1997 to fiscal 1998 and from fiscal 1998 to fiscal 1999 primarily due to increased expenses associated with the sub-licensing of third-party software used in our products, and the costs of production, manuals and other media associated with the license of an increased number of software products. Cost of license revenues as a percentage of total license revenues have decreased as add-on licenses, which have a higher gross margin than initial customer licenses, have increased as a percentage of total license revenues. Cost of Professional Services Revenues. Cost of professional services revenues were $88,000 for fiscal 1997, $1.3 million for fiscal 1998 and $3.8 million for fiscal 1999, representing increases of $1.2 million, or 1,431%, from fiscal 1997 to fiscal 1998 and $2.5 million, or 183%, from fiscal 1998 to fiscal 1999. Cost of services revenues as a percentage of services revenues were 47% for fiscal 1997, 97% for fiscal 1998 and 104% for fiscal 1999. The increase in cost and as a percentage of professional services revenues from fiscal 1997 to fiscal 1998 was primarily due to hiring and training a consulting organization to implement our products. The increase in cost and as a percentage of professional services revenues from fiscal 1998 to fiscal 1999 was primarily due to an increase in third-party professional services personnel to support the increased customer base. In certain periods in the past, and potentially in the future, our cost of professional services revenues exceeded our professional services revenues. This is generally because the actual cost of providing the services, whether provided internally or through third parties, exceeded the fixed price payment received from some of our customers. In addition, as we increase the size of our professional services staff, costs are incurred for new personnel before they become fully productive. Cost of Maintenance Revenues. Cost of maintenance revenues were $65,000 for fiscal 1997, $278,000 for fiscal 1998 and $1.3 million for fiscal 1999, representing increases of $213,000, or 328%, from fiscal 1997 to fiscal 1998 and $1.0 million, or 383%, from fiscal 1998 to fiscal 1999. Cost of maintenance revenues as a percentage of maintenance revenues were 295% for fiscal 1997, 54% for fiscal 1998 and 59% for fiscal 1999. The increase in cost of maintenance revenues from fiscal 1997 to fiscal 1998 and from fiscal 1998 to fiscal 1999 was primarily due to hiring and training a support organization needed in connection with our increased customer base during these periods. The decrease in cost of maintenance revenues as a percentage of maintenance revenues from fiscal 1997 to fiscal 1998 was primarily due to economies of scale realized as a result of increased management personnel and increased experience of the maintenance personnel. The increase in the cost of maintenance revenues as a percentage of maintenance revenues from fiscal 1998 to fiscal 1999 was primarily due to expansion of the support organization. 25 Operating Expenses Sales and Marketing. Sales and marketing expenses were $2.1 million for fiscal 1997, $8.1 million for fiscal 1998 and $13.5 million for fiscal 1999, representing increases of $5.9 million, or 276%, from fiscal 1997 to fiscal 1998 and $5.4 million, or 67%, from fiscal 1998 to fiscal 1999. Sales and marketing expenses as a percentage of total revenues were 159% for fiscal 1997, 101% for fiscal 1998 and 80% for fiscal 1999. The increase in sales and marketing expenses from fiscal 1997 to fiscal 1998 and from fiscal 1998 to fiscal 1999 primarily reflect our investment in our sales and marketing organization, including significant personnel-related expenses such as salaries, benefits and commissions, recruiting fees, travel expenses and related costs of hiring sales management, sales representatives, sales engineers and marketing personnel. The increase in sales and marketing expenses from fiscal 1997 to fiscal 1998 also reflects increased hiring rates, and increased public relations and trade show expenses. We anticipate that our sales and marketing expenses will increase in absolute dollars for the foreseeable future as we expand our domestic and international sales force. Research and Development. Research and development expenses were $2.5 million for fiscal 1997, $3.8 million for fiscal 1998 and $4.7 million for fiscal 1999, representing increases of $1.3 million, or 51%, from fiscal 1997 to fiscal 1998 and $954,000, or 25%, from fiscal 1998 to fiscal 1999. Research and development costs as a percentage of total revenues were 185% for fiscal 1997, 47% for fiscal 1998 and 28% for fiscal 1999. The increases in research and development expenses from fiscal 1997 to fiscal 1998 and from fiscal 1998 to fiscal 1999 were primarily due to the increase in the number of our software developers and quality assurance personnel and outside contractors to support our product development, documentation and testing activities related to the development and release of the latest versions of our products. We anticipate that research and development expenses will continue to increase in absolute dollars for the foreseeable future as we continue to add to our research and development staff. General and Administrative. General and administrative expenses were $1.3 million for fiscal 1997, $2.0 million for fiscal 1998 and $1.9 million for fiscal 1999, representing an increase of $662,000, or 50%, from fiscal 1997 to 1998 and a decrease of $57,000, or 3%, from fiscal 1998 to 1999. General and administrative expenses as a percentage of total revenues were 99% for fiscal 1997, 25% for fiscal 1998 and 12% for fiscal 1999. The increase in costs from fiscal 1997 to fiscal 1998 was primarily due to hiring additional finance, executive and administrative personnel to support the growth of our business during that period. We expect that general and administrative expenses will increase in absolute dollars for the foreseeable future as we expand our operations and incur the normal costs of a public company. Amortization of Stock Compensation. During fiscal 1998 and fiscal 1999, we recorded a total of approximately $7.4 million of unearned stock compensation. We recognized amortization of stock compensation of $856,000 in fiscal 1998 and $2.3 million in fiscal 1999. Interest Income (Expense), Net. Interest income (expense), net, was $70,000 for fiscal 1997, $(68,000) for fiscal 1998 and $178,000 for fiscal 1999. Income Taxes. No provision for income taxes has been recorded since our inception because we have incurred net losses in all periods. As of April 30, 1999, we had net operating loss carryforwards for federal income tax reporting purposes of approximately $20.0 million that expire in various amounts beginning in fiscal 2016. We also had net operating loss carryforwards for state income tax reporting purposes of approximately $18.0 million that expire in various amounts beginning in fiscal 2004. The U.S. tax laws contain provisions that limit the use in any future period of net operating loss and credit carryforwards upon the occurrence of certain events, including a significant change in ownership interests. We had deferred tax assets, including our net operating loss carryforwards and tax credits of approximately $8.7 million as of April 30, 1999. A valuation allowance has been recorded for the entire deferred tax asset as a result of uncertainties regarding the realization of the asset balance. See note 4 of notes to consolidated financial statements. 26 Quarterly Results of Operations The following tables set forth our unaudited consolidated statement of operations data for each of the eight quarters in the period ended April 30, 1999, as well as that data expressed as a percentage of our total revenues for the quarters presented. You should read this information in conjunction with our consolidated financial statements and related notes appearing elsewhere in this prospectus. We have prepared this unaudited consolidated information on a basis consistent with our audited consolidated financial statements, and, in the opinion of our management, reflects all normal recurring adjustments that we consider necessary for a fair presentation of our financial position and operating results for the quarters presented. You should not draw any conclusions about our future results from the operating results for any quarter.
Three Months Ended ------------------------------------------------------------------------------ Jul. 31, Oct. 31, Jan. 31, Apr. 30, Jul. 31, Oct. 31, Jan. 31, Apr. 30, 1997 1997 1998 1998 1998 1998 1999 1999 -------- -------- -------- -------- -------- -------- -------- -------- (in thousands) Revenues: License................ $ 926 $ 1,324 $ 1,543 $ 2,309 $ 2,270 $ 2,486 $ 2,898 $ 3,205 Professional services.. 213 254 419 499 655 816 976 1,218 Maintenance............ 40 91 166 219 316 510 718 739 ------- ------- ------- ------- ------- ------- ------- ------- Total revenues........ 1,179 1,669 2,128 3,027 3,241 3,812 4,592 5,162 ------- ------- ------- ------- ------- ------- ------- ------- Cost of revenues: License................ 79 124 119 221 165 241 211 202 Professional services.. 199 330 348 470 756 790 1,165 1,112 Maintenance............ 59 64 116 39 237 306 371 429 ------- ------- ------- ------- ------- ------- ------- ------- Total cost of revenues............. 337 518 583 730 1,158 1,337 1,747 1,743 ------- ------- ------- ------- ------- ------- ------- ------- Gross profit............ 842 1,151 1,545 2,297 2,083 2,475 2,845 3,419 ------- ------- ------- ------- ------- ------- ------- ------- Operating expenses: Sales and marketing.... 1,279 2,024 2,006 2,761 2,756 3,234 3,339 4,166 Research and development........... 745 826 1,044 1,173 1,076 1,140 1,294 1,232 General and administrative........ 428 448 481 638 431 439 492 576 Amortization of stock compensation.......... -- 223 280 353 444 501 622 686 ------- ------- ------- ------- ------- ------- ------- ------- Total operating expenses............. 2,452 3,521 3,811 4,925 4,707 5,314 5,747 6,660 ------- ------- ------- ------- ------- ------- ------- ------- Loss from operations.... (1,610) (2,370) (2,266) (2,628) (2,624) (2,839) (2,902) (3,241) Interest income (expense), net......... (2) (26) (23) (17) 52 98 64 (36) ------- ------- ------- ------- ------- ------- ------- ------- Net loss................ $(1,612) $(2,396) $(2,289) $(2,645) $(2,572) $(2,741) $(2,838) $(3,277) ======= ======= ======= ======= ======= ======= ======= =======
27
As a Percentage of Total Revenues ----------------------------------------------------------------------- Jul. 31, Oct. 31, Jan. 31, Apr. 30, Jul. 31, Oct. 31, Jan. 31, Apr. 30, 1997 1997 1998 1998 1998 1998 1999 1999 -------- -------- -------- -------- -------- -------- -------- -------- Revenues: License................ 79 % 79 % 72 % 76 % 70 % 65 % 63 % 62 % Professional services.. 18 15 20 17 20 22 21 24 Maintenance............ 3 6 8 7 10 13 16 14 ---- ---- ---- --- --- --- --- --- Total revenues........ 100 100 100 100 100 100 100 100 ---- ---- ---- --- --- --- --- --- Cost of revenues: License................ 7 7 6 7 5 6 5 4 Professional services.. 17 20 16 16 24 21 25 22 Maintenance............ 5 4 5 1 7 8 8 8 ---- ---- ---- --- --- --- --- --- Total cost of revenues............. 29 31 27 24 36 35 38 34 ---- ---- ---- --- --- --- --- --- Gross profit............ 71 69 73 76 64 65 62 66 ---- ---- ---- --- --- --- --- --- Operating expenses: Sales and marketing.... 109 121 94 91 85 85 73 80 Research and development........... 63 50 49 39 33 30 28 24 General and administrative........ 36 27 23 21 13 11 11 11 Amortization of stock compensation.......... -- 13 13 12 14 13 13 14 ---- ---- ---- --- --- --- --- --- Total operating expenses............. 208 211 179 163 145 139 125 129 ---- ---- ---- --- --- --- --- --- Loss from operations.... (137) (142) (106) (87) (81) (74) (63) (63) Interest income (expense), net......... -- (2) (2) -- 2 2 1 -- ---- ---- ---- --- --- --- --- --- Net loss................ (137)% (144)% (108)% (87)% (79)% (72)% (62)% (63)% ==== ==== ==== === === === === ===
Revenues. Our total revenues increased in each of the eight quarterly periods ended April 30, 1999. The increase in revenues in these periods reflects the increase in the number of customers and scope of product sales in each quarter. Our license revenues in the first fiscal quarter have historically been lower than those of the immediately preceding fourth quarter. License revenues in the first quarter of fiscal 1999 decreased 2% from the fourth quarter of fiscal 1998. In future periods, we expect these trends may cause first quarter revenues to be lower than the level achieved in the preceding fourth quarter. Cost of Revenues. Cost of revenues increased in each of the eight quarterly periods ended April 30, 1999 as a result of the growth of revenues. In the quarters ended July 31, 1998 and January 31, 1999, cost of professional services as a percentage of total professional services revenues significantly increased primarily due to lower margin third-party implementation projects and losses on certain implementation projects. Operating Expenses. Operating expenses increased significantly in each of the eight quarterly periods ended April 30, 1999 as a result of increased sales and marketing expenses associated with higher numbers of personnel, use of independent contractors and other third parties for development of our products, recruiting and related hiring expenses for additional senior management in our research and development, administrative, sales and marketing organizations and amortization of stock compensation. In addition, sales and marketing expenses increased significantly in the fourth quarter of fiscal 1998 and fiscal 1999 primarily due to commissions and other compensation paid to the direct sales force for the attainment of sales quotas. 28 Our quarterly operating results have varied widely in the past, and we expect that they will continue to fluctuate in the future as a result of a number of factors, many of which are outside our control. We believe that our period-to-period operating results are not meaningful, and you should not rely on them as indicative of our future performance. You should also evaluate our prospects in light of the risks, expenses and difficulties commonly encountered by comparable early-stage companies in new and rapidly emerging markets. We might not successfully address the risks and challenges that face us. In addition, although we have experienced significant revenue growth recently, our revenue might not continue to grow and we might not become or remain profitable in the future. Our future operating results will depend on many factors, including: . demand for our products; . size and timing of sales and installations of our products; . product and price competition; . our unpredictable sales cycle; . our ability to successfully expand our direct sales force; . our ability to develop and market new and enhanced products on a timely basis; . deferral of customer orders in anticipation of product enhancements or new products; . continued purchases by our existing customers, including additional licenses and maintenance contracts; . delays in our customers' orders due to their year 2000 priorities; . variability in the mix of our license and professional service revenues; . our ability to accurately price fixed-priced professional services projects; . variability in the mix of professional services that we perform versus those performed for our customers by others; . software defects; . technological changes in our market; . our ability to establish and maintain relationships with our third-party implementation partners; . changes in our sales force incentives; . expansion of our international sales organization and increase in international sales; . the loss of any key employees and timing of our new hires; and . general economic factors. Liquidity and Capital Resources Since our inception, we have primarily financed our operations through the sale of convertible preferred stock, resulting in net proceeds of $26.2 million through April 30, 1999. To a lesser extent, we have financed our operations through equipment financing and lending arrangements. As of April 30, 1999, we had cash and cash equivalents of $10.0 million, an increase from $2.2 million of cash and cash equivalents held as of April 30, 1998. Our working capital at April 30, 1999 was $4.2 million, compared to a working capital deficit of $930,000 at April 30, 1998. The increase in the working capital is attributable to the increase in cash from the sales of our equity securities and the increase in accounts receivable. We have a $2.0 million senior line of credit facility with a bank that bears interest at 8.5% and expires on August 31, 1999. We are currently in the process of applying for an extension to the line of credit. At April 30, 29 1999, no balance was outstanding under this line of credit. This line of credit is secured by accounts receivable and certain other assets. We also have $3.0 million outstanding of subordinated notes payable which bear interest at an annual rate of 11.75% and are payable through fiscal 2002. In addition, capital lease obligations including both short-term and long-term portions, were $1.6 million at April 30, 1999, and are payable through fiscal 2003. Our senior line of credit requires us to maintain certain monthly financial covenants, including a minimum tangible net worth and a minimum quick ratio. We were in compliance with all of our financial covenants at April 30, 1999. We also have noncancelable operating leases for office space and equipment of approximately $2.4 million which are payable through fiscal 2003. Our operating activities resulted in net cash outflows of $4.2 million for fiscal 1997 compared to $6.4 million for fiscal 1998 and $5.1 million for fiscal 1999. Investing activities resulted in cash outflows of $728,000 for fiscal 1997, provided cash of $2.6 million for fiscal 1998 and resulted in cash outflows of $459,000 for fiscal 1999. Net cash provided by investing activities for fiscal 1998 consisted of proceeds from the sale of short-term investments offset by cash used to acquire property and equipment. Net cash outflows in fiscal 1997 and fiscal 1999 were due to the acquisition of property and equipment. Financing activities provided cash of $4.0 million in fiscal 1997, $5.7 million in fiscal 1998 and $13.4 million in fiscal 1999, primarily through proceeds from the issuance of preferred stock and net proceeds from debt and capital lease borrowings. Purchases of property and equipment, including equipment purchased under capital leases, were approximately $1.1 million in fiscal 1997, $1.3 million in fiscal 1998 and $1.5 million in fiscal 1999. These expenditures were primarily for computer hardware and software and furniture and fixtures. We expect that capital expenditures will continue to increase to the extent we continue to increase our headcount or expand our operations. We currently anticipate that we will continue to experience significant growth in our operating expenses for the foreseeable future as we: . enter new markets for our products; . increase research and development spending; . increase our sales and marketing activities; and . enhance our operational and financial systems. We currently anticipate that the net proceeds from this offering, together with our current cash, cash equivalents and available credit facilities, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. However, we may need to raise additional funds in future periods through public or private financings, or other sources, to fund our operations and potential acquisitions, if any, until we achieve profitability, if ever. We may not be able to obtain adequate or favorable financing at that time. Failure to raise capital when needed could harm our business. If we raise additional funds through the issuance of equity securities, the percentage of ownership of our stockholders would be reduced. Furthermore, these equity securities might have rights, preferences or privileges senior to our common stock. Year 2000 Readiness Many currently installed computer systems are not capable of distinguishing 21st century dates from 20th century dates or have been programmed with default dates ending in 99, the common two-digit reference for 1999. As a result, as we transition from the 20th century to the 21st century, computer systems and software used by many companies and organizations in a wide variety of industries will produce erroneous results or fail 30 unless they have been modified or upgraded to process date information correctly. Significant uncertainty exists in the software industry and other industries concerning the scope and magnitude of problems associated with the year 2000 issue. State of Readiness. We have completed our initial assessment of the potential overall impact of the impending century change on our business. Based on our current assessment, we believe the current versions of our software products are year 2000 compliant. By year 2000 compliant, we mean that our software products, when used with accurate date data and in accordance with their associated documentation, are capable of properly processing date data from, into and between the 20th and 21st centuries, including the years 1999, 2000 and leap years, provided that all other products, e.g., hardware, software and firmware, used with our products properly exchange date data with them. However, our products are generally integrated into enterprise systems involving sophisticated hardware and complex software products that we cannot adequately evaluate for year 2000 compliance. We may face claims based on year 2000 problems in other companies' products, or issues arising from the integration of multiple products within an overall system even if our products are otherwise year 2000 compliant. Although we have not been a party to any litigation or arbitration proceeding involving our products or services related to year 2000 compliance issues, we may in the future be required to defend our products or services in these proceedings, or to negotiate resolutions of claims based on year 2000 issues. The costs of defending and resolving year 2000-related disputes, regardless of the merits of these disputes, and any liability we have for year 2000-related damages, including consequential damages, could substantially harm our business. In addition, we believe that the purchasing patterns of customers and potential customers may be affected by year 2000 issues, as companies expend significant resources to correct or upgrade their current software systems for year 2000 compliance and as they delay purchase of new systems that may not be year 2000 compliant. These expenditures may result in reduced funds available to purchase software products such as those we offer. To the extent year 2000 issues cause a significant delay in, or cancellation of, decisions to purchase our products or services, our business would be substantially harmed. We are currently reviewing our internal management information and other computer systems to identify any year 2000 problems, and are beginning to communicate with the external vendors that supply us with material software and information systems and with our significant suppliers to determine their year 2000 readiness. We have not completed our year 2000 investigation and overall compliance initiative. Costs. To date, we have not incurred any material costs directly associated with our year 2000 compliance efforts, except for compensation expenses associated with our salaried employees who have devoted some of their time to our year 2000 assessment and remediation efforts. We do not expect the total cost of year 2000 problems to be material to our business. However, during the months prior to the century change, we will continue to evaluate new versions of our software products, new software and information systems provided to us by third parties and any new infrastructure systems that we acquire to determine whether they are year 2000 compliant. Despite our current assessment, we may not identify and correct all significant year 2000 problems on a timely basis. Year 2000 compliance efforts may involve significant time and expense and unremediated problems could substantially harm our business. We currently have no contingency plans to address the risks associated with unremediated year 2000 problems. Risks. We are not currently aware of any year 2000 readiness problems relating to our internally-developed proprietary systems that would substantially harm our business. We may discover year 2000 readiness problems in these systems that will require substantial revision. In addition, third- party software, hardware or services incorporated into our material systems may need to be revised or replaced, all of which could be time-consuming and expensive. Our failure to fix or replace our internally developed proprietary software or third-party software, hardware or services on a timely basis could result in lost revenues, increased operating costs, the loss of customers and other business interruptions, any of which could substantially harm our business. Moreover, our failure to adequately address year 2000 readiness issues in our internally developed proprietary software could result in claims of mismanagement, misrepresentation or breach of contract and related litigation, which could be costly and time-consuming to defend. 31 In addition, governmental agencies, utility companies, Internet access companies, third-party service providers and others outside of our control may not be year 2000 ready. The failure by these entities to be year 2000 ready could result in a systemic failure beyond our control, such as a prolonged Internet, telecommunications or electrical failure, which could also prevent us from delivering our services to our customers, decrease the use of the Internet or prevent users from accessing web sites. Contingency Plan. As discussed above, we are engaged in an ongoing year 2000 assessment and have not yet developed any contingency plans. The results of our year 2000 simulation testing and the responses received from third- party vendors and service providers will be taken into account in determining the nature and extent of any contingency plans we adopt. Recent Accounting Pronouncements In March 1998, the American Institute of Certified Public Accountants, or AICPA, issued Statement of Position, or SOP, 98-1, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use. SOP 98-1 will be effective for our fiscal year ending April 30, 2000. SOP 98-1 provides guidance on accounting for computer software developed or obtained for internal use including the requirement to capitalize and amortize specified costs. We do not expect the adoption of this standard to have a material impact on our results of operations, financial position or cash flows. In June 1998, the FASB issued Statement of Financial Accounting Standard, or SFAS, 133, Accounting for Derivative Instruments and Hedging Activities. This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. SFAS 133 will be effective for our fiscal year ending April 30, 2001. The adoption of SFAS is not expected to have a material impact on our results of operations, financial position or cash flows in the foreseeable future. Qualitative and Quantitative Disclosures About Market Risk We develop products in the United States and market our products in North America, and to a lesser extent in the Europe and Asia Pacific regions. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Because all of our revenues are currently denominated in U.S. dollars, a strengthening of the dollar could make our products less competitive in foreign markets. Our interest income is sensitive to changes in the general level of U.S. interest rates, particularly since the majority of our investments are in short-term instruments. Due to the short-term nature of our investments, we believe that there is not a material risk exposure. 32 BUSINESS The following description of Agile's business should be read in conjunction with the information included elsewhere in this Prospectus. This description contains forward-looking statements that involve risks and uncertainties. Agile's actual results could differ significantly from the results discussed in the forward-looking statements as a result of the factors set forth in "Risk Factors" and elsewhere in this Prospectus. Overview Agile is a leading supplier of web-centric product content management software for use within and among enterprises in a manufacturing supply chain. Our suite of products is designed to improve the ability of supply chain members to communicate and collaborate with one another about new or changing product content. We believe that our products are well-suited for participants in web-connected outsourced supply chains, as well as those managing multi- site engineering, manufacturing, sales and distribution. Since June 1996, when we shipped our first product, we have licensed our products to approximately 300 customers in the computers and peripherals, components, consumer electronics, data networking and telecommunications equipment, electronics manufacturing, medical equipment and semiconductor equipment markets. Agile customers include Gateway, Texas Instruments, Philips Mobile Computing, Lucent Technologies, Solectron, GE Marquette Medical Systems and FSI International. Industry Background The competitive environment for enterprises has intensified dramatically and expanded globally in recent years. This trend has been driven principally by productivity improvements arising from advances in technology and growing customer expectations for feature-rich products delivered quickly and at competitive prices. To remain competitive, enterprises are re-engineering their organizations to address these challenges. Many enterprises are shifting from traditional vertically-integrated manufacturing approaches, in which a manufacturer controls most phases of the manufacturing process from raw materials to finished goods, to a more horizontally-integrated manufacturing process with much or all of the manufacturing process outsourced to multiple companies as part of a supply chain. According to Technology Forecasters, Inc., the outsourcing market in electronics alone exceeded $89 billion in 1998 and is expected to grow to $178 billion in 2001. By outsourcing their production, some enterprises have created supply chains that are more efficient, dynamic and flexible than vertically- integrated manufacturing operations. Use of the outsourced supply chain has afforded enterprises the flexibility to choose best-of-breed suppliers and partners to make each link in the supply chain more competent, innovative and productive. As enterprises operate on a global basis, supply chains can span multiple continents, tying suppliers in one part of the world with a plant in another to serve customers in a third location. The end result is that enterprises can bring their products to market more efficiently while at the same time achieving higher levels of customer satisfaction. Managing the Outsourced Supply Chain A critical aspect of managing the horizontally-integrated outsourced supply chain is finding effective ways to store, access, and share information within the enterprise as well as with all supply chain partners during each stage of the production process. Different stages of the production process generate many complex types of data that need to be shared across the supply chain. There are many types of data and a potentially vast number of information flows that can occur in the production process. Product Design. During the product design stage, the enterprise must communicate large amounts of data within the enterprise as well as to supply chain partners. The enterprise begins by designating the content of the finished product with a list of components known as the bill of materials. The components on this list can be divided into two classes: "buy" or "make." For the "buy" components, also called off-the-shelf components, 33 specifications for each part must be determined and information must be collected and analyzed to determine if the available components meet the required specifications. Once eligible components have been selected, the manufacturers of the parts are incorporated into the approved manufacturers list. For customized, or "make" components, other data are created, including: . assembly drawings, detailing precisely how the component should be fabricated; . work instructions, which guide the manual assembly process; . machine instructions, to drive automated manufacturing and assembly equipment; . art work, for processes such as printed circuit board fabrication; . schematics, for describing electronic components and assemblies; and . test instructions, which enable the suppliers and original equipment manufacturers to test for conformity to the manufacturer's specifications. New Product Introduction. Prior to volume production, the data created during the product design stage must be communicated to each relevant party in the supply chain. One of the complexities of the outsourced supply chain model is that supply chain members often have multiple discrete roles, including sourcing parts, fabrication, assembling components, testing and delivery. In addition, the manufacture of a product such as a personal computer can include several hundred suppliers. Ensuring that accurate product information is disseminated promptly and to the correct parties is one of the most difficult challenges for an enterprise employing the outsourced supply chain model. Further, suppliers may often discover constraints and/or opportunities for improvements during the prototyping and pilot production phases. This often prompts a flurry of product changes that requires rapid collaboration among supply chain partners to avoid delays and excessive start-up or inventory costs. Volume Production and Product Changes. Product specifications frequently change even during volume production. This can occur due to a number of reasons, including: . changes in design in response to customer requests or market conditions; . changes required to address a defect in the design or to improve the manufacturing process; and . changes in the costs or availability of components. The communication of information regarding product changes is a dynamic loop in which the supply chain must respond to market-dictated demands while also reacting to information being shared among supply chain partners. Whatever the reason for the change, executing it through the manufacturing process expeditiously and effectively, while minimizing cost, is a complex problem. To change a design requires: . creating an engineering change order; . developing the specifications required by the engineering change order; . securing the necessary approvals to effect the change; and . communicating the change to the supply chain. This problem is especially complex for enterprises operating in a market where product specifications or volume requirements may be changing continuously. For example, the requirements of a personal computer manufacturer that builds products to-order may change continuously during each day as information regarding orders is received from customers or its sales force. 34 To address these challenges, many companies have implemented products such as supply chain management, electronic data interchange, product data management and enterprise resource planning. However, many of these products were not designed to interconnect multiple enterprises in a horizontally- integrated supply chain, and therefore do not fully address the need for supply chain collaboration. Electronic data interchange, while facilitating interconnection, is expensive to install and maintain and therefore is viable only to large organizations that can justify the cost. Other methods of communication and collaboration within the supply chain, including phone, paper-based solutions such as courier or fax, or e-mail or web page sources, are not linked in real-time and are slow, incomplete and often inaccurate. As product changes become more frequent and time to market increasingly becomes important, the ability to manage this process effectively becomes critical to an enterprise's competitiveness. An enterprise that can disseminate information quickly and accurately to the appropriate supply chain partners may be in a position to compete effectively. However, an enterprise that is agile and can effectively collaborate with its supply chain partners in real time can have an even larger competitive advantage. For example, through collaboration with its supply chain partners, an enterprise may learn that a component is not readily available due to lack of supply or that a new component is available which might substantially reduce costs or improve manufacturing efficiencies. Instead of continuing to rely on the originally selected component, the enterprise can respond by incorporating another component in the product design and notify partners before these components are incorporated into new products. By doing so, the enterprise has the opportunity to increase revenues by maintaining product availability or increase profits by taking advantage of lower cost components more quickly. Impact of the Internet Because the Internet is ubiquitous and provides a backbone for a platform independent communications network, it has created new and evolving ways for conducting commerce. The typical corporate web site is evolving from a mere repository for information regarding products into a medium for conducting business. According to Forrester Research, business-to-business electronic commerce is expected to grow to $1.3 trillion in 2003, accounting for more than 90% of the dollar value of electronic commerce in the United States. This market is expected to create substantial demand for Internet and intranet- based commerce applications. The market for applications that enable business- to-business electronic commerce is expected to reach $1.5 billion by 2002, according to Dataquest. Enterprises that have successfully implemented web-enabled customer interfaces now face the challenge of utilizing the Internet and intranets to gain the same level of increased efficiencies in their supply chain. A web- centric software solution can offer scalability, easier implementation, compatibility across diverse information technology platforms and reduced incremental infrastructure investments. However, many companies are wary of major software development projects due to the cost and complications of enterprise application development projects undertaken in recent years. To compete effectively, enterprises must implement a solution which will allow them to interactively communicate information related to product design, development and manufacturing within the enterprise and will allow them to collaborate with their supply chain partners. At the same time, enterprises want to be able to implement new software systems without the need to burden already over-taxed internal information technology staffs while avoiding costs of outside consulting and minimizing incremental infrastructure-related expenses. The Agile Solution Agile is a leading supplier of web-centric product content management software for use among all supply chain members. Our products are designed to improve the ability of supply chain members to communicate and collaborate with one another about new or changing product content. Our solution is designed for use over the Internet, avoiding the need to depend upon traditional methods of interaction, and allows supply chain members to link to each other without requiring substantial investments in additional technology infrastructure. We have also designed our solution to allow for rapid implementation by enterprises with limited consulting assistance and by supply chain members with minimal technical expertise. 35 We believe that our products are well-suited for participants in web- connected outsourced supply chains, as well as those managing multi-site engineering, manufacturing and sales and distribution. The Agile solution delivers the following benefits to enterprises and their supply chain partners: More Effective Revenue Capture. With the help of Agile Anywhere and the Internet, enterprises can respond more rapidly to changes in customer demand, component market condition and manufacturing capacities arising throughout the production cycle. This ability to effect change even during volume production allows Agile Anywhere users to adjust production strategies, enabling enterprises to produce what they can sell, rather than sell what they can produce. Agile Anywhere also enables enterprises to enhance their sales productivity by being first to market with the right product. More Cost-effective Production. The Agile Anywhere suite of products is designed to help enterprises increase throughput, reduce inventory and compress cycle times. Through effective collaboration, both time to market and design effectiveness can be improved. Enterprises can benefit by reducing design and production errors due to miscommunication within the supply chain, and can decrease operating inefficiencies incurred when obsolete parts are specified and incorrectly built products must be scrapped. More Rapid Return on Investment. Because Agile Anywhere is based on existing industry standards and does not require the implementation of custom data models, Agile Anywhere implementations can be completed in less time than required for traditional enterprise software applications which tend to require extensive customization. The Agile Growth Strategy Our objective is to be the leading provider of business-to-business collaborative supply-chain applications to global enterprises. Key elements of our strategy include: Provide superior customer satisfaction. We expect to continue to build a highly referenceable customer base of market leaders in various vertical markets. We intend to continue to focus significant resources on customer satisfaction programs. We intend to continue to anticipate customer needs by introducing new product functionality and new technology platforms. We believe this focus can help create high levels of customer loyalty, which can provide follow-on sales opportunities and shorter sales cycles. Capitalize on network effects to expand our customer base. As users of Agile Anywhere deploy our software across their supply chains, additional supply chain members will be exposed to our solution and the functionality provided by our products. We believe that this exposure, which allows non- customer participants in the supply chain to benefit from our solutions first hand, creates a network effect that accelerates industry recognition and adoption of our products. As additional members of a supply chain deploy Agile Anywhere, the quality and timeliness of available information improves, which increases the value to each participant and helps drive greater usage. Pursue a vertical market strategy. Since inception, we have pursued a vertical market strategy, developing product features tailored for particular industries. To date, we have focused on various electronics market segments, including data communications, computers and peripherals, and the medical device market. We seek to further penetrate our current markets while addressing new vertical markets characterized by high rates of product change, short product cycles, and extensive supply chains. Continue to build upon technology leadership position. We intend to continue to pioneer new Internet business applications based on emerging standards supporting electronic commerce. For instance, we have leveraged the Java computer programming language to deliver a robust, powerful and rapidly deployable Internet business application to our customers. Further, we have taken the initiative to define a protocol for supply chains, Product Definition eXchange, or PDX, based on eXtensible Mark-up Language, or XML, and have submitted it to industry standards groups for approval. We intend to continue to lead technological innovation in the product content management market, offering our customers solutions designed to provide a rapid and high return on investment. 36 Extend supply chain collaboration and functionality. We intend to extend our leadership position in supply chain collaboration by developing additional product content management functionality and applications. In addition, we intend to seek to develop new applications and services that leverage our existing product content management suite to address additional supply chain collaboration opportunities. The Agile Suite of Products The Agile Anywhere suite of products provides a comprehensive web-centric business-to-business solution to the problem of product change collaboration across the manufacturing supply chain. Utilizing XML technology, Agile Anywhere will allow supply chain partners to share and collaborate on product content and changes in real time via the Internet. Agile Anywhere is designed to provide the scalability, security and open standards that are required in an electronic supply chain. At the core of the Agile Anywhere suite is the Agile eHub, which manages product content, processes and business rules. Users interact with the product content within the eHub via the My Agile portal. Enterprises that manage and create the product content interact with the Agile iCM client. Utilizing the Agile eXpress Viewer, product content can also be published to users anywhere throughout the supply chain. To complete the suite, Agile provides several integration products that import, export, and publish product content from or to existing design, manufacturing, finance, and supply chain systems. Following the initial implementation of Agile Anywhere, licenses for additional concurrent users and application-specific modules can be added to expand the scope of the manufacturer's implementations. Previously known as Agile Workplace, Agile Anywhere is the latest major release of our product suite. The Agile Anywhere suite and several of the underlying products and features have been renamed to reflect the integration of additional Internet standards, features and functionality. The Agile Anywhere suite was announced in June 1999 and is scheduled to ship in the quarter ending October 31, 1999. Agile Anywhere is designed to provide users additional scalability and security as well as new products and features including My Agile, Agile eXpress Viewer, Product Definition eXchange, and a software development kit. Agile Anywhere will be provided without additional charge to customers under a maintenance contract. In the interim, we will continue to ship our existing Agile Workplace suite. Agile eHub The foundation of the suite is Agile eHub. The Agile eHub is comprised of application services that enable users to define, store, change and manage product content information. Agile eHub incorporates our new caching and security technology and is designed to scale to accommodate the needs of supply chain partners of all sizes. It is also designed to facilitate fast, direct Internet access, and is easily implemented. Agile eHub includes one or more of the following server modules: Agile Product Definition Services manages parts, documents, bills of materials and drawings, in a web environment that provides fast, easy access to product content for all members of the supply chain. Agile Product Change Services automates the electronic routing, notification and sign-off processes that are associated with engineering changes. This functionality can result in reduced ordering errors and costs and improved cycle times associated with evaluating, approving and implementing changes. Agile AML Services enables enterprises to collaborate with supply chain partners on approved parts and manufacturers at the time of new product introduction as well as tracking changes throughout the manufacturing process. Agile Administrator enables enterprises to easily and rapidly configure and modify Agile Anywhere components without writing code. Agile Administrator speeds the implementation of the Agile Anywhere suite and minimizes maintenance time. 37 Accessing Agile eHub Agile customers and their supply chain partners can gain access to product content for review or modification by the following: Agile iCM (Internet Content Manager) is designed for individuals who have responsibility for managing a product and its content through its entire lifecycle. This functionality is also provided through Agile CM, a Windows client. My Agile, a web portal, allows secure, personalized web access to product content that is stored in any Agile eHub. It is an intuitive, easy-to-use portal allowing users to link to any or all of their supply-chain information sources in a customizable interface and participate in product content related processes via the Internet. This product is expected to begin shipping in the quarter ending October 31, 1999. Agile eXpress Viewer allows supply chain partners to send and receive information in the PDX format. Agile eXpress Viewer will be available for downloading free of charge from the Agile web site. Agile eXpress Viewer is expected to be available in the quarter ending October 31, 1999. Agile Integration Products Product content information flows throughout the supply chain, and is published to or from Agile Anywhere and a variety of other design, manufacturing, finance and supply chain systems. Agile Anywhere integration products provide data exchange between systems to occur, as follows: Agile ChangeCAST publishes released engineering change orders, approved parts lists, approved manufacturers lists and bills of materials from Agile to separate enterprise resource planning systems. Agile Scan allows customers to scan drawings and documents into the Agile eHub database. Agile Import allows enterprises to import bills of materials produced in ASCII format or in Microsoft Excel, providing a consolidated database of product information. Agile Export provides a quick and easy method of exporting information to an ASCII file, allowing information in Agile Anywhere to be shared with other business applications. Agile Software Development Kit allows customers and partners to develop complementary applications integrating Agile Anywhere with design, manufacturing, customer service, supply chain or other legacy systems. The Agile Software Development Kit allows users to write applications in Java, Visual Basic and Visual C++. This product is expected to begin shipping in the quarter ending October 31, 1999. Initial implementations of the Agile Anywhere suite typically include the Agile eHub and one or more server modules such as the Product Definition Services, Product Change Services and AML Services, user licenses, and one or more of the integration products, in particular Agile ChangeCAST, and often a third-party adapter for other existing enterprise systems of the customer. Following the initial implementation, additional registered subscriber licenses and additional server modules may be purchased. 38 Customers To date, we have licensed our products to approximately 300 customers, predominantly within the electronics and medical device manufacturing industries. No customer accounted for more than ten percent of our total revenues in fiscal 1997, fiscal 1998 or fiscal 1999. The following is a representative list of our customers that to date have purchased over $50,000 of Agile products and services: Datacom/Telecom Equipment Computers and Peripherals Medical Equipment Alcatel Schweiz Diamond Multimedia Systems EndoSonics Aspect Telecommunications Fujitsu Computer Products GE Marquette Medical Systems Brocade Communications Systems Gateway Guidant Lucent Technologies Hitachi Hologic Nortel Networks Iomega Humphrey Instruments PairGain Packard Bell Visx Xircom Electronics Manufacturing Components Semiconductor Equipment EFTC Advanced Micro Devices Credence Systems Flextronics International Micron Technology Electro-Scientific Industries Pemstar Reltec Communications FSI International Solectron Texas Instruments Johnson Matthey Electronics Xetel VLSI Technology Strasbaugh Consumer Electronics 3Com Palm Computing Dolby Laboratories Philips Mobile Computing Scientific Atlanta WebTV Networks
Product Technology and Architecture The Agile Anywhere product suite is designed upon open systems based on software industry standards for scalable Internet applications. The result is a low cost, low maintenance end-user business application that eliminates the need for complex custom or in-house development. Agile Anywhere is built on a web-centric architecture: . The core of our architecture is the Agile eHub, the application server, which currently runs on Microsoft NT. The application server is the intermediary between the iCM and My Agile web front-ends and the database, providing the necessary security for validation of the data, and the web server, which hosts the Internet access to Agile Anywhere. We use licensed encryption technology to maintain secure data when transported over the Internet. . The web front-ends are Java and html based applications that can run on versions of Microsoft Internet Explorer and Netscape Navigator. There is also a Windows thin client for users who prefer a native client, rather than a web browser interface. Operating systems supported include Windows 95, Windows 98, Windows NT and Sun Solaris. We follow the Microsoft standards for the Windows 95 and 98 CM clients, and Internet standards for the Java iCM front-end running within Microsoft Internet Explorer and Netscape Communicator. Our products can be integrated with more than 15 enterprise-resource planning systems including, among others, Oracle, J.D. Edwards and SAP. 39 . The backend includes the database server, which is either Oracle or Microsoft SQL Server, and the Agile Internet File Server. We connect with Microsoft SQL Server through Open Database Connectivity, and Oracle's database through direct integration. We are certified in Windows Back-Office, Oracle CAI, as a Microsoft Solution Provider, and from Sun Microsystems Inc. in "100% Pure Java." The Agile Anywhere suite is enabled for both single-byte and double-byte localization, and has been localized for French. We intend to provide localization for additional languages. We have entered into platform alliances to ensure our products are based on industry standards and to enable us to take advantage of current and emerging technologies, including alliances with Sun Microsystems, Oracle and Microsoft. To promote development, definition, adoption, promotion and implementation of open standards that can be leveraged by Agile Anywhere, we work with several industry standards organizations such as the National Institute of Standards and Technology, National Electronics Manufacturing Initiative, Institute for Interconnecting and Packaging Electronic Circuits, RosettaNet, and World Wide Web Consortium. We are involved with Solectron, Marshall Industries, and other industry participants in an initiative to define an XML-based protocol called Product Definition eXchange. Product Development Our product development objectives are to: . be innovative in developing solutions to remove complexity from supply chain collaboration; . develop products that require no custom code, contain reusable components and are easy to use, implement, maintain, and upgrade; and . adopt industry standard technologies. Our software development staff is divided into teams consisting of development engineers, project managers, quality assurance engineers, and technical writers. Working closely with our marketing department, we determine product functionality based upon market requirements, customer feedback, available technical support and customer engineering in addition to emerging technologies allowing us to develop additional features. We introduced our first product, Agile Configurator version 1.3, in June, 1996 and have subsequently released nine revisions, adding over a dozen new modules. During this time, the product has evolved from a 2-tiered client- server database application running on Oracle to a multi-tiered application supporting both Windows and Java clients, and both Oracle and Microsoft SQL Server databases. Our product development activities are focused on broadening the scalability and functionality of Agile Anywhere, enhancing scalability, and including application interfaces that allow customers to more easily integrate Agile Anywhere with other systems. Our research and development expenses were $2.5 million for fiscal 1997, $3.8 million for fiscal 1998 and $4.7 million for fiscal 1999, and we expect to continue to invest significantly in research and development in the future. We cannot be sure that we will complete our existing and future development efforts within our anticipated schedule or that our new and enhanced products will have the features to make them successful. We may experience difficulties that could delay or prevent the successful development, introduction or marketing of new or enhanced products. In addition, these new and enhanced products may not meet the requirements of the marketplace and achieve market acceptance. Furthermore, despite testing by us, our implementation partners and our customers, errors might be found in new products or in releases after shipment, resulting in loss of revenue or delay in market acceptance and sales, diversion of development resources, injury to our reputation or increased service and warranty costs. 40 Sales and Marketing Our sales and marketing organization is responsible for identifying and developing vertical markets as well as identifying and notifying our research and development staff of customer product requirements. We market and sell our products primarily through our direct sales force located at our headquarters in San Jose, California, and at regional and local sales offices in the United States and at one office in France. Our direct sales force consists of Major Account Executives who focus entirely on our major accounts, Senior Account Executives who focus on specific geographic territories, and Emerging Technology Manufacturers Account Executives who focus on emerging and smaller- sized companies. We also market and sell through our direct telesales and telemarketing representatives. Sales engineers at most regional offices provide pre-sales technical support. We intend to expand our domestic and international direct sales force significantly by expanding into additional geographic locations. We are also in the early stages of complementing our direct sales force, particularly internationally, through additional distribution channels, including non-exclusive distributors, integrators and consulting partners. To support our direct sales efforts and to actively promote our Agile brand, we engage in a variety of marketing activities. These include co- marketing strategies with our existing business partners, targeting additional strategic relationships, managing and maintaining our web site content, advertising in industry and other publications, conducting public relations campaigns and establishing and maintaining relationships with recognized industry analysts. We also actively participant in manufacturing-related trade shows. A critical element of our sales strategy is to establish strategic marketing alliances to promote sales and marketing of our products, as well as to increase product interoperability. We also pursue strategic services alliances with consulting and integration firms to implement our software, provide customer support services, create customized customer presentations and demonstrations and endorse our products during the evaluation stage of the sales cycle. We believe that our relationships with these partners may shorten our sales cycle because partners have generated and qualified sales leads, made initial customer contacts and assessed needs prior to our introduction. Our current implementation service partners include Siemens and Origin Technology in Business. Customer Service and Support Consulting and Implementation. We offer services, primarily on a fixed- price basis, to assist in implementation planning, product installation, implementation assistance, legacy data loading and effectiveness audits. To facilitate and enhance the integration of our products, we have alliances for integration of our products with existing design, manufacturing, finance and supply chain systems. This approach allows us to focus on our core competencies and leverage our partners' domain knowledge, which helps reduce time to market both for us and our customers. Customer Support. We believe that responsive technical support is a requirement for our continued growth. We provide technical support and product upgrades through our annual maintenance program. Customers generally purchase the first year of support at the time they initially license a product. After the initial term, support may be renewed on an annual or multi-year basis. Customer support is offered by telephone, email, fax and Internet-based support that features frequently asked questions, technical alerts, product upgrades and updates, problem reporting and analysis, and self-help through our on-line knowledge base. In addition, our consulting and implementation partners provide customer support and maintenance in some instances. Training. We offer a variety of classes and related materials to train our customers on system administration, upgrades and new releases. These classes are also available as part of our Train the Trainer program. Training classes are offered at our headquarters in San Jose, California, at customer sites, and at other locations. To improve access to our explanatory materials, we offer on-line documentation contained on the compact discs for our products and from our web site for all our products. We also offer on-line help for the majority of our products. Customers can purchase additional documentation via our web site. 41 Competition The market for product content management software is new, highly fragmented, rapidly changing and increasingly competitive. We expect competition to persist and intensify, which could result in price reductions, reduced gross margins and loss of market share, any one of which could seriously harm our business. Competitors vary in size and in the scope and breadth of the products and services offered. We believe that our ability to compete depends on many factors both within and beyond our control, including: . the performance, functionality, price, reliability and speed of implementation of our solutions; . the timing and market acceptance of new products and product enhancements to our Agile Anywhere suite of products; . the quality of our customer service; and . the effectiveness of our sales and marketing efforts. We currently face three primary sources of competition: . in-house development efforts by potential customers or partners; . vendors of engineering information management software, such as Parametric Technology Corporation, Dassault Systemes S.A., Structural Dynamics Research Corporation and Unigraphics Solutions, Inc.; and . developers of general purpose groupware software addressing only limited technology components of engineering change management, including companies such as Novell, Inc. and Lotus Development Corporation. In addition, we face potential competition from providers of enterprise software who seek to extend the functionality of their products, such as Oracle Corporation, SAP A.G., i2 Technologies, Inc., Aspect Development, Inc. and Baan Company N.V. Many of our actual or potential competitors have longer operating histories and significantly greater financial, technical, marketing and other resources than we do and therefore may be able to respond more quickly to new or changing opportunities, technologies and customer requirements. Also, many current and potential competitors have greater name recognition and more extensive customer bases that could be leveraged to gain market share to our detriment. These competitors may be able to undertake more extensive promotional activities, adopt more aggressive pricing policies, and offer more attractive terms to purchasers than we can. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to enhance their products. Accordingly it is possible that new competitors or alliances among competitors may emerge and rapidly acquire significant market share. We also expect that competition may increase as a result of industry consolidation. We may not be able to maintain our competitive position against current and potential competitors, especially those with significantly greater financial, marketing, service, support, technical and other resources. Proprietary Rights Our success and ability to compete depend upon our proprietary technology. We rely on patent, copyright, trade secret and trademark law to protect our proprietary information. We also typically enter into agreements with our employees, consultants and customers to control their access to and distribution of our software, documentation and other proprietary information. Nevertheless, a third party could copy or otherwise obtain our software or other proprietary information without authorization, or could develop software competitive to ours. Our means of protecting our proprietary rights may not be adequate and our competitors may independently develop similar technology, duplicate our products or design around patents that may be issued to us or our other intellectual property. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States, and we expect that it will become more difficult to monitor the use of our products if we increase our international presence. 42 We integrate third-party software into our products. This third-party software may not continue to be available on commercially reasonable terms. We depend on third-party licenses, including licenses for our servers, encryption and security software. If we cannot maintain licenses to this third-party software at an acceptable cost, shipments of our products could be delayed until equivalent software could be developed or licensed and integrated into our products, which could substantially harm our business, operating results and financial condition. There has been a substantial amount of litigation in the software and Internet industries regarding intellectual property rights. It is possible that, in the future, third parties may claim that we or our current or potential future products infringe their intellectual property. We expect that software product developers and providers of electronic commerce solutions 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 industry segments overlaps. Any claims, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. If our products were found to infringe a third party's proprietary rights, we could be required to enter into royalty or licensing agreements in order to continue to be able to sell our products. Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could seriously harm our business. Employees As of April 30, 1999, we had a total of 156 employees. Of this total, 37 were in engineering, 51 in sales and marketing, 46 in professional services, including technical support and customer training, and 22 in finance and administration. We also retain independent contractors to support activities such as our professional services and product development. Our success depends on our ability to attract and retain qualified, experienced employees. None of our employees are represented by a collective bargaining unit, and we have never experienced a work stoppage. We consider our relations with our employees to be good. Facilities Our headquarters are currently located in a leased facility in San Jose, California, consisting of approximately 43,000 square feet under a lease expiring in 2002 with expansion and renewal options, of which approximately 12,000 square feet is currently sublet to other tenants on short-term subleases. We also lease offices for sales and service personnel in eight locations in the United States as well as in Paris, France. We believe our current facilities will be adequate to meet our needs for the foreseeable future. Legal Proceedings We are currently involved in litigation with a Southern California based systems integration company that filed a complaint against us in the Superior Court for the State of California, County of Orange, on February 19, 1999. The complaint alleges our interference with prospective economic advantage and unfair business practices in connection with our quote for services to one of our customers. We have responded by filing an answer that denies all allegations. The lawsuit seeks unspecified compensatory and punitive damages as well as injunctive relief. We believe that we have strong defenses to the alleged claims, intend to defend ourselves vigorously, and after consideration of the nature of the claims do not believe that resolution of this matter will harm our business. However, due to the inherently uncertain nature of litigation and the fact that discovery has yet to take place, we cannot determine the possible loss, if any, that we may ultimately incur either in the context of a trial or as a result of a negotiated settlement. Our defense of this litigation, regardless of its outcome, could result in the expenditure of significant financial and managerial resources. 43 MANAGEMENT Executive Officers and Directors Our executive officers and directors and their ages as of June 15, 1999 are as follows:
Name Age Position - ---- --- -------- Bryan D. Stolle......... 41 Chairman of the Board, Chief Executive Officer, President and Director Thomas P. Shanahan...... 52 Executive Vice President, Chief Financial Officer, Secretary and Director Carol B. Schrader....... 43 Vice President, Marketing Dorothy O. Wise......... 38 Vice President, Development Klaus-Dieter Laidig..... 57 Director Michael Moritz.......... 44 Director James L. Patterson...... 61 Director Nancy S. Schoendorf..... 44 Director
Bryan D. Stolle is a co-founder of Agile and has served as our President and Chief Executive Officer and a member of our board of directors since our inception in March 1995. From 1987 to 1994, Mr. Stolle served as Director of Product and Strategic Marketing at Sherpa Corporation, a developer of enterprise product data management software. From 1983 to 1987, Mr. Stolle served as Marketing Officer at Rexcom Systems, a software company co-founded by Mr. Stolle. Mr. Stolle received a B.A. in Business Administration and an M.B.A. from the University of Texas at Austin. Thomas P. Shanahan is a co-founder of Agile and has been a member of our board of directors since our inception in March 1995. Since November 1997, Mr. Shanahan has served as Agile's Executive Vice President and Chief Financial Officer. From 1994 to 1997, Mr. Shanahan served as Vice President and Chief Financial Officer of Digital Generation Systems, Inc., a provider of electronic and physical distribution of audio and video spot advertising. From 1993 to 1994, Mr. Shanahan served as Chief Financial Officer of Sherpa Corporation. Mr. Shanahan received a B.A. in Economics from Stanford University and an M.B.A. from Harvard University. Carol B. Schrader has served as Agile's Vice President of Marketing since October 1997. In 1997, Ms. Schrader served as an independent consultant with Killarney Group. From 1995 to 1997, Ms. Schrader served as Director, Industry Development at Documentum, Inc., a provider of web content management solutions. From 1990 to 1995, Ms. Schrader served as Director, Market Development at Sherpa Corporation. Ms. Schrader received a B.A. in Business Management from Clarke College. Dorothy O. Wise has served as Agile's Vice President of Development since March 1996. From 1994 to 1996, Ms. Wise served as Vice President, Quattro Pro Business Unit, at Novell, Inc., a provider of network services operating system software. Ms. Wise received a B.S.E. in Electrical Engineering and Computer Science from Princeton University. Klaus-Dieter Laidig has served as a director of Agile since 1998. Mr. Laidig has served as a management consultant with Laidig Business Consulting GmbH since 1998. From 1984 to 1997, Mr. Laidig served as General Manager of Hewlett-Packard GmbH. Mr. Laidig currently serves as a director of SAP AG, Henninger Braeu AG and several privately held companies. Mr. Laidig received an M.B.A. from the Pforzheim University of Applied Sciences in Germany. Michael Moritz has served as a director of Agile since 1996. Mr. Moritz has been a general partner of Sequoia Capital, a venture capital firm, since 1986. Mr. Moritz serves as a director of eToys, Inc., Flextronics International Ltd., Yahoo! Inc. and several additional private companies. Mr. Moritz received an M.A. from Christ Church, Oxford. 44 James L. Patterson has served as a director of Agile since 1996. Mr. Patterson has been an independent consultant since 1989. Mr. Patterson currently serves as a director of Latitude Communications, Inc., a provider of integrated voice and data conferencing solutions, and several privately held companies. Mr. Patterson received a B.S. in Electrical Engineering from the University of Colorado. Nancy S. Schoendorf has served as a director of Agile since 1995. Ms. Schoendorf has been a general partner of Mohr, Davidow Ventures, a venture capital firm, since 1994, and a Managing Partner since 1997. Prior to joining Mohr, Davidow Ventures, Ms. Schoendorf spent 17 years in the computer industry including management positions with Hewlett-Packard, Software Publishing Corporation and Sun Microsystems. Ms. Schoendorf currently serves as a director of Actuate Software Corp., a provider of enterprise reporting software solutions and several privately held companies. Ms. Schoendorf received a B.S. in Computer Science from Iowa State University and an M.B.A. from Santa Clara University. Board Committees Audit Committee. The board of directors has established an audit committee consisting of Mr. Laidig and Mr. Moritz. The audit committee reviews with Agile's independent accountants the scope and timing of their audit services and any other services that they are asked to perform, the independent accountants' report on our consolidated financial statements following completion of their audit, and our policies and procedures with respect to internal accounting and financial controls. In addition, the audit committee makes annual recommendations to our board of directors for the appointment of independent accountants for the ensuing year. Compensation Committee. The board of directors has established a compensation committee consisting of Mr. Patterson and Ms. Schoendorf. The compensation committee makes recommendations to the board concerning salaries and incentive compensation for Agile's officers and employees and administers Agile's employee benefit plans. Director Compensation Our directors do not receive any cash compensation for their services as directors but are reimbursed for their reasonable travel expenses in attending meetings of the board of directors. Our directors are eligible to participate in our 1995 Stock Option Plan and employee-directors will be able to participate in our 1999 Employee Stock Purchase Plan. Mr. Laidig received an option to purchase 50,000 shares of common stock at an exercise price of $2.65 per share when he joined the board of directors in November, 1998. Compensation Committee Interlocks and Insider Participation No interlocking relationship exists between any member of our board of directors or our compensation committee and any member of the board of directors or compensation committee of any other committee, and no such relationship has existed in the past. Prior to the creation of our compensation committee in May 1999, all compensation decisions were made by our full board. Neither Mr. Stolle nor Mr. Shanahan participated in discussions by our board with respect to his compensation. Employment Contracts, Termination of Employment and Change of Control Arrangements None of our executive officers is employed under an employment agreement with significant contractual severance provisions. However, if any of our executives is terminated without cause during the eighteen months following a change of control, then vesting of all options to purchase our common stock held by these employees will accelerate. 45 Executive Compensation The following table presents information regarding the compensation paid to our chief executive officer and each of our other highest-paid compensated executive officers whose total salary and bonus exceeded $100,000 for the fiscal year ended April 30, 1999: Summary Compensation Table
Long Term Annual Compensation Compensation Awards ---------------- -------------- Securities Underlying All Other Name and Principal Position Salary Bonus Options/SARs(#) Compensation - --------------------------- -------- ------- -------------- ------------ Bryan D. Stolle.................. $159,997 $50,000 125,000 $4,000 Chairman and Chief Executive Officer Thomas P. Shanahan............... 146,664 29,735 25,000 -- Chief Financial Officer Carol B. Schrader................ 114,000 19,000 32,000 -- Vice President, Marketing Dorothy O. Wise.................. 138,000 41,669 25,000 -- Vice President, Development
Option Grants in Last Fiscal Year The following table designates each grant of stock options during fiscal 1998 to our chief executive officer and each of our other highest-paid executive officers. All of these options were granted under our 1995 Stock Option Plan. Each of these options has been exercised, but the shares purchased under these options are subject to repurchase by us at the original exercise price paid per share upon the optionee's cessation of service with us prior to vesting of the shares. Our repurchase right lapses and the optionee vests in 20% of his or her option shares upon completion of 12 months of service from the vesting start date and vests in the balance in a series of equal monthly installments over the next four years of service. Vesting of the option shares will fully accelerate upon a change in our control and involuntary termination of the employee's services during the subsequent 18 months. The percentages in the column entitled "Percent of Total Options Granted to Employees in Fiscal 1999" are based on an aggregate of 978,275 options granted to our employees under our 1995 Stock Option Plan during the fiscal year ended April 30, 1999. The exercise price of each option is equal to the fair market value of our common stock as determined by the board of directors on the date of grant, taking into account the purchase price paid by investors for shares of our preferred stock, the liquidation preferences and other rights, privileges, and preferences associated with the preferred stock and an evaluation by the board of directors of our revenues, operating history and prospects. The potential realizable value is calculated based on the ten-year term of the option at the time of grant. For purposes of these columns, we assumed stock price appreciation of 5% and 10% as required by the Securities and Exchange Commission. These rates of appreciation do not represent our prediction of our stock price performance. The potential realizable values at 5% and 10% appreciation are calculated by assuming that the estimated fair market value on the date of grant appreciates at the indicated rate for the entire term of the options and that the option is exercised at the exercise price and sold on the last day of its term at the appreciated price. 46
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Individual Grants Option Term --------------------------------------------- ----------------- Number of Percent of Securities Total Options Underlying Granted to Exercise Options Employees in Price Expiration Name Granted Fiscal 1999 ($/Share) Date 5% 10% ---- ---------- ------------- -------- ---------- -------- -------- Bryan D. Stolle......... 33,333 3.4% $3.00 3/26/09 $ 62,889 $159,373 91,667 9.4 3.00 3/26/09 172,947 438,281 Thomas P. Shanahan...... 25,000 2.6 2.50 8/25/08 39,306 99,609 Carol B. Schrader....... 22,000 2.3 2.35 7/8/08 32,514 82,396 10,000 1.0 2.65 11/17/08 16,666 42,234 Dorothy O. Wise......... 25,000 2.6 2.65 11/17/08 41,664 105,585
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values The following table presents for our chief executive officer and each of our other highest-paid executive officers the number of options exercised during the fiscal year ended April 30, 1999 and the number and value of securities underlying unexercised options that are held by our chief executive officer and each of our other highest-paid executive officers as of April 30, 1999. Each of the options listed in the table is immediately exercisable. The shares purchased under the options may be repurchased by us at the original exercise price paid per share if the optionee ceases service with us before vesting in the shares. The heading "Vested" refers to shares no longer subject to repurchase; the heading "Unvested" refers to shares subject to repurchase as of April 30, 1999. The numbers in the column entitled "Value of Unexercised In-the-Money Options at April 30, 1999" are based on the fair market value of our common stock of $3.00 at April 30, 1999, as determined by our board of directors, less the exercise price payable for these shares.
Number of Securities Value of Underlying Unexercised Unexercised In-The-Money Shares Options at Options at Acquired on April 30, 1999 April 30, 1999 ($) Exercise Value --------------- --------------------- (#) Realized ($) Vested Unvested Vested Unvested ----------- ------------ ------ -------- -------- ----------- Bryan D. Stolle......... -- -- -- 175,000 -- $77,500 Thomas P. Shanahan...... -- -- -- 25,000 -- 12,500 Carol B. Schrader....... 22,000 $51,700 -- 10,000 -- 3,500 Dorothy O. Wise......... -- -- -- 25,000 -- 8,750
Stock Plans 1995 Stock Option Plan. Our 1995 stock option plan was approved by our board of directors in May 1995 and by our stockholders in January 1996. The plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to employees, and for grants of nonstatutory stock options and stock issuances to employees, including officers, non-employee directors and consultants. The plan is currently administered by the compensation committee. Subject to the provisions of the plan, the board or its committee has the authority to select the persons to whom options or stock issuances are granted and determine the terms of each option or stock issuance, including: . the number of shares of common stock covered by the option or stock issuance; . when the option becomes exercisable or when the stock issuance vests; . the per share option exercise price, which in the case of incentive stock options must be at least equal to the fair market value of a share of common stock on the grant date or 110% of such fair market value for 47 incentive stock options granted to 10% stockholders, and, in the case of nonstatutory stock options, must be at least 85% of the fair market value of a share of common stock on the grant date; and . the duration of the option, which for incentive stock options may not exceed ten years, or, with respect to incentive stock options granted to 10% stockholders, five years. Generally, options granted under the plan are immediately exercisable. Options and stock issuances granted under the plan generally vest over five years, although the board or its committee may specify a different vesting schedule for a particular grant. Options granted under the plan are non- transferable other than by will or the laws of descent and distribution; provided, however that the board or its committee may provide that nonstatutory stock options are transferable for estate planning purposes, subject to applicable law. Unvested shares issued pursuant to a stock issuance are generally non-transferrable. In the event of a change in control of Agile, the acquiring or successor corporation may either assume the outstanding options granted under the plan or replace the options with a cash incentive program that is paid out in accordance with the original vesting schedule and that preserves the spread on the unvested shares subject to the options. If the options or stock issuances are not assumed or replaced by the acquiring or successor corporation, then the shares subject to each option outstanding under the plan at the time of the change in control shall automatically vest in full, and then expire. Currently, the maximum number of shares issuable under the plan is 5,375,000. The share reserve will automatically be increased on the first day of each fiscal year beginning on and after May 1, 2000 by the lesser of 500,000 shares per year, 5% of the number of shares of our common stock that was issued and outstanding on the last day of the preceding fiscal year, or a lesser number of shares determined by the board of directors. As of April 30, 1999, 2,127,880 shares have been issued upon the exercise of options, options to purchase a total of 1,159,725 shares at a weighted average exercise price of $2.12 per share were outstanding and 2,245,025 shares were available for future option grants. 1999 Employee Stock Purchase Plan. The board of directors adopted, subject to stockholder approval, our 1999 employee stock purchase plan in June 1999. We have reserved a total of 500,000 shares of common stock for issuance under the 1999 employee stock purchase plan, none of which have been issued as of the effective date of this offering. The share reserve will automatically be increased on May 1, 2000 and on each May 1 thereafter until and including May 1, 2009, by an amount equal to the lesser of 500,000 shares per year, 2% of our outstanding common stock on the last day of the immediately preceding fiscal year, or such lesser number of shares as determined by the board of directors. The employee stock purchase plan is intended to qualify under Section 423 of the Internal Revenue Code. The plan will be administered by our compensation committee. Employees, including officers and employee directors, of Agile or any subsidiary designated by the board for participation in the plan, are eligible to participate in the plan if they are customarily employed for more than 20 hours per week and more than five months per year. Eligible employees may begin participating at the start of any offering period. The first offering period will run for approximately 24 months and will be divided into four consecutive purchase periods of approximately six months. The first offering period and the first purchase period commence on the date of this prospectus and will terminate on the last day of August, 2001. Subsequent offering periods will generally have a duration of approximately 6 months. Offering periods after the initial offering period will commence on the first day of March and September of each year. The board may change the dates or duration of one or more offering periods, but no offering may exceed 27 months. The employee stock purchase plan permits eligible employees to purchase common stock through payroll deductions at a price no less than 85% of the lower of the fair market value of the common stock on (a) the first day of the offering, or (b) the purchase date. Participants generally may not purchase more than 1,000 shares in a six-month offering period or stock having a value greater than $25,000 in any calendar year as measured at the 48 beginning of the offering period. In the event of a change in control of Agile, the board may accelerate the purchase date of the then current offering period to a date prior to the change in control, unless the acquiring or successor corporation assumes or replaces the purchase rights outstanding under the employee stock purchase plan. Our board of directors may amend or terminate the 1999 employee stock purchase plan at any time. 401(k) Plan Agile provides a tax-qualified employee savings and retirement plan, commonly known as a 401(k) plan, which covers its eligible employees. Pursuant to the 401(k) plan, employees may elect to reduce their current annual compensation up to the lesser of 20% or the statutorily prescribed annual limit, which is $10,000 in calendar year 1999, and have the amount of the reduction contributed to the 401(k) plan. The 401(k) plan does not currently permit additional matching contributions to the 401(k) plan by Agile on behalf of the participants in the 401(k) plan. The 401(k) plan is intended to qualify under Sections 401(a) and 401(k) of the Internal Revenue Code, so that contributions by Agile or its employees to the 401(k) plan, and income earned on such contributions, are not taxable to employees until withdrawn from the 401(k) plan, and so that contributions by Agile, if any, will be deductible by Agile when made. The trustee of the 401(k) plan invests the assets of the 401(k) plan in the various investment options as directed by the participants. Limitation of Liability and Indemnification As permitted by the Delaware General Corporation Law, we have adopted provisions in our certificate of incorporation and bylaws that limit or eliminate the personal liability of our directors for a breach of their fiduciary duty of care as a director. The duty of care generally requires that, when acting on behalf of the corporation, directors exercise an informed business judgment based on all material information reasonably available to them. Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for: . any breach of the directors duty of loyalty to us or our stockholders; . acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; . unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions; or . any transaction from which the director derived an improper personal benefit. Our certificate of incorporation allows us to indemnify our officers, directors and other agents to the full extent permitted by Delaware law. We intend to enter into indemnification agreements with each of our directors and officers that are, in some cases, broader than the specific indemnification provisions permitted by in Delaware law, and that may provide additional procedural protection. The indemnification agreements require us, among other things, to: . indemnify officers and directors against certain liabilities that may arise because of their status as officers or directors; . advance expenses, as incurred, to officers and directors in connection with a legal proceeding, subject to limited exceptions; or . obtain directors and officers insurance. Our bylaws also permit us to purchase insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether Delaware law would permit indemnification, and to provide indemnification in circumstances in which indemnification is otherwise discretionary under Delaware law. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees in which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification. 49 CERTAIN TRANSACTIONS Since May 1, 1996 there has been no transaction or series of transactions to which we were a party involving $60,000 or more and in which any director, executive officer or holder of more than 5% of our capital stock had a material interest other than the transactions described below. Sales of Preferred Stock to Insiders Since inception in March 1995, we have issued shares of preferred stock, in private placement transactions to the following persons who are executive officers, directors or principal stockholders of Agile:
Series A Series B Series C Series D Series E Series F Preferred Preferred Preferred Preferred Preferred Preferred Investor Stock Stock Stock Stock Stock Stock - -------- --------- --------- --------- --------- --------- --------- Entities affiliated with Sequoia Capital........ 150,000 -- 2,275,000 322,000 334,672 148,148 Entities affiliated with Mohr, Davidow Ventures............... 30,000 2,825,000 1,225,000 448,000 565,424 74,074 Entities affiliated with Accel Partners......... 140,000 -- -- 580,000 85,893 222,222 Entities affiliated with James L. Patterson..... -- -- 75,000 -- 14,011 14,816 Affiliates of Bryan D. Stolle................. 185,000 -- -- -- -- -- Thomas P. Shanahan...... 85,000 -- -- -- -- --
The preferred stock purchased by these directors and affiliates was purchased on the same terms and conditions as the preferred stock purchased by other investors. The preferred stock is convertible into common stock at the rate of one share of common stock for each share of preferred stock. In April, 1995, we issued a total of 1,150,000 shares of Series A preferred stock and in May 1995 we issued 82,500 shares of Series A Preferred Stock at a purchase price of $.10 per share. The purchasers of the Series A Preferred Stock originally included various private individuals including Thomas P. Shanahan, Chief Financial Officer and a director of Agile, and relatives of Bryan Stolle, Chairman and Chief Executive Officer of Agile. Subsequently, entities affiliated with Sequoia Capital, Mohr, Davidow Ventures and Accel Partners purchased the shares of Series A preferred stock reflected in the table above from some of these private individuals. In June 1995, we issued a total of 2,937,995 shares of Series B preferred stock at a purchase price of $.354 per share. In January 1996, we issued 3,500,000 shares of Series C preferred stock and in October 1996 we issued 75,000 shares of Series C preferred stock at a purchase price of $1.16 per share. In February 1997, we issued 1,350,000 shares of Series D preferred stock at a purchase price of $2.964 per share. In November 1997, we issued 1,000,000 shares of Series E preferred stock at a purchase price of $5.00 per share. In June 1998, we issued 1,777,778 shares of Series F preferred stock at a purchase price of $6.75 per share. The entities affiliated with Sequoia Capital are together considered a greater than 5% stockholder of Agile. Mr. Michael Moritz, a director of Agile, is a general partner of Sequoia Capital. Entities affiliated with Mohr, Davidow are together considered a greater than 5% stockholder of Agile. Ms. Nancy Schoendorf, a director of Agile, is a general partner of Mohr, Davidow. Entities affiliated with Accel Investors are together considered a greater than 5% stockholder of Agile. Mr. James Patterson is a director of Agile, Mr. Bryan Stolle is Chairman and Chief Executive Officer of Agile, and Mr. Thomas Shanahan is Chief Financial Officer and a director of Agile. Loans to Executive Officers and Directors On November 17, 1997, we loaned $31,800 to Carol B. Schrader, our Vice President, Marketing, in connection with the purchase of 53,000 shares of our common stock for $.60 per share upon exercise of stock options. The note accrues interest at the rate of 6.14% per year and is due on November 17, 2001. On August 4, 1998, we loaned $51,700 to Ms. Schrader, in connection with the purchase of 22,000 shares of our common stock for $2.35 per share upon exercise of stock options. This note accrues interest at the rate of 5.68% per year, 50 and is due on August 4, 2003. On November 17, 1997, we loaned $5,475 to Eric Schrader, an affiliate of Carol Schrader, in connection with the purchase of 9,125 shares of our common stock for $.60 per share upon exercise of stock options. The note accrues interest at the rate of 6.14% per year and is due on November 17, 2001. The principal amounts of each of these notes remain outstanding. Each of these loans are full recourse and secured by a pledge of the stock purchased upon exercise of the stock option. On June 1, 1999, we loaned $132,500 to Klaus-Dieter Laidig, one of our directors, in connection with the purchase of 50,000 shares of our common stock for $2.65 per share upon exercise of stock options. The note accrues interest at the rate of 4.84% per year, and is due on June 1, 2004. The principal amount of the note remains outstanding. This loan is full recourse and is secured by a pledge of the stock purchased upon exercise of the stock option. All loan amounts outstanding as of April 30, 1999 are reflected as a reduction of equity in the consolidated balance sheet. Recent Option Grants On May 7, 1999, our board of directors granted to the following executive officers options to purchase shares of common stock at an exercise price per share of $5.00: . Mr. Shanahan received an option to purchase 25,000 shares; . Ms. Schrader received an option to purchase 45,000 shares; and . Ms. Wise received an option to purchase 15,000 shares. Indemnification We intend to enter into indemnification agreements with each of our directors and officers. These indemnification agreements will require us to indemnify our directors and officers to the fullest extent permitted by Delaware law. See "Management--Limitation of Liability and Indemnification." Conflict of Interest Policy We believe that all transactions with our directors, officers and principal stockholders described above were made on terms no less favorable to us than could have been obtained from unaffiliated third parties. A majority of the disinterested outside directors on our board of directors approves all transactions between Agile and our officers, directors, principal stockholders and their affiliates. Any similar transactions will continue to be on terms no less favorable to us than we could have obtained from unaffiliated third parties. 51 PRINCIPAL STOCKHOLDERS The following table sets forth the beneficial ownership of our common stock as of April 30, 1999 and as adjusted to reflect the sale of the shares of common stock offered hereby by: . the chief executive officer, each of the executive officers named in the summary compensation table and each of Agile's directors; . all executive officers and directors as a group; and . each person or entity who is known by Agile to beneficially own more than 5% of Agile's outstanding common stock. Unless otherwise indicated, the address for each of the named individuals is c/o Agile Software Corporation, One Almaden Boulevard, San Jose, California 95113-2211. Except as otherwise indicated, and subject to applicable community property laws, we believe that the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Applicable percentage ownership in the table is based on 16,133,298 shares of common stock outstanding as of April 30, 1999 and shares outstanding immediately following the completion of this offering, assuming the underwriters' over-allotment option is not exercised, and assuming the exercise of a warrant to purchase 60,000 shares of preferred stock and the conversion of all shares of preferred stock into common stock. Of the total shares outstanding, 963,606 shares are subject to our right of repurchase. Beneficial ownership is determined under the rules and regulations of the Securities and Exchange Commission. Shares of common stock subject to options or warrants that are presently exercisable or exercisable within 60 days of April 30, 1999 are deemed outstanding for the purpose of computing the percentage ownership of the person or entity holding options or warrants, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or entity. Entries denoted by an asterisk represent an amount less than 1%.
Shares Percentage Beneficially Beneficially Owned Owned ------------ ----------------- Prior to After Name and Address of Beneficial Owner Number Offering Offering - ------------------------------------ ------------ -------- -------- Bryan D. Stolle(1)............................... 1,020,500 6.3% Thomas P. Shanahan(2)............................ 410,000 2.5 Dorothy O. Wise(3)............................... 228,000 1.4 Carol B. Schrader(4)............................. 135,000 * James L. Patterson(5)............................ 153,827 * Nancy J. Schoendorf(6)........................... 5,280,493 32.7 c/o Mohr, Davidow Ventures 2775 Sand Hill Road Building 1, Suite 240 Menlo Park, CA 94025 Michael Moritz(7)................................ 3,229,820 20.0 c/o Sequoia Capital 3000 Sand Hill Road Building 4, Suite 280 Menlo Park, CA 94025 Klaus-Dieter Laidig(8)........................... 50,000 *
52
Shares Percentage Beneficially Beneficially Owned Owned ------------ ----------------- Prior to After Name and Address of Beneficial Owner Number Offering Offering - ------------------------------------ ------------ -------- -------- Entities associated with Mohr Davidow Ventures(9)................................... 5,280,493 32.7% 2775 Sand Hill Road Building 1, Suite 240 Menlo Park, CA 94025 Entities associated with Sequoia Capital(10)... 3,229,820 20.0 3000 Sand Hill Road Building 4, Suite 280 Menlo Park, CA 94025 Entities associated with Accel Partners(11).... 1,028,115 6.4 428 University Avenue Palo Alto, CA 94301 All executive officers and directors as a group (8 persons)(12)................... 10,582,765 64.5
- -------- (1) Includes 18,750 shares held by Bryan D. Stolle as Custodian for Jacob N. Stolle under UCAUTMA and 18,750 shares held by Bryan D. Stolle as Custodian for Wilson E. Stolle under UCAUTMA. Also includes 175,000 shares subject to options exercisable within 60 days of April 30, 1999. (2) Includes 81,563 shares subject to a right of repurchase in favor of Agile which lapses over time. Also includes 15,000 shares held by Thomas P. Shanahan as Custodian for Thomas A. Shanahan, 15,000 shares held by Thomas P. Shanahan as Custodian for Kelly J. Shanahan, and 15,000 shares held by Thomas P. Shanahan as Custodian for Patrick L. Shanahan, and 340,000 shares held by Thomas P. Shanahan and Robyn Lynn Shanahan, Trustees of the Shanahan Family Trust u/d/t dated April 15, 1997. Also includes 25,000 shares subject to options exercisable within 60 days of April 30, 1999. (3) Includes 70,000 shares subject to a right of repurchase in favor of Agile which lapses over time. Also includes 25,000 shares subject to options exercisable within 60 days of April 30, 1999. (4) Includes 55,125 shares subject to a right of repurchase in favor of Agile which lapses over time. Also includes 10,000 shares subject to options exercisable within 60 days of April 30, 1999, and 50,000 shares held by Eric Schrader. (5) Includes 73,011 shares held directly by James L. Patterson, 34,800 shares held by The Patterson Grandchildren's Trust, of which James L. Patterson is trustee, and 14,816 shares held by The Patterson Family Trust, of which James L. Patterson is trustee. Also includes 2,200 shares held by Mark R. Patterson, 2,200 shares held by Matthew S. Patterson, 2,200 shares held by Michael J. Patterson, 12,300 shares held by Steven C. Patterson Irrevocable Trust dated October 18, 1994, Mark R. Patterson, Trustee, and 12,300 shares held by Paul R. Patterson Irrevocable Trust dated October 18, 1994, Mark R. Patterson, Trustee, all of which Mr. James Patterson disclaims beneficial ownership. (6) Ms. Schoendorf is a general partner of Mohr, Davidow and is a director of Agile. Represents 216,284 shares held by MDV IV Entrepreneurs Network Fund, L.P., and 5,064,209 shares held by Mohr, Davidow Ventures IV, L.P. Ms. Schoendorf disclaims beneficial ownership of shares held by these entities, except to the extent of her proportional interest arising from her partnership interest in Mohr, Davidow. (7) Mr. Moritz is a general partner of the general partners of the entities affiliated with Sequoia Capital and is a director of Agile. Represents 109,880 shares held by Sequoia 1995, 2,080 shares held by Sequoia 1997, 318,074 shares held by Sequoia Capital Growth Fund, 2,631,214 shares held by Sequoia Capital VI, 20,302 shares held by Sequoia Technology Partners III, 144,572 shares held by Sequoia Technology Partners VI, and 3,698 shares held by SQP 1997. SC VIII Management, LLC exercises investment and voting power over the shares held by 53 Sequoia 1997. Mr. Moritz disclaims beneficial ownership of shares held by these entities, except to the extent of his proportional pecuniary interest arising from his partnership interest in the general partner of the general partners of the entities affiliated with Sequoia Capital. Mr. Moritz does not hold sole voting or investment power in any of these entities. (8) Represents shares subject to options exercisable within 60 days of April 30, 1999. (9) Represents 216,284 shares held by MDV IV Entrepreneurs Network Fund, L.P., and 5,064,209 shares held by Mohr, Davidow Ventures IV, L.P. Ms. Schoendorf, a director of Agile, is a general partner of Mohr, Davidow. (10) Represents 109,880 shares held by Sequoia 1995, 2,080 shares held by Sequoia 1997, 318,074 shares held by Sequoia Capital Growth Fund, 2,631,214 shares held by Sequoia Capital VI, 20,302 shares held by Sequoia Technology Partners III, 144,572 shares held by Sequoia Technology Partners VI, and 3,698 shares held by SQP 1997. SC VIII Management, LLC exercises investment and voting power over the shares held by Sequoia 1997. Mr. Moritz, a director of Agile, is a general partner of the general partners of the entities affiliated with Sequoia Capital. (11) Represents 828,661 shares held by Accel V L.P., 111,036 shares held by Accel Internet/Strategic Technology Fund L.P., 49,350 shares held by Accel Investors '96 L.P., 16,450 shares held by Accel Keiretsu V L.P and 22,618 shares held by Ellmore C. Patterson Partners. (12) Shares listed as held by all directors and executive officers as a group include 285,000 shares subject to options exercisable within 60 days of April 30, 1999. 54 DESCRIPTION OF CAPITAL STOCK Upon completion of this offering, our authorized capital stock will consist of 100,000,000 shares of common stock and 10,000,000 shares of preferred stock. The following is a summary of our capital stock. Our certificate of incorporation and bylaws, to be effective after the closing of this offering, and the provisions of applicable law provide further information about our capital stock. Common Stock As of April 30, 1999 there were 4,200,025 shares of common stock outstanding held of record by approximately 125 stockholders. Subject to preferences that may be applicable to any preferred stock outstanding at the time, the holders of outstanding shares of common stock are entitled to the following rights: . to receive dividends out of assets legally available therefor at such times and in such amounts as the board from time to time may determine in its sole discretion; . one vote for each share held on all matters submitted to a vote of stockholders; and . upon liquidation, dissolution or winding-up of Agile, to share ratably in all assets remaining after payment of liabilities and the liquidation of any preferred stock. Cumulative voting for the election of directors is not authorized by our certificate of incorporation, which means that the holders of a majority of the shares voted can elect all of the directors then standing for election. The common stock is not entitled to preemptive rights and is not subject to conversion or redemption. Each outstanding share of common stock is, and all shares of common stock to be outstanding upon completion of this offering will be, upon payment, duly and validly issued, fully paid and nonassessable. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of any shares of preferred stock which Agile may issue in the future. Preferred Stock Upon completion of this offering, all outstanding shares of preferred stock will be converted on a one-to-one basis into 11,933,273 shares of common stock. However, following this conversion, under Agile's certificate of incorporation, the board of directors will have the authority, without further action by the stockholders, to designate and issue up to 10,000,000 shares of preferred stock in one or more series. The board of directors can fix the rights, preferences and privileges of the shares of each series and any qualifications, limitations or restrictions on these shares. The board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes could, under certain circumstances, have the effect of delaying, deferring or preventing a change in control of Agile. We have no current plans to issue any shares of preferred stock. Warrants In September 1995, Agile issued a warrant to Comdisco, Inc. to purchase an aggregate of 41,111 shares of Series B preferred stock at an exercise price of $.354 per share. The warrant may be exercised at any time within seven years after issuance. 55 In March 1996, Agile issued a warrant to Comdisco, Inc. to purchase an aggregate of 35,313 shares of Series C preferred stock at an exercise price of $1.16 per share. The warrant may be exercised at any time within seven years after issuance. In February 1997, Agile issued a warrant to Comdisco, Inc. to purchase an aggregate of 17,828 shares of Series D preferred stock at an exercise price of $2.964 per share. The warrant may be exercised at any time within seven years after issuance. In November 1997, Agile issued a warrant to Comdisco, Inc. to purchase an aggregate of 4,049 shares of Series D preferred stock at an exercise price of $2.964 per share. The warrant may be exercised at any time within seven years after issuance. In February 1999, Agile issued a warrant to Comdisco, Inc. to purchase an aggregate of 60,000 shares of Series F preferred stock at an exercise price of $6.75 per share. The warrant, if not exercised prior to the completion of this offering, will expire. Registration Rights of Some of Our Stockholders Following this offering, the holders of approximately 11,933,273 shares of preferred stock convertible into 11,933,273 shares of common stock and 98,301 shares of stock issuable upon exercise of warrants will have certain rights to register those shares under the Securities Act and an amended and restated rights agreement. Subject to certain limitations in the registration rights agreement, the holders of at least 30% of such shares, or a lesser percent if the anticipated aggregate offering price, net of underwriting discounts and commissions, would exceed $10,000,000, may require, on two occasions, that Agile use its best efforts to register those shares for public resale. If Agile registers any of its common stock for its own account or for the account of other security holders, the holders of those shares are entitled to include their shares of common stock in the registration, subject to the ability of the underwriters to limit the number of shares included in the offering. Any holder or holders of those shares may also require Agile to register all or a portion of their registrable securities in a registration statement on Form S- 3 when Agile is eligible to use that form, provided, among other limitations, that the proposed aggregate price to the public is at least $500,000 and that Agile has not effected two of these registrations in any 12-month period. Agile will pay all fees, costs and expenses of these registrations, other than underwriting discounts and commissions. These rights terminate on the earlier of the date three years following the consummation of this public offering, and the date when all shares of a holder can be sold by the holder under Rule 144 of the Securities Act during any 90 day period. All of the registration rights described above are subject to conditions and limitations, among them the right of the underwriters in any underwritten offering to limit the number of shares of common stock to be included in a registration. Registrations of any shares of common stock held by holders with registration rights would result in these shares being freely tradable without restriction under the Securities Act upon the effective date of the registration. Antitakeover Effects of Delaware Law and Provisions of Our Certificate of Incorporation and Bylaws Delaware Takeover Statute We are subject to Section 203 of the Delaware General Corporation Law. This provision generally prohibits any Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date the stockholder became an interested stockholder, unless: . prior to that date the board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; . upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock outstanding at the time the transaction began; or 56 . on or following that date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder. Section 203 defines a business combination to include: . any merger or consolidation involving the corporation and the interested stockholder; . any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; . subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; . any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or . the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by such entity or person. Certificate of Incorporation and Bylaws Upon filing after the closing of this offering, our certificate of incorporation will provide that all stockholder actions must be effected at a duly called meeting and not by a consent in writing. The bylaws provide that, except as otherwise required by law or by our certificate of incorporation, special meetings of the stockholders can only be called by a resolution adopted by a majority of the board of directors, or by the president or at the request of stockholders holding at least 10% of our capital stock. Our certificate of incorporation and bylaws also provide that our board of directors will be divided into three classes, with each class serving staggered three-year terms. The classification system of electing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us and may maintain the incumbency of our board of directors, as the classification of the board of directors generally increases the difficulty of replacing a majority of the directors. Our certificate of incorporation authorizes undesignated preferred stock, which makes it possible for the board of directors to issue preferred stock with voting or other rights or preferences that could discourage potential acquisition proposals and could delay or prevent a change in our control or management. The amendment of any of these provisions would require approval by holders of at least two-thirds of the outstanding common stock. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal, and to enhance the likelihood of continuity and stability in the composition of our board of directors. These provisions are also designed to discourage tactics that may be used in proxy fights. However, these provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they may also inhibit fluctuations in the market price of our shares that could result from rumored or actual takeover attempts. Transfer Agent and Registrar The transfer agent and registrar for Agile's common stock is Boston EquiServe. Listing Agile has applied to list its common stock on the Nasdaq National Market under the trading symbol "AGIL." 57 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, we will have outstanding shares of common stock, assuming no exercise of options after April 30, 1999. Of these shares, the shares sold in this offering will be freely tradable without restrictions or further registration under the Securities Act unless such shares are purchased by affiliates of Agile, as that term is defined under Rule 144 under the Securities Act. Shares purchased by "affiliates" are subject to certain limitations and restrictions as described below. Sales of Restricted Stock The remaining 16,133,298 shares of common stock held by existing stockholders were issued and sold by us in reliance upon exemptions from the registration requirements of the Securities Act. All of these shares will be subject to "lock-up" agreements described below on the effective date of the offering. Upon expiration of the lock-up agreements 180 days after the effective date of the offering, shares will become eligible for sale, subject in most cases to the limitations of Rule 144. In addition, holders of stock options could exercise their options and sell the shares issued upon exercise as described below. In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who has beneficially owned shares 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 number of shares of common stock then outstanding, which will equal approximately shares immediately after this offering; or . the average weekly trading volume of the common stock on the Nasdaq National Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. Sales under Rule 144 are also subject to certain other requirements regarding the manner of sale, notice filing and the availability of current public information about us. Under Rule 144(k), a person who is not deemed to have been one of our affiliates at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an affiliate, is entitled to sell such shares without complying with the manner of sale, notice filing, volume limitation or notice provisions of Rule 144. Therefore, unless otherwise restricted, "Rule 144(k) shares" may be sold immediately upon the completion of this offering. Prior to this offering, there has been no public market for our common stock, and the effect, if any, that the sale or availability for sale of shares of additional common stock will have on the trading price of our common stock cannot be predicted. Nevertheless, sales of substantial amounts of these shares in the public market, or the perception that these sales could occur, could adversely affect the trading price of our common stock and could impair our future ability to raise capital through an offering of our equity securities. Options As of April 30, 1999, there were a total of 1,159,725 shares of common stock subject to outstanding options under our 1995 Stock Option Plan, 107,987 of which were vested and no longer subject to a right of repurchase. However, all of these shares are subject to lock-up agreements. Immediately after the completion of this offering, we intend to file registration statements on Form S-8 under the Securities Act to register all of the shares of common stock issued or reserved for future issuance under our 1995 Stock Option Plan and 1999 Employee Stock Purchase Plan. On the date 180 days after the effective date of the offering, a total of shares of common stock subject to outstanding options will be vested. After the effective dates of the registration statements on Form S-8, shares purchased upon exercise of options granted pursuant to the 1995 stock option plan and 1999 employee stock purchase plan generally would be available for resale in the public market. 58 In general, under Rule 701, any Agile employee, director, officer, consultant or advisor who purchases shares from us in connection with a compensatory stock or option plan or other written agreement before the effective date of the offering is entitled to resell such shares 90 days after the effective date of this offering in reliance on Rule 144, without having to comply with certain restrictions, including the holding period, contained in Rule 144. The Securities and Exchange Commission has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Securities Exchange Act of 1934, along with the shares acquired upon exercise of such options, including exercises after the date of this prospectus. Securities issued in reliance on Rule 701 are restricted securities and, subject to the contractual restrictions described above, beginning 90 days after the date of this prospectus, may be sold by persons other than affiliates, subject only to the manner of sale provisions of Rule 144 and by affiliates under Rule 144 without compliance with its one year minimum holding period requirement. Lock-up Agreements Our officers, directors and substantially all other stockholders have agreed with Morgan Stanley & Co. Incorporated not to sell or otherwise dispose of any of their shares for a period of 180 days after the date of the offering without the consent of Morgan Stanley & Co. Incorporated. 59 UNDERWRITERS Under the terms and subject to the conditions contained in the underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. Incorporated, Deutsche Bank Securities Inc. and Hambrecht & Quist LLC are acting as representatives, have severally agreed to purchase, and we have agreed to sell to them, severally, the respective number of shares of common stock set forth opposite the names of the underwriters below:
Number Name of Shares ---- --------- Morgan Stanley & Co. Incorporated................................ Deutsche Bank Securities Inc..................................... Hambrecht & Quist LLC............................................ ---- Total.......................................................... ====
The underwriters are offering the shares subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered hereby are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered hereby, other than those covered by the over- allotment option described below, if any such shares are taken. The underwriters initially propose to offer part of the shares of common stock directly to the public at the public offering price set forth on the cover page hereof and part to certain dealers at a price that represents a concession not in excess of $ a share under the public offering price. Any underwriters may allow, and such dealers may reallow, a concession not in excess of $ a share to other underwriters or to certain other dealers. After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representatives of the underwriters. We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of additional shares of common stock at the public offering price set forth on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over- allotments, if any, made in connection with the offering of the shares of common stock offered by the prospectus. To the extent this option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of additional shares of common stock as the number set forth next to each underwriters name in the preceding table bears to the total number of shares of common stock set forth next to the names of all underwriters in the preceding table. At our request, the underwriters have reserved up to shares of common stock to be sold in the offering and offered hereby for sale, at the public offering price, to various business associates and persons related to us. The number of shares of commons stock available for sale to the general public will be reduced to the extent these individuals purchase these reserved shares. Any reserved shares which are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. 60 Agile and our officers, directors and substantially all of our stockholders has agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, or otherwise during the period ending 180 days after the date of this prospectus, it will not: . offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any contract to sell, grant any option, right or warrant to purchase, lend, or otherwise dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; . enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock; or . whether any transaction described above is to be settled by delivery of common stock or such other securities, in cash or by alternative payment. The restrictions described in the previous paragraph do not apply to: . the sale of shares to the underwriters; . the issuance by Agile of shares of common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus which is described in the prospectus; . transactions by any person other than Agile relating to shares of common stock or other securities acquired in open market transactions after the completion of the offering of the shares; or . the grant of options to purchase shares of common stock pursuant to our existing employee benefit plans. The underwriters have informed us that they do not intend sales to discretionary accounts to exceed five percent of the total number of shares of common stock offered by them. We have submitted an application to have our common stock approved for quotation on the Nasdaq National Market under the symbol "AGIL." In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may over-allot in connection with the offering, creating a short position in the common stock for their own account. In addition, to cover over-allotments or to stabilize the price of the common stock, the underwriters may bid for, and purchase, shares of common stock in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the common stock in the offering if the syndicate repurchases previously distributed shares of common stock in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the common stock above independent market levels. The underwriters are not required to engage in these activities and may end any of these activities at any time. We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. On June 4, 1998, we sold shares of our Series F Preferred Stock in a private placement. In this private placement, entities associated with Hambrecht & Quist LLC, one of the underwriters in this offering, purchased 148,148 shares of Series F Preferred Stock, which are convertible into 148,148 shares of common stock, for $999,999, or $6.75 per share. These entities purchased these shares on the same terms as the other investors in the private placement. Pricing of the Offering Prior to this offering, there has been no public market for the shares of our common stock. Consequently, the public offering price for the shares of common stock will be determined by negotiations between Agile and 61 the representatives of the underwriters. Among the factors to be considered in determining the public offering price will be: . our record of operations, our current financial position and future prospects, . the experience of our management, . sales, earnings and other financial and operating information in recent periods, and . the price-earnings ratios, price-sales ratios, market prices of securities and certain financial and operating information of companies engaged in activities similar to ours. The estimated initial public offering price range indicated on the cover page of this prospectus is subject to change as a result of market conditions and other factors. LEGAL MATTERS The validity of the shares of common stock offered hereby will be passed upon for Agile by Gray Cary Ware & Freidenrich LLP, Palo Alto, California. Certain legal matters in connection with the offering will be passed upon for the underwriters by Fenwick & West LLP, Palo Alto, California. EXPERTS The consolidated financial statements of Agile Software Corporation as of April 30, 1998 and 1999 and for each of the three years in the period ended April 30, 1999 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. WHERE TO FIND ADDITIONAL INFORMATION ABOUT AGILE Agile has filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits and schedules filed with it. For further information with respect to Agile and the common stock, reference is made to the registration statement and the exhibits and schedules filed with it. With respect to statements contained in this prospectus regarding the contents of any agreement or any other document, in each instance, reference is made to the copy of such agreement or other document filed as an exhibit to the registration statement. Each statement is qualified in all respects by the exhibits and schedules. For further information with respect to Agile and the common stock, reference is made to the registration statement and its exhibits and schedules. You may read and copy any document Agile files at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information about the public reference rooms. Agile's SEC filings are also available to the public from the SEC's Web site at http://www.sec.gov. Upon completion of this offering, Agile will become subject to the information and periodic reporting requirements of the Exchange Act, and will file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information will be available for inspection and copying at the SEC's public reference rooms and the SEC's Web site, which is described above. 62 AGILE SOFTWARE CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Accountants........................................... F-2 Consolidated Balance Sheet.................................................. F-3 Consolidated Statement of Operations........................................ F-4 Consolidated Statement of Stockholders' Equity.............................. F-5 Consolidated Statement of Cash Flows........................................ F-6 Notes to Consolidated Financial Statements.................................. F-7
F-1 REPORT OF INDEPENDENT ACCOUNTANTS The reincorporation described in Note 1 to the consolidated financial statements has not been consummated at May 28, 1999. When it has been consummated, we will be in a position to furnish the following report: "To the Board of Directors and Stockholders of Agile Software Corporation In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of stockholders' equity and of cash flows present fairly, in all material respects, the financial position of Agile Software Corporation and its subsidiary (the "Company") at April 30, 1998 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended April 30, 1999 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above." PricewaterhouseCoopers LLP San Jose, California May 28, 1999 F-2 AGILE SOFTWARE CORPORATION CONSOLIDATED BALANCE SHEET (in thousands, except per share amounts)
April 30, ------------------ 1998 1999 -------- -------- ASSETS Current assets: Cash and cash equivalents................................ $ 2,160 $ 10,003 Accounts receivable, net of allowance for doubtful accounts of $379 and $495, respectively................. 3,384 4,980 Other current assets..................................... 98 624 -------- -------- Total current assets....................................... 5,642 15,607 Property and equipment, net................................ 1,694 1,973 Other assets............................................... 195 368 -------- -------- $ 7,531 $ 17,948 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank line of credit borrowings........................... $ 1,000 $ -- Accounts payable......................................... 698 1,287 Accrued expenses and other liabilities................... 1,227 3,618 Deferred revenue......................................... 3,146 5,107 Current portion of capital lease obligations............. 501 735 Current portion of notes payable......................... -- 686 -------- -------- Total current liabilities.................................. 6,572 11,433 Capital lease obligations, noncurrent...................... 743 871 Notes payable, noncurrent.................................. 39 2,353 -------- -------- 7,354 14,657 -------- -------- Commitments and contingencies (Note 7) Stockholders' equity: Convertible Preferred Stock, $.001 par value; 25,000 shares authorized; 10,096 and 11,874 shares issued and outstanding............................................. 10 12 Common Stock, $.001 par value; 100,000 shares authorized; 3,998 and 4,200 shares issued and outstanding........... 4 4 Additional paid-in capital............................... 17,868 34,814 Notes receivable from stockholders....................... (363) (748) Unearned stock compensation (Note 6)..................... (2,237) (4,258) Accumulated deficit...................................... (15,105) (26,533) -------- -------- Total stockholders' equity................................. 177 3,291 -------- -------- $ 7,531 $ 17,948 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. F-3 AGILE SOFTWARE CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share amounts)
Year Ended April 30, -------------------------- 1997 1998 1999 ------- ------- -------- Revenues: License.......................................... $ 1,143 $ 6,102 $ 10,859 Professional services............................ 187 1,385 3,665 Maintenance...................................... 22 516 2,283 ------- ------- -------- Total revenues................................. 1,352 8,003 16,807 ------- ------- -------- Cost of revenues: License.......................................... 113 543 819 Professional services............................ 88 1,347 3,823 Maintenance...................................... 65 278 1,343 ------- ------- -------- Total cost of revenues......................... 266 2,168 5,985 ------- ------- -------- Gross profit....................................... 1,086 5,835 10,822 ------- ------- -------- Operating expenses: Sales and marketing.............................. 2,149 8,070 13,495 Research and development......................... 2,510 3,788 4,742 General and administrative....................... 1,333 1,995 1,938 Amortization of stock compensation (Note 6)...... -- 856 2,253 ------- ------- -------- Total operating expenses....................... 5,992 14,709 22,428 ------- ------- -------- Loss from operations............................... (4,906) (8,874) (11,606) Interest and other income.......................... 134 95 447 Interest expense................................... (64) (163) (269) ------- ------- -------- Net loss........................................... $(4,836) $(8,942) $(11,428) ======= ======= ======== Net loss per share: Basic and diluted................................ $ (3.72) $ (4.20) $ (3.87) ======= ======= ======== Weighted average shares.......................... 1,300 2,129 2,952 ======= ======= ======== Unaudited pro forma net loss per share: Basic and diluted................................ $ (.78) ======== Weighted average shares.......................... 14,668 ========
The accompanying notes are an integral part of these consolidated financial statements. F-4 AGILE SOFTWARE CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (in thousands)
Convertible Preferred Notes Stock Common Stock Additional Receivable Unearned ------------- -------------- Paid-In From Stock Accumulated Shares Amount Shares Amount Capital Stockholders Compensation Deficit Total ------ ------ ------ ------ ---------- ------------ ------------ ----------- -------- Balance at April 30, 1996................... 7,671 $ 8 2,215 $ 2 $ 5,214 $ (40) $ -- $ (1,327) $ 3,857 Issuance of Common Stock for cash............... -- -- 52 -- 3 -- -- -- 3 Issuance of Common Stock on exercise of options................ -- -- 564 1 64 -- -- -- 65 Issuance of Common Stock in exchange for services............... -- -- 12 -- 2 -- -- -- 2 Issuance of Series C Convertible Preferred Stock at $1.16 per share, net of issuance costs.................. 75 -- -- -- 83 -- -- -- 83 Issuance of Series D Convertible Preferred Stock at $2.964 per share, net of issuance costs.................. 1,350 1 -- -- 3,979 -- -- -- 3,980 Net loss................ -- -- -- -- -- -- -- (4,836) (4,836) ------ --- ----- --- ------- ----- ------- -------- -------- Balance at April 30, 1997................... 9,096 9 2,843 3 9,345 (40) -- (6,163) 3,154 Repurchase of unvested Common Stock........... -- -- (48) -- (18) 15 -- -- (3) Issuance of Common Stock on exercise of options................ -- -- 255 -- 71 -- -- -- 71 Issuance of Common Stock in exchange for notes receivable on exercise of options............. -- -- 772 1 293 (294) -- -- -- Issuance of restricted Common Stock in exchange for notes receivable............. -- -- 176 -- 106 (106) -- -- -- Repayment of notes receivable............. -- -- -- -- -- 62 -- -- 62 Issuance of Series E Convertible Preferred Stock at $5.00 per share, net of issuance costs.................. 1,000 1 -- -- 4,978 -- -- -- 4,979 Unearned stock compensation (Note 6).. -- -- -- -- 3,093 -- (3,093) -- -- Amortization of unearned compensation (Note 6).. -- -- -- -- -- -- 856 -- 856 Net loss................ -- -- -- -- -- -- -- (8,942) (8,942) ------ --- ----- --- ------- ----- ------- -------- -------- Balance at April 30, 1998................... 10,096 10 3,998 4 17,868 (363) (2,237) (15,105) 177 Repurchase of unvested Common Stock........... -- -- (120) -- (38) 32 -- -- (6) Issuance of Common Stock on exercise of options................ -- -- 56 -- 28 -- -- -- 28 Issuance of Common Stock in exchange for notes receivable on exercise of options............. -- -- 259 -- 419 (419) -- -- -- Issuance of restricted Common Stock in exchange for notes receivable............. -- -- 7 -- 19 (19) -- -- -- Repayment of notes receivable............. -- -- -- -- -- 21 -- -- 21 Issuance of Series F Convertible Preferred Stock at $6.75 per share, net of issuance costs.................. 1,778 2 -- -- 11,970 -- -- -- 11,972 Issuance of warrants.... -- -- -- -- 274 -- -- -- 274 Unearned stock compensation (Note 6).. -- -- -- -- 4,274 -- (4,274) -- -- Amortization of unearned compensation (Note 6).. -- -- -- -- -- -- 2,253 -- 2,253 Net loss................ -- -- -- -- -- -- -- (11,428) (11,428) ------ --- ----- --- ------- ----- ------- -------- -------- Balance at April 30, 1999................... 11,874 $12 4,200 $ 4 $34,814 $(748) $(4,258) $(26,533) $ 3,291 ====== === ===== === ======= ===== ======= ======== ========
The accompanying notes are an integral part of these consolidated financial statements. F-5 AGILE SOFTWARE CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands)
Year Ended April 30, -------------------------- 1997 1998 1999 ------- ------- -------- Cash flows from operating activities: Net loss......................................... $(4,836) $(8,942) $(11,428) Adjustments to reconcile net loss to net cash used in operating activities: Provision for doubtful accounts................ 100 277 155 Depreciation................................... 220 673 1,180 Amortization of stock compensation (Note 6).... -- 856 2,253 Warrant expense................................ -- -- 21 Changes in assets and liabilities: Accounts receivable.......................... (838) (2,900) (1,751) Other assets, current and non-current........ (90) (89) (446) Accounts payable............................. 370 313 589 Accrued expenses and other liabilities....... 270 912 2,391 Deferred revenue............................. 607 2,485 1,961 ------- ------- -------- Net cash used in operating activities...... (4,197) (6,415) (5,075) ------- ------- -------- Cash flows from investing activities: Purchase of short-term investments............... (387) -- -- Proceeds from sale of short-term investments..... -- 3,023 -- Acquisition of property and equipment............ (341) (420) (459) ------- ------- -------- Net cash provided by (used in) investing activities................................ (728) 2,603 (459) ------- ------- -------- Cash flows from financing activities: Proceeds from bank line of credit................ -- 2,230 1,900 Repayment of bank line of credit................. -- (1,230) (2,900) Repayment of capital lease obligations........... (145) (382) (638) Proceeds from notes payable...................... 39 -- 3,000 Repayment of notes payable....................... (24) (24) -- Proceeds from issuance of Common Stock, net of repurchase...................................... 68 68 22 Repayment of notes receivable from stockholders.. -- 62 21 Proceeds from issuance of Convertible Preferred Stock, net...................................... 4,063 4,979 11,972 ------- ------- -------- Net cash provided by financing activities.. 4,001 5,703 13,377 ------- ------- -------- Net increase (decrease) in cash and cash equivalents....................................... (924) 1,891 7,843 Cash and cash equivalents at beginning of period... 1,193 269 2,160 ------- ------- -------- Cash and cash equivalents at end of period......... $ 269 $ 2,160 $ 10,003 ======= ======= ======== Supplemental disclosure: Cash paid during the year for interest........... $ 48 $ 138 $ 168 ======= ======= ======== Noncash investing and financing activities: Common Stock issued in exchange for notes receivable...................................... $ -- $ 400 $ 438 ======= ======= ======== Property and equipment acquired under capital lease........................................... $ 743 $ 838 $ 1,000 ======= ======= ======== Issuance of warrants............................. $ -- $ -- $ 274 ======= ======= ========
The accompanying notes are an integral part of these consolidated financial statements. F-6 AGILE SOFTWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1--The Company And Summary Of Significant Accounting Policies: The Company Agile Software Corporation (the "Company") was incorporated in California on March 15, 1995 and is headquartered in San Jose, California. The Company is a leading supplier of web-centric product content management software for use within and among enterprises in a manufacturing supply chain. The Company's suite of products is designed to improve the ability of supply chain members to communicate with one another about new or changing product content. Reincorporation In June 1999, the Company's Board of Directors authorized the reincorporation of the Company in the State of Delaware. As a result of the reincorporation, the Company is authorized to issue 100,000,000 shares of $.001 par value Common Stock and 25,000,000 shares of $.001 par value Preferred Stock. The Board of Directors has the authority to issue the undesignated Preferred Stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. Share and per share information for the each of the three years in the period ended April 30, 1999 has been retroactively adjusted to reflect the reincorporation. Principles of consolidation and basis of presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Agile Software International Corporation. All significant intercompany balances and transactions have been eliminated in consolidation. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The majority of the Company's cash equivalents consist of money market funds. Concentrations of credit risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, short-term investments and accounts receivable. Cash and cash equivalents are deposited with financial institutions that management believes are credit worthy. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. The Company maintains an allowance for doubtful accounts receivable based on the expected collectibility of accounts receivable. To date, the Company has not experienced any material losses with respect to its accounts receivable. F-7 AGILE SOFTWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Fair value of financial instruments The Company's financial instruments, including cash, cash equivalents, short-term investments, accounts receivable, accounts payable, notes payable and capital lease obligations are carried at cost, which approximates their fair value because of the short-term maturity of these instruments. Property and equipment Property and equipment are recorded at cost. Depreciation is computed using the straight-line method based upon the useful lives of the assets, which range from two to five years, or the lease term of the respective assets. Software development costs Software development costs are included in research and development and are expensed as incurred. After technological feasibility is established, material software development costs are capitalized. The capitalized cost is then amortized on a straight-line basis over the estimated product life, or in the ratio of current revenues to total projected product revenues, whichever is greater. To date, the period between achieving technological feasibility, which the Company has defined as the establishment of a working model which typically occurs when the beta testing commences, and the general availability of such software has been short and software development costs qualifying for capitalization have been insignificant. Accordingly, the Company has not capitalized any software development costs. Revenue recognition The Company derives revenues from the license of software products under software license agreements and from the delivery of professional services and maintenance services. License revenues are recognized when persuasive evidence of an arrangement exists, the fee is fixed and determinable, collectibility is probable, and delivery and acceptance of the software products have occurred. Allowances for estimated returns are provided upon product delivery. In instances where vendor obligations remain, revenues are deferred until the obligation has been satisfied. Revenues from professional services consist of implementation and training services. Training revenues are recognized as the services are performed. Implementation services are typically performed under fixed-price contracts and accordingly, revenues are recognized upon customer acceptance. Maintenance revenues are recognized ratably over the term of the maintenance contract, which is generally twelve months. During 1999, the Company has recognized revenues in accordance with Statement of Position ("SOP") No. 97-2, "Software Revenue Recognition" and SOP 98-4, "Deferral of the Effective Date of a Provision of SOP No. 97-2." Prior to 1999, the Company recognized revenues in accordance with SOP No. 91-1, "Software Revenue Recognition." In December 1998, the American Institute of Certified Public Accountants ("AICPA") issued SOP No. 98-9, "Modification of SOP No. 97-2, Software Revenue Recognition, with Respect to Certain Transactions." The provisions of SOP No. 98-9 will be adopted for transactions entered into during the fiscal year beginning May 1, 1999. The adoption of SOP No. 98-9 is not expected to have a material impact on the Company's results of operations, financial position or cash flows. Income taxes The Company accounts for income taxes under the asset and liability approach which recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax basis of assets and liabilities and their financial statement reported amounts. The Company records a valuation allowance against deferred tax assets when it is more likely than not that such assets will not be realized. F-8 AGILE SOFTWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Comprehensive income Effective May 1, 1998, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for reporting comprehensive income and its components in financial statements. Comprehensive income, as defined, includes all changes in equity (net assets) during a period from non-owner sources. To date, the Company has not had any significant transactions that are required to be reported in comprehensive income. Net loss per share The Company computes net loss per share in accordance with SFAS No. 128, "Earnings per Share" and SEC Staff Accounting Bulletin ("SAB") No. 98. Under the provisions of SFAS No. 128 and SAB No. 98, basic and diluted net loss per share is computed by dividing the net loss available to holders of Common Stock for the period by the weighted average number of shares of Common Stock outstanding during the period. The calculation of diluted net loss per share excludes potential Common Stock if their effect is antidilutive. Potential Common Stock consists of unvested restricted Common Stock, incremental common shares issuable upon the exercise of stock options and warrants and shares issuable upon conversion of the Series A, Series B, Series C, Series D, Series E and Series F Convertible Preferred Stock. The following table sets forth the computation of basic and diluted net loss per share of the period indicated (in thousands, except per share amounts):
Year Ended April 30, -------------------------- 1997 1998 1999 ------- ------- -------- Numerator: Net loss..................................... $(4,836) $(8,942) $(11,428) ======= ======= ======== Denominator: Weighted average shares...................... 2,414 3,467 4,140 Weighted average unvested shares of Common Stock subject to repurchase................. (1,114) (1,338) (1,188) ------- ------- -------- Denominator for basic and diluted calculation................................. 1,300 2,129 2,952 ======= ======= ======== Net loss per share: Basic and diluted............................ $ (3.72) $ (4.20) $ (3.87) ======= ======= ========
The following table sets forth potential shares of Common Stock that are not included in the diluted net loss per share calculation above because to do so would be anti-dilutive for the periods indicated (in thousands):
April 30, -------------------- 1997 1998 1999 ------ ------ ------ Series A Preferred Stock................................ 1,233 1,233 1,233 Series B Preferred Stock................................ 2,938 2,938 2,938 Series C Preferred Stock................................ 3,575 3,575 3,575 Series D Preferred Stock................................ 1,350 1,350 1,350 Series E Preferred Stock................................ -- 1,000 1,000 Series F Preferred Stock................................ -- -- 1,778 Preferred Stock warrants................................ 94 98 158 Unvested Common Stock subject to repurchase............. 1,251 1,361 964 Common Stock options.................................... 732 527 1,160 ------ ------ ------ 11,173 12,082 14,156 ====== ====== ======
F-9 AGILE SOFTWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Pro forma net loss per share (unaudited) Pro forma net loss per share for the year ended April 30, 1999 is computed using the weighted average number of shares of Common Stock outstanding, including the pro forma effects of the automatic conversion of the Company's Series A, Series B, Series C, Series D, Series E and Series F Convertible Preferred Stock and Series F Preferred Stock warrants into shares of the Company's Common Stock effective upon the closing of the Company's initial public offering as if such conversion occurred on May 1, 1998, or at the date of original issuance, if later. The resulting pro forma adjustment includes an increase in the weighted average shares used to compute basic net loss per share of 11,716,000 for the year ended April 30, 1999. The calculation of diluted net loss per share excludes potential shares of Common Stock as their effect would be antidilutive. Pro forma potential Common Stock consist of unvested Common Stock subject to repurchase rights and incremental shares of Common Stock issuable upon the exercise of stock options and warrants. Stock compensation The Company accounts for stock-based employee compensation arrangements in accordance with provisions of Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees" and complies with the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Under APB No. 25, unearned compensation is based on the difference, if any, on the date of the grant, between the fair value of the Company's stock and the exercise price. Unearned compensation is amortized and expensed in accordance with Financial Accounting Standards Board ("FASB") Interpretation No. 28. The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services." Foreign currency translation The Company uses the U.S. dollar as its functional currency in all foreign locations expect for France. The balance sheet accounts are translated into United States dollars at the end-of-period exchange rates except for fixed assets, which are translated at historical exchange rates. Revenue and expenses are translated at average exchange rates in effect during each period. Gains and losses resulting from translation are accumulated as a component of stockholders' equity. Net gains or losses resulting from foreign currency exchange transactions are included in the consolidated statement of operations and were not significant during any of the periods presented. Segment information Effective May 1, 1998, the Company adopted the provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The Company identifies its operating segments based on business activities, management responsibility and geographical location. During each of the three years in the period ended April 30, 1999, the Company operated in a single business segment, primarily in the United States. Through April 30, 1999, foreign operations have not been significant in either revenue or investment in long-lived assets. Recent accounting pronouncements In March 1998, the AICPA issued SOP No. 98-1, "Accounting for the Cost of Computer Software Developed or Obtained for Internal Use." SOP No. 98-1 will be effective for the Company's fiscal year ending April 30, 2000. SOP No. 98-1 provides guidance on accounting for computer software developed or obtained for internal use including the requirement to capitalize specified costs and amortization of such costs. The Company F-10 AGILE SOFTWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) does not expect the adoption of SOP No. 98-1 to have a material effect on the Company's results of operations, financial position or cash flows. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 will be effective for the Company's fiscal year ending April 30, 2001. The adoption of SFAS No. 133 is not expected to have a material effect on the Company's results of operations, financial position or cash flows. Reclassifications Certain reclassifications have been made to the prior year consolidated financial statements to conform to the current year presentation. Note 2--Balance Sheet Components (in thousands): Property and equipment comprise the following:
April 30, --------------- 1998 1999 ------ ------- Computer hardware and software.............................. $2,087 $ 3,214 Furniture and equipment..................................... 508 828 Leasehold improvements...................................... 34 46 ------ ------- 2,629 4,088 Less: accumulated depreciation.............................. (935) (2,115) ------ ------- $1,694 $ 1,973 ====== =======
Accrued expenses and other liabilities comprise the following:
April 30, -------------- 1998 1999 ------ ------- Accrued employee costs....................................... $ 661 $ 1,770 Sales taxes payable.......................................... 151 172 Accrued professional fees.................................... 125 400 Other........................................................ 290 1,276 ------ ------- $1,227 $ 3,618 ====== =======
F-11 AGILE SOFTWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Note 3--Borrowings: Notes payable Notes payable consist of amounts payable to equipment financing companies and are collateralized by the underlying assets as follows (in thousands):
April 30, ----------- 1998 1999 ---- ------ 11.75% note; interest payable monthly; principal payable monthly commencing September 1999; matures February 2002...... -- $1,000 11.75% note; interest payable monthly; principal payable monthly commencing November 1999; matures March 2002.......... -- 1,000 11.75% note; interest payable monthly; principal payable monthly commencing December 1999; matures April 2002.......... -- 1,000 Non-interest bearing note; principal payable upon maturity in July 2002..................................................... $39 39 --- ------ 39 3,039 Less: current portion of notes payable......................... -- (686) --- ------ Notes payable, non-current..................................... $39 $2,353 === ======
Future minimum principal payments under the notes at April 30, 1999 are as follows (in thousands):
Year Ending April 30, --------------------- 2000.................................................................. $ 686 2001.................................................................. 1,181 2002.................................................................. 1,133 2003.................................................................. 39 ------ Total payments........................................................ $3,039 ======
Bank line-of-credit As of April 30, 1999, the Company had a $2,000,000 line-of-credit agreement with a bank that provides for borrowings of up to $2,000,000, including $250,000 available for the issuance of letters of credit and foreign currency exchange activity. Borrowings under the credit agreement bear interest at an annual rate of 8.5%, subject to adjustment by the bank. The interest rate was 8.5% at April 30, 1999. Borrowings under the line of credit are secured by the assets of the Company. As of April 30, 1998 and 1999, $1,000,000 and no amount, respectively, were outstanding under the line. The credit agreement expires in August 1999. In connection with this line-of-credit, the Company is required to meet certain monthly financial tests, including a minimum tangible net worth and a minimum quick ratio. At April 30, 1999, the Company was in compliance with all financial covenants. Note 4--Income Taxes: For each of the three years in the period ended April 30, 1999, the Company incurred net operating losses and accordingly no provision for income taxes has been recorded. At April 30, 1999, the Company had approximately $20,000,000 of federal and $18,000,000 of state net operating loss carryforwards available to offset future taxable income which expire in varying amounts beginning in 2016 and 2004, respectively. Under the Tax Reform Act of 1986, the amounts of and benefits from net operating loss carryforwards may be impaired or limited in certain circumstances. Events which cause limitations in the amounts of net operating losses that F-12 AGILE SOFTWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) the Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50%, as defined, over a three year period. Deferred taxes comprise the following (in thousands):
April 30, ---------------- 1998 1999 ------- ------- Deferred tax assets: Depreciation............................................. $ 66 $ 67 Other accruals and liabilities........................... 123 398 Net operating loss and credit carryforwards.............. 5,235 8,197 ------- ------- Total deferred tax assets................................ 5,424 8,662 Less: Valuation allowance................................ (5,424) (8,662) ------- ------- Net deferred tax assets.................................... $ -- $ -- ======= =======
For financial reporting purposes, the Company has incurred a loss in each period since its inception. Based on the available objective evidence, including the Company's history of losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company has provided for a full valuation allowance against its net deferred tax assets at April 30, 1998 and 1999. Note 5--Stockholders' Equity: Preferred stock Convertible Preferred Stock at April 30, 1999 comprise the following (in thousands):
Shares Liquidation Proceeds, Net ---------------------- Preference of Issuance Authorized Outstanding Amount Costs ---------- ----------- ----------- ------------- Series A.................... 1,500 1,233 $ 123 $ 115 Series B.................... 3,000 2,938 1,040 1,024 Series C.................... 4,000 3,575 4,147 4,124 Series C1................... 4,000 -- -- -- Series D.................... 1,500 1,350 4,001 3,980 Series D1................... 1,500 -- -- -- Series E.................... 1,000 1,000 5,000 4,979 Series E1................... 1,000 -- -- -- Series F.................... 1,838 1,778 12,002 11,972 Series F1................... 1,838 -- -- -- ------ ------ ------- ------- 21,176 11,874 $26,313 $26,194 ====== ====== ======= =======
Each share of Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock is convertible into one share of Common Stock, at the option of the holder. The conversion ratio of the Series C Preferred Stock is subject to adjustment for dilution. F-13 AGILE SOFTWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Holders of at least 100,000 shares of Preferred Stock have a right of first offer in connection with any subsequent issuances of Preferred Stock. These provisions will terminate upon the Company's initial public offering. In the event that such holders of Series C or Series D Preferred Stock elect not to participate in certain subsequent financings, their existing shares of Series C and Series D Preferred Stock will automatically convert into shares of Series C1 and Series D1 Preferred Stock, respectively. Each share of Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock automatically converts into Common Stock upon the closing of an underwritten public offering with an offering price of at least $8.78 per share and aggregate proceeds of at least $20,000,000 or upon the consent of the holders of a majority of the outstanding shares of Series A, Series B, Series C, Series C1, Series D, Series D1, Series E and Series E1 Preferred Stock (voting together as a single class and not as separate series, on an as-converted basis). Each share of Series F and Series F1 will automatically convert into Common Stock upon the consent of a majority of the outstanding Series F and Series F1 shares. Each share of Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock has voting rights equal to the number of shares of Common Stock into which it is convertible. As long as at least 50% or more of the original issued shares of each respective class remain outstanding, holders of Series A, Series B and Series C and C1 (Series C and C1 voting as a class) are entitled to elect one director at each annual election of members of the Board of Directors. Holders of all shares of Common Stock and Preferred Stock, on an as-converted basis, are entitled to vote to elect the remaining directors of the Company. As long as at least 50% of the original Preferred Stock issued remains outstanding, the Company may not, without prior approval of at least the majority of the then outstanding shares of Preferred Stock, (a) sell, merge or consolidate the Company, (b) effect any transaction or series of transactions which would result in the dissolution of more than 50% of the voting power of the Company, (c) change the rights, preferences and privileges of the Preferred Stock or (d) authorize or issue any equity security or any security convertible into or exercisable for any equity security having a preference over or equal to those of the existing Preferred Stock with respect to voting, dividends or liquidation. Holders of Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock are entitled to receive, when and as declared by the Board of Directors, noncumulative annual dividends of $.01 per share. No dividends on the Preferred Stock or Common Stock have been declared by the Board of Directors from the Company's inception through April 30, 1999. In the event of a liquidation, dissolution or winding up of the Company, the holders of Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock shall be entitled to receive $.10, $.354, $1.16, $1.16, $2.964, $2.964, $5.00, $5.00, $6.75 and $6.75 per share, respectively, plus any declared but unpaid dividends. Thereafter, the remaining assets of the Company will be distributed pro rata among the holders of Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock and Common Stock until the holders of Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock have received an aggregate of $.708, $2.32, $2.32, $5.928, $5.928, $10.00, $10.00, $13.50 and $13.50 per share, respectively. Thereafter, the holders of Common Stock will receive all of the remaining assets of the Company. F-14 AGILE SOFTWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Preferred Stock warrants In conjunction with certain capital leases and notes payable, the Company issued warrants to purchase shares of the Company's Preferred Stock as follows:
Fiscal Exercise Year of Date of Grant Shares Price Expiration Value -------------- ------ -------- ---------- ----------- Series B Preferred Stock warrants...................... September 1995 41,111 $.354 2003 de minimus Series C Preferred Stock warrants...................... March 1996 35,313 1.160 2003 de minimus Series D Preferred Stock warrants...................... February 1997 17,828 2.964 2004 de minimus Series D Preferred Stock warrants...................... November 1997 4,049 2.964 2005 de minimus Series F Preferred Stock warrants...................... February 1999 60,000 6.750 2010 $ 274,000
The Series B, Series C and Series D Preferred Stock warrants are exercisable for the period stated above or three years from the effective date of the Company's initial public offering, whichever is longer. The Series F Preferred Stock warrants are exercisable for the shorter of the period stated above or immediately prior to the Company's initial public offering. Upon completion of the Company's initial public offering, the Series F Preferred Stock warrants expire. If the Company's initial public offering yields proceeds of not less than $14.00 per share, then the warrant shall be exercisable for no more than 45,000 shares of Series F Preferred Stock or the Common Stock issuable upon conversion thereof. The Company records the expense related to the warrants over the life of the associated financing instrument as interest expense. Common Stock The Company's Certificate of Incorporation, as amended, authorizes the Company to issue 100,000,000 shares of $.001 par value Common Stock. The Company has granted restricted stock to certain founders and employees. As of April 30, 1999, the Company had 2,269,775 shares of restricted Common Stock outstanding. The Company has a right of first offer in connection with any proposed sale or transfer of these shares and has the right to repurchase these shares at the original issue price. The Company's right to repurchase such shares declines on a percentage basis, usually over four years, based on the length of the employees' continual employment with the Company. At April 30, 1999, 173,371 of such shares granted under the Company's restricted stock plan were subject to repurchase at a weighted-average exercise price of $.69 per share and 76,500 shares were reserved for issuance as restricted Common Stock in the future. This plan was terminated in June 1999. Certain of these and other shares were issued in exchange for notes receivable. These notes receivable are payable on various dates through March 2004 and bear interest at rates ranging from 4.52% to 7.34%. These notes receivable have been included in stockholders' equity. At April 30, 1999, the Company has reserved shares of Common Stock for future issuance as follows (in thousands):
April 30, 1999 -------------- Conversion of Series A Preferred Stock........................ 1,500 Conversion of Series B Preferred Stock........................ 3,000 Conversion of Series C and Series C1 Preferred Stock.......... 8,000 Conversion of Series D and Series D1 Preferred Stock.......... 3,000 Conversion of Series E and Series E1 Preferred Stock.......... 2,000 Conversion of Series F and Series F1 Preferred Stock.......... 3,556 Exercise of Preferred Stock warrants.......................... 158 Exercise of Common Stock options.............................. 1,405 Issuance of restricted Common Stock........................... 77
F-15 AGILE SOFTWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Note 6--Employee Benefit Plans: 401(k) plan Employees of the Company may elect to participate in the Company's 401(k) plan. The Company does not make contributions to the 401(k) plan. Stock option plan In May 1995, the Company adopted the 1995 Stock Option Plan (the "Plan") which, as amended, provides for the issuance of incentive and nonqualified stock options to employees, directors and consultants of the Company. Under the Plan, 3,375,000 shares have been authorized for issuance. Options granted under the Plan are for periods not to exceed ten years and options must be issued at prices not less than 100% and 85%, for incentive and nonqualified stock options, respectively, of the estimated fair value of the stock on the date of grant as determined by the Board of Directors. Options granted to shareholders who own greater than 10% of the outstanding stock are for periods not to exceed five years, and must be issued at prices not less than 110% of the estimated fair value of the stock on the date of grant. Options are exercisable upon grant and generally vest 25% or 20% at the end of the first year and at a rate of 1/36 or 1/48 per month thereafter such that they vest over four or five years, respectively. The following table summarizes activity under the Plan (shares in thousands):
Weighted Shares Average Available Number Exercise for Grant Outstanding Price --------- ----------- -------- Balance at April 30, 1996........................ 372 406 $ .10 Options authorized............................. 575 -- -- Options granted................................ (933) 933 .24 Options exercised.............................. -- (564) .12 Options canceled............................... 43 (43) .18 ----- ------ Balance at April 30, 1997........................ 57 732 .26 Options authorized............................. 800 -- -- Options granted................................ (857) 857 .63 Options exercised.............................. -- (1,027) .31 Options canceled............................... 35 (35) .56 Unvested shares repurchased.................... 43 -- -- ----- ------ Balance at April 30, 1998........................ 78 527 .84 Options authorized............................. 1,000 -- -- Options granted................................ (978) 978 2.57 Options exercised.............................. -- (315) 1.42 Options canceled............................... 30 (30) 1.70 Unvested shares repurchased.................... 115 -- -- ----- ------ Balance at April 30, 1999........................ 245 1,160 2.12 ===== ======
At April 30, 1999, 790,235 outstanding shares of Common Stock purchased under the Plan are subject to repurchase. Upon termination of employment, unvested shares previously purchased under the Plan are subject to repurchase by the Company at a price equal to the exercise price. F-16 AGILE SOFTWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following table summarizes the information about stock options outstanding and exercisable as of April 30, 1999 (shares in thousands):
Options Vested Options Outstanding and Exercisable -------------------------------------- ----------------------- Weighted Average Weighted Weighted Range of Remaining Average Average Exercise Number Contractual Exercise Number Exercise Prices Outstanding Life (Years) Price Outstanding Price ------------ ----------- ------------ -------- ----------- -------- $.015 - .45 83 7.97 $ .36 38 $ .35 .50 - 1.25 154 8.54 .91 52 .86 1.45 - 2.50 454 9.20 2.19 18 1.91 2.65 - 3.00 469 9.71 2.77 -- -- ----- --- 1,160 9.23 2.12 108 .86 ===== ===
Fair value disclosures The Company calculated the minimum fair value of each option grant under the Plan on the date of grant using the Black-Scholes option pricing model as prescribed by SFAS No. 123 with the followings underlying assumptions:
Year Ended April 30, ----------------- 1997 1998 1999 ---- ---- ----- Dividend yield.......................................... -- -- -- Expected volatility..................................... -- -- -- Average risk free interest rate......................... 6.3% 6.0% 5.7% Expected life (in years)................................ 5 5 5 Weighted average fair value of options granted.......... $.07 $.17 $2.07
Had compensation cost for options granted under the Plan been determined based on the fair value at the grant dates for the awards under a method prescribed by SFAS No. 123, the Company's net loss would not have been materially different from that reported. Because the determination of the fair value of all options granted after the Company becomes a public entity will include an expected volatility factor in addition to the factors described above and because additional option grants are expected to be made each year, the compensation expense for options granted during each of the three years in the period ended April 30, 1999 are not representative of the pro forma effects of option grants on reported net income (loss) for future years. Unearned stock compensation In connection with certain stock option grants during the years ended April 30, 1998 and 1999, the Company recorded unearned stock compensation cost totaling $3,093,000 and $4,274,000, respectively, which is being recognized over the vesting period of the related options of five years. Amortization of unearned stock compensation totaled $856,000 and $2,253,000 for the years ended April 30, 1998 and 1999, respectively. F-17 AGILE SOFTWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Note 7--Commitments And Contingencies: Leases The Company has entered into noncancelable operating leases for office space and equipment and capital leases for equipment with original terms ranging from 12 to 60 months. The terms of certain operating leases provide for rental payments on a graduated scale. The Company recognizes expense on a straight-line basis over the lease period and has accrued for rent expense incurred but not paid. The future minimum lease payments under these leases at April 30, 1999 are as follows (in thousands):
Operating Capital Year Ending April 30, Leases Leases --------------------- --------- ------- 2000...................................................... $1,061 $ 843 2001...................................................... 967 598 2002...................................................... 339 292 2003...................................................... 56 58 ------ ------ Total minimum lease payments.............................. $2,423 1,791 ====== Less: Amount representing interest........................ (185) ------ Present value of capital lease obligations................ 1,606 Less: Current portion..................................... (735) ------ Capital lease obligations, noncurrent..................... $ 871 ======
Property and equipment under capital leases are as follows (in thousands):
April 30, --------------- 1998 1999 ------ ------- Computer hardware and software.............................. $1,519 $ 2,338 Furniture and equipment..................................... 289 470 ------ ------- 1,808 2,808 Less: Accumulated depreciation.............................. (710) (1,558) ------ ------- $1,098 $ 1,250 ====== =======
Rent expense under noncancelable operating leases was approximately $160,000, net of sublease rental income of $28,000, for the year ended April 30, 1997, $396,000 for the year ended April 30, 1998 and $568,000, net of sublease rental income of $208,000, for the year ended April 30, 1999. Contingencies From time to time, in the normal course of business, various claims are made against the Company. In the opinion of management, there are no pending claims the outcome of which is expected to result in a material adverse effect on the financial position or results of operations of the Company. Note 8--Subsequent Events: Initial public offering In June 1999, the Company's Board of Directors authorized management to file a registration statement with the Securities and Exchange Commission to permit the Company to sell shares of its Common Stock to the public. F-18 AGILE SOFTWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Stock option plan Subsequent to April 30, 1999, the Board adopted an increase in the number of shares reserved for issuance under the Company's 1995 Stock Option Plan by an additional 2,000,000 shares. This reserve will be automatically increased on the first day of each fiscal year beginning on and after May 1, 2001 by the lesser of 500,000 shares per year, 5% of the number of shares of the Company's Common Stock which were issued and outstanding on the last day of the preceding fiscal year or a number of shares determined by the Company's board of directors. Employee stock purchase plan In June 1999, the Board adopted the 1999 Employee Stock Purchase Plan (the "Purchase Plan") which will become effective on the date of the Company's initial public offering, and reserved 500,000 shares of Common Stock for issuance thereunder. This reserve will be automatically increased on May 1, 2000 and on each May 1 thereafter until and including May 1, 2009, by an amount equal to the lesser of 500,000 shares per year, 2% of the number of shares of Common Stock which are issued and outstanding on the last day of the preceding fiscal year or a number of shares determined by the Company's board of directors. Employees generally will be eligible to participate in the Purchase Plan if they are customarily employed by the Company for more than 20 hours per week and more than five months in a fiscal year end. The first Offering Period is expected to begin on the first business day on which price quotations for the Company's Common Stock are available. Depending on the effective date, the first Offering Period may be more or less than 24 months long. Offering Periods and Purchase Periods thereafter will begin on the first day of May and September of each year. In general, the price at which the Common Stock is purchased under the Purchase Plan is 85% of the lesser of the fair market value of the Company's Common Stock on the first day of the applicable Offering Period or on the purchase date. Employees generally may not purchase more than 1,000 shares in a six-month period or stock having a value greater than $25,000 in any calendar year as measured at the beginning of the offering period. Unearned stock compensation During the period May 1, 1999 through June 23, 1999, the Company granted options to purchase an aggregate of 534,700 shares of Common Stock at exercise prices ranging from $5.00 to $8.00 per share. Note 9--Unaudited Quarterly Consolidated Financial Data:
Quarter Ended ------------------------------------ Jul. Apr. 31, Oct. 31, Jan. 31, 30, Fiscal 1998 1998 1999 1999 1999 ------- -------- -------- ------- -------- 1999: (in thousands, except per share amounts) Total revenues................. $ 3,241 $ 3,812 $ 4,592 $ 5,162 $ 16,807 Gross profit................... 2,083 2,475 2,845 3,419 10,822 Loss from operations........... (2,624) (2,839) (2,902) (3,241) (11,606) Net loss....................... (2,572) (2,741) (2,838) (3,277) (11,428) Net loss per share--basic and diluted....................... (.94) (.96) (.94) (1.02) (3.87) Quarter Ended ------------------------------------ Jul. Apr. 31, Oct. 31, Jan. 31, 30, Fiscal 1997 1997 1998 1998 1998 ------- -------- -------- ------- -------- 1998: (in thousands, except per share amounts) Total revenues................. $ 1,179 $ 1,669 $ 2,128 $ 3,027 $ 8,003 Gross profit................... 842 1,151 1,545 2,297 5,835 Loss from operations........... (1,610) (2,370) (2,266) (2,628) (8,874) Net loss....................... (1,612) (2,396) (2,289) (2,645) (8,942) Net loss per share--basic and diluted....................... (.89) (1.20) (1.02) (1.07) (4.20)
F-19 [LOGO OF AGILE SOFTWARE APPEARS HERE] PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution The following table sets forth the costs and expenses, other than underwriting discounts and commissions to be paid by Agile, in connection with this offering. All amounts shown are estimates except for the registration fee and the NASD filing fee. SEC registration fee.............................................. $16,305 NASD filing fee................................................... 6,365 Nasdaq National Market initial listing fee........................ 5,000 Blue sky fees and expenses........................................ * Printing and engraving expenses................................... * Legal fees and expenses........................................... * Accounting fees and expenses...................................... * Director and officer Securities Act liability insurance........... * Transfer agent and registrar fees................................. * Miscellaneous expenses............................................ * ------- Total........................................................... $ * =======
-------- * To be filed by amendment. Item 14. Indemnification of Officers and Directors Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation's board of directors to grant, indemnity to officers, directors and other corporate agents under certain circumstances and subject to certain limitations. Our certificate of incorporation and bylaws provide that we shall indemnify our directors, officers, employees and agents to the full extent permitted by Delaware General Corporation Law, including in circumstances in which indemnification is otherwise discretionary under Delaware law. In addition, we intend to enter into separate indemnification agreements with our directors, officers and certain employees which would require us, among other things, to indemnify them against certain liabilities which may arise by reason of their status as directors, officers or certain other employees. We also intend to maintain director and officer liability insurance, if available on reasonable terms. These indemnification provisions and the indemnification agreements that we intend to enter into with our officers and directors may be sufficiently broad to permit indemnification of our officers and directors for liabilities (including reimbursement of expenses incurred) arising under the Securities Act. We intend to obtain in conjunction with the effectiveness of the registration statement a policy of directors' and officers' liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment under certain circumstances. The form of Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement provides for indemnification by the underwriters of Agile and our officers and directors for certain liabilities arising under the Securities Act, or otherwise. Item 15. Recent Sales of Unregistered Securities (a) Since May 1, 1996, we have sold and issued the following unregistered securities: (1) From inception to April 30, 1999, we issued options to purchase an aggregate of 3,395,750 shares of common stock under the 1995 Stock Option Plan at exercise prices of $.015 to $3.00 per share, of which options to purchase 2,117,880 shares have been exercised. II-1 (2) From inception to April 30, 1999, we issued options to purchase an aggregate of 183,500 shares of common stock under our Restricted Stock Purchase Plan at exercise prices of $.60 to $2.65 per share, of which options to purchase 183,500 shares have been exercised. (3) On January 16, 1996, we issued and sold 3,500,000 shares of Series C Preferred Stock to 5 private investors at a price of $1.16 per share for a total offering of $4,060,000. (4) On October 31, 1996, we issued and sold 75,000 shares of Series C Preferred Stock to one private investor at a price of $1.16 per share for a total price of $87,000. (5) On February 16, 1997, in connection with an equipment lease, we issued a warrant to an equipment lessor to purchase 17,828 shares of Series D preferred stock at an exercise price of $2.964 per share. (6) On February 16, 1997, we issued and sold an aggregate of 1,350,000 shares of Series D Preferred Stock to 10 private investors at a price of $2.964 per share for a total offering price of $4,001,400. (7) On May 1, 1997, we issued 6,750 shares of Common Stock to our Chief Executive Officer as a bonus in lieu of cash. (8) On November 14, 1997, we issued and sold an aggregate of 1,000,000 shares of Series E Preferred Stock to 14 private investors at a price of $5.00 per share for a total offering price of $5,000,000. (9) On November 14, 1997, in connection with an equipment lease, we issued a warrant to an equipment lessor to purchase 4,049 shares of Series D preferred stock at an exercise price of $2.964 per share. (10) On June 4, 1998, we issued and sold an aggregate of 1,777,778 shares of Series F Preferred Stock to 24 private investors at a price of $6.75 per share for a total offering price of $12,000,001.50. (11) On February 8, 1999, in connection with an equipment lease, we issued a warrant to an equipment lessor to purchase an aggregate of 60,000 shares of Series F preferred stock at an exercise price of $6.75 per share. There were no underwriters employed in connection with any of the transactions set forth in Item 15. For additional information concerning these equity investment transactions, please see the section entitled "Certain Transactions" in the prospectus. The issuances described in Items 15(a)(3) through 15(a)(6) and 15(a)(8) through 15(a)(11) were deemed exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering. Certain issuances described in Item 15(a)(1), 15(a)(2) and 15(a)(7) were deemed exempt from registration under the Securities Act in reliance on Section 4(2) or Rule 701 promulgated thereunder as transactions pursuant to compensatory benefit plans and contracts relating to compensation. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. All recipients either received adequate information about us or had access, through employment or other relationships, to such information. Item 16. Exhibits and Financial Statement Schedules (a) Exhibits
Exhibit Number Description of Document ------- ----------------------- 1.1 Form of Underwriting Agreement. 3.1 Amended and Restated Articles of Incorporation of Agile Software Corporation, as amended to date.
II-2
Exhibit Number Description of Document ------- ----------------------- 3.2* Form of Certificate of Incorporation of Agile, as proposed to be filed. 3.3 Bylaws of Agile Software Corporation. 4.1* Specimen Common Stock Certificate. 5.1* Opinion of Gray Cary Ware & Freidenrich LLP. 10.1* Amended and Restated 1995 Stock Option Plan and form of Stock Option Agreement thereunder. 10.2* 1999 Employee Stock Purchase Plan. 10.3* Form of Indemnity Agreement between Agile Software Corporation and its directors and officers. 10.4 Almaden Financial Plaza Office Lease dated May 30, 1996 between North Block Partnership and Agile Software Corporation, as amended. 10.5 Subordinated Loan and Security Agreement dated February 8, 1999 between Comdisco, Inc. and Agile Software Corporation. 10.6 Revolving Credit Loan and Security Agreement (Accounts and Inventory) dated December 11, 1996 between Comerica Bank-- California and Agile Software Corporation as modified. 10.7* Master Lease Agreement dated September 18, 1995 between Comdisco, Inc. and Agile Software Corporation, and associated equipment schedules. 10.8 Fifth Amended and Restated Investors' Rights Agreement dated June 4, 1998 by and among Agile Software Corporation and the investors listed on Schedule A thereto. 10.9* Series A Preferred Stock Purchase Agreement. 10.10* Series B Preferred Stock Purchase Agreement. 10.11* Series C Preferred Stock Purchase Agreement. 10.12* Series D Preferred Stock Purchase Agreement. 10.13* Series E Preferred Stock Purchase Agreement. 10.14* Series F Preferred Stock Purchase Agreement. 21.1 Subsidiaries of Agile Software Corporation. 23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants. 23.2* Consent of Gray Cary Ware & Freidenrich LLP (included in Exhibit 5.1). 24.1 Power of Attorney (included on page II-5). 27.1 Financial Data Schedule (EDGAR filed version only).
- -------- * To be filed by amendment (b) Financial Statement Schedules All financial statement schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. Item 17. Undertakings We hereby undertake 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 by us for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions described in Item 14 above or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer, or controlling person of ours 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, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of II-3 appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. We hereby undertake that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the 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, Agile has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on the 23rd day of June, 1999. Agile Software Corporation /s/ Bryan D. Stolle By: _________________________________ Bryan D. Stolle Chief Executive Officer and President POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Bryan D. Stolle and Thomas P. Shanahan as his true and lawful attorney-in-fact and agent, with full power of substitution, for him in any and all capacities, to sign any and all amendments to this Registration Statement (including post-effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of securities for which registration is sought), and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, with full power to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ Bryan D. Stolle Chief Executive Officer, June 23, 1999 ____________________________________ President and Director Bryan D. Stolle (Principal Executive Officer) /s/ Thomas P. Shanahan Chief Financial Officer, June 23, 1999 ____________________________________ Secretary and Director Thomas P. Shanahan (Principal Financial and Accounting Officer) /s/ Klaus-Dieter Laidig Director June 23, 1999 ____________________________________ Klaus-Dieter Laidig /s/ Michael Moritz Director June 23, 1999 ____________________________________ Michael Moritz /s/ James L. Patterson Director June 23, 1999 ____________________________________ James L. Patterson /s/ Nancy J. Schoendorf Director June 23, 1999 ____________________________________ Nancy J. Schoendorf
II-5 INDEX TO EXHIBITS
Exhibit Number Description of Document ------- ----------------------- 1.1 Form of Underwriting Agreement. 3.1 Amended and Restated Articles of Incorporation of Agile Software Corporation, as amended to date. 3.2* Form of Certificate of Incorporation of Agile, as proposed to be filed. 3.3 Bylaws of Agile Software Corporation. 4.1* Specimen Common Stock Certificate. 5.1* Opinion of Gray Cary Ware & Freidenrich LLP. 10.1* Amended and Restated 1995 Stock Option Plan and form of Stock Option Agreement thereunder. 10.2* 1999 Employee Stock Purchase Plan. 10.3* Form of Indemnity Agreement between Agile Software Corporation and its directors and officers. 10.4 Almaden Financial Plaza Office Lease dated May 30, 1996 between North Block Partnership and Agile Software Corporation, as amended. 10.5 Subordinated Loan and Security Agreement dated February 8, 1999 between Comdisco, Inc. and Agile Software Corporation. 10.6 Revolving Credit Loan and Security Agreement (Accounts and Inventory) dated December 11, 1996 between Comerica Bank--California and Agile Software Corporation as modified. 10.7* Master Lease Agreement dated September 18, 1995 between Comdisco, Inc. and Agile Software Corporation, and associated equipment schedules. 10.8 Fifth Amended and Restated Investors' Rights Agreement dated June 4, 1998 by and among Agile Software Corporation and the investors listed on Schedule A thereto. 10.9* Series A Preferred Stock Purchase Agreement. 10.10* Series B Preferred Stock Purchase Agreement. 10.11* Series C Preferred Stock Purchase Agreement. 10.12* Series D Preferred Stock Purchase Agreement. 10.13* Series E Preferred Stock Purchase Agreement. 10.14* Series F Preferred Stock Purchase Agreement. 21.1 Subsidiaries of Agile Software Corporation. 23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants. 23.2* Consent of Gray Cary Ware & Freidenrich LLP (included in Exhibit 5.1). 24.1 Power of Attorney (included on page II-5). 27.1 Financial Data Schedule (EDGAR filed version only).
- -------- *To be filed by amendment EX-1.1 2 FORM OF UNDERWRITING AGREEMENT EXHIBIT 1.1 DRAFT JUNE 22, 1999 __________ Shares AGILE SOFTWARE CORPORATION COMMON STOCK, $.001 PAR VALUE UNDERWRITING AGREEMENT __________, 1999 _____________, 1999 Morgan Stanley & Co. Incorporated Deutsche Bank Securities Inc. Hambrecht & Quist LLC c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Dear Sirs and Mesdames: Agile Software Corporation, a Delaware corporation (the "Company"), proposes to issue and sell to the several Underwriters named in Schedule I hereto (the "Underwriters") _______________ shares of its Common Stock, $.001 par value (the "Firm Shares"). The Company also proposes to issue and sell to the several Underwriters not more than an additional ______________ shares of its Common Stock, $.001 par value (the "Additional Shares") if and to the extent that you, as Managers of the offering, shall have determined to exercise, on behalf of the Underwriters, the right to purchase such shares of common stock granted to the Underwriters in Section 2 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the "Shares." The shares of Common Stock, $.001 par value, of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the "Common Stock." The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement, including a prospectus, relating to the Shares. The registration statement as amended at the time it becomes effective, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter referred to as the "Registration Statement"; the prospectus in the form first used to confirm sales of Shares is hereinafter referred to as the "Prospectus." If the Company has filed an abbreviated registration statement to register additional shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the "Rule 462 Registration Statement"), then any reference herein to the term "Registration Statement" shall be deemed to include such Rule 462 Registration Statement. Morgan Stanley & Co. Incorporated ("Morgan Stanley") has agreed to reserve a portion of the Shares to be purchased by it under this Agreement for sale to the Company's directors, officers, employees and business associates and other parties related to the Company (collectively, "Participants"), as set forth in the Prospectus under the heading "Underwriters" (the "Directed Share Program"). The Shares to be sold by Morgan Stanley pursuant to the Directed Share Program are referred to hereinafter as the "Directed Shares." Any Directed 2 Shares not orally confirmed for purchase by any Participant by the end of the business day on which this Agreement is executed will be offered to the public by the Underwriters as set forth in the Prospectus. 1. Representations and Warranties. The Company represents and warrants to and agrees with each of the Underwriters that: (a) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or threatened by the Commission. (b) (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain any 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 not misleading, (ii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder and (iii) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein. (c) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (d) Each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are 3 fully paid and non-assessable and are owned directly by the Company, free and clear of all liens, encumbrances, equities or claims. (e) This Agreement has been duly authorized, executed and delivered by the Company. (f) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus. (g) The shares of Common Stock outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable. (h) The Shares have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights. (i) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of applicable law or the certificate of incorporation or by- laws of the Company or any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares. (j) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement). (k) There are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required. (l) Each preliminary prospectus filed as part of the registration statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under 4 the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder. (m) The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. (n) The Company and its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (o) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (p) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement. (q) The Company has complied with all provisions of Section 517.075, Florida Statutes relating to doing business with the Government of Cuba or with any person or affiliate located in Cuba. (r) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, (1) the Company and its subsidiaries have not incurred any material liability or obligations, direct or contingent, nor entered into any material transaction not in the ordinary course of business; (2) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (3) there has not been any material change in the capital stock, short-term 5 debt or long-term debt of the Company and its subsidiaries, except in each case as described in the Prospectus. (s) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries, in each case except as described in the Prospectus. (t) The Company and its subsidiaries own or possess, or can acquire on reasonable terms, all material patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names currently employed by them in connection with the business now operated by them, and neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse affect on the Company and its subsidiaries, taken as a whole. (u) No material labor dispute with the employees of the Company or any of its subsidiaries exists, except as described in the Prospectus, or, to the knowledge of the Company, is imminent; and the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any its principal suppliers, manufacturers or contractors that could have a material adverse effect on the Company and its subsidiaries, taken as a whole. (v) The Company and its subsidiaries are insured by the insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; neither the Company nor any of its subsidiaries has been refused any insurance coverage sought or applied for; and neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, except as described in the Prospectus. (w) The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities 6 necessary to conduct their respective business, and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the Company and its subsidiaries, taken as a whole, except as described in the Prospectus. (x) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (1) transactions are executed in accordance with management's general or specific authorizations; (2) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (3) access to assets is permitted only in accordance with management's general or specific authorization; and (4) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (y) The Company has reviewed its operations and that of its subsidiaries to evaluate the extent to which the business or operations of the Company or any of its subsidiaries will be affected by the Year 2000 Problem (that is, any significant risk that computer hardware or software applications used by the Company and its subsidiaries will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000); as a result of such review, (i) the Company has no reason to believe, and does not believe, that (A) there are any issues related to the Company's preparedness to address the Year 2000 Problem that are of a character required to be described or referred to in the Registration Statement or Prospectus which have not been accurately described in the Registration Statement or Prospectus and (B) the Year 2000 Problem will have a material adverse effect on the condition, financial or otherwise, or on the earnings, business or operations of the Company and its subsidiaries, taken as a whole, or result in any material loss or interference with the business or operations of the Company and its subsidiaries, taken as a whole; and (ii) the Company reasonably believes, after due inquiry, that the suppliers, vendors, customers or other material third parties used or served by the Company and such subsidiaries are addressing or will address the Year 2000 Problem in a timely manner, except to the extent that a failure to address the Year 2000 Problem by any supplier, vendor, customer or material third party would not have a material adverse effect on the condition, financial or otherwise, or on the earnings, business or operations of the Company and its subsidiaries, taken as a whole. (z) As of the date the Registration Statement became effective, the Common Stock was authorized for listing on the Nasdaq National Market upon official notice of issuance. (aa) Substantially all of the outstanding shares of Common Stock, and all securities convertible into or exercisable or exchangeable for Common Stock, are subject 7 to valid, binding and enforceable agreements (collectively, the "Lock-up Agreements") in substantially the form attached as Exhibit A. Furthermore, the Company represents and warrants to Morgan Stanley that (i) the Registration Statement, the Prospectus and any preliminary prospectus comply, and any further amendments or supplements thereto will comply, with any applicable laws or regulations of foreign jurisdictions in which the Prospectus or any preliminary prospectus, as amended or supplemented, if applicable, are distributed in connection with the Directed Share Program, and that (ii) no authorization, approval, consent, license, order, registration or qualification of or with any government, governmental instrumentality or court, other than such as have been obtained, is necessary under the securities laws and regulations of foreign jurisdictions in which the Directed Shares are offered outside the United States. The Company has not offered, or caused the Underwriters to offer, Shares to any person pursuant to the Directed Share Program with the specific intent to unlawfully influence (i) a customer or supplier of the Company to alter the customer's or supplier's level or type of business with the Company, or (ii) a trade journalist or publication to write or publish favorable information about the Company or its products. 2. Agreements to Sell and Purchase. The Company hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees, severally and not jointly, to purchase from the Company the respective numbers of Firm Shares set forth in Schedule I hereto opposite its name at $______ a share (the "Purchase Price"). On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to sell to the Underwriters the Additional Shares, and the Underwriters shall have a one-time right to purchase, severally and not jointly, up to _______________ Additional Shares at the Purchase Price. If you, on behalf of the Underwriters, elect to exercise such option, you shall so notify the Company in writing not later than 30 days after the date of this Agreement, which notice shall specify the number of Additional Shares to be purchased by the Underwriters and the date on which such shares are to be purchased. Such date may be the same as the Closing Date (as defined below) but not earlier than the Closing Date nor later than ten business days after the date of such notice. Additional Shares may be purchased as provided in Section 4 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. If any Additional Shares are to be purchased, each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as you may determine) that bears the same proportion to the total number of Additional Shares to be purchased as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm Shares. The Company hereby agrees that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during the period ending 180 days after the date of the Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or 8 contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Shares to be sold hereunder or (B) the issuance by the Company of shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof of which the Underwriters have been advised in writing. 3. Terms of Public Offering. The Company is advised by you that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in your judgment is advisable. The Company is further advised by you that the Shares are to be offered to the public initially at $_____________ a share (the "Public Offering Price") and to certain dealers selected by you at a price that represents a concession not in excess of $______ a share under the Public Offering Price, and that any Underwriter may allow, and such dealers may reallow, a concession, not in excess of $_____ a share, to any Underwriter or to certain other dealers. 4. Payment and Delivery. Payment for the Firm Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Firm Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on ____________, 1999, or at such other time on the same or such other date, not later than _________, 1999, as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the "Closing Date." Payment for any Additional Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Additional Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on the date specified in the notice described in Section 2 or at such other time on the same or on such other date, in any event not later than _______, 1999, as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the "Option Closing Date." Certificates for the Firm Shares and Additional Shares shall be in definitive form and registered in such names and in such denominations as you shall request in writing not later than one full business day prior to the Closing Date or the Option Closing Date, as the case may be. The certificates evidencing the Firm Shares and Additional Shares shall be delivered to you on the Closing Date or the Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the Shares to the Underwriters duly paid, against payment of the Purchase Price therefor. 5. Conditions to the Underwriters' Obligations. The obligations of the Company to sell the Shares to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Shares on the Closing Date are subject to the condition that the 9 Registration Statement shall have become effective not later than [_____] (New York City time) on the date hereof. The several obligations of the Underwriters are subject to the following further conditions: (a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date: (i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the Company's securities by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; and (ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement) that, in your judgment, is material and adverse and that makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. (b) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company, to the effect set forth in Section 5(a)(i) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date. The officer signing and delivering such certificate may rely upon the best of his or her knowledge as to proceedings threatened. (c) The Underwriters shall have received on the Closing Date an opinion of Gray Cary Ware & Freidenrich LLP, outside counsel for the Company, dated the Closing Date, to the effect that: (i) the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct 10 of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (ii) each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iii) the authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus; (iv) the shares of Common Stock outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable; (v) all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly by the Company, free and clear of all liens, encumbrances, equities or claims; (vi) the Shares have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights; (vii) this Agreement has been duly authorized, executed and delivered by the Company; (viii) the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Company or, to the best of such counsel's knowledge, any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or, to the best of such counsel's knowledge, any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of 11 its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares; (ix) the statements (A) in the Prospectus under the captions "Business - Legal Proceedings," "Description of Capital Stock," "Shares Eligible for Future Sale" and "Underwriters" and (B) in the Registration Statement in Items 14 and 15, in each case insofar as such statements constitute summaries of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and fairly summarize the matters referred to therein; (x) after due inquiry, such counsel does not know of any legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required; (xi) the Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended; (xii) the Company and its subsidiaries (A) are in compliance with any and all applicable Environmental Laws, (B) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (C) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole; and (xiii) such counsel (A) is of the opinion that the Registration Statement and Prospectus (except for financial statements and schedules and other financial and statistical data included therein as to which such counsel need not express any opinion) comply as to form in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (B) has no reason to believe that (except for financial statements and schedules and other financial and statistical data as to which such counsel need not express any belief) the Registration Statement and the prospectus included therein at the time the Registration Statement became effective contained any untrue statement of a 12 material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (C) has no reason to believe that (except for financial statements and schedules and other financial and statistical data as to which such counsel need not express any belief) the Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) The Underwriters shall have received on the Closing Date an opinion of Fenwick & West LLP, counsel for the Underwriters, dated the Closing Date, covering the matters referred to in Sections 5(c)(vi), 5(c)(vii), 5(c)(ix) (but only as to the statements in the Prospectus under "Description of Capital Stock" and "Underwriters") and 5(c)(xiii) above. With respect to Section 5(c)(xiii) above, Gray Cary Ware & Freidenrich LLP and Fenwick & West LLP may state that their opinion and belief are based upon their participation in the preparation of the Registration Statement and Prospectus and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification, except as specified. The opinion of Gray Cary Ware & Freidenrich LLP described in Section 5(c) above shall be rendered to the Underwriters at the request of the Company and shall so state therein. (e) The Underwriters shall have received, on each of the date hereof and the Closing Date, a letter dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, from PricewaterhouseCoopers LLP, Independent Accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus; provided that the letter delivered on the Closing Date shall use a "cut-off date" not earlier than the date hereof. (f) The Lock-Up Agreements, each substantially in the form of Exhibit A hereto, between you and certain shareholders, officers and directors of the Company relating to sales and certain other dispositions of shares of Common Stock or certain other securities, delivered to you on or before the date hereof, shall be in full force and effect on the Closing Date. The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the delivery to you on the Option Closing Date of such documents as you may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional Shares and other matters related to the issuance of the Additional Shares. 13 6. Covenants of the Company. In further consideration of the agreements of the Underwriters herein contained, the Company covenants with each Underwriter as follows: (a) To furnish to you, without charge, four signed copies of the Registration Statement (including exhibits thereto) and for delivery to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and to furnish to you in New York City, without charge, prior to 10:00 a.m. New York City time on the business day next succeeding the date of this Agreement and during the period mentioned in Section 6(c) below, as many copies of the Prospectus and any supplements and amendments thereto or to the Registration Statement as you may reasonably request. (b) Before amending or supplementing the Registration Statement or the Prospectus, to furnish to you a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which you reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule. (c) If, during such period after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses you will furnish to the Company) to which Shares may have been sold by you on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with law. (d) To endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall reasonably request. (e) To make generally available to the Company's security holders and to you as soon as practicable an earning statement covering the twelve- month period ending ________, 2000 that satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. (f) Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company's counsel and the Company's 14 accountants in connection with the registration and delivery of the Shares under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Prospectus and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and expenses related to the transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable thereon, (iii) the cost of printing or producing any Blue Sky or Legal Investment memorandum in connection with the offer and sale of the Shares under state securities laws and all expenses in connection with the qualification of the Shares for offer and sale under state securities laws as provided in Section 6(d) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky or Legal Investment memorandum, (iv) all filing fees and the reasonable fees and disbursements of counsel to the Underwriters incurred in connection with the review and qualification of the offering of the Shares by the National Association of Securities Dealers, Inc., (v) all fees and expenses in connection with the preparation and filing of the registration statement on Form 8-A relating to the Common Stock and all costs and expenses incident to listing the Shares on the Nasdaq National Market, (vi) the cost of printing certificates representing the Shares, (vii) the costs and charges of any transfer agent, registrar or depositary, (viii) the costs and expenses of the Company relating to investor presentations on any "road show" undertaken in connection with the marketing of the offering of the Shares, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and the cost of any aircraft chartered in connection with the road show, and (ix) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section. It is understood, however, that except as provided in this Section, Section 7 entitled "Indemnity and Contribution", and the last paragraph of Section 9 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Shares by them and any advertising expenses connected with any offers they may make. (g) that in connection with the Directed Share Program, the Company will ensure that the Directed Shares will be restricted to the extent required by the National Association of Securities Dealers, Inc. (the "NASD") or the NASD rules from sale, transfer, assignment, pledge or hypothecation for a period of three months following the date of the effectiveness of the Registration Statement. Morgan Stanley will notify the Company as to which Participants will need to be so restricted. The Company will direct the transfer agent to place stop transfer restrictions upon such securities for such period of time. 15 (h) the Company agrees: (i) to enforce the terms of each Lock-Up Agreement and (ii) issue stop-transfer instructions to the transfer agent for the Common Stock with respect to any transaction or contemplated transaction that would constitute a breach of or default under the applicable Lock-Up Agreement. In addition, without the prior written consent of Morgan Stanley, the Company agrees: (i) not to amend or terminate, or waive any right under, and Lock-Up Agreement, or take any other action that would directly or indirectly have the same effect as an amendment or termination, or waiver of any right under, any Lock-Up Agreement, that would permit any holder of shares of Common Stock, or securities convertible into or exercisable or exchangeable for Common Stock, to (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, or (ii) not to consent to any of the foregoing. (i) the Company agrees to place a restrictive legend on any shares of Common Stock acquired pursuant to the exercise, after the date hereof and prior to the expiration of the 180-day period after the date of the Prospectus, of any option granted under the Company's 1995 Stock Option Plan, which legend shall restrict the transfer of such shares prior to the expiration of such 180-day period. In addition, the Company agrees that, without the prior written consent of Morgan Stanley, it will not release any stockholder or option holder from the market standoff provision imposed by the Company pursuant to its 1995 Stock Option Plan earlier than 180 days after the date of the initial public offering of the Shares. (j) to pay all fees and disbursements of counsel incurred by the Underwriters in connection with the Directed Share Program and stamp duties, similar taxes or duties or other taxes, if any, incurred by the Underwriters in connection with the Directed Share Program. Furthermore, the Company covenants with Morgan Stanley that the Company will comply with all applicable securities and other applicable laws, rules and regulations in each foreign jurisdiction in which the Directed Shares are offered in connection with the Directed Share Program. 7. Indemnity and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration 16 Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein. (b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Underwriter, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through you expressly for use in the Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 7(a) or 7(b), such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by Morgan Stanley & Co. Incorporated, in the case of parties indemnified pursuant to Section 7(a), and by the Company, in the case of parties indemnified pursuant to Section 7(b). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is 17 entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) To the extent the indemnification provided for in Section 7(a) or 7(b) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Shares or (ii) if the allocation provided by clause 7(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 7(d)(i) above but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Shares (before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares. The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters' respective obligations to contribute pursuant to this Section 7 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint. (e) The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 7(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by 18 it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 7 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (f) The indemnity and contribution provisions contained in this Section 7 and the representations, warranties and other statements of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares. 8. Directed Share Program Indemnification. (a) The Company agrees to indemnify and hold harmless Morgan Stanley and each person, if any, who controls Morgan Stanley within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act ("Morgan Stanley Entities"), from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) (i) caused by any untrue statement or alleged untrue statement of a material fact contained in any material prepared by or with the consent of the Company for distribution to Participants in connection with the Directed Share Program or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) caused by the failure of any Participant to pay for and accept delivery of Directed Shares that the Participant agreed to purchase; or (iii) related to, arising out of, or in connection with the Directed Share Program, other than losses, claims, damages or liabilities (or expenses relating thereto) that are finally judicially determined to have resulted from the bad faith or gross negligence of Morgan Stanley Entities. (b) In case any proceeding (including any governmental investigation) shall be instituted involving any Morgan Stanley Entity in respect of which indemnity may be sought pursuant to Section 8(a), the Morgan Stanley Entity seeing indemnity, shall promptly notify the Company in writing and the Company, upon request of the Morgan Stanley Entity, shall retain counsel reasonably satisfactory to the Morgan Stanley Entity to represent the Morgan Stanley Entity and any others the Company may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Morgan Stanley Entity shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Morgan Stanley Entity unless (i) the Company shall have agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Company and the Morgan Stanley Entity and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Company shall not, in respect of the legal expenses of the Morgan Stanley Entities in connection with any proceeding or related 19 proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Morgan Stanley Entities. Any such separate firm for the Morgan Stanley Entities shall be designated in writing by Morgan Stanley. The Company shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Company agrees to indemnify the Morgan Stanley Entities from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time a Morgan Stanley Entity shall have requested the Company to reimburse it for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the Company agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by the Company of the aforesaid request and (ii) the Company shall not have reimbursed the Morgan Stanley Entity in accordance with such request prior to the date of such settlement. The Company shall not, without the prior written consent of Morgan Stanley, effect any settlement of any pending or threatened proceeding in respect of which any Morgan Stanley Entity is or could have been a party and indemnity could have been sought hereunder by such Morgan Stanley Entity, unless such settlement includes an unconditional release of the Morgan Stanley Entities from all liability on claims that are the subject matter of such proceeding. (c) To the extent the indemnification provided for in Section 8(a) is unavailable to a Morgan Stanley Entity or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then the Company in lieu of indemnifying the Morgan Stanley Entity thereunder, shall contribute to the amount paid or payable by the Morgan Stanley Entity as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Morgan Stanley Entities on the other hand from the offering of the Directed Shares or (ii) if the allocation provided by clause 8(c)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(c)(i) above but also the relative fault of the Company on the one hand and of the Morgan Stanley Entities on the other hand in connection with any statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Morgan Stanley Entities on the other hand in connection with the offering of the Directed Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Directed Shares (before deducting expenses) and the total underwriting discounts and commissions received by the Morgan Stanley Entities for the Directed Shares, bear to the aggregate Public Offering Price of the Directed Shares. If the loss, claim, damage or liability is caused by an untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact, the relative fault of the Company on the one hand and the Morgan Stanley Entities on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement or the omission or alleged omission relates to information supplied by the Company or by the Morgan Stanley Entities and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 20 (d) The Company and the Morgan Stanley Entities agree that it would not be just or equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Morgan Stanley Entities were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 8(c). The amount paid or payable by the Morgan Stanley Entities as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by the Morgan Stanley Entities in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, no Morgan Stanley Entity shall be required to contribute any amount in excess of the amount by which the total price at which the Directed Shares distributed to the public were offered to the public exceeds the amount of any damages that such Morgan Stanley Entity has otherwise been required to pay. The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (e) The indemnity and contribution provisions contained in this Section 8 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Morgan Stanley Entity or the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Directed Shares. 9. Termination. This Agreement shall be subject to termination by notice given by you to the Company, if (a) after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and (b) in the case of any of the events specified in clauses 8(a)(i) through 8(a)(iv), such event, singly or together with any other such event, makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. 10. Effectiveness; Defaulting Underwriters. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto. If, on the Closing Date or the Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their 21 respective names in Schedule I bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as you may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 9 by an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares to be purchased, and arrangements satisfactory to you and the Company for the purchase of such Firm Shares are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. If, on the Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Additional Shares to be purchased, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase Additional Shares or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder. 11. Counterparts. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 12. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 22 13. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement. Very truly yours, AGILE SOFTWARE CORPORATION By:____________________________ Name: Title: Accepted as of the date hereof Morgan Stanley & Co. Incorporated Deutsche Bank Securities Inc. Hambrecht & Quist LLC Acting severally on behalf of themselves and the several Underwriters named in Schedule I hereto. By: Morgan Stanley & Co. Incorporated By:__________________________ Name: Title: 23 SCHEDULE I Number of Firm Shares Underwriter To Be Purchased Morgan Stanley & Co. Incorporated Deutsche Bank Securities Inc. Hambrecht & Quist LLC _______________ Total ........ =============== Exhibit A [FORM OF LOCK-UP LETTER] _____________, 1999 Morgan Stanley & Co. Incorporated Deutsche Bank Securities Inc. Hambrecht & Quist LLC c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, NY 10036 Dear Sirs and Mesdames: The undersigned understands that Morgan Stanley & Co. Incorporated ("Morgan Stanley") proposes to enter into an Underwriting Agreement (the "Underwriting Agreement") with Agile Software Corporation, a Delaware corporation (the "Company"), providing for the public offering (the "Public Offering") by the several Underwriters, including Morgan Stanley (the "Underwriters"), of shares (the "Shares") of the Common Stock, par value $0.001 per share, of the Company (the "Common Stock"). To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 180 days after the date of the final prospectus relating to the Public Offering (the "Prospectus"), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (a) the sale of any Shares to the Underwriters pursuant to the Underwriting Agreement or (b) transactions relating to shares of Common Stock or other securities acquired in open market transactions after the completion of the Public Offering. In addition, the undersigned agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 180 days after the date of the Prospectus, make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock. Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters. Very truly yours, _________________________ (Name) _________________________ (Address) EX-3.1 3 AMENDED AND RESTATED ARTICLES OF AGILE SOFTWARE EXHIBIT 3.1 EIGHTH AMENDED AND RESTATED ARTICLES OF INCORPORATION OF AGILE SOFTWARE CORPORATION, a California Corporation The undersigned, Bryan D. Stolle and Thomas P. Shanahan, hereby state that: ONE: They are the duly elected and acting President and Secretary, respectively, of said corporation. TWO: The Articles of Incorporation of said corporation shall be amended and restated to read in full as follows: ARTICLE I The name of this corporation is Agile Software Corporation. ARTICLE II The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code. ARTICLE III A. Classes of Stock. This corporation is authorized to issue two classes ---------------- of stock to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares which the corporation is authorized to issue is 50,175,556 shares. 29,000,000 shares shall be Common Stock and 21,175,556 shares shall be Preferred Stock. B. Rights, Preferences and Restrictions of Preferred Stock. The ------------------------------------------------------- Preferred Stock authorized by these Eighth Amended and Restated Articles of Incorporation may be issued from time to time in one or more series. The rights, preferences, privileges and restrictions granted to and imposed on the Series A Preferred Stock, which series shall consist of 1,500,000 shares, the Series B Preferred Stock, which series shall consist of 3,000,000 shares, the Series C Preferred Stock, which series shall consist of 4,000,000 shares, the Series C1 Preferred Stock, which shall consist of 4,000,000 shares, the Series D Preferred Stock, which series shall consist of 1,500,000 shares, the Series D1 Preferred Stock, which series shall consist of 1,500,000 shares, the Series E Preferred Stock, which series shall consist of 1,000,000 shares, the Series E1 Preferred Stock, which series shall consist of 1,000,000 shares, the Series F Preferred Stock, which series shall consist of 1,837,778 shares and the Series F1 Preferred Stock, which series shall consist of 1,837,778 shares, are as set forth below in this Article III(B). The Board of Directors is hereby authorized to fix or alter the rights, preferences, privileges and restrictions granted to or imposed upon additional series of Preferred Stock, and the number of shares constituting any such series and the designation thereof, or of any of them. Subject to compliance with applicable protective voting rights which have been or may be granted to the Preferred Stock or series thereof in Certificates of Determination or the corporation's Articles of Incorporation (the "Protective Provisions"), but notwithstanding any other rights of the Preferred Stock or any series thereof, the rights, privileges, preferences and restrictions of any such additional series may be subordinated to, pari passu with (including, without ---- ----- limitation, inclusion of provisions with respect to liquidation and acquisition preferences, redemption and/or approval of matters by vote or written consent) or senior to any of those of any present or future class or series of Preferred Stock or Common Stock. Subject to compliance with applicable Protective Provisions, the Board of Directors is also authorized to increase or decrease the number of shares of any series (other than the Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock) prior or subsequent to the issue of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series. 1. Dividend Provisions. Subject to the rights of series of Preferred ------------------- Stock which may from time to time come into existence, the holders of outstanding Preferred Stock shall be entitled to receive in any fiscal year, when, as and if declared by the Board of Directors, out of any assets at the time legally available therefor, dividends in cash at a rate of (i) $0.01 per share of Series A Preferred Stock, (ii) $0.01 per share of Series B Preferred Stock, (iii) $0.01 per share of Series C and Series C1 Preferred Stock, (iv) $0.01 per share of Series D and Series D1 Preferred Stock, (v) $0.01 per share of Series E and Series E1 Preferred Stock and (vi) $0.01 per share of Series F and Series F1 Preferred Stock, prior and in preference to any declaration or payment of any dividend (payable other than in Common Stock or other securities or rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock of this corporation) on the Common Stock of this corporation or, if greater (as determined on a per annum basis and on an as converted into Common Stock basis), an amount equal to that paid on any other outstanding shares on this corporation. The right to such dividends on shares of Preferred Stock shall not be cumulative and no right shall accrue to holders of shares of Preferred Stock by reason of the fact that dividends on such shares are not declared in any prior year, nor shall any undeclared or unpaid dividend bear or accrue interest. 2. Liquidation Preference. ---------------------- (a) In the event of any liquidation, dissolution or winding up of this corporation, either voluntary or involuntary, subject to the rights of series of Preferred Stock that may from time to time come into existence, the holders of Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series F and Series F1 Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of this corporation to the holders of Common Stock by reason of their ownership thereof, (A) in the case of the Series A Preferred Stock, an amount per share equal to the sum of (i) $0.10 for each outstanding share of Series A Preferred Stock (the "Original Series A Issue Price") and (ii) an amount equal to declared but unpaid dividends on such share, (B) in the case of the Series B Preferred Stock, an amount per share equal to the sum of (i) $0.354 for each outstanding share of Series B Preferred Stock (the "Original Series B Issue Price") and (ii) an amount equal to declared but unpaid dividends on such share, (C) in the case of the Series C and Series C1 2 Preferred Stock, an amount per share equal to the sum of (i) $1.16 for each outstanding share of Series C Preferred Stock and Series C1 Preferred Stock (the "Original Series C Issue Price" and the "Original Series C1 Issue Price," respectively) and (ii) an amount equal to declared but unpaid dividends on such share, (D) in the case of the Series D and Series D1 Preferred Stock, an amount per share equal to the sum of (i) $2.964 for each outstanding share of Series D Preferred Stock and Series D1 Preferred Stock (the "Original Series D Issue Price" and the "Original Series D1 Issue Price," respectively) and (ii) an amount equal to declared but unpaid dividends on such share, (E) in the case of the Series E and Series E1 Preferred Stock, an amount per share equal to the sum of (i) $5.00 for each outstanding share of Series E Preferred Stock and Series E1 Preferred Stock (the "Original Series E Issue Price" and the "Original Series E1 Issue Price," respectively) and (ii) an amount equal to declared but unpaid dividends on such share and (F) in the case of the Series F and Series F1 Preferred Stock, an amount per share equal to the sum of (i) $6.75 for each outstanding share of Series F Preferred Stock and Series F1 Preferred Stock (the "Original Series F Issue Price" and the "Original Series F1 Issue Price," respectively) and (ii) an amount equal to declared but unpaid dividends on such share. If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of series of Preferred Stock that may from time to time come into existence, the entire assets and funds of the corporation legally available for distribution shall be distributed ratably among the holders of the Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive. (b) After the distribution described in subsection (a) of this Section 2 has been paid, subject to the rights of series of Preferred Stock which may from time to time come into existence, the remaining assets of the corporation available for distribution to shareholders shall be distributed among the holders of Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock and of Common Stock pro rata based on the number of shares of Common Stock held by each (assuming full conversion of all such Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock) until, (i) with respect to the holders of Series B Preferred Stock, such holders shall have received an aggregate of $0.708 per share (including amounts paid pursuant to subsection (a) of this Section 2), (ii) with respect to the holders of Series C and Series C1 Preferred Stock, such holders shall have received an aggregate of $2.32 per share (including amounts paid pursuant to subsection (a) of this Section 2), (iii) with respect to the holders of Series D and Series D1 Preferred Stock, such holders shall have received an aggregate of $5.928 per share (including amounts paid pursuant to subsection (a) of this Section 2), (iv) with respect to the holders of Series E and Series E1 Preferred Stock, such holders shall have received an aggregate of $10.00 per share (including amounts paid pursuant to subsection (a) of this Section 2); and (v) with respect to the holders of Series F and Series F1 Preferred Stock, such holders shall have received an aggregate of $13.50 per share (including amounts paid pursuant to subsection (a) of this Section 2). Thereafter, subject to the rights of series of Preferred Stock that may from time to time come into existence, if assets remain in this corporation, the holders of the Common Stock of this corporation shall receive all of the remaining assets of this corporation pro rata based on the number of shares of Common Stock held by each. 3 (c)(i) For purposes of this Section 2, a liquidation, dissolution or winding up of this corporation shall be deemed to be occasioned by, or to include, (A) the acquisition of the corporation by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation, but excluding any merger effected exclusively for the purpose of changing the domicile of the corporation), or (B) a sale of all or substantially all of the assets of the corporation; unless the corporation's shareholders of record as constituted ------ immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the corporation's acquisition or sale or otherwise) hold at least 50% of the voting power of the surviving or acquiring entity. (ii) In any of such events, if the consideration received by the corporation is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows: (A) Securities not subject to investment letter or other similar restrictions on free marketability: (1) If traded on a securities exchange or on the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the 30-day period ending three days prior to the closing; (2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the 30-day period ending three days prior to the closing; and (3) If there is no active public market, the value shall be the fair market value thereof, as reasonably determined in good faith by the Board of Directors of the corporation. (B) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A) (1), (2) or (3) to reflect the approximate fair market value thereof, as reasonably determined in good faith by the Board of Directors of the corporation. (iii) In the event the requirements of this section 2(c) are not complied with, this corporation shall forthwith either: (A) cause such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or (B) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in subsection 2(c)(iv) hereof. 4 (iv) In the event a consolidation or merger of the corporation is to be treated as a liquidation pursuant to paragraph (c)(i) above, this corporation shall give each holder of record of Preferred Stock written notice of such impending transaction not later than 20 days prior to the shareholders' meeting called to approve such transaction, or 20 days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and the corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the corporation has given the first notice provided for herein or sooner than ten days after the corporation has give notice of any material changes provided for herein: provided, however, that such periods may be shortened upon the written consent of the holders of Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least a majority of the voting power of all then outstanding shares of Preferred Stock. 3. Redemption. The Preferred Stock is not redeemable. ---------- 4. Conversion. The holders of the Series A, Series B, Series C, Series ---------- C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Each share of Series A, Series B, Series C, Series ---------------- C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share at the office of this corporation or any transfer agent for such stock, into such number of fully paid and nonassessable share of Common Stock as is determined by dividing the Original Issue Price for such series by the Conversion Price applicable to such share, determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. The initial Conversion Price per share for shares of Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock, respectively, shall be the applicable Original Issue Price for such series: provided, however, that (i) the Conversion Price for the Series A, Series B, Series C1, Series D1, Series E1 and Series F1 Preferred Stock shall be subject to adjustment as set forth in subsections 4(e), 4(f) and 4(h) and (ii) the Conversion Price for the Series C, Series D, Series E and Series F Preferred Stock shall be subject to adjustment as set forth in subsections 4(d), 4(e), 4(f) and 4(h). (b) Automatic Conversion. Each share of Series A, Series B, Series C, -------------------- Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock shall automatically be converted into shares of Common Stock at the Conversion Price at the time in effect for such series of Preferred Stock immediately upon the earlier of (i) the corporation's sale of its Common Stock in a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), the public offering price of which is not less than $8.78 per share (adjusted to reflect subsequent stock dividends, stock splits or recapitalizations) and $20,000,000 in the aggregate (ii) in the case of the Series A, Series B, Series C, Series C1, Series D, Series D1, Series E and Series E1 Preferred Stock, the date specified by written consent or agreement of the holders of a majority of the then outstanding shares of Series A, Series B, Series C, Series C1, Series D, Series D1, 5 Series E and Series E1 Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis) or (iii) in the case of the Series F and Series F1 Preferred Stock, the date specified by written consent or agreement of the holders of a majority of the then outstanding shares of Series F and Series F1 Preferred Stock (voting together as a single class and not as a separate series and on an as-converted basis). (c) Mechanics of Conversion. Before any holder of Preferred Stock shall ----------------------- be entitled to convert the same into shares of Common Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of this corporation or of any transfer agent for such Preferred Stock, and shall give written notice to this corporation at its principal corporate office of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. This corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act, the conversion may, at the option of any holder tendering Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Common Stock upon conversion of the Preferred Stock shall not be deemed to have converted such Preferred Stock until immediately prior to the closing of such sale of securities. (d) Conversion Price Adjustments of Preferred Stock. The Conversion Price ----------------------------------------------- of the Series C, Series D, Series E and Series F Preferred Stock shall be subject to adjustment from time to time as follows: (i) (A) If after the date upon which any shares of the Series F Preferred Stock were first issued (the "Purchase Date") the corporation issues (or is deemed hereunder to have issued) any shares of Additional Stock (as defined below in subsection 4(d)(ii)), without consideration or for a consideration per share less than the Conversion Price for any of the Series C, Series D, Series E or Series F Preferred Stock in effect immediately prior to each such issuance of any such Additional Stock, then the Conversion Price for each such share of Series C and/or Series D and/or Series E and/or Series F Preferred Stock in effect immediately prior to each such issuance shall forthwith (except as otherwise provided in this clause (i)) be adjusted to a price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance (including shares of Common Stock deemed issued pursuant to subsection 4(d)(i)(E) below) plus the number of shares of Common Stock (including shares of Common Stock deemed issued pursuant to subsection 4(d)(i)(E) below) which the aggregate consideration received by the corporation for such issuance would purchase at such Conversion Price; and the denominator of which shall be the number of shares of Common Stock (including shares of Common Stock deemed issued pursuant to subsection 4(d)(i)(E) below) outstanding immediately prior to such issuance plus the number of shares of such Additional Stock so issued. 6 No adjustment shall be made to the Conversion Price of the Series A, Series B, Series C1, Series D1, Series E1 and Series F1 Preferred Stock pursuant to this subsection 4(d)(i). (B) No adjustment of the Conversion Price for the Series C, Series D, Series E or Series F Preferred Stock shall be made in an amount less than one cent per share, provided that any adjustments which are not required to be made by reason of this sentence shall be carried forward and shall be either taken into account in any subsequent adjustment made prior to three years from the date of the event giving rise to the adjustment being carried forward, or shall be made at the end of three years from the date of the event giving rise to the adjustment being carried forward. Except to the limited extent provided for in subsections (E)(3) and (E)(4), no adjustment of such Conversion Price pursuant to this subsection 4(d)(i) shall have the effect of increasing the Conversion Price above the Conversion Price in effect immediately prior to such adjustment. (C) In the case of the issuance of Additional Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any reasonable discounts, commissions or other expenses allowed, paid or incurred by this corporation for any underwriting or otherwise in connection with the issuance and sale thereof. (D) In the case of the issuance of Additional Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as determined by the corporation's Board of Directors in good faith irrespective of any accounting treatment. (E) In the case of the issuance (whether before, on or after the Purchase Date) of options, warrants or other rights to purchase or subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock, or options, warrants or other rights to purchase or subscribe for such convertible or exchangeable securities, the following provisions shall apply for all purposes of this subsection 4(d)(i) and subsection 4(d)(ii): (1) The aggregate maximum number of shares of Common Stock deliverable upon exercise (assuming the satisfaction of any conditions to exercisability, including without limitation, the passage of time, but without taking into account potential antidilution adjustments) of such options, warrants or other rights to purchase or subscribe for Common Stock shall be deemed to have been issued at the time such options, warrants or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subsections 4(d)(i)(C) and 4(d)(i)(D)), if any, received by the corporation upon the issuance of such options, warrants or other rights plus the minimum exercise price provided in such options, warrants or other rights (without taking into account potential antidilution adjustments) for the Common Stock covered thereby. (2) The aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange (assuming the satisfaction of any conditions to convertibility or exchangeability, including, 7 without limitation, the passage of time, but without taking into account potential antidilution adjustments) for any such convertible or exchangeable securities or upon the exercise of options, warrants or other rights to purchase or subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options, warrants or other rights were issued and for a consideration equal to the consideration, if any, received by the corporation for any such securities and related options, warrants or other rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by the corporation (without taking into account potential antidilution adjustments) upon the conversion or exchange in full of such securities or the exercise in full of any related options, warrants or other rights (the consideration in each case to be determined in the manner provided in subsections 4(d)(i)(C) and 4(d)(i)(d)). (3) In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to this corporation upon exercise of such options, warrants or other rights or upon conversion of or in exchange for such convertible or exchangeable securities, including, but not limited to, a change resulting from the antidilution provisions thereof, the Conversion Price of the Series C, Series D, Series E or Series F Preferred Stock, to the extent in any way affected by or computed using such options, warrants or other rights or securities, or options, warrants or other rights related to such securities, shall be recomputed to reflect such change; but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options, warrants or other rights or the conversion or exchange of such securities. (4) Upon the expiration of any such options, warrants or other rights, the termination of any such rights to convert or exchange or the expiration of any options, warrants or other rights related to such convertible or exchangeable securities, the Conversion Price of the Series C, Series D, Series E or Series F Preferred Stock, to the extent in any way affected by or computed using such options, warrants or other rights or securities, or options, warrants or other rights related to such securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and convertible or exchangeable securities which remain in effect) actually issued upon the exercise of such options, warrants or other rights upon the conversion or exchange of such securities or upon the exercise of the options, warrants or other rights related to such securities. (5) The number of shares of Common Stock deemed issued and the consideration deemed paid therefor pursuant to subsections 4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either subsection 4(d)(i)(E)(3) or (4). 8 (ii) "Additional Stock" shall mean any shares of Common Stock issued (or deemed to have been issued pursuant to subsection 4(d)(i)(E)) by this corporation after the Purchase Date other than: (A) Common Stock issued pursuant to a transaction described in subsection 4(e) hereof: (B) up to 4,375,000 shares of Common Stock issuable or issued to officers, employees, consultants or directors of the Company, directly or pursuant to a plan, arrangement or agreement approved by the Board of Directors of this corporation; (C) shares of Common Stock issued or issuable (x) in a public offering registered under the Securities Act, before or in connection with which all outstanding shares of Preferred Stock will be converted to Common Stock or (y) upon exercise of warrants or rights granted to underwriters in connection with such a public offering; or (D) the issuance of stock, warrants or other securities or rights as approved by the Board of Directors to persons or entities with which the Company has business relationships provided such issuances are for other than primarily equity financing purposes. (e) Adjustment of Conversion Price for Dividends, Distributions and Common ---------------------------------------------------------------------- Stock Equivalents. In the event the corporation should at any time or from time - ----------------- to time after the Purchase Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Conversion Price of the Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of each such series shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents. (f) Adjustment of Conversion Price for Combination of Common Stock. If -------------------------------------------------------------- the number of shares of Common Stock outstanding at any time after the Purchase Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, or the date of such combination if no record date is fixed, the Conversion Price for the Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock shall be appropriately increased so that the 9 number of shares of Common Stock issuable on conversion of each share of each such series shall be decreased in proportion to such decrease in outstanding shares. (g) Other Distributions. In the event this corporation shall declare a ------------------- distribution payable in securities of other persons, evidences of indebtedness issued by this corporation or other persons, or assets (excluding cash dividends), then, in each such case for the purpose of this subsection 4(g), the holders of the Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of the corporation into which their shares of Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the corporation entitled to receive such distribution (or the date of such distribution if no record date is fixed). (h) Recapitalization. If at any time or from time to time there shall be a ---------------- recapitalization of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 4 or Section 2), provision shall be made so that the holders of the Preferred Stock shall thereafter be entitled to receive upon conversion of the Preferred Stock the number of shares of stock or other securities or property of the corporation, or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of the Preferred Stock after the recapitalization to the end that the provisions of this Section 4 (including adjustment of the Conversion Price then in effect and the number of shares issuable upon conversion of the Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable. (i) No Impairment. This corporation will not, by amendment of its Articles ------------- of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by this corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Preferred Stock against impairment. (j) No Fractional Shares and Certificate as to Adjustments. ------------------------------------------------------ (i) No fractional shares shall be issued upon conversion of the Preferred Stock, and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share (with one-half (1/2) being rounded upward). Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. (ii) Upon the occurrence of each adjustment or readjustment of the Conversion Price of the Preferred Stock pursuant to this Section 4, this corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms 10 hereof and prepare and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. This corporation shall, upon the written request at any time of any holder of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment or readjustment, (B) the Conversion Price at the time in effect and (C) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of Preferred Stock. (k) Notice of Record Date. In the event of any taking by this corporation --------------------- of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, this corporation shall mail to each holder of Preferred Stock, at least 20 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. (l) Reservation of Stock Issuable Upon Conversion. This corporation shall --------------------------------------------- at all times reserve and keep available out of it, authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock, in addition to such other remedies as shall be available to the holder of such Preferred Stock, this corporation will take such corporate action as may, in the opinion of its counsel, be necessary, to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. (m) Notices. Any notice required by the provisions of this Section 4 to be ------- given to the holders of shares of Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his or her address appearing on the books of this corporation. (n) Special Mandatory Conversion. ---------------------------- (i) At any time following the Purchase Date, if (a) the holders of shares of Series C, Series D, Series E or Series F Preferred Stock are entitled to exercise the right of first offer (the "Right of First Offer") set forth in Section 2.4 of the Fifth Amended and Restated Investors' Rights Agreement, of even date with the Purchase Date, by and between this corporation and certain investors, as amended from time to time (the "Rights Agreement"), with respect to an equity financing of the corporation (the "Equity Financing"), (b) the Equity Financing would result in a Conversion Price adjustment to the Series C, Series D, Series E or 11 Series F Preferred Stock, as provided, in subsection 4(d)(i) herein, (c) this corporation has complied with its notice obligations under the Right of First Offer (or such notice obligations have been waived) with respect to such Equity Financing and requests, in writing, to each such holder that such holder exercise its Right of First Offer, and this corporation thereafter proceeds to consummate the Equity Financing and (d) such holder (a "Non-Participating Holder") does not by exercise of such holder's Right of First Offer acquire his, her or its pro rata share offered in such Equity Financing (a "Mandatory Offering"), then, all of such Non-Participating Holder's shares of Series C, Series D, Series E or Series F Preferred Stock, as the case may be, 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 "Mandatory Offering Date") into an equivalent number of shares of Series C1, Series D1, Series E1 or Series F1 Preferred Stock, as the case may be; provided, however, that no such conversion shall occur in -------- ------- connection with a particular Equity Financing with respect to a particular holder if, pursuant to the written request of this corporation to all such holders (on an equivalent basis), such holder agrees in writing to waive his, her or its Right of First Offer with respect to such Equity Financing. Upon conversion pursuant to this subsection 4(n)(i), the shares of Series C, Series D, Series E and Series F Preferred Stock so converted shall be cancelled and not subject to reissuance. (ii) The holder of any shares of Series C, Series D, Series E, or Series F Preferred Stock converted pursuant to this subsection 4(n) shall deliver to this corporation during regular business hours at the office of any transfer agent of the corporation for the Series C, Series D, Series E or Series F Preferred Stock, 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 this corporation. As promptly as practicable thereafter, this 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 Series C1, Series D1, Series E1 or Series F1 Preferred Stock to be issued and such holder shall be deemed to have become a shareholder of record of Series C1, Series D1, Series E1 or Series F1 Preferred Stock, as the case may be, immediately prior to the close of business on the Mandatory Offering Date. (iii) In the event any shares of Series C1, Series D1, Series E1 or Series F1 Preferred Stock are issued, concurrently with such issuance, this corporation shall use its best efforts to take all such action as may be required, including amending its Articles of Incorporation, (a) to cancel all authorized shares of Series C1, Series D1, Series E1 or Series F1 Preferred Stock that remain unissued after such issuance, (b) to create and reserve for issuance upon conversion pursuant to this subsection 4(n) of any Series C, Series D, Series E or Series F Preferred Stock a new series of Preferred Stock equal in number to the number of shares of Series C1, Series D1, Series E1 or Series F1 Preferred Stock so cancelled and designated Series C2, Series D2, Series E2 or Series F2 Preferred Stock, with the designations, powers, preferences and rights and the qualifications, limitations and restrictions identical to those then applicable to the Series C1, Series D1, Series E1 or Series F1 Preferred Stock, except that the Conversion Price for such shares of Series C2, Series D2, Series E2 or Series F2 Preferred Stock shall be the Series C, Series D, Series E or Series F Conversion Price, respectively, in effect immediately prior to such issuance and (c) to amend the provisions of this subsection 4(n) to provide that any subsequent conversion pursuant to this subsection 4(n) will be into shares of Series C2, Series D2, Series E2 or Series F2 Preferred Stock. This corporation shall take the same actions with 12 respect to the Series C2, Series D2, Series E2 or Series F2 Preferred Stock and each subsequently authorized series of Preferred Stock 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 Preferred Stock converted pursuant to the provisions of this subsection 4(n) shall accrue to the benefit of the new shares of Preferred Stock issued upon conversion thereof. 5. Voting Rights. ------------- (a) General Voting Rights. Each holder of Series A Preferred Stock, --------------------- each holder of Series B Preferred Stock, each holder of Series C Preferred Stock, each holder of Series C1 Preferred Stock, each holder of Series D Preferred Stock, each holder of Series D1 Preferred Stock, each holder of Series E Preferred Stock, each holder of Series E1 Preferred Stock, each holder of Series F Preferred Stock and each holder of Series F1 Preferred Stock shall have the right to one vote for each share of Common Stock into which such Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F or Series F1 Preferred Stock, as the case may be, could then be converted. Except as otherwise provided by law, holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series C1 Preferred Stock, Series D Preferred Stock, Series D1 Preferred Stock, Series E Preferred Stock, Series E1 Preferred Stock, Series F Preferred Stock and Series F1 Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any shareholders' meeting in accordance with the bylaws of this corporation, and shall be entitled to vote, together with holders of Common Stock, with respect to any questions upon which holders of Common Stock have the right to vote. Fractional votes shall not, however, be permitted and any fractional voting rights available on an as- converted basis (after aggregating all shares into which shares of Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock, as the case may be, held by each holder could be converted) shall be rounded to the nearest whole number (with one-half (1/2) being rounded upward). (b) Voting for the Election of Directors. As long as 50% or more of ------------------------------------ the shares of Series A Preferred Stock originally issued remain outstanding, the holders of such shares of Series A Preferred Stock shall be entitled to elect one director of this corporation at each annual election of directors. As long as 50% or more of the shares of Series B Preferred Stock originally issued remain outstanding, the holders of such shares of Series B Preferred Stock shall be entitled to elect one director of the corporation at each annual election of directors. As long as 50% or more of the shares of Series C Preferred Stock and Series C1 Preferred Stock originally issued remain outstanding, the holders of such shares of Series C Preferred Stock and Series C1 Preferred Stock, voting together as a single class, shall be entitled to elect one director of the corporation at each annual election of directors. The holders of outstanding Common Stock shall be entitled to elect one director of the corporation at each annual election of directors. The holders of Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F and Series F1 Preferred Stock, the holders of Common Stock and the holders of any series of Preferred Stock that may from time to time come into existence (voting together as a single class and not as separate series, and on an as-converted basis), shall be entitled to elect any remaining directors of the corporation. 13 In the case of any vacancy (other than a vacancy caused by removal) in the office of a director occurring among the directors elected by the holders of a class or series of stock pursuant to this subsection (5)(b), the remaining directors so elected by that class or series may, by affirmative vote of a majority thereof (or the remaining director so elected if there be but one, or if there are no such directors remaining, by the affirmative vote of the holders of a majority of the shares of that class or series), elect a successor or successors to hold office for the unexpired term of the director or directors whose place or places shall be vacant. Any director who shall have been elected by the holders of a class or series of stock or by any directors so elected as provided in the immediately preceding sentence hereof may be removed during the aforesaid term of office, either with or without cause, by, and only by, the affirmative vote of the holders of the shares of the class or series of stock entitled to elect such director or directors, given either at a special meeting of such shareholders duly called for that purpose or pursuant to a written consent of shareholders, and any vacancy thereby created may be filled by the holders of that class of stock represented at the meeting or pursuant to unanimous written consent. 6. Protective Provisions. Subject to the rights of series of Preferred --------------------- Stock which may from time to time come into existence, so long as at least 50% of the shares of Preferred Stock originally issued are outstanding (as appropriately adjusted for any stock splits, stock combinations, recapitaliziations or the like), the corporation shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Preferred Stock (voting together as a single class and not as separate series, and on as- converted basis): (a) sell, convey or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any transaction or series of related transactions in which more than 50% of the voting power of the corporation is disposed of; (b) alter or change the rights, preferences or privileges of the shares of Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F or Series F1 Preferred Stock so as to affect adversely the shares; or (c) authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security having a preference over, or being on a parity with, the Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F or Series F1 Preferred Stock with respect to voting, dividends or upon liquidation. Subject to the rights of series of Preferred Stock which may from time to time come into existence, as so long as, in the aggregate, at least 50% of the shares of Series F Preferred Stock and Series F1 Preferred Stock originally issued are outstanding (as appropriately adjusted for any stock splits, stock combinations, recapitalizations or the like), the corporation shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series F and Series F1 Preferred Stock (voting together as a single class and not as separate series), (i) increase the total number of authorized shares of Series F or Series F1 Preferred Stock or (ii) decrease the public 14 offering price set forth in subsection 4(b) herein at which the shares of Preferred Stock shall automatically be converted into shares of Common Stock. 7. Status of Converted Stock. In the event shares of Series A, Series B, ------------------------- Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F or Series F1 Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so converted shall be cancelled and shall not be issuable by the corporation. The Articles of Incorporation of this corporation shall be appropriately amended to effect the corresponding reduction in the corporation's authorized capital stock. 8. Repurchase of Shares. In connection with repurchase by this -------------------- corporation of its Common Stock pursuant to its agreements with certain of the holders thereof, Sections 502 and 503 of the California General Corporation Law shall not apply in whole or in part with respect to such repurchases. C. Common Stock. ------------ 1. Dividend Rights. Subject to the prior rights of holders of all classes --------------- of stock at the time outstanding having prior rights as to dividends (as set forth in Section 1 of Division (B) of this Article III hereof), the holders of the Common Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the corporation legally available therefor, such dividends as may be declared from time to time by the Board of Directors. 2. Liquidation Rights. Upon the liquidation, dissolution or winding up of ------------------ the corporation, the assets of the corporation shall be distributed as provided in Section 2 of Division (B) of this Article III hereof. 3. Redemption. The Common Stock is not redeemable. ---------- 4. Voting Rights. The holder of each share of Common Stock shall have the ------------- right to one vote, and shall be entitled to notice of any shareholders' meeting in accordance with the bylaws of this corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law. ARTICLE IV 1. The liability of the directors of this corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. 2. This corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) through bylaw provisions, agreements with the agents, vote of shareholders or disinterested directors, or otherwise in excess of the indemnification otherwise permitted by Section 317 of the California Corporations Code, subject only to applicable limits set forth in Section 204 of the California Corporations Code with respect to actions for breach of duty to the corporation and its shareholders. 15 THREE: The foregoing amendment has been approved by the Board of Directors of said corporation. FOUR: The foregoing amendment was approved by the holders of the requisite number of shares of said corporation in accordance with Sections 902 and 903 of the California General Corporation Laws: the total number of outstanding shares of each class entitled to vote with respect to the foregoing amendment was 4,220,275 shares of Common Stock, 1,232,500 shares of Series A Preferred Stock, 2,937,995 shares of Series B Preferred Stock, 3,575,000 shares of Series C Preferred Stock, no shares of Series C1 Preferred Stock, 1,350,000 shares of Series D Preferred Stock, no shares of Series D1 Preferred Stock, 1,000,000 shares of Series E Preferred Stock, no shares of Series E1 Preferred Stock, 1,777,778 shares of Series F Preferred Stock and no shares of Series F1 Preferred Stock. The number of shares voting in favor of the foregoing amendment equaled or exceeded the vote required, such required vote being a majority of the outstanding shares of Common Stock, Series A, Series B, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F or Series F1 Preferred Stock voting as a single class and on an as-converted basis. 16 The undersigned certify under penalty of perjury that they have read the foregoing Eighth Amended and Restated Articles of Incorporation and know the contents thereof, and that the statements therein are true. IN WITNESS WHEREOF, the undersigned have executed this certificate at San Jose, California on May 10, 1999. /s/ Bryan D. Stolle ------------------------------ Bryan D. Stolle, President /s/ Thomas P. Shanahan ------------------------------ Thomas P. Shanahan, Secretary [SEAL APPEARS HERE] 17 EX-3.3 4 BYLAWS OF AGILE SOFTWARE CORPORATION EXHIBIT 3.3 BYLAWS OF AGILE SOFTWARE CORPORATION ARTICLE I - OFFICES ------------------- Section 1. The principal executive offices of AGILE SOFTWARE CORPORATION (the "Corporation") shall be at such place inside or outside the State of California as the Board of Directors may determine from time to time. Section 2. The Corporation may also have offices at such other places as the Board of Directors may from time to time designate, or as the business of the Corporation may require. ARTICLE II- SHAREHOLDERS' MEETINGS --------------------------------- Section 1. Annual Meetings. The annual meeting of the shareholders --------------- of the Corporation for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting shall be held at such place and at such time as may be fixed from time to time by the Board of Directors and stated in the notice of the meeting. If the annual meeting of the shareholders be not held as herein prescribed, the election of directors may be held at any meeting thereafter called pursuant to these Bylaws. Section 2. Special Meetings. Special meetings of the shareholders, for ---------------- any purpose whatsoever, unless otherwise prescribed by statute, may be called at any time by the Chairman of the Board, the President, or by the Board of Directors, or by one or more shareholders holding not less than ten percent (10%) of the voting power of the Corporation. Section 3. Place. All meetings of the shareholders shall be at any ----- place within or without the State of California designated either by the Board of Directors or by written consent of the holders of a majority of the shares entitled to vote thereat, given either before or after the meeting. In the absence of any such designation, shareholders' meetings shall be held at the principal executive office of the Corporation. Section 4. Notice. Notice of meetings of the shareholders of the ------ Corporation shall be given in writing to each shareholder entitled to vote, either personally or by first-class mail (unless the Corporation has 500 or more shareholders determined as provided by the California Corporations Code on the record date for the meeting, in which case notice may be sent by third-class mail) or other means of written communication, charges prepaid, addressed to the shareholder at his address appearing on the books of the Corporation or given by the shareholder to the Corporation for the purpose of notice. Notice of any such meeting of shareholders shall be sent to each shareholder entitled thereto not fewer than ten (10) (or, if sent by third-class mail, 30) nor more than 60 days before the meeting. Said notice shall state the place, date and hour of the meeting and, (1) in the case of special meetings, the general nature of the business to be transacted, and no other business may be transacted, or (2) in the case of annual meetings, those matters that the Board of Directors, at the time of the mailing of the notice, intends to present for action by the shareholders, but subject to Section 601(f) 2. of the California Corporations Code any proper matter may be presented at the meeting for shareholder action, and (3) in the case of any meeting at which directors are to be elected, the names of the nominees intended at the time of the mailing of the notice to be presented by management for election. Section 5. Adjourned Meetings. Any shareholders' meeting may be ------------------ adjourned from time to time by the vote of the holders of a majority of the voting shares present at the meeting either in person or by proxy. Notice of any adjourned meeting need not be given unless a meeting is adjourned for forty-five (45) days or more from the date set for the original meeting. Section 6. Quorum. The presence in person or by proxy of the persons ------ entitled to vote a majority of the shares entitled to vote at any meeting constitutes a quorum for the transaction of business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. In the absence of a quorum, any meeting of shareholders may be adjourned from time to time by the vote of a majority of the shares, the holders of which are either present in person or represented by proxy thereat,- but no other business may be transacted, except as provided above. Section 7. Consent to Shareholder Action. Any action that may be taken at ----------------------------- any meeting of shareholders may be taken without a meeting and without prior notice, 3. if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted; provided, -------- however, that (1) unless the consents of all shareholders entitled to vote have - -------- been solicited in writing, notice of any shareholder approval without a meeting by less than unanimous written consent shall be given as required by the California Corporations Code, and (2) directors may not be elected by written consent except by unanimous written consent of all shares entitled to vote for the election of directors. Any written consent may be revoked by a writing received by the Secretary of the Corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the Secretary. Section 8. Waiver of Notice. The transactions of any meeting of ---------------- shareholders, however called and noticed, and whenever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice, or a consent to the holding of the meeting, or an approval of the minutes thereof. All such waivers, consents, or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Section 9. Voting. The voting at all meetings of shareholders need ------ not be by ballot, but any qualified shareholder before the voting begins may demand a stock 4. vote whereupon such stock vote shall be taken by ballot, each of which shall state the name of the shareholder voting and the number of shares voted by such shareholder, and if such ballot be cast by a proxy, it shall also state the name of such proxy. At any meeting of the shareholders, every shareholder having the right to vote shall be entitled to vote in person, or by proxy appointed in a writing subscribed by such shareholder and bearing a date not more than eleven (11) months prior to said meeting, unless the writing states that it is irrevocable and satisfies Section 705(e) of the California Corporations Code, in which event it is irrevocable for the period specified in said writing and said Section 705(e). Section 10. Record Dates. In the event the Board of Directors fixes ------------ a day for the determination of shareholders of record entitled to vote as provided in Section 1 of Article V of these Bylaws, then, subject to the provisions of the General Corporation Law of the State of California, only persons in whose name shares entitled to vote stand on the stock records of the Corporation at the close of business on such day shall be entitled to vote. If no record date is fixed: The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held; The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board of 5. Directors is necessary, shall be the day on which the first written consent is given; and The record date for determining shareholders for any other purpose shall be at the close of business on the day on Which the Board of Directors adopts the resolution relating thereto, or the sixtieth (60th) day prior to the date of such other action, whichever is later. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting, but the Board of Directors shall fix a new record date if the meeting is adjourned for more than forty-five (45) days. Section 11. Cumulative Voting for Election of Directors. Provided ------------------------------------------- the candidate's name has been placed in nomination prior to the voting and one or more shareholders has given notice at the meeting prior to the voting of the shareholder's intent to cumulate the shareholder's votes, every shareholder entitled to vote at any election for directors shall have the right to cumulate such shareholder's votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which the shareholder's shares are normally entitled, or distribute the shareholder's votes on the same principle among as many candidates as the shareholder shall think fit. The candidates receiving the highest number of votes of the shares entitled to be voted for them up to the number of directors to be elected by such shares are elected. 6. ARTICLE III - BOARD OF DIRECTORS -------------------------------- Section 1. Powers. Subject to any limitations in the Articles of ------ Incorporation or these Bylaws and to any provision of the California Corporations Code requiring shareholder authorization or approval for a particular action, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by, or under the direction of, the Board of Directors. The Board of Directors may delegate the management of the day-to-day operation of the business of the Corporation to a management company or other person provided that the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised, under the ultimate direction of the Board of Directors. Section 2. Number, Tenure and Qualifications. The number of directors --------------------------------- that shall constitute the whole board shall be not less than three (3) nor more than five (5), the exact number of directors to be fixed from time to time within such limit by a duly adopted resolution of the Board of Directors or shareholders. The exact number of directors presently authorized shall be three (3) until changed within the limits specified above by a duly adopted resolution of the Board of Directors or shareholders. Directors need not be shareholders. Directors shall hold office until the next annual meeting of shareholders and until their respective successors are elected. If any such annual meeting is not held, or the directors are not elected thereat, the directors may be elected at any special meeting of shareholders held for that purpose. 7. Section 3. Regular Meetings. A regular annual meeting of the Board ---------------- of Directors shall be held without other notice than this Bylaw immediately after, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide for other regular meetings from time to time by resolution. Section 4. Special Meetings. Special meetings of the Board of Directors ---------------- may be called at any time by the Chairman of the Board, or the President or any Vice President, or the Secretary or any two (2) directors. Written notice of the time and place of all special meetings of the Board of Directors shall be delivered personally or by telephone or telegraph to each director at least forty-eight (48) hours before the meeting, or sent to each director by first- class mail, postage prepaid, at least four (4) days before the meeting. Such notice need not specify the purpose of the meeting. Notice of any meeting of the Board of Directors need not be given to any director who signs a waiver of notice, whether before or after the meeting, or who attends the meeting without protesting prior thereto or at its commencement, the lack of notice to such director. Section 5. Place of Meetings. Meetings of the Board of Directors may ----------------- be held at any place within or without the State of California, which has been designated in the notice, or if not stated in the notice or there is no notice, the principal executive office of the Corporation or as designated by the resolution duly adopted by the Board of Directors. Section 6. Participation by Telephone. Members of the Board of Directors -------------------------- may participate in a meeting through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can 8. hear one another. Section 7. Quorum. A majority of the Board of Directors shall constitute ------ a quorum at all meetings. In the absence of a quorum a majority of the directors present may adjourn any meeting to another time and place. If a meeting is adjourned for more than twenty-four (24) hours, notice of any adjournment to another time or place shall be given prior to the time of the reconvened meeting to. the directors who were not present at the time of adjournment. Section 8. Action at Meeting. Every act or decision done or made by ----------------- a majority of the directors present at a meeting duly held at which a quorum is present is the act of the Board of Directors. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting. Section 9. Waiver of Notice. The transactions of any meeting of the Board ---------------- of Directors, however called and noticed or wherever held, are as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting, or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Section 10. Action Without Meeting. Any action required or permitted to ---------------------- be taken by the Board of Directors may be taken without a meeting, if all members of the Board individually or collectively consent in writing to such action. Such written 9. consent or consents shall be filed with the minutes of the proceedings of the Board. Such action by written consent shall have the same force and effect as a unanimous vote of such directors. Section 11. Removal. The Board of Directors may declare vacant the ------- office of a director who has been declared of unsound mind by an order of court or who has been convicted of a felony. The entire Board of Directors or any individual director may be removed from office without cause by a vote of shareholders holding a majority of the outstanding shares entitled to vote at an election of directors; provided, --------- however, that unless the entire Board is removed, no individual director may be - -------- removed when the votes cast against removal, or not consenting in writing to such removal, would be sufficient to elect such director if voted cumulatively at an election at which the same total number of votes cast were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of the director's most recent election were then being elected. In the event an office of a director is so declared vacant or in case the Board or any one or more directors be so removed, new directors may be elected at the same meeting. Section 12. Resignations. Any director may resign effective upon giving ------------ written notice to the Chairman of the Board, the President, the Secretary or the Board of Directors of the Corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a 10. successor may be elected to take office when the resignation becomes effective. Section 13. Vacancies. Except for a vacancy created by the removal --------- of a director, all vacancies in the Board of Directors, whether caused by resignation, death or otherwise, may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, and each director so elected shall hold office until his successor is elected at an annual, regular or special meeting of the shareholders. Vacancies created by the removal of a director may be filled only by approval of the shareholders. The shareholders may elect a director at any time to fill any vacancy not filled by the directors. Any such election by written consent requires the consent of a majority of the outstanding shares entitled to vote. Section 14. Compensation. No stated salary shall be paid directors, ------------ as such, for their services, but, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of such Board; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 15. Committees. The Board of Directors may, by resolution ---------- adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two (2) or more directors, to serve at the pleasure of the Board of Directors. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent member at any 11. meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have all the authority of the Board of Directors in the management of the business and affairs of the Corporation, except with respect to (a) the approval of any action requiring shareholders' approval or approval of the outstanding shares, (b) the filling of vacancies on the Board or any committee, (c) the fixing of compensation of directors for serving on the Board or a committee, (d) the adoption, amendment or repeal of Bylaws, (e) the amendment or repeal of any resolution of the Board that by its express terms is not so amendable or repealable, (f) a distribution to shareholders, except at a rate or in a periodic amount or within a price range determined by the Board, and (g) the appointment of other committees of the Board or the members thereof. ARTICLE IV - OFFICERS --------------------- Section 1. Number and Term. The officers of the Corporation shall be --------------- a Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Chief Financial Officer, all of which shall be chosen by the Board of Directors. In addition, the Board of Directors may appoint such other officers as may be deemed expedient for the proper conduct of the business of the Corporation, each of whom shall have such authority and perform such duties as the Board of Directors may from time to time determine. The officers to be appointed by the Board of Directors shall be chosen annually at the regular meeting of the Board of Directors held after the annual meeting of shareholders and shall serve at the pleasure of the Board of Directors. If officers are 12. not chosen at such meeting of the Board of Directors, they shall be chosen as soon thereafter as shall be convenient. Each officer shall hold office until his successor shall have been duly chosen or until his removal or resignation. Section 2. Inability to Act. In the case of absence or inability to ---------------- act of any officer of the Corporation and of any person herein authorized to act in his place, the Board of Directors may from time to time delegate the powers or duties of such officer to any other officer, or any director or other person whom it may select. Section 3. Removal and Resignation. Any officer chosen by the Board ----------------------- of Directors may be removed at any time, with or without cause, by the affirmative vote of a majority of all the members of the Board of Directors. Any officer chosen by the Board of Directors may resign at any time by giving written notice of said resignation to the Corporation. Unless a different time is specified therein, such resignation shall be effective upon its receipt by the Chairman of the Board, the President, the Secretary or the Board of Directors. Section 4. Vacancies. A vacancy in any office because of any cause --------- may be filled by the Board of Directors for the unexpired portion of the term. Section 5. Chairman of the Board. The Chairman of the Board shall --------------------- preside at all meetings of the Board. Section 6. President. The President shall be the general manager and --------- chief executive officer of the Corporation, subject to the control of the Board of Directors, and as such shall preside at all meetings of shareholders, shall have general supervision of the affairs of the Corporation, shall sign or countersign or authorize another officer to sign all certificates, contracts, and other instruments of the 13. Corporation as authorized by the Board of Directors, shall make reports to the Board of Directors and shareholders, and shall perform all such other duties as are incident to such office or are properly required by the Board of Directors. Section 7. Vice President. In the absence of the President, or in -------------- the event of such officer's death, disability or refusal to act, the Vice President, or in the event there be more than one Vice President, the Vice Presidents in the order designated at the time of their selection, or in the absence of any such designation, then in the order of their selection, shall perform the duties of President, and when so acting, shall have all the powers and be subject to all restrictions upon the President. Each Vice President shall have such powers and discharge such duties as may be assigned from time to time by the President or by the Board of Directors. Section 8. Secretary. The Secretary shall see that notices for all --------- meetings are given in accordance with the provisions of these Bylaws and as required by law, shall keep minutes of all meetings, shall have charge of the seal and the corporate books, and shall make such reports and perform such other duties as are incident to such office, or as are properly required by the President or by the Board of Directors. The Assistant Secretary or the Assistant Secretaries, in the order of their seniority, shall, in the absence or disability of the Secretary, or in the event of such officer's refusal to act, perform the duties and exercise the powers and discharge such duties as may be assigned from time to time by the President or by the Board of Directors. 14. Section 9. Chief Financial Officer. The Chief Financial Officer may ----------------------- also be designated by the alternate title of "Treasurer." The Chief Financial Officer shall have custody of all moneys and securities of the Corporation and shall keep regular books of account. Such officer shall disburse the funds of the Corporation in payment of the just demands against the Corporation, or as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Board of Directors from time to time as may be required of such officer, an account of all transactions as Chief Financial Officer and of the financial condition of the Corporation. Such officer shall perform all duties incident to such office or that are properly required by the President or by the Board of Directors. The Assistant Treasurer or the Assistant Treasurers, in the order of their seniority, shall, in the absence or disability of the Chief Financial Officer, or in the event of such officer's refusal to act, perform the duties and exercise the powers of the Chief Financial Officer, and shall have such powers and discharge such duties as may be assigned from time to time by the President or by the Board of Directors. Section 10. Salaries. The salaries of the officers shall be fixed -------- from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that such officer is also a director of the Corporation. Section 11. Officers Holding More than One Office. Any two or more ------------------------------------- offices may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity. 15. Section 12. Approval of Loans to Officers. */ The Corporation may, ----------------------------- -- upon the approval of the Board of Directors alone, make loans of money or property to, or guarantee the obligations of, any officer of the Corporation or its parent or subsidiary, whether or not a director, or adopt an employee benefit plan or plans authorizing such loans or guaranties provided that (i) the Board of Directors determines that such a loan or guaranty or plan may reasonably be expected to benefit the Corporation, (ii) the Corporation has outstanding shares held of record by 100 or more persons (determined as provided in Section 605 of the California Corporations Code) on the date of approval by the Board of Directors, and (iii) the approval of the Board of Directors is by a vote sufficient without counting the vote of any interested director or directors. ARTICLE V - MISCELLANEOUS ------------------------- Section 1. Record Date and Closing of Stock Books. The Board of -------------------------------------- Directors may fix a time in the future as a record date for the determination of the shareholders entitled to notice of and to vote at any meeting of shareholders or entitled to receive payment of any dividend or distribution, or any allotment of rights, or to exercise rights in respect to any other lawful action. The record date so fixed shall not be more than sixty (60) nor less than ten (10) days prior to the date of the meeting or event for the purposes of which it is fixed. When a record date is so fixed, only shareholders of record at the close of business on that date are entitled to notice of and to vote at the meeting or to receive the dividend, distribution, or allotment of rights, or __________________ */ This section is effective only if it has been approved by the shareholders - -- in accordance with Sections 315(b) and 152 of the California Corporations Code. 16. to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after the record date. The Board of Directors may close the books of the Corporation against transfers of shares during the whole or any part of a period of not more than sixty (60) days prior to the date of a shareholders' meeting, the date when the right to any dividend, distribution, or allotment of rights vests, or the effective date of any change, conversion or exchange of shares. Section 2. Certificates. Certificates of stock shall be issued in ------------ numerical order and each shareholder shall be entitled to a certificate signed in the name of the Corporation by the Chairman of the Board or the President or a Vice President, and the Chief Financial Officer, the Secretary or an Assistant Secretary, certifying to the number of shares owned by such shareholder. Any or all of the signatures on the certificate may be facsimile. Prior to the due presentment for registration of transfer in the stock transfer book of the Corporation, the registered owner shall be treated as the person exclusively entitled to vote, to receive notifications and otherwise to exercise all the rights and powers of an owner, except as expressly provided otherwise by the laws of the State of California. Section 3. Representation of Shares in Other Corporations. Shares of ---------------------------------------------- other corporations standing in the name of this Corporation may be voted or represented and all incidents thereto may be exercised on behalf of the Corporation by the Chairman of the Board, the President or any Vice President and the Chief Financial Officer or the Secretary or an Assistant Secretary. 17. Section 4. Fiscal Year. The fiscal year of the Corporation shall end ----------- on the 31st day of December. Section 5. Annual Reports. The Annual Report to shareholders, -------------- described in the California Corporations Code, is expressly waived and dispensed with. Section 6. Amendments. Bylaws may be adopted, amended, or repealed ---------- by the vote or the written consent of shareholders entitled to exercise a majority of the voting power of the Corporation. Subject to the right of shareholders to adopt, amend, or repeal Bylaws, Bylaws may be adopted, amended, or repealed by the Board of Directors, except that a Bylaw amendment thereof changing the authorized number of directors may be adopted by the Board of Directors only if these Bylaws permit an indefinite number of directors and the Bylaw or amendment thereof adopted by the Board of Directors changes the authorized number of directors within the limits specified in these Bylaws. Section 7. Indemnification of Corporate Agents. The Corporation ----------------------------------- shall indemnify each of its agents against expenses, judgments, fines, settlements and other amounts, actually and reasonably incurred by such person by reason of such person's having been made or having threatened to be made a party to a proceeding to the fullest extent permissible under the California Corporations Code and the Corporation shall advance the expenses reasonably expected to be incurred by such agent in defending any such proceeding upon receipt of the undertaking required by subdivision (f) of Section 317 of the California Corporations Code. The terms "agent", "proceeding" and "expenses" made in this Section 7 shall have the same meaning as such terms in said Section 317. 18. CERTIFICATE OF ADOPTION OF BYLAWS OF AGILE SOFTWARE CORPORATION The undersigned, Thomas P. Shanahan, hereby certifies that he is the duly elected and acting Secretary of Agile Software Corporation, a California corporation (the "Corporation"), and that the Bylaws attached hereto were duly adopted by an Action by Unanimous Written Consent in Lieu of the Organizational Meeting by the Sole Director of the Corporation effective as of March 13/th/, 1995. IN WITNESS WHEREOF, the undersigned has hereunto subscribed his name this 13/th/ day of March, 1995. /s/ Thomas P. Shanahan ----------------------------- Thomas P. Shanahan, Secretary EX-10.4 5 ALMADEN FINANCIAL PLAZA OFFICE LEASE EXHIBIT 10.4 ALMADEN FINANCIAL PLAZA OFFICE LEASE 1. PARTIES 1.1 This Lease is entered into as of this 30th day of May, 1996, in the City of San Jose, County of Santa Clara, State of California, by and between NORTH BLOCK PARTNERSHIP (hereinafter referred to as "Landlord") and AGILE SOFTWARE, a California Corporation (hereinafter referred to as "Tenant"). 2. PREMISES 2.1 In consideration of their respective agreements contained herein, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord premises described as the twelfth (12) floor of the building described as: ONE ALMADEN BOULEVARD, SUITE 1200 SAN JOSE, CALIFORNIA 95113 comprising approximately 13,000 rentable square feet and described in Exhibit A attached. Said premises are herein referred to as the "Premises" and the building in which the Premises are located is herein referred to as the "Building". 3. TERM 3.1 The Term of this Lease shall be for a period of five (5) years commencing on the date defined in Article 4 which date will be set forth in the Confirmation of Lease Commencement to be hereinafter attached to this Lease. A copy of such form of Confirmation of Lease Commencement is attached hereto as Exhibit "D". If the Term expires on a date other than the last day of the month, the Term shall continue up to and including the last day of that month. 4. LEASE COMMENCEMENT 4.1 The Term of this Lease shall commence on July 15, 1996. 4.2 The Lease Commencement Date and Lease Expiration Date as prescribed herein shall be confirmed by Landlord to Tenant in a written Confirmation of Lease Commencement which shall be prepared by Landlord, served on Tenant, executed by Tenant within fifteen (15) days, returned to Landlord and attached to this lease after Tenant takes occupancy. 4.3 Possession - Tenant agrees that if Landlord is unable to deliver ---------- possession of the Premises to Tenant on the date above specified for the commencement of the Term of this Lease, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom, but the Commencement Date of the Term shall be delayed by the same number of days that the Tenant's possession of the Premises was delayed by Landlord's inability to deliver possession, and in such event Tenant shall not be liable for any rent until such time as Landlord tenders delivery of possession of the Premises to Tenant with Landlord's work therein, if any, substantially completed. The above notwithstanding, there shall be no delay in commencement of the Term or in Tenant's liability for payment of rent if Landlord is unable to deliver possession of the Premises due to any act, omission or delay of Tenant. In the event that Tenant commences occupancy of the Premises on any date other than the commencement date of the Term pursuant to this Paragraph 4, Landlord and Tenant shall promptly execute a written amendment to this Lease setting forth and confirming the date occupancy commenced. 5. RENT 5.1 Commencing on the first day of the Term of this Lease, Tenant shall pay to Landlord as monthly installments of Rent in advance, due and payable on the first day of each calendar month in lawful money of the United States the following sums:
PERIOD RATE MONTHLY RENT ------ ---- ------------ Months 01-03 0.85 $11,050.00 Months 04-06 1.20 $15,600.00 Months 07-12 1.45 $18,850.00 Months 13-36 1.55 $20,150.00 Months 37-60 1.70 $22,100.00
5.2 All rent, including Rent and escalation, due under this Lease shall be paid at the address set out after the name of the Landlord or such other address as may be designated in writing by Landlord. If the date of commencement occurs on a day other than the first day of a calendar month, the rent for such first month shall be prorated at the monthly rate agreed upon in this lease agreement divided by the total number of days in the first month times the number of days occupied during the first month. If the date of expiration occurs on a day other than the last day of a calendar month, the rent for such last month shall be prorated at the monthly rate agreed upon in this lease agreement divided by the total number of days in the last month times the number of days occupied during the last month. 6. TAXES AND OPERATING EXPENSES ESCALATION 6.1 Tenant shall pay to Landlord its pro rata share (as defined in Section 6.2 below) of the following expenses ("Expenses") paid or incurred, by Landlord on the Building, land, parking, and appurtenant site improvements whereon the Premises are located (the "Property") to the extent of the Expenses exceed the expenses paid or incurred in the calendar year 1996 hereinafter defined as "Base Year". 6.1.1. All real property taxes paid by Landlord that are levied upon and/or assessed against the Property, including any taxes which may be levied on rents (other than state or federal income taxes), the use or occupation of the Building, vehicles utilizing parking areas, the making of this Lease, and the occupancy of Tenant, Tenant shall be responsible for and charged separately for any real property tax assessed on tenant improvements installed by Tenant in accordance with Article 13 herein. If the local taxing authority issues a separate tax statement for Tenant's improvements, Tenant shall pay those taxes directly prior to delinquency. Notwithstanding the foregoing, the following shall be excluded from real property taxes as defined herein: (a) Any charges or penalties or interest accrued through Landlord's nonpayment or late payment of taxes or assessments. (b) Any taxes arising from or applicable to all other real and personal property of the Landlord. (c) Any real property tax assessed on tenant improvements installed by or at the cost and expense of any other tenant of the Building. 6.1.2 Any tax, fee, charge, or excise, however designated, by any governmental or public authority applicable to the Property that is a direct or indirect substitute in whole or in part for or in addition to real property taxes. Estate, inheritance, transfer, gift, or franchise taxes levied on Landlord shall not be included in Expenses, provided such taxes are not levied to replace real property taxes, or relate to environmental or energy charges. 6.1.3 If, during the Term of this Lease, Landlord makes capital improvements to the Building, Premises, or common areas as required by any new or existing federal, state, city, or county legislation for reasons of energy conservation, handicapped access, or other reasons of public health, safety, and welfare, Landlord may amortize such capital improvement costs over the useful life of the capital improvement as determined by generally accepted accounting principles and include the amortized cost in Expenses. Any work necessary to correct latent defects in the Building or to correct Landlord's failure to construct the Building in accordance with applicable building codes and standards, shall be excluded from Expenses. 6.1.4 All insurance premiums of fire, earthquake, extended coverage, liability, and any other insurance that Landlord reasonably maintains on the Building. 6.1.5 The cost of all Building services, including, without limitation, elevator maintenance, engineering wages and benefits, maintenance and repair, supplies, janitorial wages and benefits, utilities for heating and ventilation, window cleaning, miscellaneous operating expenses, landscaping and common area expenses, security, utilities provided to all common areas, the salaries of the building manager and other building and parking personnel, and administration and management fees. Any building services may be performed by Landlord or its affiliates or agents provided such charges and fees do not exceed those charges and fees of independent contractors in similar buildings in the San Jose area. 6.2 Tenant's pro rata share of Taxes and Operating Expenses shall be dividends of those fractions represented by Tenant's total net rentable square feet as of Lease Commencement Date (defined as 13,000 Square Feet) increased by the portion of any Expansion Space upon exercise of any Expansion Option, divided by the total net rentable square feet of the building (153,683 Square Feet which based on space originally leased would be 8.46%). If less than one hundred percent (100%) of the net rentable area of the building is serviced as applicable during any calendar year or portions thereon, there will be a proportional decrease to the total net rentable area of the building for variable expenses only based on the ratio of the Tenant's total net rentable square footage bears to the total net rentable area of the Building actually serviced as applicable. Variable expenses shall be defined as all utilities, janitorial, janitorial supplies, Building services, and Building supplies which are provided to the Property. Therefore, Tenant is only responsible for its pro rata share of expenses on occupied or serviced areas and not for vacant areas, which is Landlord's responsibility. 6.3 The amount of Additional Rent to be paid by Tenant shall be determined and payable as follows: 6.3.1 After the end of each calendar year during the Lease Term, Landlord shall deliver to Tenant a statement of the actual Operating Expenses for the preceding calendar year which shall become the current year's estimate of Operating Expenses ("Estimated Expenses"), and Landlord's statement of Tenant's Pro rata Share of the increase, if any, in the Estimated Expenses over the Base Year Expenses (the "Excess Expenses"). For purpose hereof, the term "Base Year Expenses" shall mean the Expenses incurred during calendar year 1996. 6.3.2 If the Estimated Expenses as determined for any calendar year are less than the actual Operating Expenses incurred by Landlord during that calendar year, then Tenant shall pay its pro rata share of such difference within thirty (30) days on receipt of Landlord's statement delivered pursuant to Subparagraph 6.3.1. 6.3.3 Tenant shall also pay, within thirty (30) days of receipt of such statement, an amount equal to one-twelfth (1/12th) of its Pro rata Share of the Excess Expenses times the number of months (including the month in which payment is made) since the first such month of the year. 6.3.4 Thereafter, with each payment of Rent, Tenant shall pay one-twelfth (1/12) of its Pro rata Share of the Excess of Expenses. 6.3.5 If the Estimated Expenses as determined for any calendar year exceed the actual operating Expenses incurred by Landlord during that calendar year, then Tenant's Pro rata Share of such difference shall be credited against its next payment of Rent. 6.3.6 Landlord's and Tenant's obligation to make any payment pursuant to subparagraph 6.3.2 and 6.3.5 above shall survive the termination of this Lease. If after termination of this Lease, actual Operating Expenses for the calendar year of the termination are less than Estimated Expenses for such year, Landlord shall pay Tenant in cash its Pro rata share of such difference. If actual expenses are higher than Estimated Expenses, then Tenant shall pay Landlord in cash its Pro rata Share of such difference. Any payment pursuant to this subparagraph shall be prorated based upon the number of months of the Term in the year of termination. 6.4 Landlord shall maintain complete and accurate records of all Expenses. Tenant or its representative shall have the right to inspect Landlord's records of the Expenses once each year during reasonable business hours and following thirty (30) days' notice to Landlord. 6.5 For purposes of computing Tenant's pro rata share of Excess Expenses under this Lease, the maximum increase in the Building's Operating Expenses for any one year over the prior year shall be limited to ten percent (10%). This provision limits the base for calculating Tenant's pro rata share and shall not be construed to limit any annual increase in Tenant's pro rata share of the Excess Expenses. 7. CONSIDERATION 7.1 Upon occupancy of the Premises by Tenant, Tenant shall deposit with landlord the sum of Eleven Thousand Fifty hundred and No/100ths Dollars ($11,050.00) which shall be credited to the first monthly installment of Rent due hereunder under section 5.1 hereof, and upon execution of this Lease by Tenant the additional sum of Twenty-Two Thousand One Hundred and No/100ths Dollars ($22,100.00), ("Security Deposit") to secure the faithful performance by Tenant under this Lease. If Tenant shall at any time fail to make payment or fail to keep or perform any Term, covenant, and condition on its part may be made or performed or kept under this Lease, including without limitation, payment of Rent, maintenance of the Premises in good repair, and surrendering the Premises in a clean condition, Landlord may, but shall not be obligated to and without waiving or releasing Tenant from any obligation under this Lease, and without waiving its right to treat such failure as a default hereof, use, apply or retain the whole or any part of the Security Deposit reasonably necessary to remedy such failure of Tenant. In such event, Tenant shall, within five (5) days of written demand by Landlord, remit to Landlord sufficient funds to restore said Security Deposit and Landlord may commingle it, use it in ordinary business, transfer or assign it, or use it in any combination of those ways. No interest shall accrue on the Security Deposit. Should Tenant comply with all of said Terms, covenants, and conditions, and promptly pay all of the rental herein provided as it falls due, and at the end of the Term of this Lease, then said Security Deposit shall be returned to Tenant within thirty (30) following the termination of this Lease and vacating of the Premises by Tenant. 8. LATE CHARGE 8.1 Lessee hereby acknowledges that late payment by Lessee to Lessor of Base Rent, Lessee's Share of Operating Expense increases or other sums due hereunder will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed on Lessor by the terms of any mortgage or trust deed covering the Building. Accordingly, if any installment of Base Rent, Operating Expense increase, or any other sum due from Lessee shall not be received by Lessor or Lessor's designee within ten (10) days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a late charge equal to 5% of such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of late payment by Lessee. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's default with respect to such overdue amount, nor prevent Lessor from exercising any of the other rights and remedies granted hereunder. 9. USE 9.1 Tenant shall use and occupy the Premises during the Term for general office purposes and no other purpose without the prior written consent of Landlord. Tenant shall not use, suffer or permit the Premises or any part thereof to be used for any other purpose or purposes without obtaining written consent of Landlord, which consent shall not be unreasonably withheld. 9.2 Nothing contained in this Lease shall be construed to prohibit or limit Landlord from using or leasing any portion of the Building, development, or project of which the Premises are a part, or any other property owned or controlled by him, for any lawful purpose. 9.3 Should Tenant commit or permit any act or acts upon the Premises or use the Premises or permit the Premises to be used in any manner which will increase the existing rate of insurance on the Building, any part thereof or its contents or any part thereof, such additional expense shall be paid by Tenant to Landlord within ten (10) days of delivery to Tenant of notice of such increase. Tenant shall not, however, commit any acts which will cause the cancellation of any insurance policy. Tenant shall not sell or permit to be kept, used or sold in or about the Premises any article which may be prohibited by the standard form of fire insurance policies, as such now or are hereafter provided, covering the Building, any part thereof, or its contents. 9.4 Tenant shall not commit or suffer to be committed any waste upon the Premises or any public or private nuisance or any other act or thing which may disturb the quiet enjoyment of any other tenant in the Building in which the Premises are located. Tenant shall not use the Premises or permit the Premises to be used in whole or in part for any purpose that is deemed to be in violation of any laws, ordinances, regulations or rules of any public authority or organization at any time. A judgment of any court of competent jurisdiction or the admission by Tenant in any judicial or administrative action or proceeding against Tenant that Tenant has violated any such laws, ordinances, regulations, or rules in the use of the Premises shall be deemed to be a conclusive determination of that fact between Landlord and Tenant. 9.5 Upon the expiration or sooner termination of this Lease, Tenant shall quit and surrender the Premises to Landlord in good condition and repair reasonable wear and tear excepted. 10. BUILDING SERVICES 10.1 Landlord agrees to furnish heating, ventilating and air conditioning to the Premises to an extent lawfully permitted for the comfort and occupation of the Premises to during the hours 7:00 a.m. to 6:00 p.m., Monday through Friday and from 9:00 a.m. through 3:00 p.m. on Saturdays, legal holidays excepted. Tenant agrees to keep the corridor doors closed. Tenant agrees not to install any equipment which gives off heat in an amount which would place an overload on the central building facilities; and in all respects to conform with any reasonable rules and regulations Landlord shall make for the use of the heating and air conditioning systems and will not install equipment which would place an overload on the structure of the Building. Tenant will have the right to require and pay for at its cost and expense heating and air conditioning delivered to the floor or floors in which its Premises are located at times other than those specified herein, provided it gives Landlord twenty-four (24) hours notice of such requirements during weekdays and forty-eight (48) hours during weekends and holidays. 10.1.1 The charge for after hours operation of the Building's system, heating and air conditioning, if required by Tenant, will be $27.50 per hour. Tenant acknowledges that there is supplemental heating and air conditioning servicing the Premises, which is separately metered and when activated Tenant shall pay the utility costs to operate this supplemental system. 10.2 Landlord shall provide water, electricity, and use of elevators twenty-four (24) hours per day, seven (7) days a week. 10.2.1 Landlord shall maintain, in good condition, the following: (a) The structural parts and exterior walls of the Premises which structural parts include the foundations, bearing walls, subfloor, roof, and windows (except if caused by acts of Tenant or its invitees). (b) The unexposed electrical, plumbing and sewage systems including without limitation, those portions of the systems lying outside Premises; (c) Utilities and building standard lamp replacement on a scheduled basis; (d) Heating, ventilating and air conditioning systems of the Building; (e) The landscaping, parking, loading areas, walks and driveways of Premises; (f) Elevators 10.3 Landlord agrees to furnish, or cause to be furnished, the Premises with electricity necessary for lighting and fractional horsepower office machines, water, and elevator service in the Building. Janitorial service will be furnished five (5) times weekly, legal holidays excepted, time and days to be at Landlord's option. Window cleaning, inside and outside, will be furnished two (2) times per year. No electric current will be furnished for high-energy consumption equipment such as electronic business machines or computers (other than electric typewriters, word processors, adding machines, copy machines, fax machine, desk-top computers, servers, or printers using 110 volts 20 amp circuits) or for hot plates or electric heaters (see Exhibit B attached hereto). 10.4 If Tenant shall require electric current for purposes other than those specified above, it is understood that Landlord may cause an electric meter to be installed in the Premises for that equipment and kept in repair at the sole cost and expense of the Tenant, so Tenant agrees to pay Landlord for all such electric current consumed for any such other purposes at the rates charged for similar services by the local public utility plus any additional expense incurred in installing and maintaining such meter and keeping account of the current so consumed. Statements of Landlord for such consumption of electric current shall be rendered to Tenant not less frequently than quarter annually, and final statements shall be rendered to Tenant on or before the last days of the fourth month after expiration of the Lease. The amount of such statements shall be paid by Tenant within fifteen (15) days after the same have been rendered. 10.5 Landlord shall not be liable for any damage to person or property of any nature whatsoever, or compensation or claim for abatement of Rent or otherwise by reason of any inconvenience, annoyance, injury, or loss arising from the installation, operation, and maintenance of any equipment or service provided under this Article 10 or otherwise or from any failure to keep said equipment or service in operation when such failure is occasioned by act or neglect of Tenant or by repairs, removals, improvements needful in the judgment of Landlord or by any power failure, labor controversy or by any accident or casualty whatsoever, or for any other reason whatsoever and howsoever occurring beyond Landlord's reasonable control. If interruptions, curtailment or stoppage of any equipment or service extends beyond five (5) working days after written notification is received by Landlord and is caused by Landlord or its agents', employees', or contractors' negligence in properly maintaining or otherwise timely commencing repair of any item of equipment, then Tenant shall be entitled to a pro rata adjustment of rent for the period of any such curtailment or stoppage of service. 10.6 Landlord shall not be required to furnish and Tenant shall not be entitled to receive any such service provided for in this Article 10 during any period when Tenant is in default under the provisions of this Lease. 11. CONDITION OF PREMISES AND REPAIRS 11.1 Tenant shall be deemed to have agreed by accepting occupancy that the Premises are in good order, condition, and repair except for latent defects and except for items as to which Tenant has notified Landlord in writing prior to the date on which Tenant occupies the Premises. Tenant, at Tenant's expense, shall keep the interior, non-structural portions of the Premises in good order, condition, and repair, including all fixtures, and equipment installed by Tenant except for normal wear and tear. In the event Tenant fails to maintain the Premises in good order and repair, except for reasonable wear and tear, Landlord shall give Tenant notice to make such repairs or perform such maintenance as Landlord deems appropriate. In the event Tenant fails to do so within fifteen (15) days of receipt of notice, or if such repairs cannot be reasonably made within such a period and if Tenant has not commenced to make the repairs and/or has not diligently prosecuted the repairs to completion, Tenant shall be in material breach and default of this Lease, and Landlord shall have the option, but not the obligation, to make such repairs or perform such maintenance at the expense of Tenant and the cost thereof shall be deemed to be, and shall be paid, as additional rent, with the rent next due following the delivery of notice to Tenant of said cost. 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 making any such repairs or performing such maintenance. Landlord's right to perform such repair is in addition to a cumulative with all other rights Landlord has hereunder and at law and in equity, and Landlord may elect to utilize any number of such other remedies with or without so performing such work. 12. ALTERATIONS 12.1 Tenant, at its expense, may make changes, additions and improvements to the Premises provided any change, addition or improvement shall: (a) Be made only with the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed, and which shall include approval of space plans and final working drawings, if applicable; and (b) comply with all applicable governmental regulations and carry certification from the Tenant's designer or architect that the changes, additions or improvements to the Premises, to the best of the certifier's knowledge, meet the requirements of the Americans with Disabilities Act; and (c) equal or exceed the current construction standards for the building; and (d) be performed by licensed contractors who have, prior to commencing work, delivered to Landlord evidence of insurance coverage in amount and form satisfactory to Landlord, which current insurance requirements are described in Article 12.1.1 of this Lease. 12.1.1 Commercial General Liability Insurance - Landlord's current -------------------------------------- insurance requirements for contractors working in the Building, which may be changed from time to time as is reasonably necessary, are as follows: Each contractor or subcontractor shall secure and maintain, at its own expense, a commercial general liability policy which insures against bodily injury, property damage, personal injury and advertising injury claims arising from work conducted or service provided on behalf of the Tenant, with a combined single limit of $1,000,000 per occurrence, a general aggregate limit of $2,000,000, and a products/completed operations aggregate limit of $2,000,000. Any general aggregate limit shall apply per project (contractor). Such insurance shall include Landlord, Landlord's Agents or Representatives and the Engineer/Architect as additional insureds and certificate holders. Such insurance shall include the following coverage extensions: (a) Contractual liability; (b) Broad form property damage liability, (c) Personal and advertising injury liability; and (d) Coverage for liability arising from independent contractors. Coverage may not be written on a claims made basis without prior approval of Landlord. High Risk - --------- Any contractors or subcontractors whose work or services listed on the "High Risk Schedule" attached as Exhibit E-1 are required to provide a combined single limit of $5,000,000 per occurrence, a general aggregate limit of $5,000,000 and a products/completed operations aggregate of $5,000,000. All other requirements remain unchanged. Business Auto Liability - ----------------------- Contractors and subcontractors shall secure and maintain, at their own expense, a business auto liability policy which insures against bodily injury and property damage claims arising out of maintenance, use or operation of "any auto." A combined single limit of liability for bodily injury and property damage of $1,000,000 per accident shall be furnished. Such insurance shall include Landlord and Landlord's Agents or Representatives as additional insureds and certificate holders. Workers Compensation & Employers Liability - ------------------------------------------ Contractors and subcontractors shall secure and maintain, at its own expense, workers compensation insurance and employers liability insurance. The workers compensation insurance must satisfy the Contractor's/Subcontractor's workers compensation obligation to its employees in the states in which they operate on the Tenant's behalf. Employers liability insurance must be secured with minimum limits of $1,000,000 for bodily injury by accident, $1,000,000 each employee for bodily injury by disease, and a $1,000,000 policy limit for bodily injury be disease or by Contractor's/Subcontractor's employees. Certificate of Insurance - ------------------------ Contractors/Subcontractors shall furnish certificates of insurance, evidencing such policies required above prior to commencement of work or services and prior to each renewal thereafter. Such insurance shall be written with insurers licensed to do business in the state in which the property is located, with a Best Insurance Reports rating of "A," "VIII" or better unless otherwise approved by Landlord, Landlord's Agents or Representatives. Such policies shall be endorsed and such certificates shall provide that no cancellation, non-renewal or material reduction in coverage can take effect unless 30 days prior written notice by registered mail to furnished to the Landlord. 12.1.2 Tenant or Tenant's contractor(s) shall apply for and obtain any and all permits required for any alteration. Copies of each permit, the signed, approved inspection records and a Certificate of Occupancy issued by the Building Department shall be provided to Landlord at the completion of work and prior to Tenant's occupancy of the Premises. 12.1.3 Within sixty (60) days of the completion of any alterations to the Premises, Tenant shall provide Landlord with a copy of the construction contract for the alteration along with copies of lien releases evidencing Tenant's full payment under that contract. 12.1.4 Within sixty (60) days of completion of any alterations to the Premises, Tenant shall provide to Landlord one (1) set of reproducible sepia "as built" drawings and two (2) "as built" copies of drawings showing all alterations, improvements, and changes to the Building and Premises. 12.2 Tenant shall have the right at any time during the Term of this lease to remove its trade fixtures and personal property from the Premises provided that such removal shall not damage or mar the Premises. Tenant, upon the termination of this lease or the expiration of the Term hereof or upon vacating the Premises for any reason, shall quit and surrender the Premises in good order, condition, and repair, reasonable wear and tear excepted. Upon the termination of this Lease or the expiration of the Term, Landlord shall have the option to require Tenant to remove from the Premises, at Tenant's expense, all trade fixtures placed on the Premises by Tenant, with the Premises thereafter to be restored or repaired as required in Article 11.1 by Landlord, at the expense of the Tenant. 12.3 Tenant shall keep the Premises and the Building of which the Premises are a part free and clear of any liens and shall indemnify, hold harmless, and defend Landlord from any liens and encumbrances arising out of any work performed or materials furnished by or at the direction of Tenant. In the event any lien is filed, Tenant shall do all acts necessary to discharge any lien within ten (10) days of filing, or if Tenant desires to contest any lien, then Tenant shall deposit with Landlord within ten (10) days of filing the lien such security as Landlord shall demand to insure the payment of the lien claim. In the event Tenant shall fail to pay any lien claim when due or shall fail to deposit the security with Landlord within the aforesaid ten (10) day period, the Tenant shall be in default of this Lease. In addition to any other remedies Landlord may have under this Lease for the default, Landlord shall also have the right to expend all sums reasonably necessary to discharge the lien claim and to notify the Tenant of the amount of such sums. Thereafter, Tenant shall pay as additional rental, when the next rental payment is due, all sums expended by Landlord in discharging any lien, including actual attorneys' fees and costs. 13. TAXES 13.1 Tenant shall pay, or cause to be paid, before delinquency, any and all taxes levied or assessed and which become payable during the Term hereof upon all Tenant's leasehold improvements, equipment, furniture, fixtures and personal property located in the Premises; except taxes attributed to Landlord's tenant improvement allowance given to the original tenant of the Premises. In the event any or all of the Tenant's leasehold improvements, equipment, furniture, fixtures, and personal property shall be assessed or taxed with the Building, Tenant shall pay to Landlord its share of such taxes within ten (10) days after delivery to Tenant by Landlord of a statement in writing setting forth the amount of such taxes applicable to Tenant's property. If the local taxing authority issues a separate tax statement for Tenant's improvements, Tenant shall pay those taxes directly prior to delinquency. Failure of Tenant to so pay timely all or any part of the taxes it is obligated to pay hereunder shall be a material breach and default of this Lease. 14. ASSIGNMENT AND SUBLETTING 14.1 Tenant shall not voluntarily or by operation of law assign, transfer, mortgage, sublet or otherwise transfer or encumber all or any part of Tenant's interest in this Lease or in the Premises, without Landlord's prior written consent, which Landlord shall not unreasonably withhold or delay. Landlord shall respond to Tenant's request for consent hereunder in a timely manner and any attempted assignment, transfer, mortgage, encumbrance or subletting without such consent shall be void, and shall constitute a breach of this Lease. 14.2 If Tenant wishes to sublet any portion of the Premises ("Proposed Sublease Space"), Tenant shall give to Landlord, at least thirty (30) days prior to the proposed effective date of such subletting ("Proposed Effective Date") a notice of intention to sublease ("Notice of Intention"), which states the Proposed Effective Date and fully describes the Proposed Sublease Space and the proposed subtenant. Tenant shall also provide Landlord any reasonable additional information requested by Landlord concerning the proposed sublease or the proposed sublessee immediately upon request. 14.3 If Tenant wishes to sublet the whole Premises for the entire remaining term, as to the whole Premises, Landlord shall have the right, to be exercised by giving notice ("Recapture Notice") to Tenant within fifteen (15) working days after receipt of Tenant's Notice of Intention, to recapture the Premises. If such Recapture Notice is given, it shall serve to cancel and terminate the entire remaining Term of this Lease as of the Proposed Effective Date and as fully and completely as if said Date had been definitely fixed for the expiration of the Term of this Lease and all option rights of Tenant under this Lease with respect to the space shall also terminate retroactively as of the date Tenant gave its Notice of Intention. If such Recapture Notice is not given within 15 working days after receipt of Tenant's Notice of Intention, to recapture the Premises then approval to sublease shall be deemed given. 14.4 As to a portion of the Premises, upon receiving Tenant's Notice of Intention, Landlord will not unreasonably withhold or delay its consent to Tenant's subletting the Proposed Sublease Space pursuant to the Proposed Agreement as provided in its Notice of Intention subject, however, to all the other provisions of this Article. 14.5 In the event of any assignment or sublease of all or any portion of the Premises ("Transferred Space") where the rental reserved and all other consideration paid by or on behalf of the assignee or subtenant for such assignment or sublease, no matter how characterized and without regard to whether such appears in the assignment or sublease, exceed or are in addition to the rental reserved in the Lease or prorate portion of such rental, as the case may be, for such Transferred Space, Tenant shall pay Landlord, as additional rent, immediately after Tenant receives the same, fifty percent (50%) of such excess after first deducting the cost amortized on a straight line basis over the remaining term of the lease of (i) the Broker's commission paid by Tenant with regard to the transfer, (ii) and the cost of improvements made to the Premises by Tenant at Tenant's expense for the purpose of subletting or assigning of the rental reserved or other consideration for the assignment or sublease over the rental reserved in this Lease applicable to the Transferred Space. 14.6 That Tenant (and any guarantor of this Lease) remains fully liable during the unexpired Term of the Lease. Regardless of the Landlord's consent, no subletting or assignment shall release Tenant of Tenant's obligation or alter the primary liability of Tenant to pay the rent and to perform all other obligations to be performed by Tenant hereunder. The acceptance of rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provisions hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting. In the event of default by any assignee of Tenant or any successor of Tenant, in the performance of any of the terms hereof, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against said assignee. Landlord may consent to subsequent assignments or subletting of this Lease or amendments or modifications to this Lease with assignees of Tenant, without notifying Tenant, or any successor of Tenant, and without obtaining its or their consent thereto and such action shall not relieve Tenant of liability under this lease. 14.7 Tenant shall have the right to enter into a sublease, subject to the Landlord's approval as defined herein and which approval will not be unreasonably withheld or delayed, provided that the proposed tenant is generally compatible with the use and tenant mix of the Building and that existing tenants would not be adversely affected by the sublease tenant's use and occupancy of the Premises. Tenant shall not sublease the Premises to any other Tenant that is or in the future will be prohibited by virtue of restrictive clause(s) in any other tenant lease and Landlord reserves the right to deny the right to sublease to such tenant(s) unless express permission and waiver are received from the tenant or tenants holding such restrictive clause(s). For purpose of this Section 14.7 any use permitted in Section 9.1 shall be deemed a compatible use and tenant mix of the building. 14.9 Attorney's Fees: In the event Tenant shall assign or sublet the Premises or request the consent of Landlord to any assignment or subletting or if Tenant shall request the consent of Landlord for any act Tenant proposes to do then Tenant shall pay Landlord's reasonable attorney's fees incurred in connection therewith, such attorney's fees not to exceed Three Hundred Fifty ($350.00) Dollars for each such request. 15. HOLDING OVER 15.1 Any holding over after the expiration of this Lease by Tenant with the consent of the Landlord shall be deemed to be a tenancy from month to month and except for the Term thereof shall be on the same terms and conditions specified herein, so far as applicable, except for Rent which shall be at 125% month's rent due under this agreement. 16. NOTICES 16.1 All notices required or permitted by this Lease shall be in writing and may be delivered in person (by hand or by messenger or courier service) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 16. Either Party may by written notice to the other specify a different address for notice purposes, except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for the purpose of mailing or delivering notices to Lessee. A copy of all notices required or permitted to be given to Lessor hereunder shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate by written notice to Lessee. 16.2 Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given forty-eight (48) hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantees next day delivery shall be deemed given twenty-four (24) hours after delivery of the same to the United States Postal Service or courier. If any notice is transmitted by facsimile transmission or similar means, the same shall be deemed served or delivered upon telephone confirmation of receipt of the transmission thereof, provided a copy is also delivered via delivery or mail. If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day. 16.3 Notices for Landlord shall be addressed to: NORTH BLOCK PARTNERSHIP c/o Stephen T. Wong LaSalle Advisors Limited Partnership 888 S.W. Fifth Avenue, Suite 1280 Portland, OR 97204 c/o Robert E. Cullen North Block Partnership c/o Wolff Senson Buttery c/o Wolff Senson Buttery 99 Almaden Boulevard, Suite 1075 11828 La Grange Ave., #200 San Jose, CA 95113 Los Angeles, CA 90025 16.3 Notices for Tenant, prior to its occupancy of the Premises, shall be addressed to: AGILE SOFTWARE 2 North First Street San Jose, CA 95113 17. SIGNS 17.1 Tenant may not place or permit to be placed in, upon, about, or outside the Premises or any part of the Building in which the Premises are located, any sign(s) unless the prior written consent of Landlord is obtained. 17.2 Tenant shall pay all permit and license fees which may be required to be paid for the erection and maintenance of any and all such signs, and such signs shall be legally permitted to be installed. Tenant agrees to exonerate, save harmless, protect and indemnify Landlord from and against any and all losses, damages, claims, suits, or actions for any damage or injury to person or property caused by the erection and maintenance of such signs or parts thereof, and insurance coverage for such signs shall be included in the public liability policy which Tenant is required to furnish under Sections 20.1 and 20.2 hereof: 17.3 Landlord hereby agrees to install a building directory in the lobby of the Building, which building directory shall list, one time only at Landlord's expense in one location, both the name of the Tenant and each of Tenant's partners, principals, and key executives. Each directory shall be listed alphabetically from A through Z, and all names shall be of uniform size and style. 18. RIGHT OF ENTRY 18.1 Landlord and its agents shall have the right at any reasonable time upon reasonable notice and accompanied by Tenant, except for janitors, emergencies and in response to Tenant's request for repairs, to enter upon the Premises for the purposes of inspection, serving, or posting notices, maintaining the Premises, making any necessary or appropriate repairs, alterations, or additions to any portion of the Premises (including the erection and maintenance of scaffolding, partitions, and repair equipment as shall be required), complying with laws, ordinances, and regulations, protecting the Premises, or for any other lawful purpose, including showing the Premises to prospective purchasers or tenants, so long as such entry and activity do not interfere with the business activities of Tenant on the Premises. Tenant shall not, in such event, claim or be allowed or paid any damages for any injury or inconvenience occasioned thereby. 19. INDEMNIFICATION 19.1 Tenant shall indemnify and hold harmless Landlord from any and all claims arising from Tenant's use of the Premises or from the conduct of its business or from any activity, work, or other things done, permitted or suffered by Tenant in or about the Premises, and shall further indemnify and hold harmless Landlord against and from any and all claims arising from any breach or default to 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 the Tenant, and from all costs, attorneys fees, and liabilities, incurred in or about the defense of any such claim or any action or proceeding brought thereon. Tenant upon notice from Landlord shall defend the same at Tenant's expense by counsel reasonably satisfactory to Landlord. Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to property or injury to persons in, upon, or about the Premises, from any cause other than Landlord's negligence or intentional misconduct; and Tenant hereby waives all claims in respect thereof against Landlord. Tenant shall give prompt notice to Landlord of any casualty or accident in or about the Premises of which it has knowledge or notice. This indemnity is conditioned upon Landlord giving Tenant prompt notice of any claim being asserted or claimed against Landlord for which Tenant might be called upon to indemnify Landlord. 19.2 Landlord shall indemnify and hold harmless Tenant from any and all claims arising from Landlord's work, or other things done, permitted or suffered by Landlord in or about the Premises, and shall further indemnify and hold harmless Tenant against and from any and all claims arising from any breach or default to the performance of any obligation on Landlord's part to be performed under the terms of this Lease, or arising from any act or negligence of the Landlord, and from all costs, attorneys fees, and liabilities, incurred in or about the defense of any such claim or any action or proceeding brought thereon. Landlord upon notice from Tenant shall defend the same at Landlord's expense by counsel reasonably satisfactory to Tenant. 20. INSURANCE 20.1 Landlord's Insurance - Landlord shall secure and maintain. -------------------- (a) All risk property insurance on the Project. Landlord shall not be obligated to insure any furniture, equipment trade fixtures, machinery, goods, or supplies which Tenant may keep or maintain in the Premises or any alteration, addition, or improvement which Tenant may make upon the Premises. In addition, Landlord shall secure and maintain rental income insurance. If the annual cost to Landlord for such property or rental income insurance exceeds the standard rates because of the nature of Tenant's operations, Tenant shall, upon receipt of appropriate invoices, reimburse Landlord for such increased cost. (b) Commercial general liability insurance. Such insurance shall be in addition to, and not in lieu of, insurance required to be maintained by Tenant. Tenant shall not be named as an additional insured on any policy of liability insurance maintained by Landlord. 20.2 Tenant's Insurance. Tenant shall secure and maintain, at tenant's ------------------ expense: (a) All risk property insurance on all of Tenant's fixtures and personal property in the Premises and on any alterations, additions or improvements made by Tenant upon the Premises, all for the full replacement cost thereof. Tenant shall use the proceeds from such insurance for the replacement of fixtures and personal property and for the restoration of Tenant's improvements, alterations, additions to the leased premises. Landlord shall be named as loss payee as respects alterations, additions or improvements. (b) Extra expense insurance to cover the cost of Tenant's relocation due to destruction of the Premises. (c) Workers compensation and employers liability insurance. The employers liability insurance shall afford limits not less than $500,000 per accident, $500,000 per employee for bodily injury by disease, and $500,000 policy limit for bodily injury by disease. Such insurance shall comply with Tenant's obligations to the employees under California law. (d) Commercial general liability insurance which insures against claims for bodily injury, personal injury, advertising injury and property damage based upon, involving or arising out of the use, occupancy or maintenance of the Premises and the Project. Such insurance shall afford, at a minimum, the following limits: Each Occurrence $1,000,000 General Aggregate 2,000,000 Personal & Advertising Injury Liability 1,000,000 Fire Damage Legal Liability 50,000 Medical Payments 5,000 Any general aggregate limit shall apply on a per-location basis. Such insurance shall name Landlord; its trustees, officers, directors agents and employees; Landlord's Mortgagees; and Landlord's Representatives as additional insureds. This coverage shall include blanket contractual liability, broad form property damage liability and shall contain an exception to any pollution exclusion which insures damage or injury arising out of heat, smoke or fumes from a hostile fire. Such insurance shall be written on an occurrence basis and contain a standard separation of insureds provision. (e) Business auto liability which insures against bodily injury and property damage claims arising out of the ownership, maintenance or use of "any auto". A minimum of a $1,000,000 combined single limit per accident shall apply. (f) Umbrella excess liability insurance, on an occurrence basis, that applies excess of required commercial general liability, business auto liability and employers liability policies, which insures against bodily injury, property damage, personal injury and advertising injury claims with the following minimum limits: Each Occurrence $2,000,000 minimum Annual Aggregate 2,000,000 minimum These limits shall be in addition to and not including those stated for underlying commercial general liability, business auto liability and employers liability, business auto liability and employers liability insurance. Such policy shall name Landlord; its trustees, officers, directors, agents and employees; Landlord's Mortgagees; and Landlords' Representatives as additional insureds. (g) General insurance requirements. All policies required to be carried by Tenant hereunder shall be issued by and binding upon an insurance company licensed to do business in the state of California with a rating of at least "A VIII" or better as set forth in the most current issue of Best's Insurance Reports, unless otherwise approved by Landlord. Tenant shall not do or permit anything to be done that would invalidate the insurance policies required. Liability insurance maintained by Tenant shall be primary coverage without right of contribution by any similar insurance that may be maintained by Landlord. Certificates of insurance, acceptable to Landlord, evidencing the existence and amount of each insurance policy required hereunder shall be delivered to Landlord prior to delivery or possession of the Premises and ten days prior to each renewal date. Certificates of insurance shall include an endorsement for each policy showing that Landlord; its trustees, officers, directors, agents and employees; Landlord's Mortgagees; and Landlord's Representatives are included as additional insureds on liability policies and that Landlord is loss payee for property insurance. Further, the certificates must include an endorsement for each policy whereby the insurer agrees not to cancel, non-renew or materially reduce the limits of the policy on the premises without at least 30 days prior written notice to Landlord and Landlord's Representative. In the event that Tenant fails to provide evidence of insurance required to be provided by Tenant hereunder, prior to commencement of the term and thereafter during the term, within 10 days following Landlord's request thereof, and 30 days prior to the expiration date of any such coverage. Landlord shall be authorized (but not required) to procure such coverage in the amount stated with all costs thereof to be chargeable to Tenant and payable upon written invoice thereof. The limits of insurance required by this lease, or as carried by Tenant, shall not limit the liability of Tenant or relieve Tenant of any obligation thereunder, except to the extent provided for under Waiver of Subrogation. Any deductibles selected by tenant shall be the sole responsibility of Tenant. 20.3 Waiver of Subrogation - Anything in this lease to the contrary --------------------- notwithstanding, Landlord and Tenant each waives all rights of recovery, claim, action or cause of action against the other, its agents (including partners, both general and limited), trustees, officers, directors, employees, for any loss or damage that may occur to the Premises, or any improvements thereto, or the Project or any personal property of such party therein, by reason of any peril required to be insured against under this lease, regardless of cause of origin, including negligence of the other party. Tenant and Landlord covenants that, to the fullest extent permitted by law, no insurer shall hold any right of subrogation against the other. Tenant shall advise its insurers of the foregoing and such waiver shall be permitted under any policies maintained by Tenant pursuant to Paragraph 20.2(a) and Paragraph 20.2(b) 21. ESTOPPEL CERTIFICATE 21.1 Tenant shall execute, acknowledge and deliver to Landlord within ten (10) days of request by Landlord from Lease Commencement Date or payment in full by Landlord of any contribution toward Tenant Improvements, if any, the attached form of Estoppel unmodified and in full force and effect (or if there have been modifications that the same are in full force and effect as modified), the date of commencement of this Lease, the date on which rent has been paid, and any such other information as Landlord shall reasonably request. Also, at any time if requested by Landlord, Tenant shall execute and return to Landlord within ten (10) days the same or a similar form of Estoppel Certificate. It is acknowledged by Tenant that any such statement is intended to be delivered by Landlord and relied upon by prospective purchasers, mortgages, beneficiaries under deeds of trust or assignees thereof. Failure of Tenant to timely execute and return said Certificate to Landlord within said ten (10) days shall be deemed approval of same by Tenant and all information set forth on said Certificate shall be conclusively binding on Tenant. 22. SUBORDINATION AND NON-DISTURBANCE 22.1 Tenant shall, subject to the conditions set forth below, at the request of Landlord, in writing, cause its interest to become subordinate to any such first mortgage or first deed of trust which has been or shall be placed on the land and building or land or building of which the Premises form a part. Tenant shall, at any time hereinafter on demand, execute any instruments, releases, or other documents that may be required by any mortgagee, mortgagor, or trustor or beneficiary under any such first deed of trust or first mortgage for the purpose of subjecting and subordinating this Lease to the lien of any such first mortgage or first deed of trust, provided, however, that such instrument must provide in effect that: (a) in the event of foreclosure or other action taken under the mortgage or deed of trust by the holder thereof, this Lease and the rights of Tenant hereunder (including the right, if any, to extend the Term thereof and for additional space) shall not be disturbed but shall continue in full force and effect so long as Tenant shall not be in default hereunder, and (b) such holder shall permit insurance proceeds and condemnation proceeds to be used for any restoration and repair required by this Lease; and (c) no property owned or removable by Tenant shall be subject to any lien of the mortgage or deed of trust. Tenant agrees that if the mortgagee, beneficiary, or any person claiming under the mortgagee or beneficiary shall succeed to the interest of Landlord in this Lease, Tenant will recognize said mortgagee, beneficiary, or person as its landlord under the terms of this Lease, provided that said mortgagee, beneficiary, or person for the period during which beneficiary, trustee, or person shall hold Landlord's interest in the Premises shall assume all of its obligations of Landlord hereunder. 23. COMPLIANCE WITH LAWS AND RULES 23.1 Tenant, at Tenant's sole cost, shall comply at all times with all laws, ordinances, orders, and regulations of all governmental and public authorities with respect to the use of the Premises and any associated adjacent Parking Facilities structure controlled or managed by Landlord and the use and occupation thereof by Tenant. A judgment of any court of competent jurisdiction or the admission by Tenant in any judicial or administrative action or proceeding against Tenant that Tenant has violated any such laws, ordinances, or order or regulations, shall be deemed to be conclusive as to Landlord and Tenant. 23.2 Tenant and Tenant's agent, servants, and employees, visitors, and licensees shall observe and comply strictly with all reasonable rules and regulations now adopted or which are adopted hereafter for the care, protection, cleanliness, and proper operation of the Building. A copy of the current Rules and Regulations is attached as Exhibit B. Landlord shall have no obligation to Tenant as a result of the violation of any such rules by any tenant or any other person. Landlord shall maintain a copy of such rules in the office of Landlord for inspection by Tenant at any reasonable time. Each and every such rule shall be deemed a material term of this Lease. 24. DESTRUCTION 24.1 In the event of damage causing a partial destruction of the Premises during the Term of this Lease from any cause as to which repairs can be made within (90) days from the date of the damage under the applicable laws and regulations of governmental authorities, Landlord shall repair said damage promptly and within a reasonable period of time, but Tenant and Tenant's insurance carrier will be solely responsible for repair and replacement, if any, of Tenant's improvements, furniture, fixtures, or any other work required in the Premises, and shall repair and replace within said ninety (90) days following full access to the Premises by Tenant, all improvements made at Tenant's expense and all furniture and fixtures in the Premises. Any such partial destruction shall in no way void this Lease, except that Tenant shall be entitled to a proportionate reduction of rent while such repairs are being made such proportionate reduction to be based upon the extent to which the portion of the Premises not usable by Tenant bears to the total area of the Premises, provided that if such damage is caused by negligence or greater culpability of Tenant, his agents, servants, employees, invitees, or permitees then Tenant shall not be entitled to abatement of rent not covered by insurance. Tenant shall be liable to Landlord for any and all damage caused by negligence or greater culpability of Tenant, his agents, servants, employees, invitees, or permitees and the cost of repairing same and Tenant shall be entitled to no reduction in rent. 24.2 If such repairs cannot be made within ninety (90) days, Landlord may, at its option, make the same within the period of no more than one hundred twenty (120) days, this Lease continuing in full force and effect and the rent to be proportionately rebated as provided in the previous Section. In the event that Landlord does not so elect to make such repairs which cannot be made in ninety (90) days, or such repairs cannot be made under such laws and regulations, or in the event Landlord does not make the repair within one hundred twenty (120) days, this Lease may be terminated at the option of either party. 24.3 With respect to any partial destruction which Landlord is obligated to repair or may elect to repair under the terms of this Article, the provisions of any statute or law permitting Tenant to terminate this Lease are waived by Tenant. In the event that the Building which the Premises are situated is destroyed to the extent of thirty-three and one-third percent (33-1/3%) or more of the then replacement cost thereof, the Landlord may elect to terminate this Lease, whether the Premises are injured or not. 24.4 A total destruction of the Premises or of the Building shall terminate this Lease as of the date of such total destruction. The determination that such total destruction has occurred shall be made by Landlord in its sole discretion which shall be reasonably exercised. 24.5 Except as stated in Section 24.1 herein with respect to reduction of rent as therein provided, Tenant shall not have any claim whatsoever against Landlord for any damages, nor shall Tenant be released or discharged from any of its obligations, liabilities, or indebtedness hereunder, should the possession by Tenant of the Premises be disturbed or interfered with or affected in any manner whatsoever, and irrespective of how caused, or by whom, excepting only the negligent, intentional, or willful interference in the possession of Tenant by Landlord. 24.6 Upon termination of this Lease pursuant to Article 24, an equitable adjustment shall be made concerning advance rent and any advance payments made by Tenant to Landlord. Landlord shall, in addition, return to Tenant so much of Tenant's security deposit as to which Landlord is not entitled hereunder. 24.7 Tenant waives the provisions of California Civil Code Sections 1932 (2) and 1933 (4) and any successor statutes or other statutes or laws which may now or during the Term of this Lease exist and which relate to termination of leases when the thing leased is destroyed, in whole or in part, and agrees that such event shall be governed solely by the terms of this Lease. 24.8 Anything contained in this Article to the contrary notwithstanding, Landlord shall not have any obligation whatsoever to repair, reconstruct, or restore the Premises when the damages from any casualty covered by this Article occurs during the last twelve (12) months of this Lease or any extensions thereof. Tenant shall have the right to cancel this lease if Landlord elects not to make repairs under Section 24.2. 25. CONDEMNATION 25.1 If any part of the Premises shall be taken or condemned for public or quasi-public use by right of eminent domain, with or without litigation, or transferred by agreement in connection with such public or quasi-public use, this Lease, as to the part so taken or condemned or transferred shall terminate as of the date title shall vest in the condemnor or transferee and the rent payable hereunder shall be adjusted so that tenant shall be required to pay for the remainder of the Term only such portion of the rent as the area in the part remaining that remains useable by Tenant for its business purposes after the taking or condemnation or transfer bears to the area of the entire Premises as of the date title shall vest in the condemnor. 25.2 In the event of such partial taking or condemnation by judgment, verdict or agreement, Landlord and Tenant each shall have the option to terminate this Lease as of the date title shall vest in the condemnor or transferee. If all of the Premises shall be so taken, condemned, or transferred or such part thereof be so taken, condemned, or transferred so that there does not remain a portion susceptible of occupation hereunder, this Lease shall terminate as of the date title shall vest in the condemnor or transferee and Tenant shall have no responsibility to pay rent from the date of such termination. 25.3 All compensation awarded upon such condemnation or taking shall go to the Landlord and the Tenant shall have no claim thereto, and the Tenant hereby irrevocably assigns and transfers to Landlord any right to compensation or damages to which Landlord may become entitled during the Term hereof by reason of the condemnation of all or part of the Premises. Notwithstanding anything in the foregoing to the contrary, Tenant, if not in default hereunder, shall have the right to receive that portion of the award made expressly for the moving or relocation expenses of Tenant, the trade fixtures of Tenant, any improvements paid for by Tenant and business disruption of Tenant. 26. INABILITY TO PERFORM 26.1 This Lease and the obligation of Tenant hereunder shall not be affected or impaired because Landlord is unable to fulfill any of his obligations hereunder or is delayed in doing so, if such inability or delay is caused by reason of unavailability or scarcity of material, strike, or other labor troubles, or any other causes beyond the reasonable control of Landlord. If Landlord is unable to give possession of the Premises to Tenant as provided for under Article 4 hereof within 45 days after the estimated Lease Commencement Date set forth therein, this Lease shall automatically terminate, and Landlord, by reason thereof shall not be subject to any liability therefor except that Landlord shall return to Tenant all monies which Landlord has theretofore received from Tenant as prepaid rent or as a security deposit. 27. INVOLUNTARY TERMINATION 27.1 This Lease, at the option of Landlord, shall cease and terminate upon the happening of any of the following events: (a) The filing of a petition for any proceeding under the Bankruptcy Act or any amendment thereto by Tenant or Lease Guarantor or any other person against Tenant or any Lease Guarantor, and same is not discharged within ninety (90) days of filing. (b) A finding or judgment of insolvency of Tenant or any Lease Guarantor. (c) An assignment for the benefit of creditors by Tenant or any Lease Guarantor. (d) The levying of a writ of execution on the business of Tenant or any Lease Guarantor or on the assets of Tenant or any Lease Guarantor which represents thirty-three and one-third percent (33-1/3%) or more of net worth of that Tenant or Lease Guarantor. (e) The appointment of a receiver to take possession of the Premises or the assets of Tenant or any Lease Guarantor which represents thirty-three and one-third percent (33-1/3%) or more of the net worth of that Tenant or Lease Guarantor. 28. DEFAULT 28.1 Tenant shall be in material default of this lease, if Tenant fails to observe or perform any of the covenants, conditions or provisions of this Lease to be observed or performed by Tenant other than the payment of rent where such failure shall continue for a period of thirty (30) days after written notice thereof from Landlord to Tenant; provided, however, that if the nature of Tenant's noncompliance is such that more than thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant commenced such cure within said thirty (30) day period and thereafter diligently pursues such cure to completion. To the extent permitted by law, such thirty (30) day notice shall constitute the sole and exclusive notice required to be given Tenant under applicable Unlawful Detainer statutes. If Tenant shall fail to make any payment of rent or any other payment required to be made by Tenant, as and when due, where such failure shall continue for a period of three (3) business days after written notice thereof from Landlord to Tenant, or if Tenant should abandon, vacate, or surrender the Premises or be dispossessed by any process of law, or Tenant shall fail to perform timely any of its other terms or obligations under this Lease, the same shall constitute an act of default and Tenant shall be in material breach of this Lease, and Landlord, in addition to all other rights or remedies provided by law, shall have the following rights: 28.1.1 In the event Tenant commits an act of default and abandons the Premises, Landlord may elect to continue this Lease in full force and effect and not terminate Tenant's right to possession of the Premises, in which event Landlord shall have the right to enforce any rights and remedies granted by this Lease and by law against Tenant, including without limitation, the right to collect when due rental and other sums payable hereunder, provided that after the occurrence of the act of default and abandonment of the Premises by Tenant and for so long as Landlord does not terminate Tenant's right to possession of the Premises, Tenant shall have the right to assign or sublet this Lease upon the prior written consent of Landlord, which consent Landlord will not unreasonably withhold. Landlord shall not be deemed to have elected to terminate Tenant's right to possession unless Landlord gives Tenant written notice of such election to terminate and in no event shall Landlord's acts of maintenance or preservation of the Premises, efforts to relet the Premises, or obtaining the appointment of a receiver to protect the interest of Landlord under the Lease be deemed to constitute such termination. 28.1.2 Landlord may elect by written notice to Tenant to terminate the Lease at any time after the occurrence of an act of default, and in such event Landlord may, at Landlord's option and to the extent permitted by law, declare this Lease and Tenant's right to possession terminated, re-enter the Premises, remove Tenant's property therefrom and store it for Tenant's account and at Tenant's expense, eject all persons from the Premises, and recover damages from Tenant without hindrance, and Landlord shall not thereby be liable in damages for such re-entry or be guilty of trespass or forcible entry. In the event Landlord elects to so terminate this Lease and Tenant's right to possession, or they are terminated by operation of law, such termination shall cancel all Tenant's options, if any, to extend the Term. 28.1.3 In the event Landlord elects to so terminate this Lease and Tenant's right to possession in accordance with the foregoing paragraph, or the same are terminated by operation of law, Landlord may recover as damages from Tenant the following: (i) The worth at the time of award of the unpaid rent and other sums due hereunder which had been earned at the time of termination of the Lease; plus (ii) The worth at the time of the award of the amount by which the unpaid rent and other sums due hereunder which would have been earned after the date of termination of this Lease until the time of the award exceeds the amount of such loss of rental and other sums due that Tenant proves could have been reasonably avoided; plus (iii) The worth at the time of award of the amount by which unpaid rental and other sums due hereunder for the balance of the Term after the time of award exceeds the amount of loss of such rental and other sums that Tenant proves could be reasonably avoided; plus (iv) Any other amount, including attorney's fees and court costs, necessary to compensate Landlord for all detriment proximately caused by Tenant's act of default or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of reletting and remodeling the Premises for a new tenant and brokerage fees involved in same. 28.1.4 The "worth at the time of award" of the amounts referred to in subparagraphs 28.1.3 (i) and 28.1.3 (ii) above is computed by allowing interest, at the maximum rate allowable in California as of the date of this Agreement for business loans, from the date(s) such unpaid rental and other sums became due. The "worth at the time of award" of the amount referred to in subparagraph 28.1.3 (iii) above is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). 29. ATTORNEY'S FEES AND HOLD HARMLESS 29.1 Tenant agrees that if Landlord is involuntarily made a party defendant to any litigation concerning this Lease or the Premises or the Building in which the Premises are a part by reason, in whole or in part, of any act of omission of Tenant and not because of any act or omission of Landlord, the Tenant shall hold harmless the Landlord from all liability by reason thereof, including reasonable attorney's fees incurred by Landlord in such litigation and all taxable court costs. Landlord agrees that if Tenant is involuntarily made a party defendant to any litigation concerning this Lease or the Premises or the Building in which the Premises are a part by reason, in whole or in part, of any act of omission of Landlord and not because of any act or omission of Tenant, the Landlord shall hold harmless the Tenant from all liability by reason thereof, including reasonable attorney's fees incurred by Tenant in such litigation and all taxable court costs. If legal or equitable action shall be brought by Landlord for unlawful detainer of the Premises, for the breach of any term, covenant or provision hereof, the party prevailing in said action (Landlord or Tenant as the case may be) shall be entitled to recover from the party not prevailing costs of suit and a reasonable attorney's fee which shall be fixed by the Judge of the Court, or any court-appointed arbitrator or any Judge pro tem. 30. WAIVER 30.1 No covenant, term, or condition or the breach thereof shall be deemed to be waived by Landlord, except by written consent of Landlord, and any waiver or breach of any covenant, term, or condition shall not be deemed to be a waiver of any preceding or succeeding breach of the same or any other covenant, term, or condition. Acceptance of all or any portion of rent at any time shall not be deemed to be a waiver of any covenant, term, or condition except as to the rent payment accepted. 31. QUIET POSSESSION 31.1 Upon commencement of the Term of this Lease and Tenant's timely paying the Rent, Operating Expenses Escalation payments and other sums provided hereunder and timely observing and performing all of the covenants, conditions, and provisions on Tenant's part to be observed and performed hereunder, Tenant, so long as not in default hereunder, shall have quiet possession of the Premises for the entire Term hereof, subject to all the provisions of the Lease. 32. SALE BY LANDLORD 32.1 In the event of a sale or conveyance by Landlord of the Building containing the Premises, the same shall operate to release Landlord from any future liability upon any of the covenants or conditions, express or implied, herein contained in favor of Tenant, and in such event Tenant agrees to look solely to the responsibility of the successor in interest to Landlord in and to this Lease. This Lease shall not be affected by any such sale, and Tenant agrees to attorn to the purchaser or assign. 33. BROKER REPRESENTATION 33.1 Landlord and Tenant agree that neither party has appointed a real estate broker to represent it in the negotiation and consummation of the Lease except for Colliers Parrish International, Inc. representing the Landlord and Ritchie Commercial representing the Tenant which commission shall be paid by Landlord. 35. CONDITION OF PREMISES 35.1 Following execution of this Lease, Landlord shall at its sole cost and expense make the following tenant improvements prior to occupancy: 1. Touch-up paint in the entire Premises. 2. Steam clean the carpet. 3. Ensure that all electrical, mechanical and other systems serving the floor are in good working order. 36. MISCELLANEOUS 36. 1 The captions of the paragraphs contained in this Lease are for convenience only and shall not be deemed to be relevant in resolving any question of interpretation or construction of any paragraph of the Lease. 36.2 All of the terms, covenants, and conditions of the Lease shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, and administrators, successors, and assigns, except that nothing in this provision shall be deemed to permit any assignment, subletting or use of the Premises other than expressly provided herein. 36.3 This Lease shall be governed and interpreted solely by the laws of the State of California then in force. Each number, singular or plural, as used in this Lease shall include all numbers and each gender shall be deemed to include all genders. 36.4 Time is of the essence of this Lease and of each and every provision hereof, except as to the conditions relating to the delivery of possession of the Premises to Tenant. Each term and covenant contained in this Lease to be performed by Tenant is a condition and any breach of such after notice and the applicable grace period is a material breach of this Lease. If Tenant shall consist of more than one person or organization, each such term and covenant shall be deemed to be the joint and several obligation of each such person or organization. All rights and remedies granted to Landlord by law or equity or under the Lease shall be cumulative and non-exclusive of any other remedy. 36.5 In the event Tenant hereunder shall be a corporation, the Tenant hereby covenants and warrants that Tenant is a duly qualified corporation and all steps have been taken prior to the date hereof to qualify Tenant to do business in California and all franchise and corporate taxes have been paid to date, and all future forms, reports, fees, and other documents necessary to comply with applicable law will be filed when due. Each individual executing this Lease on behalf of said corporation, warrants that the execution and delivery of this Lease by him has been duly authorized by the Board of Directors of the Tenant. If Tenant is a corporation Tenant shall, within thirty (30) days after execution of this Lease, deliver to Landlord a certified copy of a resolution of the Board of Directors said corporation authorizing or ratifying execution of this Lease. 36.6 If Tenant is a partnership, joint venture, or other unincorporated association, each individual executing this Lease on behalf of Tenant represents that this Lease is binding upon Tenant; furthermore, Tenant agrees that the execution of any written consent hereunder, or of any written modification or termination of this Lease, by a general partner of Tenant or any authorized agent of Tenant, shall be binding upon Tenant. 36.7 The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for, the Premises; and this document shall become effective and binding only upon execution and delivery hereof by Tenant and by Landlord (or, when duly authorized, by Landlord's agent or employee). No act or omission of any agent of Landlord or of Landlord's broker shall alter, change, or modify any of the provisions hereof. 36.8 If any provision of this Lease shall be determined to be void by any court of competent jurisdiction, then such determination shall not affect any other provisions of this lease and all other provisions shall remain in full force and effect; and it is the intention of the parties hereto that if any provision of this Lease is capable of two constructions, only one of which would render the provision valid, then the provision shall have the meaning which renders it valid. 36.9 Tenant agrees and covenants to comply with all of Landlord's rules and regulations as set forth in Exhibit B attached hereto. Landlord shall have the right from time to time to promulgate amendments and additional new rules and regulations for the care, safety, maintenance, and cleanliness of the Premises and the Building, or for the preservation of good order. On delivery of a copy of such reasonable amendments and reasonable new rules and regulations to Tenant, Tenant shall comply with same. A violation of any such rules and regulations which continue beyond a reasonable cure period after written notice by Landlord to Tenant shall constitute a default by Tenant under this Lease. If there is a conflict between the said rules and regulations and any of the provisions of this Lease, the provisions of the Lease shall prevail. 36.10 The laws of the State of California shall govern the validity, performance and enforcement of this Lease. Should either party institute a legal suit or action for enforcement of any obligation contained herein, it is agreed that the venue of such suit or action shall be in the county in which the Premises are located. This Lease is the result of negotiations between the parties hereto and shall not be construed either for or against Landlord or Tenant, but this Lease shall be interpreted in accordance with the general tenor of the language in an effort to reach an equitable result. 37. PARKING 37.1 Tenant shall be granted twenty-six (26) free employee parking spaces. Such spaces shall be for passenger vehicles which fit inside the parking structure only and shall be located in Park Center Plaza Garage III. 37.2 In addition, Tenant is granted the right to purchase up to twenty-six (26) additional employee parking spaces at the current rate. Landlord, at Landlord's sole option, may assign up to thirteen (13) of these spaces as roof top only parking. Tenant shall also have the right to purchase additional spaces at current market rates on an "as available" basis. 37.3 Tenant is granted the use of all spaces subject to the reasonable rules and regulations for operation of the parking facilities. 37.4 Tenant agrees not to assign, sublet, or in any way transfer the right to use of the parking spaces, except to any successor to Tenant's Premises. 38. HAZARDOUS MATERIALS 38.1 Landlord warrants that, to the best of its knowledge, the Premises are free of Hazardous Substances at the time of delivery to Tenant. 38.2 Tenant shall not cause or permit any Hazardous Substances to be used, stored, generated, or disposed of on or in the Premises by Tenant, Tenant's agents, employees, contractors, or invitees without first obtaining Landlord's written consent. If Hazardous Substances are used, stored, generated, or disposed of on or in the Premises except as permitted above, or if the Premises become contaminated in any manner for which Tenant is legally liable, Tenant shall indemnify and hold harmless the Landlord from any and all claims, damages, fine, judgments, penalties, costs, liabilities or losses (including, without limitation, a decrease in value of the Premises, damages caused by loss or restriction of rentable or usable space, and any and all sums paid for settlement of claims, attorneys' fees, consultants' fees, and experts' free) arising during or after the Lease Term and arising as a result of that contamination by Tenant. This indemnification includes, without limitation, any and all costs incurred because of any investigation of the site or any cleanup removal, or restoration mandated by a federal, state, or local agency or political subdivision. 38.3 Without limitation of the foregoing, if Tenant causes or permits the presence of any Hazardous Substance on the Premises and that results in contamination, Tenant shall promptly, at its sole expense, take any and all necessary actions to return the Premises to the condition existing prior to the presence of any such Hazardous Substance on the Premises. Tenant shall first obtain Landlord's approval for any such remedial action. 38.4 As used herein, "Hazardous Substances" means any substance that is toxic, ignitable, reactive, or corrosive and that is regulated by any local government, the state of California, or the United States Government. "Hazardous Substance" includes any and all materials or substances that are defined as "hazardous waste," extremely hazardous waste" or a "hazardous substance" pursuant to state, federal or local governmental law. "Hazardous Substance" includes, but is not restricted to, asbestos, polychlorobiphenyls ("PCBs") and petroleum. 38.5 Without limitation of the foregoing, it is understood that Tenant may use or store Hazardous Substances which are required for the operation of normal office equipment, including, but not limited to copiers, printers, fax machines, etc. 39. SEE ADDENDUM NORTH BLOCK PARTNERSHIP, a California limited partnership By: PROPERTY SAN JOSE ONE CORPORATION, an Oregon corporation, sole General Partner By: LaSalle Advisors Limited Its: Advisor and Duly Authorized Agent /s/ ------------------------------- Its: Stephen T. Wong Date: 6/5/96 ------------------------------- By: /s/ ------------------------------- Diane R. McMahon Its: Vice President Date: 6/5/96 ------------------------------- TENANT: Agile Software, a California Corporation By: /s/ --------------------------------- By:__________________________________ Date: 5/31/96 ------------------------------ ADDENDUM TO LEASE THIS ADDENDUM is made March 20, 1996 by and between NORTH BLOCK PARTNERSHIP ("Landlord"), and AGILE SOFTWARE, a California Corporation ("Tenant") to that lease herewith (the "Lease") between Landlord and Tenant affecting certain real property commonly known as the ONE ALMADEN BOULEVARD Building, located in the City of San Jose, County of Santa Clara, State of California. The following provisions are hereby added to the Lease: 1. LEASE BUY-OUT: Tenant shall have a one (1) time right to cancel the Lease at the end of the thirty-sixth (36th) month by performing the following: a) Six (6) months advance written notice to Landlord. b) Payment to Landlord of a Lease Cancellation Fee of Fifty Eight Thousand Five Hundred and No/100ths Dollars ($58,500.00) which is the equivalent of three (3) months rent at $1.50 per square foot. c) Repayment of deferred rent to Landlord in the amount of Forty Eight Thousand Seven Hundred Fifty and No/100ths Dollars ($48,750.00) such that upon Lease Cancellation, Tenant shall have paid an average of $1.50 per square foot over the thirty-six (36) month Lease Term. d) Payment to Landlord of the costs of unamortized tenant improvements, furniture costs and leasing commissions using a straight-line method with sixty (60) months as the amortization period. 2. OPTION TO RENEW: a) Provided Tenant is not in default under this Lease, Tenant shall have an option to extend this Lease for one (1) additional three (3) year period except that the new rent for the option period will be ninety-five percent (95%) of the then prevailing market rate. Tenant must exercise its option to renew no later than four (4) months prior to the termination of the original term of the Lease. b) In the event Tenant notifies Landlord of its intention to exercise its option to extend the term of the Lease, Tenant and Landlord shall meet and agree as to the new rent for the first year of the option period, in the event the parties fail to agree within thirty (30) days following written notice by the Tenant of Tenant's intention to exercise the option to renew, then each shall appoint an licensed appraiser. It shall be the duty of the appointed appraisers to appraise the fair market rental value of the demised Premises, using values that are reasonable and comparable for rentals in the Downtown San Jose office market. The base rent for the first year of the option period shall be the average of the fair market rental values determined by the two appraisers, provided such values do not vary from each other by more than 10%. Should the variance be greater than 10%, the two appraisers shall jointly appoint a third appraiser, who shall evaluate the appraisals submitted and select one of the appraisals as correct. The third appraiser's decision shall be binding upon Landlord and Tenant. Landlord and Tenant shall share equally in the payment of all appraisal fees pursuant to this subparagraph. 3. EXPANSION a) From time to time, during the Term of this Lease, Landlord will provide Tenant with lease expiration dates for the next twelve (12) months and a listing of current vacancies in the Building covering spaces greater than 5,000 square feet. Such information will be provided upon written request from Tenant no more frequently than quarter-annually. The provision of this information shall in no way infringe upon any rights of existing tenants concerning such vacant space nor affect Landlord's right to lease any such space in any manner it sees fit. 4. LETTER OF CREDIT: In order to secure the full and faithful performance of Tenant's obligations under this Lease (including, without limitation, Tenant's obligation to repay Landlord the sum of Thirty-Nine Thousand Dollars ($39,000) which Landlord has advanced for the purchase of certain furniture, fixtures and equipment), Tenant shall cause to be issued and shall deliver to Landlord within two weeks of lease execution an irrevocable Letter of Credit issued to and for the benefit of Landlord by Comerica Bank in an amount of not less than Two Hundred Thirty Four Dollars ($234,000), and valid for a term not less than thirty six (36) months, provided however, that the face amount of such Letter of Credit shall decline to zero on a straight-line basis over such thirty six month term. Should Comerica Bank notify Landlord of its election not to renew such Letter of Credit after the first year of its term, Tenant shall have thirty (30) days in which to deliver to Landlord an equivalent Letter of Credit to replace the original. Should Tenant fail to replace the non-renewed Letter of Credit within such 30 day period, Landlord shall be entitled to draw the full scheduled amount available under that Letter of Credit, regardless of whether Tenant is then in default of this Lease, and hold such sum as additional Security Deposit under the terms of this Lease. 5. FURNITURE: Tenant shall deal directly with Accel to purchase their work stations. Landlord agrees to reimburse Tenant in the amount of Thirty-Nine Thousand and No/100ths Dollars ($39,000.00) towards the cost of furniture Tenant is purchasing from Accel Technologies, Inc. Landlord will tender a check in this amount within five (5) days from the date Tenant occupies the Premises and delivers to Landlord a Bill of Sale. AGREED & ACCEPTED: - ----------------- LANDLORD: NORTH BLOCK PARTNERSHIP TENANT: AGILE SOFTWARE, a California Corporation By: /s/ By: /s/ ----------------------------------- ------------------------------ Title: Vice Presidents Title: President & CEO -------------------------------- --------------------------- Date: 6/5/96 Date: 5/31/96 -------------------------------- --------------------------- FIRST AMENDMENT TO OFFICE LEASE This First Lease Amendment (the "First Amendment") made and entered into the 15th day of October, 1996 by and between NORTH BLOCK PARTNERSHIP ("Landlord") and AGILE SOFTWARE, a California Corporation ("Tenant"). WITNESSETH: ----------- Reference is made to that certain Office Lease by and between Landlord and Tenant made and entered into on May 30, 1996, covering 13,0000 rentable square feet on the twelfth floor of the building at One Almaden Boulevard, San Jose, California, which is hereby amended as follows: 1. PREMISES 1.1 In consideration of their respective agreements contained herein, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord premises located on the eleventh floor of the Building, comprising approximately 2,477 rentable square feet designated as Suite 1101, and described on the attached Exhibit A-1 (the "Suite 1101 Additional Premises"). 1.2 Effective on the Suite 1101 Commencement Date, the Suite 1101 Additional Premises shall form a part of the Premises under the Lease and shall increase the size of the Premises to 15,477 rentable square feet. 2. TERM 2.1 The term of this lease of the Suite 1101 Additional Premises shall commence on November 15, 1996 (the "Suite 1101 Commencement Date") and shall run through July 31, 2001. 2.2 Tenant agrees that if Landlord is unable to deliver possession of the Suite 1101 Additional Premises to Tenant on the date above specified for the Suite 1101 Commencement Date, this Amendment shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom, but in such event Tenant shall not be liable for rent on the Suite 1101 Additional Premises until such time as Landlord tenders delivery of possession of those Premises to Tenant with Landlord's work therein substantially completed. The above notwithstanding, there shall be no delay in commencement of the Term or in Tenant's liability for payment of rent if Landlord is unable to deliver possession of the Suite 1101 Additional Premises due to any act, omission or delay of Tenant. Should Landlord tender possession of the Suite 1101 Additional Premises to Tenant prior to the date specified for commencement of the term thereof; and Tenant elects to accept such prior tender, such early occupancy shall be subject to all of the terms, covenants and conditions of this Lease, except the payment or rent, and shall not alter or affect the expiration date of the Term as set forth in Paragraph 2.1 above. In the event that Tenant commences occupancy of the Suite 1101 Additional Premises on any date other than the commencement date of the Term pursuant to this Paragraph 2, Landlord and Tenant shall promptly execute a written document confirming the date occupancy commenced. 3. RENT 3.1 Effective upon the Suite 1101 Commencement Date, the monthly base rent due and payable under this shall be as follows: PERIOD SUITE 1101 SUITE 1200 TOTAL ------ ---------- ---------- ----- 11/15/96 - 01/14/97 $3,715.50 $15,600.00 $19,315.50 01/15/97 - 07/14/97 3,715.50 18,850.00 22,565.50 07/15/97 - 07/14/99 3,963.20 20,150.00 24,113.20 07/15/99 - 07/31/2001 4,334.75 22,100.00 26,434.75 4. TENANT IMPROVEMENT'S 4.1 Landlord shall, at its own cost and expense, construct certain improvements in the Suite 1101 Additional Premises prior to Tenant's occupancy. The improvements to be constructed are delineated in the attached Exhibit E-1. 5. SUBSTITUTED PREMISES 5.1 Landlord shall have the right one (1) time during the Term hereof, upon giving Tenant not less than three (3) months prior written notice, to provide and furnish Tenant with space elsewhere within the Building of substantially the same size and of similar desirability and containing similar improvements as the Suite 1101 Additional Premises and remove and place Tenant in such space with Landlord to pay all reasonable costs and expenses incurred as a result of such removal of Tenant. Should Tenant be provided a notice that Landlord intends to relocate Tenant, then Tenant will have the right to terminate the Lease of the Suite 1101 Additional Premises only. Tenant will have thirty (30) days after receipt of (i) notice from Landlord and (ii) space plan of alternative space together with specific information on the improvements to be installed by Landlord in the alternative space to exercise the right to terminate. Should Tenant refuse to permit Landlord to move Tenant to such new space at the end of said three (3) month period, Landlord shall have the right to cancel and terminate this Lease of the Suite 1101 Additional Premises effective three (3) months from the date of original notification by Landlord. If Landlord moves Tenant to such new space, this Lease and each and all of its terms, covenants, and conditions shall remain in full force and effect and be deemed applicable to such new space, and such new space shall thereafter be deemed to be the "Premises" as though landlord and Tenant had entered into an express written amendment of this Lease with respect thereto. 5.2 Landlord and Tenant acknowledge that Landlord shall not exercise its rights under Section 5.1 of this Amendment for the purpose of providing the Suite 1101 Additional Premises to Virtual Chips. Furthermore, Landlord shall not exercise those rights for the purpose of providing the Suite 1101 Additional Premises to an assignee or sublessee of Virtual Chips unless the existing lease between Landlord and Virtual Chips has been terminated. 6. OPTION TO RENEW 6.1 Landlord and Tenant agree that the Option to Renew the Lease of the twelfth floor Premises does not apply to the Suite 1101 Additional Premises. 7. PARKING 7.1 Effective upon the Suite 1101 Commencement Date, Tenant will be granted an additional five (5) free employee parking spaces, bringing the total of free parking spaces under the Lease to (31). OTHER THAN THE FOREGOING, all other terms, covenants and conditions of the Lease as far as applicable remain unchanged. IN WITNESS WHEREOF, the parties hereto have subscribed their names and executed this First Amendment the day and year written below. NORTH BLOCK PARTNERSHIP a California limited partnership By: PROPERTY SAN JOSE ONE CORPORATION, an Oregon corporation, sole General Partner By: LaSalle Advisors Limited Its: Advisor and Duly Authorized Agent By: /s/ Stephen T. Wong ------------------------------ Stephen T. Wong Its: Vice President. Date: 10/22/96 ---------------------------- By: /s/ Diane R. McMahon ------------------------------ Diane R. McMahon Its: Vice President Date: 10/22/96 ---------------------------- AGILE SOFTWARE, a California Corporation Tenant By: /s/ ------------------------------ Its: President ------------------------- SECOND AMENDMENT TO OFFICE LEASE This Second Lease Amendment (the "Second Amendment") made and entered into the 12th day of March, 1998 by and between NORTH BLOCK PARTNERSHIP ("Landlord") and AGILE SOFTWARE, a California Corporation ("Tenant"). WITNESSETH: ----------- Reference is made to that certain Office Lease by and between Landlord and Tenant made and entered into on May 30, 1996, Addendum to Lease dated March 20, 1996, and First Amendment dated October 15, 1996, covering 13,000 rentable square feet on the twelfth floor and 2,477 rentable square feet on the eleventh floor of the building at One Almaden Boulevard, San Jose, California, which is hereby amended as follows: 1. TERM 1.1 The term of the Lease is hereby extended for a period of thirteen (13) months beginning August 1, 2001 and expiring on August 31, 2002 (the "Extended Term"). 2. RENT 2.1 Monthly base Rent for the Extended Term will be $27,935.99, which is calculated at the rate of $1.805 per rentable square foot. 3. LEASE BUY-OUT (DELETION) 3.1 Article 1 of the Addendum to Lease dated March 20, 1996 entitled "Lease Buy-Out" is hereby deleted in its entirety. 4. OPTION TO RENEW 4.1 Paragraph 2 a) of the Addendum to Lease dated March 20, 1996 is hereby deleted and is replaced with the following new paragraph 2a): "Provided Tenant is not in default under this Lease, Tenant shall have an option to extend the Term of this Lease on the same terms and conditions for one (1) additional three (3) year period ("Second Extended Term") except that the rent for the Second Extended Term period will be one-hundred percent (100%) of the then prevailing market rate. Tenant shall exercise its option to renew, if at all, by written notice to Landlord no later than six (6) months prior to the expiration of the Extended Term. Landlord and Tenant acknowledge that the option described in this Paragraph 2 a.) does not apply to the Suite 1101. Premises unless Tenant exercises the option described in Article 5 of the Second Amendment to this Lease. 5. OPTION TO EXPAND AND EXTEND TERM - 11TH FLOOR 5.1 Provided Tenant is not in default under this Lease and provided that Phoenix Technologies or its successor does not exercise its option to extend its lease of Suite 1100, Tenant shall have the option, upon the expiration of the Extended Term, to add Suites 1100 and 1101 to the Premises under lease for the Second Extended Term. Suite 1100 is currently occupied by Tenant under a sublease with Phoenix Technologies and Suite 1101 is currently occupied by Tenant under this Lease but is not subject to the Option to Renew (Article 2 of Addendum to Lease). The option described in this paragraph 5.l applies to Suites 1100 and 1101 together and may not be exercised for either suite separately. 5.2 Tenant acknowledges that if Tenant exercises the option described in the foregoing Paragraph 5.1, the eleventh floor Premises consisting of Suites 1100 and l101 shall be deemed to contain a total of 13,000 rentable square feet and that Rent and Operating Expense Escalation for the Second Extended Term shall be based on a total of 26,000 rentable square feet under this Lease. 5.3 Tenant further acknowledges that if this option is exercised, free parking shall be allocated in the ratio described in paragraph 37.1 of this Lease, so that Tenant shall be granted fifty-two (52) free employee parking spaces during the Second Extended Term. OTHER THAN THE FOREGOING, all other terms, covenants and conditions of the Lease as far as applicable remain unchanged. IN WITNESS WHEREOF, the parties hereto have subscribed their names and executed this Second Amendment the day and year written below. NORTH BLOCK PARTNERSHIP a California limited partnership By: Second Tower Its General Partner By: /s/ Lewis N. Wolff ------------------- Lewis N. Wolff AGILE SOFTWARE, a California Corporation By: /s/ -------------------------- Its: CFO ------------------------- THIRD AMENDMENT TO OFFICE LEASE This Third Amendment to Office Lease ("Third Amendment") is made and entered into this 18th day of September, 1998 by and between North Block Partnership ("Landlord") and Agile Software, a California Corporation ("Tenant"). RECITALS 1. Tenant and Landlord are parties to that certain Office Lease by and between Landlord and Tenant dated May 30, 1996, Addendum to Lease dated March 20, 1996, First Amendment dated October 15, 1996 and Second Amendment dated March 12, 1998 covering 13,000 rentable square feet on the twelfth floor and 2,477 rentable square feet on the eleventh floor at One Almaden Boulevard, San Jose, California, ("Building") comprising 15,477 rentable square feet. 2. Tenant wishes to lease from Landlord and Landlord wishes to lease to Tenant certain additional office premises located on the sixth floor of the Building. Those premises consist of 4,685 rentable square feet designated Suite 600 (the "Suite 600 Additional Premises") which is currently leased to the Accel Technologies, Inc. through September 30, 1998. Accel Technologies Inc. desires to surrender the Premises. Landlord is willing to recapture the Additional Premises and to lease the Additional Premises to Tenant. Therefore, Tenant and Landlord agree to amend the Lease as follows: 1. CONTINGENCY 1.1 This Third Amendment shall be contingent upon Landlord's execution of a lease amendment with Accel Technologies terminating that lease. None of the terms, covenants or conditions of this Third Amendment shall have any effect unless and until such amendment is executed. 2. PREMISES 2.1 Upon the commencement date described herein, the Suite 600 Additional Premises as depicted in the attached Exhibit A-3 will be added to the Premises under the Lease and will become subject to all the applicable terms thereof. When the Suite 600 Additional Premises have been added to the Lease, the total area of the Premises under Lease shall be 20,162 rentable square feet. 3. TERM 3.1 The term for the Suite 600 Additional Premises shall be for a period of forty-seven (47) months and eight (8) days, commencing September 23, 1998 and expiring concurrently with the Term of the Lease on August 31, 2002. 4. RENT 4.1 Effective September 23, 1998, Rent for the Suite 600 Additional Premises shall be as follows: Month Per Sq. Ft. Base Rent ----- ----------- --------- 09/23/98- 12/31/99 $1.85 $8,667.25 01/01/00- 08/31/02 $1.95 $9,135.75 5. TAXES AND OPERATING EXPENSES ESCALATION 5.1 Effective September 23, 1998, and continuing throughout the Term of the Lease, Tenant shall pay to Landlord its prorata share of Expenses for the Suite 600 Additional Premises to the extent the Expenses exceed the Expenses for calendar year 1998. Therefore, in Article 6 of the Lease, all references to Base Year, Real Estate Tax Base Year, or Base Year Expenses shall be changed to calendar year 1998 only insofar as they relate to the Suite 600 Additional Premises. Tenant's prorata share for the Suite 600 Additional Premises per Section 6.2 of the Lease shall be calculated using 4,685 rentable square feet as the numerator. None of the foregoing shall alter the Base Year or Tenant's obligations applicable to the Premises on the Suite 1100 and Twelfth Floor of the Building. 6. CONSIDERATION 6.1 Upon execution of this Amendment, Tenant shall deposit with Landlord the sum of Eight Thousand Six Hundred Sixty Seven and 25/100 Dollars ($8,667.25) to be credited to the first monthly installment of Rent for the Suite 600 Additional Premises and the additional sum of Nine Thousand One Hundred Thirty Five and 75/100 Dollars ($9,135.75) to serve as additional security deposit. 7. CONDITION OF PREMISES 7.1 Tenant accepts the Suite 600 Additional Premises strictly "as-is". 8. PARKING 8.1 Effective September 23, 1998 and continuing throughout the Term of this Lease, the number of parking spaces that Landlord shall provide Tenant shall be increased by nine (9) such that when the area of the Premises under Lease becomes 20,162 rentable square feet, Tenant shall be entitled to a total of forty (40) spaces. 9. BROKER REPRESENTATION 9.1 Landlord and Tenant agree that neither party has appointed a real estate broker to represent it in the negotiation and consummation of this Third Amendment and that neither party shall be responsible for payment of real estate commission(s) pursuant to this Third Amendment. OTHER THAN THE FOREGOING, all other terms, covenants and conditions of the Lease as far as applicable remain unchanged. IN WITNESS WHEREOF, the parties hereto have subscribed their names and executed this Third Amendment the day and year written below. NORTH BLOCK PARTNERSHIP a California limited partnership By: Second Tower Its General Partner By: /s/ Lewis N. Wolff ------------------- Lewis N. Wolff AGILE SOFTWARE, a California Corporation Tenant By: /s/ -------------------------- Its: CFO ------------------------- Date: 9-19-98 ------- FOURTH AMENDMENT TO OFFICE LEASE This Fourth Amendment to Office Lease ("Fourth Amendment") is made and entered into this 6th day of April, 1999 by and between North Block Partnership ("Landlord") and Agile Software, a California Corporation ("Tenant"). RECITALS 1. Tenant and Landlord are parties to that certain Office Lease by and between Landlord and Tenant dated May 30, 1996, Addendum to Lease dated March 20, 1996, First Amendment dated October 15, 1996, Second Amendment dated March 12, 1998 and Third Amendment dated September 18, 1998 covering 13,000 rentable square feet on the twelfth floor, 2,477 rentable square feet on the eleventh floor and 4,685 rentable square feet on the sixth floor of the building located at One Almaden Boulevard, San Jose, California, ("Building") 2. Tenant wishes to lease from Landlord and Landlord wishes to lease to Tenant certain additional office premises located on the third floor of the Building. Those premises consist of 13,000 rentable square feet designated Suite 300 (the "Suite 300 Additional Premises"). The Suite 300 Additional Premises are currently leased to Sequoia Insurance and subleased to Winston Advertising, with terms expiring March 31, 2001. Tenant intends to sub- sublease the Suite 300 Additional Premises from Winston through March 31, 2001. Therefore, Tenant and Landlord agree to amend the Lease as follows: 1. CONTINGENCY 1.1 This Third Amendment shall be contingent upon Tenant's execution of a sub-sublease with Winston Advertising covering the Suite 300 Additional Premises through March 31, 2001. None of the terms, covenants or conditions of this Third Amendment shall have any effect unless and until such sub- sublease is fully executed and approved by Landlord. 1.2 In the event that the master lease governing Tenant's sub-sublease of the Suite 300 Additional Premises terminates for any reason prior to March 31, 2001 and provided that Tenant is not then in default under the terms of the Lease, Tenant shall have the option of (a) terminating this Fourth Amendment or (b) electing to advance the commencement date of this Fourth Amendment to the date of termination of such master lease. 1.3 Landlord represents and warrants that as of the date of execution of this Fourth Amendment, Landlord is not aware of any uncured default by any tenant, assignee, or subtenant under the master lease for the Suite 300 Additional Premises. 2. PREMISES 2.1 Upon the commencement date described herein, the Suite 300 Additional Premises as depicted in the attached Exhibit A-4 will be added to the Premises under the Lease and will become subject to all the applicable terms thereof. When the Suite 300 Additional Premises have been added to the Lease, the total area of the Premises under Lease shall be 33,162 rentable square feet. 3. TERM 3.1 The term for the Suite 300 Additional Premises shall be for a period of seventeen (17) months, commencing April 1, 2001 and expiring concurrently with the Term of the Lease on August 31, 2002. 4. RENT 4.1 Effective April 1, 2001, and continuing throughout the Term, base Rent for the Suite 300 Additional Premises shall be twenty-nine thousand two hundred fifty dollars ($29,250.00) per month, calculated at the rate of $2.25 per rentable square foot. 5. TAXES AND OPERATING EXPENSES ESCALATION 5.1 Effective April 1, 2001 and continuing throughout the Term of the Lease, Tenant shall pay to Landlord its prorata share of Expenses for the Suite 300 Additional Premises to the extent the Expenses exceed the Expenses for calendar year 1998. Therefore, in Article 6 of the Lease, all references to Base Year, Real Estate Tax Base Year, or Base Year Expenses shall be changed to calendar year 1998 insofar as they relate to the Suite 300 Additional Premises. Tenant's prorata share for the Suite 300 Additional Premises per Section 6.2 of Page 1 of 3 the Lease shall be calculated using 13,000 rentable square feet as the numerator. None of the foregoing shall alter the Base Year or Tenant's obligations applicable to any other portion of the Premises under this Lease. 6. CONSIDERATION 6.1 Upon execution of this Amendment, Tenant shall deposit with Landlord the sum of twenty-nine thousand two hundred fifty dollars ($29,250.00) to serve as additional Security Deposit. 7. CONDITION OF PREMISES 7.1 Tenant accepts the Suite 300 Additional Premises strictly "as-is". 7.2 Tenant acknowledges that Landlord may, during the Term of the Lease and at its own expense, elect to remove the stairwell connecting the Suite 300 Additional Premises with the fourth floor of the Building. If such removal is accomplished, the scope of work will include the removal of the stairwell and the patching of walls, carpet and ceiling in way of the removal only. Any additional work desired by Tenant must be accomplished at Tenant's expense. The scope of work of any such removal will include restoration of such area including, without limitation, painting, so that the restored area reasonably matches the surrounding premises. In addition, such work shall be performed by Landlord in a manner that does not unreasonably interfere with Tenant's use of the Premises. 8. PARKING 8.1 Effective April 1, 2001 and continuing throughout the Term of this Lease, the number of parking spaces that Landlord shall provide Tenant shall be increased by twenty-six (26), such that when the area of the Premises under Lease becomes 33,162 rentable square feet, Tenant shall be entitled to a total of sixty-six (66) spaces. 9. EXPANSION OPTION - TENTH FLOOR 9.1 Provided Tenant is not then in default hereunder, Tenant shall have the option to lease the entire tenth floor of the Building, comprising 13,000 rentable square feet, upon expiration of the existing lease covering that floor which is scheduled to expire on September 30, 2001. This option shall be subject to all of the following conditions: (a) Tenant shall exercise such option, if at all, by giving Landlord written notice of its exercise of option, on or before December 31, 2000. (b) Tenant's exercise of this option for the tenth floor is contingent upon the concurrent exercise of Tenant's options for the twelfth floor per Paragraph 4.1 of the Second Amendment and for the eleventh floor in accordance with and as conditioned by Article 5 of the Second Amendment. Notwithstanding the foregoing, Tenant's options concerning the eleventh and twelfth floors will not be affected if Tenant declines to exercise the option described in Paragraph 9.1 of this Fourth Amendment. (c) Any lease of the tenth floor by Tenant shall be on the same terms and conditions as this Lease, as far as applicable, except for: (1) Rent, which shall be one hundred percent (100%) of the then prevailing market rate, and shall be determined in accordance with Paragraph 2(b) of the Addendum to Lease dated March 20, 1996. Upon determination of the Rent for the premises covered by the option, Landlord and Tenant shall execute an amendment to this Lease setting forth their agreement. (2) Parking, which shall include only twenty-six spaces in consideration of the lease of the tenth floor. (d) The term of any lease of the tenth floor pursuant to this option shall commence immediately upon the expiration of the existing lease for that floor, which is scheduled for September 30, 2001, and shall expire concurrent with the Second Extended Term on August 31, 2005. (e) Upon exercise of its option for the tenth floor, Tenant shall deposit with Landlord the sum of $30,000 to serve as additional Security Deposit under the Lease. Page 2 of 3 Upon execution of the amendment discussed in Paragraph 9.1(c) (1) above, Tenant shall deposit with Landlord an amount equal to the first month's Rent due for the tenth floor, which shall be credited to said first monthly installment of Rent due thereunder. 10. OPTION TO EXTEND TERM - SUITE 300 - ------------------------------------- 10.1 Provided Tenant is not then in default hereunder, Tenant shall have the option to extend its lease of the Suite 300 Additional Premises for one (1) additional period of three (3) years, subject to the following conditions: (a) Tenant shall exercise such option, if at all, by giving Landlord written notice of its exercise of option, on or before August 31, 2001. (b) The extension of the Term of Tenant's lease of the Suite 300 Additional Premises pursuant to this option shall be on the same terms and conditions as this Lease, as far as applicable, except for Rent, which shall be one hundred percent (100%) of the then prevailing market rate, and shall be determined in accordance with Paragraph 2(b) of the Addendum to Lease dated March 20, 1996. Upon determination of the Rent for the premises covered by the option, Landlord and Tenant shall execute an amendment to this Lease setting forth their agreement. 11. BROKER REPRESENTATION 11.1 Landlord and Tenant agree that neither party has appointed a real estate broker to represent it in the negotiation and consummation of this Fourth Amendment except Mark Ritchie of Ritchie Commercial, whose fee shall be paid by Landlord pursuant to a separate agreement. OTHER THAN THE FOREGOING, all other terms, covenants and conditions of the Lease as far as applicable remain unchanged. IN WITNESS WHEREOF, the parties hereto have subscribed their names and executed this Third Amendment the day and year written below. NORTH BLOCK PARTNERSHIP a California limited partnership By: Second Tower Its General Partner By: /s/ Lewis N. Wolff ------------------- Lewis N. Wolff AGILE SOFTWARE, a California Corporation Tenant By: /s/ ----------------------------- Its: CFO ---------------------------- Date: 4-9-99 ------ Page 3 of 3 SUBLEASE AGREEMENT ------------------ This Sublease Agreement ("Sublease") is dated as of March 1, 1998 (the "Effective Date") by and between Phoenix Technologies Ltd., a Delaware corporation ("Sublessor") and Agile Software, a California corporation ("Sublessee"). 1. PROVISIONS CONSTITUTING SUBLEASE -------------------------------- 1.1 This Sublease is and at all times shall be subject and subordinate to the Almaden Financial Plaza Office Lease dated as of May 9, 1996 between North Block Partnership as landlord ("Landlord") and Virtual Chips, Inc. (to which Sublessor is the successor by acquisition) as tenant ("Tenant") (the "Master Lease"). A copy of the Master Lease is attached hereto as EXHIBIT A. --------- Sublessor shall comply with all of the provisions of the Master Lease and shall perform all the obligations on the part of the "Tenant" under the Master Lease other than the obligations of Tenant contained in the following paragraphs of the Master Lease: paragraphs 1, 3, 4, 5, 7, 8, 12 (with respect to the obligation to restore any condition that exists as of the Sublease commencement date or the date Sublessee occupies the Subleased Premises if Sublessee occupies the Subleased Premises before the Sublease commencement date) 15, 19.1 (with respect to events occurring prior to the Sublease commencement date), 21.1, 29.1 (to the extent attributable to Sublessor) and 37.2 and 37.3 (with respect to the obligations of Sublessor to indemnify, defend and hold harmless the Landlord for violations of paragraphs 37.2 and 37.3 caused by Sublessor). Such obligations shall continue to be obligations of Sublessor and Sublessor covenants and agrees to perform such obligations and to maintain the Master Lease in full force and effect for the term of this Sublease (except for breaches of the Master Lease caused by any breach of this Sublease by Sublessee). Sublessee and Sublessor each shall indemnify and hold the other harmless from and against all liability, costs, damages, claims, demands and expenses, including reasonable attorney's fees and costs, arising out of such party's failure to comply with or to perform its obligations hereunder or the obligations of the "Tenant" under the Master Lease (to the extent such obligation has been allocated to a party under this Sublease). In the event of the termination of Sublessor's interest as Tenant under the Master Lease for any reason other than a voluntary termination of the Master Lease by Sublessor without Sublessee's consent or a breach by Sublessor of its obligations under the Master Lease (except for breaches resulting from Sublessee's breach of this Sublease) or this Sublease, then this Sublease shall terminate concurrently therewith without any liability of Sublessor to Sublessee. 1.2 Except for paragraphs 1, 3, 4, 5, 7, 8, 15, 16.4, the first sentence of paragraph 21.1, 33, 34, 37.1, the Addendum to Lease, Exhibit D (Confirmation of Lease Commencement) and Exhibit E (Improvements Work Letter) of the Master Lease, all of the terms and conditions contained in the Master Lease are incorporated herein as terms and conditions or this Sublease and along with all of the following paragraphs set out in this Sublease shall be the complete terms and conditions of this Sublease. For purposes of such incorporation, all references in the Master Lease to the "Lease" shall be deemed to refer to this Sublease and all references in the Master Lease to "Landlord" and "Tenant" shall be deemed to refer to Sublessor and Sublessee, respectively, except that any reference to "Landlord" in Sections 10.5, 11, 14.1 14.2, 14.3, 14.4, 14.6, 14.7, 14.8, 14.9, 18, 19.1, 26.1, 37.2, (expect to the extent that losses are occasioned by the acts or omissions of Sublessor) and 37.3 of the Master Lease shall be deemed to refer to both Landlord and Sublessor and any reference to "Landlord" in Sections 10.1, 10.2, 10.3, 10.4, 12, 14.5, 17, 20.1, 20.2, 21.1, 22, 23.1, 24.1, 24.2, 24.3, 24.4, 24.5, 24.7, 24.8, 32 and 35.9 of the Master Lease shall be deemed to refer to Landlord only. 2. PREMISES -------- 2.1 Sublessor leases to Sublessee and Sublessee hires from Sublessor the premises consisting of approximately ten thousand three hundred seventeen (10,317) square feet, commonly known as Suite 1100, as more particularly shown on EXHIBIT B (the Subleased Premises"), located on the eleventh (11/th/) floor --------- of the building at One Almaden Boulevard, San Jose, California (the "Building"), together with the parking rights contained in paragraph 36 of the Master Lease. Upon commencement of the term of this Sublease, Sublessor shall transfer title to the personal property (the "Personal Property") described in EXHIBIT C in its --------- "as is" condition for the sum of One Dollar ($1.00). Upon request of Sublessee, Sublessor shall execute and deliver to Sublessee a bill of sale transferring title to the Personal Property to Sublessee. Upon expiration or earlier termination of this Sublease, Sublessee shall remove the Personal Property and restore any damage caused by such removal at its sole cost. 2.2 Sublessee accepts the Subleased Premises, and all improvements included therein, in their present condition, "as is," without representation or warranty by Sublessor as to the condition of the Subleased Premises or as to the use or occupancy which may be made thereof. Sublessee acknowledges (a) that it has been advised by Sublessor to satisfy itself with respect to each and every condition of the Subleased Premises and the present and future suitability or the Subleased Premises for Sublessee's intended use, (b) that Sublessee has made such investigations of the Subleased Premises as it deems necessary and assumes all responsibility for the results of such investigations, and (c) that neither Landlord nor Sublessor, or any of their agents, has made any oral or written representations or warranties with respect to such matters other than as set forth in this Sublease, if any. Sublessor shall have no obligation whatsoever to construct or make any alterations or improvements to the Subleased Premises. 2.3 Except to the extent that the Hazardous Substances (as defined in paragraph 37.4 of the Master Lease) in question was released, emitted, used, ---- stored, manufactured, transported or discharged by Sublessee, or its agents, employees or contractors, as between Sublessor and Sublessee, Sublessee shall not be responsible for and hereby is released by Sublessor from any claim, remediation obligation, removal obligation, monitoring cost, investigation obligation liability, cause of action, penalty, attorneys' fee, cost, expense or damage owing or alleged to be owing to any third party with respect to any Hazardous Substances present on or about the Subleased Premises, the Building or the soil, groundwater or surface water thereof, without regard to whether the Hazardous Substances were present on the Subleased Premises, the Building as of the commencement date or this Sublease or whether the presence of the Hazardous Substances was caused by any person other than Sublessor. Nothing contained in this paragraph shall be construed as to permit Sublessee to use, store or transport Hazardous Substances on the Subleased Premises. Sublessee's rights with respect to the use of Hazardous Substances on the Subleased Premises are set forth in paragraph 37 of the Master Lease. 3. TERM. ---- 3.1 The term of this Sublease shall commence on March 1, 1998, and shall terminate fifty-three months thereafter, unless sooner terminated pursuant to any provision hereof. Upon execution of this Sublessee and payment of the advance rent described in paragraph 4.1, Sublessee shall be given access to the Subleased Premises for the purpose of preparing the Subleased Premises for occupancy, provided, however, that Sublessee shall not be required to pay rent of additional charges prior to commencement of the Sublease on March 1, 1998. 3.2 If Sublessee remains in possession of all or any party of the Subleased Premises upon expiration of the term of this Sublease, with the consent of Sublessor, such tenancy shall be month-to-month only and shall not constitute a renewal or extension for any further term. If as a result of Sublessee's continued possession Sublessor must pay holdover rent pursuant to paragraph 15.1 of the Master Lease, the monthly rent shall be increased to an amount equal to one hundred twenty-five percent (125%) of the monthly rent payable during the last month of the term and any other sums due under this Sublease shall be payable in the amount and at the times specified in this Sublease. Such month-to-month tenancy shall be subject to every other term, condition, and covenant contained herein. If Sublessee fails to surrender the Subleased Premises to Sublessor upon the expiration of the term, despite demand to do so by Sublessor, Sublessee shall indemnify and hold Sublessor harmless from all loss or liability resulting from Sublessee's failure to surrender. 3.3 Notwithstanding any option to extend the term set forth in the Addendum to the Master Lease, Sublessee shall have no option to extend the term of this Sublease. 4. RENT. ---- 4.1 Sublessee shall pay to Sublessor as rent for the Subleased Premises the following amounts: Period Rate/sq. ft. Monthly Rent ------ ------------ ------------ Effective Date - February 28, 1999 $ 1.63 $16,816.71 March 1, 1999 - August 31, 2000 $ 1.73 $17,848.41 September 1, 2000 - July 3l, 2002 $1.805 $18,622.19 Each monthly rent payment shall be paid in advance, on the first day of each month of the term hereof. Sublessee shall pay Sublessor upon the execution hereof the sum of Sixteen Thousand Eight Hundred Sixteen and 71/100 Dollars ($16,816.71) as rent for the first month of the term. Rent for any period during the term hereof which is for less than one month shall be prorated based on the actual number of days in such month. Rent shall be payable without notice or demand and without any deduction, offset, or abatement in lawful money of the United States of America to Sublessor at the address stated herein or to such other persons or at such other places as Sublessor may designate in writing; provided, however, that to the extent that Sublessor's rent is abated for any reason under the Master Lease, Sublessee's rent hereunder shall likewise abate. 4.2 It is understood and agreed that the rent paid by Sublessee pursuant to paragraph 4.1 represents base rent only and does not include any expenses payable by Sublessor as described in paragraph 6 of the Master Lease. Sublessee shall be responsible for all such expenses and shall pay such expenses to Sublessor by the date that Sublessor is required to pay same to Landlord under the Master Lease. 4.3 Sublessee acknowledges that late payment by Sublessee to Sublessor of rent and other charges provided for under this Sublease will cause Sublessor to incur costs not contemplated by this Sublease, the exact amount of such costs being extremely difficult or impracticable to fix. Therefore, if any installment of rent or any other charge due from Sublessee is not received by Sublessor within ten (10) days after the day on which such payment was due, and Sublessee is notified of such nonreceipt, Sublessee shall pay to Sublessor an additional sum equal to five percent (5%) of the amount overdue as a late charge. The parties agree that this late charge represents a fair and reasonable estimate of the costs that Sublessor will incur by reason of the late payment by Sublessee. Initials: - -------- /s/ /s/ - --------------------------- --------------------------- Sublessor Sublessee 5. SECURITY DEPOSIT. Upon execution of this Sublease, Sublessee shall ---------------- deposit with Sublessor the sum of Sixteen Thousand Eight Hundred Sixteen and 7l/100 Dollars ($16,816.71) as security for Sublessee's faithful performance of Sublessee's obligations hereunder. If Sublessee fails to pay rent or other charges due hereunder, or otherwise defaults with respect to any provision of this Sublease, Sublessor may use, apply or retain all or any portion of said deposit for the payment of any rent or other charge in default or for the payment of any other sum to which Sublessor may become obligated by reason of Sublessee's default, or to compensate Sublessor for any loss or damage which Sublessor may suffer thereby. If Sublessor so uses or applies all or any portion of said deposit, Sublessee shall within ten (10) days after written demand therefor deposit cash with Sublessor in an amount sufficient to restore said deposit to the full amount hereinabove stated and Sublessee's failure to do so shall be a breach of this Sublease. Sublessor shall not be required to keep said deposit separate from its general accounts. Said deposit or so much thereof as had not theretofore been applied by Sublessor shall be returned without payment of interest for its use, to Sublessee within ten (10) days after the expiration or the term hereof or ten (10) days after the date Sublessee has vacated the Premises, whichever is later. 6. DAMAGE AND DESTRUCTION. In the event of the occurrence of an event ---------------------- set forth in paragraph 24 of the Master Lease, Sublessor agrees not to exercise any right to terminate the Master Lease unless and until requested to do so by Sublessee. Sublessee acknowledges, however, that Sublessor shall have no obligation to repair or restore the Subleased Premises following any such damage or destruction. Sublessor's only obligation in such event shall be to notify Sublessee or Landlord of the other party's election under paragraph 24 of the -- Master Lease. 7. PARKING. Sublessee's parking rights shall be as provided in ------- paragraph 36 of the Master Lease. 8. LANDLORD'S CONSENT. Sublessee acknowledges that this Sublease is ------------------ subject to the consent of the Landlord under the Master Lease. Accordingly, this Sublease shall not be effective unless and until Landlord has consented to this Sublease in writing. Sublessor shall use diligent efforts to obtain such consent as soon as reasonably possible following execution of this Sublease by Sublessor and Sublessee. Sublessor shall have no liability whatsoever to Sublessee, however, if Sublessor is unable to obtain such consent from Landlord. If Sublessor is unable to obtain Landlord's consent by March 10, 1998, this Sublease shall terminate. Sublessee has requested the right to occupy the Subleased Premises as of March 1st, 1998. Accordingly, upon execution of this Sublease, Sublessee shall have the right to occupy the Subleased Premises under the terms and conditions set forth herein prior to obtaining Landlord's consent; provided, however, that Sublessee shall defend, indemnify and hold Sublessor harmless from any and all claims, losses, damages and costs resulting from such early occupancy, including without limitation, any liabilities resulting from failure to obtain Landlord's prior consent to such occupancy. This indemnity obligation shall survive the termination of this Sublease. 9. ADDRESSES FOR NOTICES. Any notice shall be served by certified --------------------- mail, return receipt requested, overnight courier or hand delivery. Notices shall be deemed effective when received if served by hand delivery, one day after being sent if delivered by overnight carrier or three (3) days after deposit in the U.S. Mail if sent by certified mail. Sublessor's address for notices, and the address to which Sublessee shall make all payments of Rent due hereunder, shall be 411 East Plumeria Drive, San Jose, CA 95134, Attn: Director, Corporate Services. Notice sent to Sublessor shall include a copy to the attention of the General Counsel. Sublessee's address for notices shall be the address for the Subleased Premises. Either party may change the address for notices (or for rent payments) by giving written notice as set forth in this section. 10. SUBLESSOR'S OBLIGATIONS. With respect to work, services, repairs, ----------------------- restoration or the performance of any other obligation of Landlord under the Master Lease (including without limitation the obligations of Landlord in paragraphs 6, 10 and 24 of the Master Lease) (collectively, "Master Lessor - -- -- Obligations"), the sole obligation of Sublessor shall be to use its best efforts to cause Master Lessor to perform such Master Lessor Obligations as and when requested to do so by Sublessee; provided, however, that in no event shall Sublessor be liable to Sublessee for Master Lessor's failure to perform the same. If, notwithstanding Sublessor's efforts, Master Lessor shall continue to fail to perform any Master Lessor Obligation, upon written request from Sublessee, Sublessor shall either assign Sublessor's rights under the Master Lease to the extent necessary to permit Sublessee, at Sublessee's sole cost, to institute legal proceedings against Master Lessor to obtain the performance of such Master Lessor obligation (or assign any rights or remedies of Sublessor to obtain such performance); or Sublessor may, in its sole discretion, itself institute legal proceedings to enforce the performance of such Master Lessor Obligation. In the event that such legal proceedings are required, Sublessor and Sublessee agree to cooperate with each other in good faith in the course and conduct of such legal proceedings (including any settlement thereof). 11. DEFAULT: BREACH AND REMEDIES. The provisions set forth in section ---------------------------- 28 of the Master Lease are incorporated into this Sublease as if set forth fully herein. In the event Sublessee breaches any obligation of this sublease (including the terms of the Master Lease incorporated herein), Sublessor shall have the rights and remedies available to Landlord under the Master Lease. 12. SUBLESSOR'S REPRESENTATION. Sublessor represents and warrants -------------------------- that the Master Lease is in full force and effect, and there exists under the Master Lease no default or event of default by either Landlord, to the best of Sublessor's knowledge, or Sublessor, has any event occurred, or any circumstances exist, which, with the giving of notice or passage of time or both, could constitute such a default or event of default. Sublessor represents and warrants that it is successor by acquisition to Virtual Chips, Inc., the original Tenant under the Master Lease, and as such full power and authority to enter into this Sublease. 13. SUBLESSEE'S INSURANCE. Sublessor shall be named as an additional ---------------------- insured on all insurance policies required to be carried by Sublessee pursuant to this Sublease (including without limitation the policies required to be carried pursuant to paragraphs 12 and 20.2 of the Master Lease). Sublessee shall deliver to Sublessor copies of any certificate of insurance or notices related to insurance policies required to be given to Landlord pursuant to this Sublease (including the provisions of the Master Lease incorporated herein) in the time and manner such certificates or notices are required to be given to Landlord. 14. MERGER. This Sublease (including the applicable provisions of the ------ Master Lease) contains all agreements between Sublessor and Sublessee with respect to Sublessee's hiring of the Subleased Premises, and no other prior or contemporaneous agreement or understanding shall be effective. 15. Provided Sublessee is not in default, Sublessor will not exercise its option to renew under Addendum to lease for Master Lease.
SUBLESSOR SUBLESSEE - --------- --------- Phoenix Technologies Ltd., a Delaware Agile Software Corporation, a California corporation corporation
By /s/ Stuart J. Nichols By /s/ T.P. SHANAHAN ------------------------------- ------------------------------ Name Stuart J. Nichols Name T.P. SHANAHAN ----------------------------- ----------------------------- Its VP General Counsel & Secretary Its CFO ------------------------------ ----------------------------- SUB-SUBLEASE Sub-sublandlord: Winston Marketing & Communications, Inc. Sub-subtenant: Agile Software, Inc. Subject Property: One Almaden Plaza, Suite 300 San Jose, California Date: February 19, 1999 THIS SUB-SUBLEASE (this "Sub-Sublease") is entered into as of the 9th day of April, 1999, by and between (i) Winston Marketing & Communications, Inc., a California corporation ("Winston"), and (ii) Agile Software, Inc. ("Agile"), and is made with reference to the following facts: RECITALS A. Citation Insurance Company, a California corporation ("Citation"), is the tenant and North Block Partnership is the landlord pursuant to that certain Lease dated July 9, 1990 (the "Master Lease"), in which Citation leased certain space in an office building located at One Almaden Boulevard, San Jose, California, which promises are more particularly described in the Master Lease. A copy of the Master Lease is attached hereto as Exhibit A. --------- B. Pursuant to that certain Sublease Agreement dated September 5, 1997 (the "Sublease"), Citation subleased to Winston Marketing & Communications, Inc. ("Winston") Page 1 of 14 the premises described in the Master Lease consisting of approximately 13,000 rentable square feet, which space is more particularly described in the Sublease (the "Subleased Premises), a floor plan of which is attached to the Sublease as Exhibit A. A copy of the Sublease is attached hereto as Exhibit B. --------- C. Agile desires to lease the Subleased Premises consisting of approximately thirteen thousand (13,000) square feet from Winston and Winston desires to lease the Subleased Premises to Agile, on the terms, covenants and conditions contained herein. NOW, THEREFORE, in consideration of the mutual covenants and promises of the parties contained herein, the parties hereto agree as follows: 1. Provisions Constituting Sub-sublease: 1.1 This Sub-sublease consists of all of the terms and conditions set forth herein, and incorporates all of the terms and conditions of the Master Lease and of the Sublease (read, with respect to the Master Lease, as if Winston were the master landlord and Agile were the master tenant, and, with respect to the Sublease, as if Winston were the Sublandlord and Agile were the subtenant), with the exception of those portions of the Master Lease and Sublease as are specifically excluded in this agreement, or are modified by this agreement, provided however, that with respect to the obligations of the master landlord, and representations by the master landlord, to the tenant under the master lease, and the obligations of the sublandlord, and representations of the sublandlord, to the subtenant under the sublease, in the event of default or breach by the Master Landlord or the Sublandlord with respect to such obligations and representations, Winston's sole obligation to Agile shall be to assign whatever Page 2 of 14 rights it may have to enforce the provisions of the Master Lease or the Sublease, to the extent that any such rights exist and are assignable, without cost to Winston, to Agile. Agile hereby assumes and agrees to perform all of the obligations of "Tenant" under the Master Lease (limited only by the extent said obligations are expressly limited to the portion of the premises under the Master Lease which constitute the Subleased Premises), except as such obligations may be modified by this agreement. Agile further agrees to assume and to perform all of the obligations of "Subtenant" under the Sublease, except as such obligations may be modified by this agreement. Agile shall not commit or permit to be committed on the Subleased Premises, or the building and/or real property on which the Subleased Premises are located, any act or omission which violates any term or condition of the Master Lease or the Sublease. The following provisions in the Master Lease were excluded from Winston's obligations under the Sublease and are not part of Agile's obligations under this Sub-sublease: Paragraphs 1, 2, 3.1, 4.1, 4.2, 5.1, 5.2, 7, 32, 33, 35 and Exhibits D and E. Similarly, the following provisions in the Sublease are excluded from Agile's obligations under this Sub-sublease: Paragraphs 3.2, 3.3, 4, 5, 6, 7, 8, 9, 10, 11, 13, 14, 15, 16, 17. Notwithstanding any other provision of this Sub-sublease, or of the sublease, Winston does not make any representation that the Premises comply with ADA, or that the Premises were constructed in accordance with plans or permits, or that there were no hazardous materials on the Page 3 of 14 Premises prior to Winston's occupancy, provided, further, that Winston represents that it has not brought any hazardous materials on to the Premises during its occupancy. Except as modified in this paragraph, the provisions of Paragraph 12 of the Sublease are incorporated in this Sub- sublease. Except to the extent waived or consented to in writing by the other party or parties hereto who are affected thereby, neither of the parties hereto will, by renegotiation of the Sublease, assignment, subletting, default or any other voluntary action, avoid or seek to avoid the observance or performance of the terms to be observed or performed hereunder by such party. Nothing contained in this Section 1.1 or elsewhere in this Sub-sublease shall prevent or prohibit Winston from assigning its interest in this Sub-sublease, provided that the assignee recognizes the terms of this Sub-sublease. 2. Rent: 2.1 Rent: Agile shall pay to Winston as Rent for the Subleased Premises per the schedule below, without deductions, offset, prior notice or demand. Rent shall be payable by Agile to Winston in consecutive monthly installments on or before the first day of each calendar month during the Sub-sublease Term. If the Sub-sublease commencement date or the termination date of the Sub-sublease occurs on a date other than the first day or the last day, respectively, of a calendar month, then the Rent for such partial month shall be prorated and the prorated Rent Page 4 of 14 shall be payable on the Sub-sublease commencement date or on the first day of the calendar month in which the Sublease termination date occurs, respectively: May 1, 1999 - March 31, 2001: $28,600.00 per month At Sub-sublease execution, Sub-sublessee shall deliver to Sub-sublessor a check in the amount of $57,200.00 to cover the first month's rent of $28,600.00 and a security deposit in the amount of $28,600.00 2.2 Security Deposit: In addition to the Rent specified above, Agile shall pay to Winston $28,600.00 as a non-interest bearing Security Deposit. In the event Agile has performed all of the terms and conditions of this Sub-sublease during the term hereof, Winston shall return to Agile, within ten days after Agile has vacated the Subleased Premises or the Sub-sublease has been terminated, whichever occurs first, the Security Deposit less any sums due and owing to Winston. 3. Operating Expenses: Notwithstanding any provision in Section 6.1 of the Master Lease, Agile shall pay all increases in the Subtenant's share of operating expenses for the Subleased Premises for which Winston is responsible, as such expenses are defined in the Master Lease, and as modified by the Sublease, to the extent that such operating costs exceed the operating costs for the base calendar year ending December 31, 1999. Upon being billed by the Master Landlord, Winston shall bill such operating costs to Agile, to be payable by Agile within 10 days. Page 5 of 14 4. Rights of Access and Use: 4.1 Use: Agile shall use the Subleased Premises only for those purposes permitted in the Master Lease, and the Sublease, unless Winston, Citation, and the Master Landlord consent in writing to other uses prior to the commencement thereof. 5. Sub-sublease Term: 5.1 Sub-sublease Term/Occupancy: The Sub-sublease Term and occupancy shall be for the period commencing on May 1, 1999, and continuing through March 31, 2001. In no event shall the Sub-sublease Term extend beyond the Term of the Master Lease. 5.2 Inability to Deliver Possession: Winston shall use its best efforts to deliver possession of the Subleased Premises to Agile on the commencement date of the term. In the event Winston is unable to deliver possession of the Subleased Premises on May 1, 1999, due to circumstances beyond the reasonable control of Winston, Winston shall not be liable for any damage caused thereby, nor shall this Sub-sublease be void or voidable, provided, however, that in such event, Winston agrees to make available to Agile by May 1, 1999, at least 3,000 square feet of the Premises, in which case, the term of this Sub-sublease shall commence on such delivery, but until such time as Winston has delivered the entire Premises to Agile, Agile's rent and expenses under this Sub-sublease shall be pro-rated based upon the actual amount of space delivered to Agile, compared with the total square footage in the Premises, and, provided, further, that if Winston is unable to Page 6 of 14 deliver the entire premises by June 1, 1999, Agile shall have the option to terminate this Sub-sublease, which option may be exercised by written notice to Winston at any point in time between May 1, 1999 and July 1, 1999. If Agile, with Winston's prior written consent, commences operations in the Premises prior to commencement of the term, Agile shall do so subject to all the covenants and conditions hereof and shall pay Rent for such period at the same rental as that prescribed for the first month of the term prorated at the rate of 1/30th thereof per day. 6. Notices: All notices, demands, consents and approvals which may or are required to be given by either party to the other hereunder shall be given in the manner provided in the Master Lease, at the addresses shown on the signature page hereof. Winston shall notify Agile of any Event of Default under the Master Lease, or the Sublease, or of any other event of which Winston has actual knowledge which will impair Agile's ability to conduct its normal business at the Subleased Premises, as soon as reasonably practicable following Winston's receipt of notice from the Landlord or Citation of an Event of Default or actual knowledge of such impairment. 7. Broker Fee: Upon execution of the Sublease, Winston shall pay Colliers International, Inc., a licensed real estate broker, and shall cooperate with Agile's broker, Ritchie Commercial, fees set forth in a separate agreement between Winston and Broker, for brokerage services rendered by Broker to Winston in these Page 7 of 14 transactions. 8. Tenant Improvements: Winston shall deliver the Premises to Agile in an "As-is" condition with the Premises broom clean. All tenant improvements performed by Agile shall be done at Agile's own expense and in compliance with applicable codes and regulations and subject to first obtaining Master Landlord's consent as required under the Master Lease, and Citation's consent as may be required under the Sublease. In this regard, Agile acknowledges that it has been informed that Citation's leased premises were originally on two different floors, which were joined by a stairwell from what is now the Winston lobby to the Citation floor above. When Winston subleased its premises, Citation sealed off the stairwell at the fourth floor. As a result, the stairwell in the Winston premises is non-functional. Agile acknowledges that the fire marshall may require signage to the effect that the stairwell is not an exit, or other measures to indicate that the stairwell is non-functioning, and agrees to bear the cost of such signage/other measures which may be required by the fire marshall or building inspector. Winston and Agile shall negotiate separately regarding any furniture, fixtures and equipment currently on the Premises to be acquired or leased by Agile. 9. Trade Fixtures, Personal Property and Surrender of the Subleased Premises: Provided that Subtenant is not then in default of any of its obligations Page 8 of 14 hereunder, and provided such removal shall not damage or mar the Premises, Agile shall have the right at any time during the Term of this lease to remove its trade fixtures and personal property from the Premises. In the event of involuntary or voluntary termination of this sub-sublease, Agile shall (a) quit and surrender the Premises in good order and condition, reasonable wear and tear excepted, and (b), at Winston's option, Agile shall remove from the Premises all trade fixtures placed on the Premises by Agile, with the Premises thereafter to be restored or repaired, at Agile's expense, to the condition in which the Premises were delivered at the commencement of this sub-sublease. Provided, however, that in the event that Agile has entered into an agreement with the Master Landlord to allow it to continue possession of the Premises after the expiration of the term of this sub-sublease, and provided further that this sub-sublease has not been terminated prior to expiration of its term, Agile shall not be required to (a) quit and surrender the Premises in good order and condition, reasonable wear and tear excepted, or (b) to remove from the Premises all trade fixtures placed on the Premises by Agile, with the Premises thereafter to be restored or repaired, at Agile's expense, to the condition in which the Premises were delivered at the commencement of this sub-sublease. Further, upon the termination of this sub-sublease, whether such termination is voluntary or involuntary, if required by the Master Landlord, or by Citation, Agile shall restore the Premises to the condition in which Page 9 of 14 the Premises were delivered at the commencement of this sub-sublease, reasonable wear and tear excepted. 10. Parking: Winston shall assign to Agile its right to two (2) free parking spaces per 1,000 square feet leased and one (1) parking space for every 1,000 square feet leased on the roof of the garage at $30.00 per stall, per month. Any additional parking desired by Agile shall be separately negotiated between Agile and the Master Landlord. 11. Alterations: Agile shall be responsible for the installation of any and all improvements, alterations or other work required on or to the Subleased Premises or to any other portion of the property and/or building of which the Subleased Premises are a part, required or reasonably necessary because of: (1) Agile's use of the Subleased Premises or any portion thereof; (2) the use by Agile by reason of assignment or sublease; or (3) both, including any improvements, alterations or other work required under the Americans With Disabilities Act of 1990. Compliance with the provisions of this Section shall be a condition of Winston granting its consent to any assignment or further sublease of all or a portion of the Subleased Premises. 12. Compliance With Nondiscrimination Regulations: It is understood that it is illegal for Winston to refuse to display or sublease the Subleased Premises, or to assign, surrender or sell the Master Lease, to any Page 10 of 14 person because of race, color, religion, national origin, sex, sexual orientation, marital status or disability. 13. Toxic Contamination Disclosure: Winston and Agile each acknowledge that they have been advised that numerous federal, state, and/or local laws, ordinances and regulations ("Laws") affect the existence and removal, storage, disposal, leakage of and contamination by materials designated as hazardous or toxic ("Toxics"). Many materials, some utilized in everyday business activities and property maintenance, are designated as hazardous or toxic. Some of the Laws require that Toxics be removed or cleaned up by landowners, future landowners or former landowners without regard to whether the party required to pay for "clean up" caused the contamination, owned the property at the time the contamination occurred or even knew about the contamination. Some items, such as asbestos or PCBs, which were legal when installed, now are classified as Toxics, and are subject to removal requirements. Civil lawsuits for damages resulting from Toxics may be filed by third parties in certain circumstances. Winston and Agile each acknowledge that Broker has no specific expertise with respect to environmental assessment or physical condition of the Subleased Premises, including, but not limited to, matters relating to: (i) problems which may be posed by the presence or disposal of hazardous or toxic substances on or from the Subleased Premises, (ii) problems which may be posed by the Subleased Premises being within the Special Studies Zone as Page 11 of 14 designated under the Alquist-Priolo Special Studies Zone Act (Earthquake Zones), Section 2621-2630, inclusive of California Public Resources Code, and (iii) problems which may be posed by the Subleased Premises being within a HUD Flood Zone as set forth in the U.S. Department of Housing and Urban Development "Special Flood Zone Area Maps," as applicable. Winston and Agile each acknowledge that Broker has not made an independent investigation or determination of the physical or environmental condition of the Subleased Premises, including, but not limited to, the existence or nonexistence of any underground tanks, sumps, piping, toxic or hazardous substances on the Subleased Premises. Agile agrees that it will rely solely upon its own investigation and/or the investigation of professionals retained by it or Winston, and neither Winston nor Agile shall rely upon Broker to determine the physical and environmental condition of the Subleased Premises or to determine whether, to what extent or in what manner, such condition must be disclosed to potential sublessee's, assignees, purchasers or other interested parties. 14. Rent Abatement and Damages to Personal Property: In the event Winston, pursuant to the terms of the Sublease, is entitled to and receives rent abatement, then to the extent such rent abatement affects the Subleased Premises, Agile shall be entitled to a pro-rata rent abatement in the same proportion that the rental abatement received by Winston bears to the rent paid by Winston under the Sublease. In addition, any amounts paid or credited to Winston under the terms of the Sublease for damage to personal property shall be credited to Agile, subject to the same limitations set forth above. Page 12 of 14 15. Winston's Indemnity: So long as Agile performs its obligations hereunder, Winston covenants to Agile that, during the term of the Sub-sublease, Winston shall fully perform all of the covenants and obligations of Winston under the Sublease, and that Winston shall at all times maintain the Sublease, and Winston's right to possession of the Premises thereunder, current and in good standing. Winston shall hold Agile, and any subtenants and/or assignees of Agile, harmless from, and indemnify and defend Agile, and/or its subtenants and assignees, including attorneys' fees and court costs, against, any and all claims, damage, injury, suits, losses, judgments (including judgments of unlawful detainer), and expenses, arising as the result of the failure of Winston to perform all its obligations as Subtenant under the Sublease and to maintain the Sublease and Winston's right to possession of the Premises thereunder, current and in good standing. 16. Insurance: Agile shall cause all insurance policies required under Section 20 of the Master Lease to name Winston and Citation as named additional insureds. Sub-sublandlord: WINSTON MARKETING & COMMUNICATIONS, INC., One Almaden Boulevard, Suite 300 San Jose, CA 95113 By: /s/ Date: 4/9/99 --------------------------------------- ----------- Page 13 of 14 Sub-subtenant: AGILE SOFTWARE, INC., One Almaden Boulevard, Suite 700 San Jose, CA 95113 By: /s/ Date: 4-9-99 ---------------------------------------- ------ NOTICE TO WINSTON AND AGILE: COLLIERS INTERNATIONAL IS NOT AUTHORIZED TO GIVE LEGAL OR TAX ADVICE; NOTHING CONTAINED IN THIS SUB-SUBLEASE OR ANY DISCUSSIONS BETWEEN COLLIERS INTERNATIONAL AND WINSTON AND AGILE SHALL BE DEEMED TO BE A REPRESENTATION OR RECOMMENDATION BY COLLIERS INTERNATIONAL, OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL EFFECT OR TAX CONSEQUENCES OF THIS DOCUMENT OR ANY TRANSACTION RELATING THERETO. ALL PARTIES ARE ENCOURAGED TO CONSULT WITH THEIR INDEPENDENT FINANCIAL CONSULTANTS AND/OR ATTORNEYS REGARDING THE TRANSACTION CONTEMPLATED BY THIS PROPOSAL. This Sub-sublease is hereby approved. CITATION INSURANCE COMPANY By: /s/ Date: 4/14/99 -------------------------------- ------- Landlord hereby consents to Sub-sublease: NORTH BLOCK PARTNERSHIP a California limited partnership By: Second Tower Its General Partner By: /s/ Lewis N. Wolff Date: 4/17/99 -------------------------------- --------- Lewis N. Wolff EX-10.5 6 SUBORDINATED LOAN AND SECURITY AGREEMENT EXHIBIT 10.5 SUBORDINATED LOAN AND SECURITY AGREEMENT THIS AGREEMENT (the "Agreement"), dated as of February 8, 1999, is entered into by and between Agile Software Corporation, a California corporation, with its chief executive office, and principal place of business located at One Almaden Boulevard, 12/th/ Floor, San Jose, California 95113 (the "Borrower") and Comdisco, Inc., a Delaware corporation, with its principal place of business located at 6111 North River Road, Rosemont, Illinois 60018 (the "Lender" or sometimes, "Comdisco"). In consideration of the mutual agreements contained herein, the parties hereto agree as follows: RECITALS WHEREAS, Borrower has requested Lender to make available to Borrower a loan in the aggregate principal amount of THREE MILLION and 00/100 DOLLARS ($3,000,000.00) in minimum installments of ONE MILLION DOLLARS ($1,000,000.00) each (as the same may from time to time be amended, modified, supplemented or revised, the "Loan"), which would be evidenced by Subordinated Promissory Note(s) executed by Borrower substantially in the form of Exhibit A hereto (as the same may from time to time be amended, modified, supplemented or restated the "Note(s)"). WHEREAS, Lender is willing to make the Loan on the terms and conditions set forth in this Agreement, and WHEREAS, Lender and Borrower agree any Loan hereunder shall be subordinate to Senior Debt (as defined herein) to the extent set forth in the Subordination Agreement (as defined herein). AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, Borrower and Lender hereby agree as follows: SECTION 1. DEFINITIONS Unless otherwise defined herein, the following capitalized terms shall have the following meanings (such meanings being equally applicable to both the singular and plural form of the terms defined); 1.1 "Account" means any "account," as such term is defined in Section 9106 of the UCC, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest and, in any event, shall include, without limitation, all accounts receivable, book debts and other forms of obligations (other than forms of obligations evidenced by Chattel Paper, Documents or Instruments) now owned or hereafter received or acquired by or belonging or owing to Borrower (including, without limitation, under any trade name, style or division thereof) whether arising out of goods sold or services rendered by Borrower or from any other transaction, whether or not the same involves the sale of goods or services by Borrower (including, without limitation, any such obligation which may be characterized as an account or contract right under the UCC) and all of Borrower's rights in, to and under all purchase orders or receipts now owned or hereafter acquired by it for goods or services, and all of Borrower's rights to any goods represented by any of the foregoing (including, without limitation, unpaid seller's rights of rescission, replevin, reclamation and stoppage in transit and 1 rights to returned, reclaimed or repossessed goods), and all monies due or to become due to Borrower under all purchase orders and contracts for the sale of goods or the performance of services or both by Borrower (whether or not yet earned by performance on the part of Borrower or in connection with any other transaction), now in existence or hereafter occurring, including, without limitation, the right to receive the proceeds of said purchase orders and contracts, and all collateral security and guarantees of any kind given by any Person with respect to any of the foregoing. 1.2 "Account Debtor" means any "account debtor," as such term is defined in Section 9105(1)(a) of the UCC. 1.3 "Advance" means each installment made by the Lender to Borrower pursuant to the Loan to be evidenced by the Note(s) secured by the Collateral. 1.4 "Advance Date" means the funding date of any Advance of the Loan. 1.5. "Advance Request" means the request by Borrower for an Advance under the Loan, each to be substantially in the form of Exhibit C attached hereto, as submitted by Borrower to Lender from time to time. 1.6 "Chattel Paper" means any "chattel paper," as such term is defined in Section 9105(1)(b) of the UCC, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest. 1.7 "Closing Date" means the date hereof. 1.8 "Collateral" shall have the meaning assigned to such term in Section 3 of this Agreement. 1.9 "Contracts" means all contracts, undertakings, franchise agreements or other agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which Borrower may now or hereafter have any right, title or interest, including, without limitation, with respect to an Account, any agreement relating to the terms of payment or the terms of performance thereof. 1.10 "Copyrights" means all of the following now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest: (i) all copyrights, whether registered or unregistered, held pursuant to the laws of the United States, any State thereof or of any other country; (ii) registrations, applications and recordings in the United States Copyright Office or in any similar office or agency of the United States, any state thereof or any other country; (iii) any continuations, renewals or extensions thereof; and (iv) any registrations to be issued in any pending applications. 1.11 "Copyright License" means any written agreement granting any right to use any Copyright or Copyright registration now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest. 1.12 "Documents" means any "documents," as such term is defined in Section 9105(1)(f) of the UCC, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest. 2 1.13 "Equipment" means any "equipment," as such term is defined in Section 9109(2) of the UCC, now or hereafter owned or acquired by Borrower or in which Borrower now holds or hereafter acquires any interest and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. 1.14 "Excluded Agreements" means (i) any Warrant Agreement(s) executed hereunder, and any other warrants (including without limitation, the warrant agreements dated as of September 18, 1995, March 1, 1996, February 6, 1997 and November 7, 1997) to acquire, or agreements governing the rights of the holders of, any equity security of Borrower, (ii) any stock of the Borrower issued or purchased pursuant to the Warrant Agreement, and (iii) the Master Lease Agreement dated as of September 18, 1995 between Borrower, as lessee, and Lender, as lessor, including, without limitation, any Equipment Schedules and Summary Equipment Schedules to the Master Lease Agreement executed or delivered by Borrower pursuant thereto and any other modifications or amendments thereof, whereby Borrower (as lessee) leases equipment, software, or goods from Lender (as lessor) to Borrower (as lessee). 1.15 "Facility Fee" means one percent (1.0%) of the principal amount of the installment of the Loan due at the Closing Date. 1.16 "Fixtures" means any "fixtures," as such term is defined in Section 9313(1)(a) of the UCC, now or hereafter owned or acquired by Borrower or in which Borrower now holds or hereafter acquires any interest and, now or hereafter attached or affixed to or constituting a part of, or located in or upon, real property wherever located, together with all right, title and interest of Borrower in and to all extensions, improvements, betterments, renewals, substitutes, and replacements of, and all additions and appurtenances to any of the foregoing property, and all conversions of the security constituted thereby, immediately upon any acquisition or release thereof or any such conversion, as the case may be. 1.17 "General Intangibles" means any "general intangibles," as such term is defined in Section 9106 of the UCC, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest and, in any event, shall include, without limitation, all right, title and interest which Borrower may now or hereafter have in or under any contract, all customer lists, Copyrights, Trademarks, Patents, rights to intellectual Property, interests in partnerships, joint ventures and other business associations, Licenses, permits, trade secrets, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, recipes, experience, processes, models, drawings, materials and records, goodwill (including, without limitation, the goodwill associated with any Trademark, Trademark registration or Trademark licensed under any Trademark License), claims in or under insurance policies, including unearned premiums, uncertificated securities, cash and other forms of money or currency, deposit accounts (including as defined in Section 9105(e) of the UCC), rights to sue for past, present and future infringement of Copyrights, Trademarks and Patents, rights to receive tax refunds and other payments and rights of indemnification. 1.18 "Instruments" means any "instrument," as such term is defined in Section 9105(1)(i) of the UCC, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest. 1.19 "Intellectual Property" means all Copyrights, Trademarks, Patents, trade secrets, source codes, customer lists, proprietary or confidential information, inventions (whether or not 3 patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, skill, expertise, experience, processes, models, drawings, materials and records. 1.20 "Inventory" means any "inventory," as such term is defined in Section 9109(4) of the UCC, wherever located, now or hereafter owned or acquired by Borrower or in which Borrower now holds or hereafter acquires any interest, and, in any event, shall include, without limitation, all inventory, goods and other personal property which are held by or on behalf of Borrower for sale or lease or are furnished or are to be furnished under a contract of service or which constitute raw materials, work in process or materials used or consumed or to be used or consumed in Borrower's business, or the processing, packaging, promotion, delivery or shipping of the same, and all furnished goods whether or not such inventory is listed on any schedules, assignments or reports furnished to Lender from time to time and whether or not the same is in transit or in the constructive, actual or exclusive occupancy or possession of Borrower or is held by Borrower or by others for Borrower's account, including, without limitation, all goods covered by purchase orders and contracts with suppliers and all goods billed and held by suppliers and all inventory which may be located on premises of Borrower or of any carriers, forwarding agents, truckers, warehousemen, vendors, selling agents or other persons. 1.21 "License" means any Copyright License, Patent License, Trademark License or other license of rights or interests now held or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest and any renewals or extensions thereof. 1.22 "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or charge of any kind, whether voluntarily incurred or arising by operation of law or otherwise, against any property, any conditional sale or other title retention agreement, any lease in the nature of a security interest, and the filing of any financing statement (other than a precautionary financing statement with respect to a lease that is not in the nature of a security interest) under the UCC or comparable law of any jurisdiction. 1.23 "Loan Documents" shall mean and include this Agreement, the Note(s), and any other documents executed in connection with the Secured Obligations or the transactions contemplated hereby, as the same may from time to time be amended, modified, supplemented or restated, provided, that the Loan Documents -------- shall not include any of the Excluded Agreements. --- 1.24 "Material Adverse Effect" means a material adverse effect upon: (i) the business, operations, properties, assets or financial condition of Borrower; or (ii) the ability of Borrower to perform, or of Lender to enforce, the Secured Obligations. 1.25 "Maturity Date" means the date thirty-six (36) months from the Advance Date of each installment of the Loan. 1.26 "Patent License" means any written agreement granting any right with respect to any invention on which a Patent is in existence now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest. 1.27 "Patents" means all of the following now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest: (a) letters patent of, or rights 4 corresponding thereto in, the United States or any other county, all registrations and recordings thereof, and all applications for letters patent of, or rights corresponding thereto in the United States or any other country, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country; (b) all reissues, continuations, continuations-in-part or extensions thereof; (c) all petty patents, divisionals, and patents of addition; and (d) all patents to issue in any such applications. 1.28 "Permitted Liens" means any and all of the following: (i) liens in favor of Lender, (ii) liens related to, or arising in connection with, Senior Debt. 1.29 "Proceeds" means "proceeds," as such term is defined in Section 9306(1) of the UCC and, in any event, shall include, without limitation, (a) any and all Accounts, Chattel Paper, Instruments, cash or other forms of money or currency or other proceeds payable to Borrower from time to time in respect of the Collateral, (b) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Borrower from time to time with respect to any of the Collateral, (c) any and all payments (in any form whatsoever) made or due and payable to Borrower from time to time in connection with any requisition, confiscation, condemnation seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any Person acting under color of governmental authority), (d) any claim of Borrower against third parties (i) for past, present or future infringement of any Copyright, Patent or Patent License or (ii) for past, present or future infringement or dilution of any Trademark or Trademark License or for injury to the goodwill associated with any Trademark, Trademark registration or Trademark licensed under any Trademark License and (e) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. 1.30 "Receivables" shall mean and include all of the Borrowers accounts, instruments, documents, chattel paper and general intangibles whether secured or unsecured, whether now existing or hereafter created or arising, and whether or not specifically sold or assigned to Lender hereunder. 1.31 "Secured Obligations" shall mean and include all principal, interest, fees, costs, or other liabilities or obligations for monetary amounts owed by Borrower to Lender, whether due or to become due, matured or unmatured, liquidated or unliquidated, contingent or non-contingent, and all covenants and duties regarding such amounts, of any kind of nature, present or future, arising under this Agreement, the Note(s), or any of the other Loan Documents, whether or not evidenced by any Note(s), Agreement or other instrument, as the same may from time to time be amended, modified, supplemented or restated, provided, that the Secured Obligations shall not include any indebtedness or obligations of Borrower arising under or in connection with the Excluded Agreements. 1.32 "Senior Creditor" means a bank, insurance company, pension fund, or other institutional lender to be determined, or a syndication of such institutional lenders that provides Senior Debt financing to Borrower; provided, -------- that Senior Creditor shall not include any officer, director, shareholder, venture capital investor, or insider of Borrower, or any affiliate of the foregoing persons, except upon the express written consent of Lender. 1.33 "Senior Debt" means any and all indebtedness and obligations for borrowed money (including, without limitation, principal, premium (if any), interest, fees charges, expenses, costs, professional fees and expenses, and reimbursement obligations) at any time 5 owing by Borrower to Senior Creditor under the Senior Loan Documents, including, but not limited to such amounts as may accrue or be incurred before or after default or workout or the commencement of any liquidation, dissolution, bankruptcy, receivership or reorganization by or against Borrower provided, that Senior Debt shall not include the following indebtedness or obligations: (a) obligations incurred after default or workout or the commencement of any liquidation, dissolution, bankruptcy, receivership, or reorganization case by or against Borrower, and (b) From the date hereof, Borrower shall not incur Senior Debt in excess of the amounts as follows: For FYE 4/30/99: $ 6,000,000.00 For FYE 4/30/00: $10,000,000.00 For FYE 4/30/01: $15,000,000.00 1.34 "Senior Loan Documents" means the loan agreement between Borrower and Senior Creditor and any other agreement, security agreement, document, promissory note, UCC financing statement, or instrument executed by Borrower in favor of Senior Creditor pursuant to or in connection with the Senior Debt or the loan agreement, as the same may from time to time be amended, modified, supplemented, extended, renewed, restated or replaced. 1.35 "Subordination Agreement" means the Subordination Agreement of even date herewith, entered into between Borrower and Lender for the benefit of Senior Creditor. 1.36 "Trademark License" means any written agreement granting any right to use any Trademark or Trademark registration now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest. 1.37 "Trademarks" means any of the following now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest: (a) any and all trademarks, tradenames, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and any applications in connection therewith, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof and (b) any reissues, extensions or renewals thereof. 1.38 "UCC" shall mean the Uniform Commercial Code as the same may, from time to time, be in effect in the State of Illinois. Unless otherwise defined herein, terms that are defined in the UCC and used herein shall have the meanings given to them in the UCC. 1.39 "Warrant Agreement(s)" shall mean those agreements entered into in connection with the Loan, substantially in the form attached hereto as Exhibit B pursuant to which Borrower granted Lender the right to purchase that number of shares of Series F Preferred Stock of Borrower as more particularly set forth therein. 6 SECTION 2. THE LOAN 2.1 The outstanding principal amount of the Loan, together with interest thereon precomputed at the rate of eleven and three quarter (11.75%) percent per annum, shall be due and payable in six (6) equal monthly installments of interest only, payable on the first day of each month, followed by thirty (30) equal monthly installments of principal and interest, payable on the first day of each month, to and including the Maturity Date (each, a "Payment Date"). If any payment under the Note(s) shall be payable on a day other than a business day, then such payment shall be due and payable on the next succeeding business day. 2.2 Borrower shall have the option to prepay the Loan, in whole or in part, after twelve (12) months from the Closing Date by paying the principal amount thereon together with all accrued and unpaid interest with respect to such principal amount, as of the date of such prepayment, without premium. In the event Borrower prepays the Note(s) within twelve (12) months from the Closing Date hereof, Borrower shall pay the principal amount together with all accrued and unpaid interest and a prepayment premium equal to one percent (1%) of the then outstanding principal amount (the "Prepayment Penalty"). Notwithstanding the foregoing, in the event Borrower prepays the Loan in conjunction with an initial public offering of Borrower's equity securities, the Prepayment Penalty shall not apply. 2.3 (a) Notwithstanding any provision in this Agreement, the Note(s), or any other Loan Document, it is not the parties intent to contract for, charge or receive interest at a rate that is greater than the maximum rate permissible by law which a court of competent jurisdiction shall deem applicable hereto (which under the laws of the State of Illinois shall be deemed to be the laws relating to permissible rates of interest on commercial loans) (the "Maximum Rate"). If the Borrower actually pays Lender an amount of interest, chargeable on the total aggregate principal Secured Obligations of Borrower under this Agreement and the Note(s) (as said rate is calculated over a period of time from the date of this Agreement through the end of time that any principal is outstanding on the Note(s)), which amount of interest exceeds interest calculated at the Maximum Rate on said principal chargeable over said period of time, then such excess interest actually paid by Borrower shall be applied first, to the payment of principal outstanding on the Note(s); second, after all principal is repaid, to the payment of Lender's out of pocket costs, expenses, and professional fees which are owed by Borrower to Lender under this Agreement or the Loan Documents; and third, after all principal, costs, expenses, and professional fees owed by Borrower to Lender are repaid, the excess (if any) shall be refunded to Borrower, and the effective rate of interest will be automatically reduced to the Maximum Rate. (b) In the event any interest is not paid when due hereunder, delinquent interest shall be added to principal and shall bear interest on interest, compounded at the rate set forth in Section 2.1. (c) Upon and during the continuation of an Event of Default hereunder, all Secured Obligations, including principal, interest, compounded interest, and professional fees, shall bear interest at a rate per annum equal to the rate set forth in Section 2.1. plus five percent (5%) per annum ("Default Rate"). 2.4 If the Borrower has not repaid the outstanding principal amount under the Loan in its entirety by the Maturity Date (as defined in the applicable Note(s)), then for each additional month, or portion thereof, thereafter that the outstanding principal is not paid, Lender shall have the right to purchase from the Borrower, at the Exercise Price (adjusted, as set forth 7 and defined in the Warrant Agreement), an additional number of shares of Preferred Stock which number shall be determined by (i) multiplying the outstanding principal amount which is due but unpaid by 1% and (ii) dividing the product thereof by the Exercise Price. SECTION 3. SECURITY INTEREST As security for the prompt, complete and indefeasible payment when due (whether at stated payment dates or otherwise) of all the Secured Obligations and in order to induce Lender to make the Loan upon the terms and subject to the conditions of the Note(s), Borrower hereby assigns, conveys, mortgages, pledges, hypothecates and transfers to Lender for security purposes only, and hereby grants to Lender a security interest in, all of Borrower's right, title and interest in, to and under each of the following (all of which being hereinafter collectively called the "Collateral"): (a) All Receivables; (b) All Equipment; (c) All Fixtures; (d) All General Intangibles; (e) All Inventory; (f) All other goods and personal property of Borrower whether tangible or intangible and whether now or hereafter owned or existing, leased, consigned by or to, or acquired by, Borrower and wherever located; and (g) To the extent not otherwise included, all Proceeds of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of each of the foregoing. SECTION 4. REPRESENTATIONS AND WARRANTIES OF BORROWER The Borrower represents, warrants and agrees that; 4.1 Borrower owns all right title and interest in and to the Collateral, free of all liens, security interests, encumbrances and claims whatsoever, except for Permitted Liens. 4.2 Borrower has the full power and authority to, and does hereby grant and convey to the Lender, a perfected security interest in the Collateral as security for the Secured Obligations, free of all liens, security interests, encumbrances and claims, other than Permitted Liens and shall execute such Uniform Commercial Code financing statements in connection herewith as the Lender may reasonably request. Except as set forth herein, no other lien, security interest, adverse claim or encumbrance has been created by Borrower or is known by Borrower to exist with respect to any Collateral. 4.3 Borrower is a corporation duly incorporated, legally existing and in good standing under the laws of the State of California, and is duly qualified as a foreign corporation in all jurisdictions in which the nature of its business or location of its properties require such qualifications and where the failure to be qualified would have a material adverse effect. 8 4.4 Borrower's execution, delivery and performance of the Note(s), this Agreement, all financing statements, all other Loan Documents required to be delivered or executed in connection herewith, and the Warrant Agreement(s) have been duly authorized by all necessary corporate action of Borrower, the individual or individuals executing the Loan Documents and the Warrant Agreement(s) were duly authorized to do so; and the Loan Documents and the Warrant Agreement(s) constitute legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization or other similar laws generally affecting the enforcement of the rights of creditors. 4.5 This Agreement, the other Loan Documents and the Warrant Agreement(s) do not and will not violate any provisions of Borrower's Articles of Incorporation, bylaws or any contract, agreement, law, regulation, order, injunction, judgment, decree or writ to which the Borrower is subject, or result in the creation or imposition of any lien, security interest or other encumbrance upon the Collateral, other than those created by this Agreement. 4.6 The execution, delivery and performance of this Agreement, the other Loan Documents and the Warrant Agreement(s) do not require the consent or approval of any other person or entity including, without limitation, any regulatory authority or governmental body of the United States or any state thereof or any political subdivision of the United States or any state thereof. 4.7 No event which has had or could reasonably be expected to have a Material Adverse Effect has occurred and is continuing. 4.8 No fact or condition exists that would (or would, with the passage of time, the giving of notice, or both) constitute a default under the Loan Agreement between Borrower and Senior Creditor. 4.9 Borrower has filed and will file all tax returns, federal, state and local, which it is required to file and has duly paid or fully reserved for all taxes or installments thereof (including any interest or penalties) as and when due, which have or may become due pursuant to such returns or pursuant to any assessment received by Borrower for the three (3) years preceding the Closing Date, if any (including any taxes being contested in good faith and by appropriate proceedings). SECTION 5. INSURANCE 5.1 So long as there are any Secured Obligations outstanding, Borrower shall cause to be carried and maintained comprehensive general liability insurance against risks customarily insured against in Borrower's line of business. Such risks shall include, without limitation, the risks of death, bodily injury and property damage. So long as there are any Secured Obligations outstanding, Borrower shall also cause to be carried and maintained insurance upon the Collateral and Borrower's business, covering casualty, hazard and such other property risks customarily insured against in Borrower's line of business and in customary amounts. Borrower shall deliver to Lender lender's loss payable endorsements (Form BFU 438 or equivalent) naming Lender as loss payee or additional insured, as appropriate. Borrower shall use commercially reasonable efforts to cause all policies evidencing such insurance to provide for at least thirty (30) days prior written notice by the underwriter or insurance company to 9 Lender in the event of cancellation or expiration. Such policies shall be issued by such insurers as are reasonably acceptable to Lender. 5.2 Borrower shall and does hereby indemnify and hold Lender, its agents and shareholders harmless from and against any and all claims, costs, expenses, damages and liabilities (including, without limitation, such claims, costs, expenses, damages and liabilities based on liability in tort, including without limitation, strict liability in tort), including reasonable attorneys' fees, arising out of the disposition or utilization of the Collateral, other than claims arising at or caused by Lender's negligence or willful misconduct. SECTION 6. COVENANTS OF BORROWER Borrower covenants and agrees as follows at all times while any of the Secured Obligations remain outstanding: 6.1 Borrower shall furnish to Lender the financial statements listed hereinafter, each prepared in accordance with generally accepted accounting principles consistently applied (the "Financial Statements"): (a) as soon as practicable (and in any event within thirty (30) days) after the end of each quarter, unaudited interim financial statements as of the end of such quarter (prepared on a consolidated and consolidating basis, if applicable), including balance sheet and related statements of income accompanied by a report detailing any material contingencies, if applicable (including the commencement of any material litigation by or against Borrower) or any other occurrence that could reasonably be expected to have a Material Adverse Effect, as applicable, all certified by Borrower's Chief Executive Officer or Chief Financial Officer to be true and correct; (b) as soon as practicable (and in any event within ninety (90) days) after the end of each fiscal year, unqualified audited financial statements as of the end of such year (prepared on a consolidated and consolidating basis, if applicable), including balance sheet and related statements of income and cash flows, and setting forth in comparative form the corresponding figures for the preceding fiscal year, certified by a firm of independent certified public accountants selected by Borrower and reasonably acceptable to Lender, and, if prepared, accompanied by any management report from such accountants; (c) at such time as is applicable, promptly after the sending or filing thereof, as the case may be, copies of any proxy statements, financial statements or reports which Borrower has made available to its shareholders and copies of any regular, periodic and special reports or registration statements which Borrower files with the Securities and Exchange Commission or any governmental authority which may be substituted therefor, or any national securities exchange; and (d) promptly, any additional information, financial or otherwise (including, but not limited, to tax returns and names of principal creditors) as Lender reasonably believes necessary to evaluate Borrower's continuing ability to meet its financial obligations. 6.2 Borrower shall permit any authorized representative of Lender and its attorneys and accountants on reasonable notice to inspect, examine and make copies and abstracts of 10 the books of account and records of Borrower at reasonable times during normal business hours, provided Lender and its attorneys and accountants agree to maintain the confidentiality of such books and records. In addition, such representative of Lender and its attorneys and accountants shall have the right to meet with management and officers of the Company to discuss such books of account and records. 6.3 Borrower will from time to time execute, deliver and file, alone or with Lender, any financing statements, security agreements or other documents; procure any instruments or documents as may be requested by Lender; and take all further action that may be necessary or desirable, or that Lender may request, to confirm, perfect, preserve and protect the security interests intended to be granted hereby, and in addition, and for such purposes only. Borrower hereby authorizes Lender to execute and deliver on behalf of Borrower and to file such financing statements, security agreement and other documents without the signature of Borrower either in Lender's name or in the name of Borrower as agent and attorney-in-fact for Borrower. The parties agree that a carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement and may be filed in any appropriate office in lieu thereof. 6.4 Borrower shall protect and defend Borrower's title as well as the interest of the Lender against all persons claiming any interest adverse to Borrower or Lender and shall at all times keep the Collateral free and clear from any legal process, liens or encumbrances whatsoever (except any placed thereon by Lender or as permitted by Lender) and shall give Lender immediate written notice thereof. 6.5 Without Lender's prior written consent, Borrower shall not, out of the ordinary course of business or inconsistent with past practice, (a) grant any material extension of the time of payment of any of the Receivables, (b) to any material extent, compromise, compound or settle the same for less than the full amount thereof, (c) release, wholly or partly, any Person liable for the payment thereof, or allow any credit or discount whatsoever thereon other than trade discounts granted in the ordinary course of business of Borrower. 6.6 Borrower shall maintain and protect its properties, assets and facilities, including without limitation, its Equipment and Fixtures, in good order and working repair and condition (taking into consideration ordinary wear and tear) and from time to time make or cause to be made all necessary and proper repairs, renewals and replacements thereto and shall competently manage and care for its property in accordance with prudent industry practices. 6.7 Borrower shall not merge with and into any other entity; or sell or convey all or substantially all of its assets or stock to any other person or entity without notifying Lender a minimum of thirty (30) days prior to the closing date and either (i) requesting Lender's consent to the assignment of all of Borrower's Secured Obligations hereunder to the successor entity in form and substance satisfactory to Lender or (ii) coordinating prepayment of the Secured Obligations with Lender. In the event Lender does not consent to such assignment the parties agree Borrower shall prepay the Loan in accordance with Section 2.2 hereof. 6.8 Until such time as Borrower's securities initially are sold to the public pursuant to an effective registration statement filed pursuant to the Securities Act of 1933, as amended, Borrower shall not, without the prior written consent of Lender, such consent not to be unreasonably withheld, declare or pay any cash dividend or make a distribution on any class of stock, other than pursuant to employee repurchase plans upon an employee's death or termination of employment or transfer, sell, lease, lend or in any other manner convey any 11 equitable, beneficial or legal interest in any material portion of the assets of Borrower (except inventory sold in the normal course of business or securities sold pursuant to equity financing arrangements whereby Borrower raises additional capital for operating purposes). 6.9 Upon the request of Lender, Borrower shall, during business hours, make the Inventory and Equipment available to Lender for inspection at the place where it is normally located and shall make Borrower's log and maintenance records pertaining to the Inventory and Equipment available to Lender for inspection. Borrower shall take reasonable action to maintain such logs and maintenance records in a correct and complete fashion. 6.10 Borrower covenants and agrees to pay when due, all taxes, fees or other charges of any nature whatsoever (together with any related interest or penalties) now or hereafter imposed or assessed against Borrower, Lender or the Collateral or upon Borrower's ownership, possession, use, operation or disposition thereof or upon Borrower's rents, receipts or earnings arising therefrom. Borrower shall file on or before the due date therefor all personal property tax returns in respect of the Collateral. Notwithstanding the foregoing, Borrower may contest, in good faith and by appropriate proceedings, taxes for which Borrower maintains adequate reserves therefor. 6.11 Borrower shall not relocate any item of the Collateral (other than sale of inventory in the ordinary course of business and portable Equipment used by Borrower's employees) except: (i) with prior written notice to the Lender; and (ii) if such relocation shall be within the continental United States, or if such relocation shall be outside of the continental United States, with Lender's consent. If permitted to relocate Collateral pursuant to the foregoing sentence, unless otherwise agreed in writing by Lender, Borrower shall first (a) cause to be filed and/or delivered to the Lender all Uniform Commercial Code financing statements, certificates or other documents or instruments necessary to continue in effect the perfected security interest of the Lender in the Collateral, and (b) have given the Lender no less than fifteen (15) days prior written notice of such relocation. SECTION 7. CONDITIONS PRECEDENT TO LOAN The obligation of Lender to fund the Loan on each Advance Date shall be subject to Lender's satisfactory completion of its due diligence and approval process, and satisfaction by Borrower or waiver by Lender, in Lender's sole discretion, of the following conditions: 7.1 (a) The Advance Date for any installment shall occur on or before April 30, 1999. 7.2 Document Delivery. Borrower, on or prior to the Closing Date, shall have delivered to Lender the following: (a) executed originals of the Agreement, the Warrant Agreement, and any documents reasonably required by Lender to effectuate the liens of Lender, with respect to all Collateral; (b) copy of resolutions of Borrower's board of directors evidencing approval of the borrowing and other transactions evidenced by the Loan Documents and the Warrant Agreement(s); 12 (c) file stamped copies of the Articles of Incorporation, as amended through the Closing Date, of Borrower; (d) payment of the Facility Fee; (e) such other documents as Lender may reasonably request. 7.3 Advance Request. Borrower shall: (a) deliver to Lender, at least five (5) business day prior to the Advance Date, written notice in the form of an Advance Request, or as otherwise specified by Lender from time to time, specifying the date and amount of such Advance. (b) deliver executed original Note(s) as set forth in Section 2, as applicable. (c) such other documents as Lender may reasonably request. 7.4 Perfection of Security Interests. Borrower shall have taken or caused to be taken such actions requested by Lender to grant Lender a first priority perfected security interest in the Collateral, subject only to Permitted Liens. Such actions shall include, without limitation, the delivery to Lender of all appropriate financing statements, executed by Borrower, as to the Collateral granted by Borrower for all jurisdictions as may be necessary or desirable to perfect the security interest of Lender in such Collateral 7.5 Absence of Events of Defaults. As of the Closing Date or the Advance Date, no fact or condition exists that would (or would, with the passage of time, the giving of notice, or both) constitute an Event of Default under this Agreement or any of the Loan Documents and no fact or condition exists that would (or would, with the passage of time, the giving of notice, or both) constitute a default under the Senior Loan Documents between Borrower and Senior Creditor. 7.6 Material Adverse Effect. As of the Closing Date or the Advance Date, no event which has had or could reasonably be expected to have a Material Adverse Effect has occurred and is continuing. SECTION 8. DEFAULT The occurrence of any one or more of the following events (herein called "Events of Default") shall constitute a default hereunder and under the Note(s) and other Loan Documents: 8.1 Borrower defaults in the payment of any principal, interest or other Secured Obligation involving the payment of money under this Agreement, the Note(s) or any of the other Loan Documents, and such default continues for more than five (5) days after the due date thereof; or 8.2 Borrower defaults in the performance of any other covenant or Secured Obligation of Borrower hereunder or under the Note(s) or any of the other Loan Documents, and such default continues for more than twenty (20) days after Lender has given notice of such default to Borrower. 13 8.3 Any representation or warranty made herein by Borrower shall prove to have been false or misleading in any material respect; or 8.4 Borrower shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts as they become due, or shall file a voluntary petition in bankruptcy, or shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation pertinent to such circumstances, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver, or liquidator of Borrower or of all or any substantial part (33-1/3% or more) of the properties of Borrower; or Borrower or its directors or majority shareholders shall take any action initiating the dissolution or liquidation of Borrower; or 8.5 Sixty (60) days shall have expired after the commencement of an action by or against Borrower seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, without such action being dismissed or all orders or proceedings thereunder affecting the operations or the business of Borrower being stayed; or a stay of any such order or proceedings shall thereafter be set aside and the action setting it aside shall not be timely appealed; or Borrower shall file any answer admitting or not contesting the material allegations of a petition filed against Borrower in any such proceedings; or the court in which such proceedings are pending shall enter a decree or order granting the relief sought in any such proceedings; or 8.6 Sixty (60) days shall have expired after the appointment, without the consent or acquiescence of Borrower, of any trustee, receiver or liquidator of Borrower or of all or any substantial part of the properties of Borrower without such appointment being vacated; or 8.7 The default by Borrower under any Excluded Agreement(s), any other promissory note or agreement for borrowed money, or any other agreement between Borrower and Lender; or 8.8 The occurrence of any default under any lease or other agreement or obligation of Borrower involving an amount in excess of $250,000.00 or having a Material Adverse Effect; or the entry of any judgement against Borrower involving an award in excess of $250,000.00 that would have a Material Adverse Effect, that has not been bonded or stayed on appeal within thirty (30) days; or 8.9 The occurrence of any material default under the Senior Loan Documents. SECTION 9. REMEDIES Upon the occurrence of any one or more Events of Default, to the extent there are then outstanding Secured Obligations and to the extent necessary to satisfy them, Lender, at its option, may declare the Note and all of the other Secured Obligations to be accelerated and immediately due and payable (provided, -------- that upon the occurrence of an Event of Default of the type described in Sections 8.4 or 8.5, the Note(s) and all of the other Secured Obligations shall automatically be accelerated and made due and payable without any further act), whereupon the unpaid principal of and accrued interest on such Note(s) and all other outstanding Secured Obligations shall become immediately due and payable, and shall thereafter bear interest at the Default Rate set forth in, and calculated according to, Section 2.3 (c) of this Agreement. Lender may exercise all rights and remedies with respect to the Collateral under the Loan Documents 14 or otherwise available to it under applicable law, including the right to release, hold or otherwise dispose of all or any part of the Collateral and the right to occupy, utilize, process and commingle the Collateral. Upon the happening and during the continuance of any Event of Default, Lender may then, or at any time thereafter and from time to time, apply, collect, sell in one or more sales, lease or otherwise dispose of, any or all of the Collateral, in its then condition or following any commercially reasonable preparation or processing, in such order as Lender may elect, and any such sale may be made either at public or private sale at its place of business or elsewhere. Borrower agrees that any such public or private sale may occur upon ten (10) calendar days' prior written notice to Borrower. Lender may require Borrower to assemble the Collateral and make it available to Lender at a place designated by Lender which is reasonably convenient to Lender and Borrower. The proceeds of any sale, disposition or other realization upon all or any part of the Collateral shall be distributed by Lender in the following order of priorities: First, to Lender in an amount sufficient to pay in full Lender's costs and professionals' and advisors' fees and expenses; Second, to Lender in an amount equal to the then unpaid amount of the Secured Obligations in such order and priority as Lender may choose in its sole discretion; and Finally, upon payment in full of all of the Secured Obligations, to Borrower or its representatives or as a court of competent jurisdiction may direct. Lender shall be deemed to have acted reasonably in the custody, preservation and disposition of any of the Collateral if it complies with the obligations of a secured party under Section 9207 of the UCC. Lender's rights and remedies hereunder are subject to the terms of the Subordination Agreement. SECTION 10. MISCELLANEOUS 10.1 Continuation of Security Interest. This is a continuing Agreement and the grant of a security interest hereunder shall remain in full force and effect and all the rights, powers and remedies of Lender hereunder shall continue to exist until the Secured Obligations are paid in full as the same become due and payable and until Lender has executed a written termination statement (which Lender shall execute within a reasonable time after full payment of the Secured Obligations hereunder), reassigning to Borrower, without recourse, the Collateral and all rights conveyed hereby and returning possession of the Collateral to Borrower. The rights, powers and remedies of Lender hereunder shall be in addition to all rights, powers and remedies given by statute or rule of law and are cumulative. The exercise of any one or more of the rights, powers and remedies provided herein shall not be construed as a waiver of or election of remedies with respect to any other rights, powers and remedies of Lender. 10.2 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be 15 ineffective only to the extent and duration of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 10.3 Notice. Except as otherwise provided herein, all notices and service of process required, contemplated, or permitted hereunder or with respect to the subject matter hereof shall be in writing, and shall be deemed to have been validly served, given or delivered upon the earlier of: (i) the first business day after transmission by facsimile or hand delivery or deposit with an overnight express service or overnight mail delivery service; or (ii) the third calendar day after deposit in the United States mails, with proper first class postage prepaid, and shall be addressed to the party to be notified as follows: (a) If to Lender: COMDISCO, INC. Legal Department Attention: General Counsel 6111 North River Road Rosemont, IL 60018 Facsimile: (847) 518-5088 With a copy to: COMDISCO, INC./COMDISCO VENTURES 6111 North River Road Rosemont, IL 60018 Facsimile: (847) 518-5465 (b) If to Borrower: AGILE SOFTWARE CORPORATION Attention: Tom Shanahan One Almaden Boulevard, 12/th/ Floor San Jose, CA 95113 Facsimile: (408) 975-3949 Phone: (408) 975-3900 or to such other address as each party may designate for itself by like notice. 10.4 Entire Agreement; Amendments. This Agreement, the Note(s), and the other Loan Documents, and the Warrant Agreement(s) constitute the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and thereof, and supersede and replace in their entirety any prior proposals, term sheets, letters, negotiations or other documents or agreements, whether written or oral, with respect to the subject matter hereof or thereof (including, without limitation, Lender's proposal letter dated November 19, 1998, all of which are merged herein and therein. None of the terms of this Agreement, the Note(s), any of the other Loan Documents or Warrant Agreement(s) may be amended except by an instrument executed by each of the parties hereto. 10.5 Headings. The various headings in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provisions hereof. 16 10.6 No Waiver. The powers conferred upon Lender by this Agreement are solely to protect its interest in the Collateral and shall not impose any duty upon Lender to exercise any such powers. No omission, or delay, by Lender at any time to enforce any right or remedy reserved to it, or to require performance of any of the terms, covenants or provisions hereof by Borrower at any time designated, shall be a waiver of any such right or remedy to which Lender is entitled, nor shall it in any way affect the right of Lender to enforce such provisions thereafter. 10.7 Survival. All agreements, representations and warranties contained in this Agreement, the Note(s), the other Loan Documents and the Warrant Agreement(s) or in any document delivered pursuant hereto or thereto shall be for the benefit of Lender and shall survive the execution and delivery of this Agreement and the expiration or other termination of this Agreement. 10.8 Successor and Assigns. The provisions of this Agreement, the other Loan Documents and the Warrant Agreement(s) shall inure to the benefit of and be binding on Borrower and its permitted assigns (if any). Borrower shall not assign its obligations under this Agreement, the Note(s), any of the other Loan Documents or the Warrant Agreement(s), without Lender's express written consent, and any such attempted assignment shall be void and of no effect. Lender may assign, transfer, or endorse its rights hereunder and under the other Loan Documents or Warrant Agreement(s) without prior notice to Borrower, and all of such rights shall inure to the benefit of Lender's successors and assigns. 10.9 Further Indemnification. Borrower agrees to pay, and to save Lender harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all excise, sales or other similar taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 10.10 Governing Law. This Agreement, the Note(s), the other Loan Documents and the Warrant Agreement(s) have been negotiated and delivered to Lender in the State of Illinois, and shall not become effective until accepted by Lender in the State of Illinois. Payment to Lender by Borrower of the Secured Obligations is due in the State of Illinois. This Agreement, the Note(s), the other Loan Documents and the Warrant Agreement(s) shall be governed by, and construed and enforced in accordance with, the laws of the State of Illinois, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction. 10.11 Consent To Jurisdiction And Venue. All judicial proceedings arising in or under or related to this Agreement, the Note(s), any of the other Loan Documents or Warrant Agreement(s) may be brought in any state or federal court of competent jurisdiction located in the State of Illinois. By execution and delivery of this Agreement, each party hereto generally and unconditionally: (a) consents to personal jurisdiction in Cook County, State of Illinois; (b) waives any objection as to jurisdiction or venue in Cook County, State of Illinois; (c) agrees not to assert any defense based on lack of jurisdiction or venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement, the Note(s), the other Loan Documents or Warrant Agreement(s). Service of process on any party hereto in any action arising out of or relating to this agreement shall be effective if given in accordance with the requirements for notice set forth in Section 10.3, above and shall be deemed effective and received as set forth in Section 10.3, above. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of either party to bring proceedings in the courts of any other jurisdiction. 17 10.12 Mutual Waiver Of Jury Trial. Because disputes arising in connection with complex financial transactions are most quickly and economically resolved by an experienced and expert person and the parties wish applicable state and federal laws to apply (rather than arbitration rules), the parties desire that their disputes be resolved by a judge applying such applicable laws. EACH OF BORROWER AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY BORROWER AGAINST LENDER OR ITS ASSIGNEE AND/OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER. This waiver extends to all such Claims, including, without limitation, Claims which involve persons or entities other than Borrower and Lender; Claims which arise out of or are in any way connected to the relationship between Borrower and Lender; and any Claims for damages, breach of contract arising out of this Agreement, any other Loan Document or any of the Excluded Agreements, specific performance, or any equitable or legal relief of any kind. 10.13 Confidentiality. Lender acknowledges that certain items of Collateral, including, but not limited to trade secrets, source codes, customer lists and certain other items of Intellectual Property, and any Financial Statements provided pursuant to Section 6 hereof, constitute proprietary and confidential information of the Borrower (the "Confidential Information"). Accordingly, Lender agrees that any Confidential Information it may obtain in the course of acquiring, perfecting or foreclosing on the Collateral or otherwise provided under this Agreement, provided such Confidential Information is marked as confidential by Borrower or Lender is otherwise notified that such information is Confidential Information at the time of disclosure, shall be received in the strictest confidence and will not be disclosed to any other person or entity in any manner whatsoever, in whole or in part, without the prior written consent of the Borrower, unless and until Lender has acquired indefeasible title thereto. 10.14 Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so delivered shall be deemed an original, but all of which counterparts shall constitute but one and the same instrument. IN WITNESS WHEREOF, the Borrower and the Lender have duly executed and delivered this Agreement as of the day and year first above written. BORROWER: AGILE SOFTWARE CORPORATION Signature: /s/ T. Shanahan --------------------------- Print Name: T. SHANAHAN -------------------------- Title: CFO ------------------------------- 18 Accepted In Rosemont, Illinois: - ------------------------------ LENDER COMDISCO, INC. Signature: /s/ James P. Labe ---------------------------- Print Name: JAMES P. LABE --------------------------- PRESIDENT Title: COMDISCO VENTURES DIVISION -------------------------------- 19 EX-10.6 7 REVOLVING CREDIT LOAN AND SECURITY AGREEMENT REVOLVING CREDIT LOAN & SECURITY AGREEMENT (ACCOUNTS AND INVENTORY) EXHIBIT 10.6
- --------------------------------------------------------------------------------------------------------- OBLIGOR# NOTE# AGREEMENT DATE DECEMBER 11, 1996 - --------------------------------------------------------------------------------------------------------- CREDIT LIMIT INTEREST RATE B+1.00% OFFICER NO./INITIALS $1,000,000.00 9.25% 48704 CLAY JONES - ---------------------------------------------------------------------------------------------------------
THIS AGREEMENT is entered into on DECEMBER 11, 1996, between COMERICA BANK- CALIFORNIA ("Bank") as secured party, whose Headquarter Office is 333 WEST SANTA CLARA STREET, SAN JOSE, CA and AGILE SOFTWARE CORPORATION ("Borrower"), a CALIFORNIA CORPORATION whose sole place of business (if it has only one), chief executive office (if it has more than one place of business) or residence (if an individual is located at ONE ALMADEN BLVD., 12TH FLOOR, SAN JOSE, CA. The parties agree as follows: 1. DEFINITIONS ----------- 1.1 "Agreement" as used in this Agreement means and includes this Revolving Credit Loan & Security Agreement (Accounts and Inventory), any concurrent or subsequent rider to this Revolving Credit Loan & Security Agreement (Accounts and Inventory) and any extensions, supplements, amendments or modifications to this Revolving Credit Loan & Security Agreement (Accounts and Inventory) and to any such rider. 1.2 "Bank Expenses" as used in this Agreement means and includes: all costs or expenses required to be paid by Borrower under this Agreement which are paid or advanced by Bank; taxes and insurance premiums of every nature and kind of Borrower paid by Bank; filing, recording, publication and search fees, appraiser fees, auditor fees and costs, and title insurance premiums paid or incurred by Bank in connection with Bank's transactions with Borrower; costs and expenses incurred by Bank in collecting the Receivables (with or without suit) to correct any default or enforce any provision of this Agreement, or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, disposing of, preparing for sale and/or advertising to sell the Collateral, whether or not a sale is consummated; costs and expenses of suit incurred by Bank in enforcing or defending this Agreement or any portion hereof, including, but not limited to, expenses incurred by Bank in attempting to obtain relief from any stay, restraining order, injunction or similar process which prohibits Bank from exercising any of its rights or remedies; and attorneys' fees and expenses incurred by Bank in advising, structuring, drafting, reviewing, amending, terminating, enforcing, defending or concerning this Agreement, or any portion hereof or any agreement related hereto, whether or not suit is brought. Bank Expenses shall include Bank's in-house legal charges at reasonable rates. 1.3 "Base Rate" as used in this Agreement means that variable rate of interest so announced by Bank at its headquarters office in San Jose, California as its "Base Rate" from time to time and which serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto. 1.4 "Borrower's Books" as used in this Agreement means and includes all of the Borrower's books and records including but not limited to: minute books; ledgers; records indicating, summarizing or evidencing Borrower's assets, liabilities, Receivables, business operations or financial condition, and all information relating thereto, computer programs; computer disk or tape files; computer printouts, computer runs; and other computer prepared information and equipment of any kind. 1.5 "Borrowing Base" as used in this Agreement means the sum of: (1) SEVENTY FIVE percent (75.00%) of the net amount of Eligible Accounts after deducting therefrom all payments, adjustments and credits applicable thereto ("Accounts Receivable Borrowing Base"); and (2) the amount, if any, of the advances against inventory agreed to be made pursuant to any Inventory Rider ("Inventory Borrowing Base"), or other rider, amendment or modification to this Agreement, that may now or hereafter be entered into by Bank and Borrower. Up to $350,000 can be advanced without regard to formula; Upon borrowings exceeding $350,000 (including Letters of Credit) advance on Accounts Receivable will be limited, in aggregate, to 75% of eligible accounts receivable. 1.6 "Cash Flow" as used in this Agreement means, for any applicable period of determination, the Net Income (after deduction for income taxes and other taxes of such person determined by reference to income or profits of such person) for such period, plus, to the extent deducted in computation of such Net Income, the amount of depreciation and amortization expense and the amount of deferred tax liability during such period, all as determined in accordance with GAAP. The applicable period of determination will be N/A, beginning with the period from ____________ to _________________________. 1.7 "Collateral" as used in this Agreement means and includes each and all of the following: the Receivables; the Intangibles; the negotiable collateral, the inventory; all money, deposit accounts and all other assets of Borrower in which Bank receives a security interest or which hereafter come into the possession, custody or control of Bank; and the proceeds of any of the foregoing, including, but not limited to, proceeds of insurance covering the collateral and any and all Receivables, Intangibles, negotiable collateral, inventory, equipment, money, deposit accounts or other tangible and intangible property of borrower resulting from the sale or other disposition of the collateral, and the proceeds thereof. Notwithstanding anything to the contrary contained herein, collateral shall not include any waste or other materials which have been or may be designated as toxic or hazardous by Bank. 1.8 "Credit" as used in this Agreement means all Obligations, except those obligations arising pursuant to any other separate contract, instrument, note, or other separate agreement which, by its terms, provides for a specified interest rate and term. 1 REVOLVING LOAN & SECURITY AGREEMENT (ACCOUNTS & INVENTORY) 1.9 "Current Assets" as used in this Agreement means, as of any applicable date of determination, all cash, non-affiliated customer receivables, United States government securities, claims against the United States government, and inventories. 1.10 "Current Liabilities" as used in this Agreement means, as of any applicable date of determination, (i) all liabilities of a person that should be classified as current in accordance with GAAP, including without limitation any portion of the principal of the Indebtedness classified as current, plus (ii) to the extent not otherwise included, all liabilities of the Borrower to any of its affiliates whether or not classified as current in accordance with GAAP. 1.11 "Daily Balance" as used in this Agreement means the amount determined by taking the amount of the Credit owed at the beginning of a given day, adding any new Credit advanced or incurred on such date, and subtracting any payments or collections which are deemed to be paid and are applied by Bank in reduction of the Credit on that date under the provisions of this Agreement. 1.12 "Eligible Accounts" as used in this Agreement means and includes those accounts of Borrower which are due and payable within THIRTY (30) days, or ------ ---- less, from the date of invoice, have been validly assigned to Bank and strictly comply with all of Borrower's warranties and representations to Bank; but Eligible Accounts shall not include the following: (a) accounts with respect to which the account debtor is an officer, employee, partner, joint venturer or agent of Borrower; (b) accounts with respect to which goods are placed on consignment, guaranteed sale or other terms by reason of which the payment by the account debtor may be conditional; (c) accounts with respect to which the account debtor is not a resident of the United States; (d) accounts with respect to which the account debtor is the United States or any department, agency or instrumentality of the United States; (e) accounts with respect to which the account debtor is any State of the United States or any city, county, town, municipality or division thereof; (f) accounts with respect to which the account debtor is a subsidiary of, related to, affiliated or has common shareholders, officers or directors with Borrower; (g) accounts with respect to which Borrower is or may become liable to the account debtor for goods sold or services rendered by the account debtor to Borrower; (h) accounts not paid by an account debtor within ninety (90) days from the date of the invoice; (i) accounts with respect to which account debtors dispute liability or make any claim, or have any defense, crossclaim, counterclaim, or offset; (j) accounts with respect to which any insolvency Proceeding is filed by or against the account debtor, or if an account debtor becomes insolvent, fails or goes out of business; and (k) accounts owed by any single account debtor which exceed twenty percent (20%) of all of the Eligible Accounts; and (l) accounts with a particular account debtor on which over twenty-five percent (25%) of the aggregate amount owing is greater than ninety (90) days from the date of the invoice. 1.13 "Event of Default" as used in this Agreement means those events described in Section 7 contained herein below. 1.14 "Fixed Charges" as used in this Agreement means and includes, for any applicable period of determination, the sum, without duplication, of (a) all interest paid or payable during such period by a person on debt of such person, plus (b) all payments of principal or other sums paid or payable during such period by such person with respect to debt of such person having a final maturity more than one year from the date of creation of such debt, plus (c) all debt discount and expense amortized or required to be amortized during such period by such person, plus (d) the maximum amount of all rents and other payments paid or required to be paid by such person during such period under any lease or other contract or arrangement providing for use of real or personal property in respect of which such person is obligated as a lessee, use or obligor, plus (e) all dividends and other distributions paid or payable by such person or otherwise accumulating during such period on any capital stock of such person, plus (f) all loans or other advances made by such person during such period to any Affiliate of such person. The applicable period of determination will be N/A, beginning with the period from ________________ --- to ____________________. 1.15 "GAAP" as used in this Agreement means as of any applicable period, generally accepted accounting principles in effect during such period. 1.16 "Insolvency Proceeding" as used in this Agreement means and includes any proceeding or case commenced by or against the Borrower, or any guarantor of Borrower's Obligations, or any of borrower's account debtors, under any provisions of the Bankruptcy Code, as amended, or any other bankruptcy or insolvency law, including but not limited to assignments for the benefit of creditors, formal or informal moratoriums, composition or extensions with some or all creditors, any proceeding seeking a reorganization, arrangement or any other relief under the Bankruptcy code, as amended, or any other bankruptcy or insolvency law. 1.17 "Intangibles" as used in this Agreement means and includes all of Borrower's present and future general intangibles and other personal property (including, without limitation, any and all rights in any legal proceedings, goodwill, patents, trade names, copyrights, trademarks, blueprints, drawings, purchase orders, computer programs, computer disks, computer tapes, literature, reports, catalogs and deposit accounts) other than goods and Receivables, as well as Borrower's Books relating to any of the foregoing. 1.18 "Inventory" as used in this Agreement means and includes all present and future inventory in which Borrower has any interest, including, but not limited to, goods held by Borrower for sale or lease or to be furnished under a contract of service and all of Borrower's present and future raw materials, work in process, finished goods, advertising materials, and packing and shipping materials, wherever located and any documents of title representing any of the above, and any equipment, fixtures or other property used in the storing, moving, preserving, identifying, accounting for and shipping of preparing for the shipping of inventory, and any and all other items hereafter acquired by Borrower by way of substitution, 2 REVOLVING LOAN & SECURITY AGREEMENT (ACCOUNTS & INVENTORY) replacement, return, repossession or otherwise, and all additions and accessions thereto, and the resulting product or mass, and any documents of title respecting any of the above. 1.19 "Net Income" as used in this Agreement means the net income (or loss) of a person for any period determined in accordance with GAAP but excluding in any event: (a) any gains or losses on the sale or other disposition, not in the ordinary course of business, of investments or fixed or capital assets, and any taxes on the excluded gains and any tax deductions or credits on account on any excluded losses; and (b) in the case of the Borrower, net earnings of any Person in which Borrower has an ownership interest, unless such net earnings shall have actually been received by Borrower in the form of cash distributions. 1.20 "Judicial Officer or Assignee" as used in this Agreement means and includes any trustee, receiver, controller, custodian, assignee for the benefit of creditors or any other person or entity having powers or duties like or similar to the powers and duties of trustee, receiver, controller, custodian or assignee for the benefit of creditors. 1.21 "Obligations" as used in this Agreement means and includes any and all loans, advances, overdrafts, debts, liabilities (including, without limitation, any and all amounts charged to Borrower's account pursuant to any agreement authorizing Bank to charge Borrower's account), obligations, lease payments, guaranties, covenants and duties owing by Borrower to Bank of any kind and description whether advanced pursuant to or evidenced by this Agreement; by any note or other instrument; or by any other agreement between Bank and Borrower and whether or not for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including, without limitation, any debt, liability or obligation owing from Borrower to others which Bank may have obtained by assignment, participation, purchase or otherwise, and further including, without limitation, all interest not paid when due and all Bank Expenses which Borrower is required to pay or reimburse by this Agreement, by law, or otherwise. 1.22 "Person" or "person" as used in this Agreement means and includes any individual, corporation, partnership, joint venture, association, trust, unincorporated association, joint stock company, government, municipality, political subdivision or agency, or other entity. 1.23 "Receivables" as used in this Agreement means and includes all presently existing and hereafter arising accounts, instruments, documents, chattel paper, general intangibles, all other forms of obligations owing to Borrower, all of Borrower's rights in, to and under all purchase orders heretofore or hereafter received, all moneys due to Borrower under all contracts or agreements (whether or not yet earned or due), all merchandise returned to or reclaimed by Borrower and the Borrower's books (except minute books) relating to any of the foregoing. 1.24 "Subordinated Debt" as used in this Agreement means indebtedness of the Borrower to third parties which has been subordinated to the Obligations pursuant to a subordination agreement in form and content satisfactory to the Bank. 1.25 "Subordination Agreement" as used in this Agreement means a subordination agreement in form satisfactory to Bank making all present and future indebtedness of the Borrower to N/A subordinate to the Obligations. --- 1.26 "Tangible Effective Net Worth" as used in this Agreement means net worth as determined in accordance with GAAP consistently applied, increased by Subordinated Debt, if any, and decreased by the following: patents, licenses, goodwill, subscription lists, organization expenses, trade receivables converted to notes, money due from affiliates (including officers, directors, subsidiaries and commonly held companies). 1.27 "Tangible Net Worth" as used in this Agreement means, as of any applicable date of determination, the excess of a. the net book value of all assets of a person (other than patents, patent rights, trademarks, trade names, franchises, copyrights, licenses, goodwill, and similar intangible assets) after all appropriate deductions in accordance with GAAP (including, without limitation, reserves for doubtful receivables, obsolescence, depreciation and amortization), over b. all Debt of such person. 1.28 "Total Liabilities" as used in this Agreement means the total of all items of indebtedness, obligation or liability which, in accordance with GAAP consistently applied, would be included in determining the total liabilities of the Borrower as of the date Total Liabilities is to be determined, including without limitation (a) all obligations secured by any mortgage, pledge, security interest or other lien on property owned or acquired, whether or not the obligations secured thereby shall have been assumed; (b) all obligations which are capitalized lease obligations; and (c) all guaranties, endorsements or other contingent or surety obligations with respect to the indebtedness of others, whether or not reflected on the balance sheets of the Borrower, including any obligation to furnish funds, directly or indirectly through the purchase of goods, supplies, services, or by way of stock purchase, capital contribution, advance or loan or any obligation to enter into a contract for any of the foregoing. 1.29 "Working Capital" as used in this Agreement means, as of any applicable date of determination, Current Assets less Current Liabilities. 3 REVOLVING LOAN & SECURITY AGREEMENT (ACCOUNTS & INVENTORY) 1.30 Any and all terms used in this Agreement shall be construed and defined in accordance with the meaning and definition of such terms under and pursuant to the California Uniform Commercial Code (hereinafter referred to as the "Code") as amended. 1.31 As of 6/30/1997 all existing current obligations under stand-by and commercial Letters of Credit will be reserved under the Borrowing Base. 2. LOAN AND TERMS OF PAYMENT ------------------------- For value received, Borrower promises to pay to the order of Bank such amount, as provided below, together with interest, as provided for below. 2.1 Upon the request of Borrower, made at any time and from time to time during the term hereof, and so long as no Event of Default has occurred, Bank shall lend to Borrower an amount equal to the Borrowing Base; provided, however, that in no event shall Bank be obligated to make advances to Borrower under this Section 2.1 whenever the Daily Balance exceeds, at any time, either the Borrowing Base or the sum of ONE MILLION AND NO/100 ---------------------- ($1,000,000.00), such amount being referred to herein as an "Overadvance". --------------- 2.2 Except as hereinbelow provided, the Credit shall bear interest, on the Daily Balance owing, at a rate of ONE AND NO/1000 (1.000) percentage points --------------- ------- per annum above the Base Rate (the "Rate"). The Credit shall bear interest, from and after the occurrence of an Event of Default and without constituting a waiver of any such Event of Default, on the Daily Balance owing, at a rate three (3) percentage points per annum above the Rate. All Interest chargeable under this Agreement that is based upon a per annum calculation shall be computed on the basis of a three hundred sixty (360) day year for actual days elapsed. The Base Rate as of the date of this Agreement is EIGHT AND 250/1000 ------------------ (8.250%) per annum. In the event that the Base Rate announced is, from time -------- to time hereafter changed, adjustment in the Rate shall be made and based on the Base Rate in effect on the date of such change. The Rate, as adjusted, shall apply to the Credit until the Base Rate is adjusted again. The minimum interest payable by the Borrower under this Agreement shall in no event be less than N/A per month. All interest payable by Borrower under the Credit, --- shall be due and payable on the first day of each calendar month during the term of this Agreement and Bank may, at its option, elect to treat such interest and any and all Bank Expenses as advances under the Credit, which amounts shall thereupon constitute Obligations and shall thereafter accrue interest at the rate applicable to the Credit under the terms of the Agreement. 2.3 Without affecting Borrower's obligation to repay immediately any Overadvance in accordance with Section 2.1 hereof, all Overadvances shall bear additional interest on the amount thereof at a rate equal to N/A --- (N/A%) percentage points per month in excess of the interest rate set forth ------ in Section 2.2, from the date incurred and for each month thereafter, until repaid in full. 3. TERM. ---- 3.1 This Agreement shall remain in full force and effect until JANUARY 1, 1998, or until terminated by notice by Borrower. Notice of such termination by Borrower shall be effectuated by mailing of a registered or certified letter not less than thirty (30) days prior to the effective date of such termination, addressed to the Bank at the address set forth herein and the termination shall be effective as of the date so fixed in such notice. Notwithstanding the foregoing, should Borrower be in default of one or more of the provisions of this Agreement, Bank may terminate this Agreement at any time without notice. Notwithstanding the foregoing, should either Bank or Borrower become insolvent or unable to meet its debts as they mature, or fail, suspend, or go out of business, the other party shall have the right to terminate this Agreement at any time without notice. On the date of termination all Obligations shall become immediately due and payable without notice or demand; no notice of termination by Borrower shall be effective until Borrower shall have paid all Obligations to Bank in full. Notwithstanding termination, until all Obligations have been fully satisfied, Bank shall retain its security interest in all existing Collateral and Collateral arising thereafter, and Borrower shall continue to perform all of its Obligations. 3.2 After termination and when Bank has received payment in full of Borrower's obligations to Bank, Bank shall reassign to Borrower all Collateral held by Bank, and shall execute a termination of all security agreements and security interests given by Borrower to Bank, upon the execution and delivery of mutual general releases. 4. CREATION OF SECURITY INTEREST. ----------------------------- 4.1 Borrower hereby grants to Bank a continuing security interest in all presently existing and hereafter arising Collateral in order to secure prompt repayment of any and all Obligations owed by Borrower to Bank and in order to secure prompt performance by Borrower of each and all of its covenants and Obligations under this Agreement and otherwise created. Bank's security interest in the Collateral shall attach to all Collateral without further act on the part of Bank or Borrower. In the event that any Collateral, including proceeds, is evidenced by or consists of a letter of credit, advice of credit, instrument, money, negotiable documents, chattel paper or similar property (collectively, "Negotiable Collateral"), Borrower shall, immediately upon receipt thereof, endorse and assign such Negotiable Collateral over to Bank and deliver actual physical possession of the Negotiable Collateral to Bank. 4.2 Bank's security interest in Receivables shall attach to all Receivables without further act on the part of Bank or Borrower. Upon request from Bank, Borrower shall provide Bank with schedules describing all Receivables created or acquired by Borrower (including without limitation agings listing the names and addresses of, and amounts owing by date by account debtors), and shall execute and deliver written assignments of all Receivables to Bank all in a form acceptable to Bank, provided, however, Borrower's failure to execute and deliver such schedules and/or assignments shall not effect or limit Bank's security interest and other rights in and to the Receivables. Together with each schedule, 4 REVOLVING LOAN & SECURITY AGREEMENT (ACCOUNTS AND INVENTORY) Borrower shall furnish Bank with copies of Borrower's customers' invoices or the equivalent, and original shipping or delivery receipts for all merchandise sold, and Borrower warrants the genuineness thereof. Bank or Bank's designee may notify customers or account debtors of collection costs and expenses to Borrower's account but, unless and until Bank does so or gives Borrower other written instructions, Borrower shall collect all Receivables for Bank, receive in trust all payments thereon as Bank's trustee, and, if so requested to do so from Bank, Borrower shall immediately deliver said payments to Bank in their original form as received from the account debtor and all letters of credit, advices of credit, instruments, documents, chattel paper or any similar property evidencing or constituting Collateral. Notwithstanding anything to the contrary contained herein, if sales of inventory are made for cash, Borrower shall immediately deliver to Bank, in identical form, all such cash, checks, or other forms of payment which Borrower receives. The receipt of any check or other item of payment by Bank shall not be considered a payment on account until such check or other item of payment is honored when presented for payment, in which event, said check or other item of payment shall be deemed to have been paid to Bank TWO (2) calendar days after the date Bank actually receives such check or other item of payment. 4.3 Bank's security interest in inventory shall attach to all inventory without further act on the part of Bank or Borrower. Upon Bank's request Borrower will from time to time at Borrower's expense pledge, assemble and deliver such inventory to Bank or to a third party as Bank's bailee; or hold the same in trust for Bank's account or store the same in a warehouse in Bank's name; or deliver to Bank documents of title representing said inventory; or evidence of Bank's security interest in some other manner acceptable to Bank. Until a default by Borrower under this Agreement or any other Agreement between Borrower and Bank. Borrower may, subject to the provisions hereof and consistent herewith, sell the inventory, but only in the ordinary course of Borrower's business. A sale of inventory in Borrower's ordinary course of business does not include an exchange or a transfer in partial or total satisfaction of a debt owing by Borrower. 4.4 Borrower shall execute and deliver to Bank concurrently with Borrower's execution of this Agreement, and at any time or times hereafter at the request of Bank, all financing statements, continuation financing statements, security agreements, mortgages, assignments, certificates of title, affidavits, reports, notices, schedules of accounts, letters of authority and all other documents that Bank may request, in form satisfactory to Bank, to perfect and maintain perfected Bank's security interest in the Collateral and in order to fully consummate all of the transactions contemplated under this Agreement. Borrower hereby irrevocably makes, constitutes and appoints Bank (and any of Bank's officers, employees or agents designated by Bank) as Borrower's true and lawful attorney-in-fact with power to sign the name of Borrower on any financing statements, continuation financing statements, security agreement, mortgage, assignment, certificate of title, affidavit, letter of authority, notice of other similar documents which must be executed and/or filed in order to perfect or continue perfected Bank's security interest in the Collateral. Borrower shall make appropriate entries in Borrower's Books disclosing Bank's security interest in the Receivables. Bank (through any of its officers, employees or agents) shall have the right at any time or times hereafter during Borrower's usual business hours, or during the usual business hours of any third party having control over the records of Borrower, to inspect and verify Borrower's Books in order to verify the amount or condition of, or any other matter, relating to, said Collateral and Borrower's financial condition. 4.5 Borrower appoints Bank or any other person whom Bank may designate as Borrower's attorney-in-fact, with power to endorse Borrower's name on any checks, notes, acceptances, money order, drafts or other forms of payment or security that may come into Bank's possession; to sign Borrower's name on any invoice or bill of lading relating to any Receivables, on drafts against account debtors, on schedules and assignments of Receivables, on verifications of Receivables and on notices to account debtors; to establish a lock box arrangement and/or to notify the post office authorities to change the address for delivery of Borrower's mail addressed to Borrower to an address designated by Bank, to receive and open all mail addressed to Borrower, and to retain all mail relating to the Collateral and forward all other mail to Borrower; to send, whether in writing or by telephone, requests for verification of Receivables; and to do all things necessary to carry out this Agreement. Borrower ratifies and approves all acts of the attorney-in- fact. Neither Bank nor its attorney-in-fact will be liable for any acts or omissions or for any error of judgement or mistake of fact or law. This power being coupled with an interest, is irrevocable so long as any Receivables in which Bank has a security interest remain unpaid and until the Obligations have been fully satisfied. 4.6 In order to protect or perfect any security interest which Bank is granted hereunder, Bank may, in its sole discretion, discharge any lien or encumbrance or bond the same, pay any insurance, maintain guards, warehousemen, or any personnel to protect the Collateral, pay any service bureau, or, obtain any records, and all costs for the same shall be added to the Obligations and shall be payable on demand. 4.7 Borrower agrees that Bank may provide information relating to this Agreement or relating to Borrower to Bank's parent, affiliates, subsidiaries and service providers. 5. CONDITIONS PRECEDENT -------------------- 5.1 Conditions precedent to the making of the loans and the extension of the financial accommodations hereunder, Borrower shall execute, or cause to be executed, and deliver to Bank, in form and substance satisfactory to Bank and its counsel, the following: a. This Agreement and other documents required by Bank; b. Financing statements (Form UCC-1) in form satisfactory to Bank for filing and recording with the appropriate governmental authorities; 5 REVOLVING LOAN & SECURITY AGREEMENT (ACCOUNTS AND INVENTORY) c. If Borrower is a corporation, then certified extracts from the minutes of the meeting of its board of directors, authorizing the borrowings and the granting of the security interest provided for herein and authorizing specific officers to execute and deliver the agreements provided for herein; d. If Borrower is a corporation, then a certificate of good standing showing that Borrower is in good standing under the laws of the state of its incorporation and certificates indicating that Borrower is qualified to transact business and is in good standing in any other state in which it conducts business; e. If Borrower is a partnership, then a copy of Borrower's partnership agreement certified by each general partner of Borrower; f. UCC searches, tax lien and litigation searches, fictitious business statement filings, insurance certificates, notices or other similar documents which Bank may require and in such form as Bank may require, in order to reflect, perfect or protect Bank's first priority security interest in the Collateral and in order to fully consummate all of the transactions contemplated under this Agreement; g. Evidence that Borrower has obtained insurance and acceptable endorsements; h. Waivers executed by landlords and mortgagees of any real property on which any Collateral is located; and i. Warranties and representations of officers. 6. WARRANTIES REPRESENTATIONS AND COVENANTS. ---------------------------------------- 6.1 If so requested by Bank, Borrower shall, at such intervals designated by Bank, during the term hereof execute and deliver a Report of Accounts Receivable or similar report, in form customarily used by Bank. Borrower's Borrowing Base at all times pertinent hereto shall not be less than the advances made hereunder. Bank shall have the right to recompute Borrower's Borrowing Base in conformity with this Agreement. 6.2 If any warranty is breached as to any account, or any account is not paid in full by an account debtor within NINETY (90) days from the date of invoice, or an account debtor disputes liability or makes any claim with respect thereto, or a petition in bankruptcy or other application for relief under the Bankruptcy Code or any other insolvency law is filed by or against an account debtor, or an account debtor makes and assignment for the benefit of creditors, becomes insolvent, fails or goes out of business, then Bank may deem ineligible any and all accounts owing by that account debtor, and reduce Borrower's Borrowing Base by the amount thereof. Bank shall retain its security interest in all Receivables and accounts, whether eligible or ineligible, until all Obligations have been fully paid and satisfied. Returns and allowances, if any, as between Borrower and its customers, will be on the same basis and in accordance with the usual customary practices of the Borrower, as they exist at this time. Any merchandise which is returned by an account debtor or otherwise recovered shall be set aside, marked with Bank's name, and Bank shall retain a security interest therein. Borrower shall promptly notify Bank of all disputes and claims and settle or adjust them on terms approved by Bank. After default by Borrower hereunder, no discount, credit or allowance shall be granted to any account debtor by Borrower and no return of merchandise shall be accepted by Borrower without Bank's consent, Bank may, after default by Borrower, settle or adjust disputes and claims directly with account debtors for amounts and upon terms which Bank considers advisable, and in such cases Bank will credit Borrower's account with only the net amounts received by Bank in payment of the accounts, after deducting all Bank Expenses in connection therewith. 6.3 Borrower warrants, represents, covenants and agrees that: a. Borrower has good and marketable title to the Collateral. Bank has and shall continue to have a first priority perfected security interest in and to the Collateral. The Collateral shall at all times remain free and clear of all liens, encumbrances and security interests (except those in favor of Bank). b. All accounts are and will, at all times pertinent hereto, be bona fide existing obligations created by the sale and delivery of merchandise or the rendition of services to account debtors in the ordinary course of business, free of liens, claims, encumbrances and security interests (except as held by Bank and except as may be consented to, in writing, by Bank) and are unconditionally owed to Borrower without defenses, disputes, offsets, counterclaims, rights of return or cancellation, and Borrower shall have received no notice of actual or imminent bankruptcy or insolvency of any account debtor at the time an account due from such account debtor is assigned to Bank. c. At the time each account is assigned to Bank, all property giving rise to such account shall have been delivered to the account debtor or to the agent for the account debtor for immediate shipment to, and unconditional acceptance by, the account debtor. Borrower shall deliver to Bank, as Bank may from time to time require, delivery receipts, customer's purchase orders, shipping instruction, bills of lading and any other evidence of shipping arrangements. Absent such a request by Bank, copies of all such documentation shall be held by Borrower as custodian for Bank. 6.4 At the time each eligible account is assigned to Bank, all such eligible accounts will be due and payable on terms set forth in Section 1.12, or on such other terms approved in writing by Bank in advance of the creation of such accounts and which are expressly set forth on the face of all invoices, copies of which shall be held by Borrower as custodian for Bank, and no such eligible account will then be past due. 6 REVOLVING LOAN & SECURITY AGREEMENT (ACCOUNTS AND INVENTORY) 6.5 Borrower shall keep the inventory only at the following locations: _______ __________________________________________ and the owner or mortgagees of the respective locations are:____________________________________________________ a. Borrower, immediately upon demand by Bank therefor, shall now and from time to time hereafter, at such intervals as are requested by Bank, deliver to Bank, designations of inventory specifying Borrower's cost of inventory, the wholesale market value thereof and such other matters and information relating to the inventory as Bank may request; b. Borrower's inventory, valued at the lower of Borrower's cost or the wholesale market value thereof, at all times pertinent hereto shall not be less than N/A Dollars ($N/A) of which no less than N/A Dollars ($N/A) --- ------ --- ------ shall be in raw materials and finished goods; c. All of the inventory is and shall remain free from all purchase money or other security interests, liens or encumbrances, except as held by Bank; d. Borrower does now keep and hereafter at all times shall keep correct and accurate records itemizing and describing the kind, type, quality and quantity of the inventory, its cost therefor and selling price thereof, and the daily withdrawals therefrom and additions thereto, all of which records shall be available upon demand to any of Bank's officers, agents and employees for inspection and copying; e. All inventory, now and hereafter at all times, shall be new inventory of good and merchantable quality free from defects; f. Inventory is not now and shall not at any time or times hereafter be located or stored with a bailee, warehouseman or other third party without Bank's prior written consent, and, in such event, Borrower will concurrently therewith cause any such bailee, warehouseman or other third party to issue and deliver to Bank, in a form acceptable to Bank, warehouse receipts in Bank's name evidencing the storage of inventory or other evidence of Bank's prior rights in the inventory. In any event, Borrower shall instruct any third party to hold all such inventory for Bank's account subject to Bank's security interests and its instructions; and g. Bank shall have the right upon demand now and/or at all times hereafter, during Borrower's usual business hours, to inspect and examine the inventory and to check and test the same as to quality, quantity, value and condition and Borrower agrees to reimburse Bank for Bank's reasonable costs and expenses in so doing. 6.6 Borrower represents, warrants and covenants with Bank that Borrower will not, without Bank's prior written consent: a. Grant a security interest in or permit a lien, claim or encumbrance upon any of the Collateral to any person, association, firm, corporation, entity or governmental agency or instrumentality; b. Permit any levy, attachment or restraint to be made affecting any of Borrower's assets; c. Permit any Judicial Officer or Assignee to be appointed or to take possession of any or all of Borrower's assets; d. Other than sales of inventory in the ordinary course of Borrower's business, to sell, lease, or otherwise dispose of, move, or transfer, whether by sale or otherwise, any of Borrower's assets; e. Change its name, business structure, corporate identity or structure; add any new fictitious names, liquidate, merge or consolidate with or into any other business organization; f. Move or relocate any Collateral; g. Acquire any other business organization; h. Enter into any transaction not in the usual course of Borrower's business; i. Make any investment in securities of any person, association, firm, entity, or corporation other than the securities of the United States of America; j. Make any change in Borrower's financial structure or in any of its business objectives, purposes or operations which would adversely effect the ability of Borrower to repay Borrower's Obligations; k. Incur any debts outside the ordinary course of Borrower's business except renewals or extensions of existing debts and interest thereon; l. Make any advance or loan except in the ordinary course of Borrower's business as currently conducted; 7 REVOLVING LOAN & SECURITY AGREEMENT (ACCOUNTS AND INVENTORY) m. Make icons, advances or extensions of credit to any Person, except for sales on open account and otherwise in the ordinary course of business; n. Guarantee or otherwise, directly or indirectly, in any way be or become responsible for obligations of any other Person, whether by agreement to purchase the indebtedness of any other Person, agreement for the furnishing of funds to any other Person through the furnishing of goods, supplies or services, by way of stock purchase, capital contribution, advance or loan, for the purpose of paying or discharging (or causing the payment or discharge of) the indebtedness of any other Person, or otherwise, except for the endorsement of negotiable instruments by the Borrower in the ordinary course of business for deposit or collection. o. (a) Sell, lease, transfer or otherwise dispose of properties and assets having an aggregate book value of more than N/A Dollars ($N/A) (whether in one --- ------ transaction or in a series of transactions) except as to the sale of inventory in the ordinary course of business; (b) change its name, consolidate with or merge into any other corporation, permit another corporation to merge into it, acquire all or substantially all the properties or assets of any other Person, enter into any reorganization or recapitalization or reclassify its capital stock, or (c) enter into any sale-leaseback transaction; p. Subordinate any indebtedness due to it from a person to indebtedness of other creditors of such person; q. Purchase or hold beneficially any stock or other securities of, or make any investment or acquire any interest whatsoever in, any other Person except for the common stock of the Subsidiaries owned by the Borrower on the date of this Agreement and except for certificates of deposit with maturities of one year or less of United States commercial banks with capital, surplus and undivided profits in excess of $100,000,000 and direct obligations of the United States Government maturing within one year from the date of acquisition thereof; or r. Allow any fact, condition or event to occur or exist with respect to any employee pension or profit sharing plans established or maintained by it which might constitute grounds for termination of any such plan or for the court appointment of a trustee to administer any such plan. 6.7 Borrower is not a merchant whose sales for resale of goods for personal, family or household purposes exceeded seventy-five percent (75%) in dollar volume of its total sales of all goods during the 12 months preceding the filing by Bank of a financing statement describing the Collateral. At no time hereafter shall Borrower's sales for resale of goods for personal, family or household purposes exceed seventy-five (75%) in dollar volume of its total sales. 6.8 Borrower's sole place of business or chief executive office or residence is located at the address indicated above and Borrower covenants and agrees that it will not, during the term of the Agreement, without prior written notification to Bank, relocate said sole place of business or chief executive office or residence. 6.9 If Borrower is a corporation, Borrower represents, warrants and covenants as follows: a. Borrower will not make any distribution or declare or pay any dividend (in stock or in cash) to any shareholder or on any of its capital stock, of any class, whether now or hereafter outstanding, or purchase, acquire, repurchase, redeem or retire any such capital stock; b. Borrower is and shall at all times hereafter be a corporation duly organized and exleting in good standing under the laws of the state of its incorporation and qualified and licensed to do business in California or any other state in which it conducts its business; c. Borrower has the right and power and is duly authorized to enter into this Agreement; and d. The execution by Borrower of this Agreement shall not constitute a breach of any provision contained in Borrower's articles of incorporation or by-laws, 6.10 The execution of and performance by Borrower of all of the terms and provisions contained in this Agreement shall not result in a breach of or constitute an event of default under any agreement to which Borrower is now or hereafter becomes a party. 6.11 Borrower shall promptly notify Bank in writing of its acquisition by purchase, lease or otherwise of any after acquired property of the type included in the Collateral, with the exception of purchases of inventory in the ordinary course of business. 6.12 All assessments and taxes, whether real, personal or otherwise, due payable by, or imposed, levied or assessed against, Borrower or any of its property have been paid, and shall hereafter be paid in full, before delinquency, Borrower shall make due and timely payment or deposit of all federal, state and local taxes, assessments or contributions required of it by law, and will execute and deliver to Bank, on demand, appropriate certificates attesting to the payment or deposit thereof. Borrower will make timely payment or deposit of all F.I.C.A. payments and withholding taxes required of it by applicable laws, and will upon request furnish Bank with proof satisfactory to it that Borrower has made such payments or deposit. If Borrower fails to pay any such assessment, tax, contribution, or make such deposit, or furnish the required proof, Bank may, in its sole and absolute discretion and without notice to Borrower, 8 REVOLVING LOAN & SECURITY AGREEMENT (Accounts & Inventory) (i) make payment of the same or any part thereof; or (ii) set up such reserves in Borrower's account as Bank deems necessary to satisfy the liability therefor, or both. Bank may conclusively rely on the usual statements of the amount owing or other official statements issued by the appropriate governmental agency. Each amount so paid or deposited by Bank shall constitute a Bank Expense and an additional advance to Borrower. 6.13 There are no actions or proceedings pending by or against Borrower or any guarantor of Borrower before any court or administrative agency and Borrower has no knowledge of any pending, threatened or imminent litigation, governmental investigations or claims, complaints, actions or prosecutions involving Borrower or any guarantor of Borrower, except as heretofore specifically disclosed in writing to Bank. If any of the foregoing arise during the term of the Agreement, Borrower shall immediately notify Bank in writing. 6.14 a. Borrower, at its expense, shall keep and maintain its assets insured against loss or damage by fire, theft, explosion, sprinklers and all other hazards and risks ordinarily insured against by other owners who use such properties in similar businesses for the full insurable value thereof. Borrower shall also keep and maintain business interruption insurance and public liability and property damage insurance relating to Borrower's ownership and use of the Collateral and its other assets. All such policies of insurance shall be in such form, with such companies, and in such amounts as may be satisfactory to Bank. Borrower shall deliver to Bank certified copies of such policies of insurance and evidence of the payments of all premiums therefor. All such policies of insurance (except those of public liability and property damage) shall contain an endorsement in a form satisfactory to Bank showing Bank as a loss payee thereof, with a waiver of warranties (Form 438-BFU), and all proceeds payable thereunder shall be payable to Bank and, upon receipt by Bank shall be applied on account of the Obligations owing to Bank. To secure the payment of the Obligations, Borrower grants Bank a security interest in and to all such policies of insurance (except those of public liability and property damage) and the proceeds thereof, and Borrower shall direct all insurers under such policies of insurance to pay all proceeds thereof directly to Bank. b. Borrower hereby irrevocably appoints Bank (and any of Bank's officers, employees or agents designated by Bank) as Borrower's attorney for the purpose of making, selling and adjusting claims under such policies of insurance, endorsing the name of Borrower on any check, draft, instruments or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect to such policies of insurance. Borrower will not cancel any of such policies without Bank's prior written consent. Each such insurer shall agree by endorsement upon the policy or policies of insurance issued by it to Borrower as required above, or by independent instruments furnished to Bank, that it will give Bank at least ten (10) days written notice before any such policy or policies of insurance shall be altered or cancelled, and that no act or default of Borrower, or any other person, shall affect the right of Bank to recover under such policy or policies of insurance required above or to pay any premium in whole or in part relating thereto. Bank without waiving or releasing any Obligations or any Event of Default, may, but shall have no obligation to do so, obtain and maintain such policies of insurance and pay such premiums and take any other action with respect to such policies which Bank deems advisable. All sums so disbursed by Bank, as well as reasonable attorneys' fees, court costs, expenses and other charges relating thereto, shall constitute Bank Expenses and are payable on demand. 6.15 All financial statements and information relating to Borrower which have been or may hereafter be delivered by Borrower to Bank are true and correct and have been prepared in accordance with GAAP consistently applied and there has been no material adverse change in the financial condition of Borrower since the submission of such financial information to Bank. 6.16 a. Borrower at all times hereafter shall maintain a standard and modern system of accounting in accordance with GAAP consistently applied with ledger and account cards and/or computer tapes and computer disks, computer printouts and computer records pertaining to the Collateral which contain information as may from time to time be requested by Bank, not modify or change its method of accounting or enter into, modify or terminate any agreement presently existing, or at any time hereafter entered into with any third party accounting firm and/or service bureau for the preparation and/or storage of Borrower's accounting records without the written consent of Bank first obtained and without said accounting firm and/or service bureau agreeing to provide information regarding the Receivables and Inventory and Borrower's financial condition to Bank; permit Bank and any of its employees, officers or agents, upon demand, during Borrower's usual business hours, or the usual business hour of third persons having control thereof, to have access to and examine all of the Borrower's Books relating to the Collateral, Borrower's Obligations to Bank, Borrower's financial condition and the results of Borrower's operations and in connection therewith, permit Bank or any of its agents, employees or officers to copy and make extracts therefrom. b. Borrower shall deliver to Bank within thirty (30) days after the end of each month, a company prepared balance sheet and profit and loss statement covering Borrower's operations and deliver to Bank within one hundred twenty (120) days after the end of each of Borrower's fiscal years a(n) audited statement of the financial condition of the Borrower for each such fiscal year, including but not limited to, a balance sheet and profit and loss statement and any other report requested by Bank relating to the Collateral and the financial condition of Borrower, and a certificate signed by an authorized employee of Borrower to the effect that all reports, statements, computer disk or tape files, computer printouts, computer runs, or other computer prepared information of any kind or nature relating to the foregoing or documents delivered or caused to be delivered to Bank under this subparagraph are complete, correct and thoroughly present the financial condition of borrower and that there exists on the date of delivery to Bank no condition or event which constitutes a breach or Event of Default under this Agreement. 9. REVOLVING LOAN & SECURITY AGREEMENT (Accounts & Inventory) c. In addition to the financial statements requested above, the Borrower agrees to provide Bank with the following schedules:
x Accounts Receivable Agings on a MONTHLY basis: * ---------------------- ---------------------------------------- x Accounts Payable Agings on a MONTHLY basis: * ---------------------- ---------------------------------------- Job Progress Reports on a basis; and ______________________ ________________________________________ x BORROWING BASE CERTIFICATES on a MONTHLY basis: * ---------------------- ----------------------------------------
* within 15 days of month end 6.17 Borrower shall maintain the following financial ratios and covenants on a consolidated and non-consolidated basis: a. Working Capital in an amount not less than n/a ------------------------------ ___________________________________________________________________________ b. Tangible Effective Net Worth in an amount not less than $750,000.00 ----------------- ___________________________________________________________________________ c. a ratio of Current Assets to Current Liabilities of not less than n/a ------- ___________________________________________________________________________ d. a quick ratio of cash plus securities plus Receivables to Current Liabilities of not less than 1.25:1.00 ----------------------------------------------- ___________________________________________________________________________ e. a ratio of Total Liabilities (less debt subordinated to Bank) to tangible Effective Net Worth of less than 2.50:1.00 ---------------------------------- ___________________________________________________________________________ f. a ratio of Cash Flow to Fixed Charges of not less than n/a ------------------ ___________________________________________________________________________ g. Net income after taxes of ______________________________________________ ___________________________________________________________________________ h. Borrower shall not without Bank's prior written consent acquire or expend for or commit itself to acquire or expend for fixed assets by lease, purchase or otherwise in an aggregate amount that exceeds no/100 ------------------ n/a Dollars ($ n/a 0.00) in any fiscal year; and - -------------------------- --------------- i. Upon a capital raising event of $1,000,000 or greater, Borrower and ------------------------------------------------------------------------ Lender will review and revisit financial covenants. ------------------------------------------------------------------------ All financial covenants shall be computed in accordance with GAAP consistently applied except as otherwise specifically set forth in this Agreement. All monies due from affiliates (including officers, directors and shareholders) shall be excluded from Borrower assets for all purposes hereunder. 6.18 Borrower shall promptly supply Bank (and cause any guarantor to supply Bank) with such other information (including tax returns) concerning its financial affairs (or that any guarantor) as Bank may request from time to time hereafter, and shall promptly notify Bank of any material adverse change in Borrower's financial condition and of any condition or event which constitutes a breach of or an event which constitutes an Event of Default under this Agreement. 6.19 Borrower is now and shall be at all times hereafter solvent and able to pay its debts (including trade debts) as they mature. 6.20 Borrower shall immediately and without demand reimburse Bank for all sums expended by Bank in connection with any action brought by Bank to correct any default or enforce any provision of this Agreement, including all Bank Expenses; Borrower authorizes and approves all advances and payments by Bank for items described in this Agreement as Bank Expenses. 6.21. Each warranty, representation and agreement contained in this Agreement shall be automatically deemed repeated with each advance and shall be conclusively presumed to have been relied on by Bank regardless of any investigations made or information possessed by Bank. The warranties, representations and agreements set forth herein shall be cumulative and in addition to any and all other warranties, representations and agreements which Borrower shall give, or cause to be given, to Bank, either now or hereafter. 6.22 Borrower shall keep all of its principal bank accounts with Bank and shall notify the Bank immediately in writing of the existence of any other bank account, deposit account, or any other account into which money can be deposited. 6.23. Borrower shall furnish to the Bank: (a) as soon as possible, but in no event later than thirty (30) days after Borrower knows or has reason to know that any reportable event with respect to any deferred compensation plan has occurred, a statement of the chief financial officer of Borrower setting forth the details concerning such reportable 10. REVOLVING LOAN & SECURITY AGREEMENT (Accounts & Inventory) event and the action which Borrower proposes to take with respect thereto, together with a copy of the notice of such reportable event given to the Pension Benefit Guaranty Corporation, if a copy of such notice is available to Borrower; (b) promptly after filing thereof with the United States Secretary of Labor or the Pension Benefit Guaranty Corporation, copies of each annual report with respect to each deferred compensation plan; (c) promptly after receipt thereof, a copy of any notice Borrower may receive from the Pension Benefit Guaranty Corporation or the Internal Revenue Service with respect to any deferred compensation plan; provided, however, this subparagraph shall not apply to notice of general application issued by the Pension Benefit Guaranty Corporation or the Internal Revenue Service; and (d) when the same is made available to participants in the deferred compensation plan, all notices and other forms of information from time to time disseminated to the participants by the administrator of the deferred compensation plan. 6.24 Borrower is now and shall at all times hereafter remain in compliance with all federal, state and municipal laws, regulations and ordinances relating to the handling, treatment and disposal of toxic substances, wastes and hazardous material and shall maintain all necessary authorizations and permits. 6.25 Borrower shall maintain Insurance on the life of N/A in an ------------ amount not to be less than No/100 Dollars ($ n/a ) ------------------------- ---------------- under one or more policies issued by insurance companies satisfactory to Bank, which policies shall be assigned to Bank as security for the Obligations and on which Bank shall be named as sole beneficiary. 6.26 Borrower shall limit direct and indirect compensation paid to the following employees: _______________________, __________________, to an aggregate of N/A Dollars ($ N/A ) per __________. -------------------------- ------------- 7. EVENTS OF DEFAULT ----------------- Any one or more of the following events shall constitute a default by Borrower under the Agreement: a. If Borrower fails or neglects to perform, keep or observe any term, provision, condition, covenant, agreement, warranty or representation contained in this Agreement, or any other present or future agreement between Borrower and Bank; b. If any representation, statement, report, or certificate made or delivered by Borrower, or any of its officers, employees or agents to Bank is not true and correct; c. If Borrower fails to pay when due and payable or declared due and payable, all or any portion of the Borrower's Obligations (whether of principal, interest, taxes, reimbursement of Bank Expenses, or otherwise); d. If there is a material impairment of the prospect of repayment of all or any portion of Borrower's Obligations or a material impairment of the value or priority of Bank's security interest in the Collateral; e. If all or any of Borrower's assets are attached, seized, subject to a writ or distress warrant, or are levied upon, or come into the possession of any Judicial Officer or Assignee and the same are not released, discharged or bonded against within ten (10) days thereafter; f. If any insolvency Proceeding is filed or commenced by or against Borrower without being dismissed within ten (10) days thereafter; g. If any proceeding is filed or commenced by or against Borrower for its dissolution or liquidation; h. If Borrower is enjoined, restrained or in any way prevented by court order from continuing to conduct all or any material part of its business affairs; i. If a notice of lien, levy or assessment is filed of record with respect to any or all of Borrower's assets by the United States Government, or any department, agency or instrumentality thereof, or by any state, county municipal, or other government agency, or if any taxes or debts owing at any time hereafter to any one or more of such entitles becomes a lien, whether choate or otherwise, upon any or all of the Borrower's assets and the same is not paid on the payment date thereof; j. If a judgement or other claim becomes a lien or encumbrance upon any or all of Borrower's assets and the same is not satisfied, dismissed or bonded against within ten (10) days thereafter; k. If Borrower's records are prepared and kept by an outside computer service bureau at the time this Agreement is entered into or during the term or this Agreement such an agreement with an outside service bureau is entered into, and at any time thereafter, without first obtaining the written consent of Bank, Borrower terminates, modifies, amends or changes its contractual relationship with said computer service bureau or said computer service bureau fails to provide Bank with any requested information or financial data pertaining to Bank's Collateral, Borrower's financial condition or the results of Borrower's operations; l. If Borrower permits a default in any material agreement to which Borrower is a party with third parties so as to result in an acceleration of the maturity of Borrower's indebtedness to others, whether under any indenture, agreement or otherwise; 11. REVOLVING LOAN & SECURITY AGREEMENT (Accounts & Inventory) m. If Borrower makes any payment on account of indebtedness which has been subordinated to Borrower's Obligations to Bank; n. If any misrepresentation exists now or thereafter in any warranty or representation made to Bank by any officer or director of Borrower, or if any such warranty or representation is withdrawn by any officer or director; o. If any party subordinating its claims to that of Bank's or any guarantor of Borrower's Obligations dies or terminates its subordination or guaranty, becomes insolvent or an insolvency Proceeding is commenced by or against any such subordinating party or guarantor; p. If Borrower is an individual and Borrower dies; q. If there is a change of ownership or control of N/A percent -------------- (__________ %) or more of the issued and outstanding stock of Borrower; or r. If any reportable event, which the Bank determines constitutes grounds for the termination of any deferred compensation plan by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer any such plan, shall have occurred and be continuing thirty (30) days after written notice of such determination shall have been given to Borrower by Bank, or any such Plan shall be terminated within the meaning of Title IV of the Employment Retirement Income Security Act ("ERISA"), or a trustee shall be appointed by the appropriate United States District Court to administer any such plan, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any plan and in case of any event described in this Section 7.0, the aggregate amount of the Borrower's liability to the Pension Benefit Guaranty Corporation under Sections 4062, 4063 or 4064 of ERISA shall exceed five percent (5%) of Borrower's Tangible Effective Net Worth. Notwithstanding anything contained in Section 7 to the contrary, Bank shall refrain from exercising its rights and remedies and Event of Default shall thereafter not be deemed to have occurred by reason of the occurrence of any of the events set forth in Sections 7.e, 7.f or 7.j of this Agreement if, within ten (10) days from the date thereof, the same is released, discharged, dismissed, bonded against or satisfied; provided, however, if the event is the institution of Insolvency Proceedings against Borrower, Bank shall not be obligated to make advances to Borrower during such cure period. 8. BANK'S RIGHTS AND REMEDIES -------------------------- 8.1 Upon the occurrence of an Event of Default by Borrower under this Agreement, Bank may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by Borrower: a. Declare Borrower's Obligations, whether evidenced by this Agreement, Installment notes, demand notes or otherwise, immediately due and payable to the Bank; b. Cease advancing money or extending credit to or for the benefit of Borrower under this Agreement, or any other agreement between Borrower and Bank; c. Terminate this Agreement as to any future liability or obligation of Bank, but without affecting Bank's rights and security interests in the Collateral, and the Obligations of the Borrower to Bank. d. Without notice to or demand upon Borrower or any guarantor, make such payments and do such acts as Bank considers necessary or reasonable to protect its security interest in the Collateral. Borrower agrees to assemble the Collateral if Bank so requires and to make the Collateral available to Bank as Bank may designate. Borrower authorizes Bank to enter the premises where the Collateral is located, take and maintain possession of the Collateral and the premises (at no charge to Bank), or any part thereof, and to pay, purchase, contest or compromise any encumbrance, charge or lien which in the opinion of Bank appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith; e. Without limiting Bank's rights under any security interest, Bank is hereby granted a license or other right to use, without charge, Borrower's labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks and advertising matter, or any property of a similar nature as it pertains to the Collateral, in completing production of, advertising for sale and selling any Collateral and Borrower's rights under all license and all franchise agreement shall inure to Bank's benefit, and Bank shall have the right and power to enter into sublicense agreements with respect to all such rights with third parties on terms acceptable to Bank; f. Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sales and sell (in the manner provided for herein) the inventory; g. Sell or dispose the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Borrower's premises) as is commercially reasonable in the opinion of Bank. It is not necessary that the Collateral be present at any such sale; h. Bank shall give notice of the disposition of the Collateral as follows: 12. REVOLVING LOAN & SECURITY AGREEMENT (Accounts & Inventory) (1) Bank shall give the Borrower and each holder of a security interest in the Collateral who has filed with Bank a written request for notice, a notice in writing of the time and place of public sale, or, if the sale is a private sale or some disposition other than a public sale is to be made of the Collateral, the time on or after which the private sale or other disposition is to be made: (2) The notice shall be personally delivered or mailed, postage prepaid, to Borrower's address appearing in this Agreement, at least five (5) calendar days before the date fixed for the sale, or at least five (5) calendar days before the date on or after which the private sale or other disposition is to be made, unless the Collateral is perishable or threatens to decline speedily in value. Notice to persons other than Borrower claiming an interest in the Collateral shall be sent to such addresses as they have furnished to Bank; (3) If the sale is to be a public sale, Bank shall also give notice of the time and place by publishing a notice one time at least five (5) calendar days before the date of the sale in a newspaper of general circulation in the county in which the sale is to be held; and (4) Bank may credit bid and purchase at any public sale. i. Borrower shall pay all Bank Expenses incurred in connection with Bank's enforcement and exercise of any of its rights and remedies as herein provided, whether or not suit is commenced by Bank; j. Any deficiency which exists after disposition of the Collateral as provided above will be paid immediately by Borrower. Any excess will be returned, without interest and subject to the rights of third parties, to Borrower by Bank or, in Bank's discretion, to any party who Bank believes, in good faith, is entitled to the excess; and k. Without constituting a retention of Collateral in satisfaction of an obligation within the meaning of 9505 of the Uniform Commercial Code or an action under California Code of Civil Procedure 726, apply any and all amounts maintained by Borrower as deposit accounts (as that term is defined under 8105 of the Uniform Commercial Code) or other accounts that Borrower maintains with Bank against the Obligations. 8.2 Bank's rights and remedies under this Agreement and all other agreements shall be cumulative. Bank shall have all other rights and remedies not inconsistent herewith as provided by law or in equity. No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any default on Borrower's part shall be deemed a continuing waiver. No delay by Bank shall constitute a waiver, election or acquiescence by Bank. 9. TAXES AND EXPENSES REGARDING BORROWER'S PROPERTY. ------------------------------------------------ If Borrower fails to pay promptly when due to another person or entity, monies which Borrower is required to pay by reason of any provision in the Agreement, Bank may, but need not, pay the same and charge Borrower's account therefor, and Borrower shall promptly reimburse Bank. All such sums shall become additional indebtedness owing to Bank, shall bear interest at the rate hereinabove provided, and shall be secured by all Collateral. Any payments made by Bank shall not constitute (i) an agreement by it to make similar payments in the future; or (ii) a waiver by Bank of any default under this Agreement. Bank need not inquire as to, or contest the validity of, any such expense, tax, security interest, encumbrance or lien and the receipt of the usual official notice of the payment thereof shall be conclusive evidence that the same was validly due and owing. Such payments shall constitute Bank Expenses and additional advances to Borrower. 10. WAIVERS. ------- 10.1 Borrower agrees that checks and other instruments received by Bank in payment or on account of Borrower's Obligations constitute only conditional payment until such items are actually paid to the Bank and Borrower waives the right to direct the application of any and all payments at any time or times hereafter received by Bank on account of Borrower's Obligations and Borrower agrees that Bank shall have the continuing exclusive right to apply and reapply such payments in any manner as Bank may deem advisable, notwithstanding any entry by Bank upon its books. 10.2 Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, documents, instruments chattel paper, and guarantees at any time held by Bank on which Borrower may in any way be liable. 10.3 Bank shall not in any way or manner be liable or responsible for (a) the safekeeping of the inventory; (b) any loss or damage thereto occurring or arising in any manner or fashion from any cause; (c) any diminution in the value thereof; or (d) any act or default of any carrier, warehouseman, bailee, forwarding agency or other person whomsoever. All risk of loss, damage or destruction of inventory shall be borne by Borrower. 10.4 Borrower waives the right and the right to assert a confidential relationship, if any, it may have with any accountant, accounting firm and/or service bureau or consultant in connection with any information requested by Bank pursuant to or in accordance with this Agreement, and agrees that a Bank may contact directly any such accountants, accounting firm and/or service bureau or consultant in order to obtain such information. 10.5 BORROWER AND BANK EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY TRANSACTION HEREUNDER, OR CONTEMPLATED HEREUNDER OR ANY OTHER CLAIM (INCLUDING TORT OR BREACH OF DUTY CLAIMS) OR DISPUTE HOWSOEVER ARISING BETWEEN BANK AND BORROWER. 13. REVOLVING LOAN & SECURITY AGREEMENT (Accounts & Inventory) 10.6 In the event that Bank elects to waive any rights or remedies hereunder, or compliance with any of the terms hereof, or delays or fails to pursue or enforce any terms, such waiver, delay or failure to pursue or enforce shall only be effective with respect to that single act and shall not be construed to affect any subsequent transactions or Bank's right to later pursue such rights and remedies. 11. ONE CONTINUING LOAN TRANSACTION. ------------------------------- All loans and advances heretofore, now or at any time or times hereafter made by Bank to Borrower under this Agreement or any other agreement between Bank and Borrower, shall constitute one loan secured by Bank's security interests in the Collateral and by all other security interests, liens, encumbrances heretofore, now or from time to time hereafter granted by Borrower to Bank. Notwithstanding the above, (i) to the extent that any portion of the Obligations are a consumer loan, that portion shall not be secured by any deed of trust or mortgage on or other security interest in the Borrower's principal dwelling which is not a purchase money security interest as to that portion, unless expressly provided to the contrary in another place, or (ii) if the Borrower (or any of them) has (have) given or give(s) Bank a deed of trust or mortgage covering real property, that deed of trust or mortgage shall not secure the loan and any other Obligation of the Borrower (or any of them), unless expressly provided to the contrary in another place. 12. NOTICES. ------- Unless otherwise provided in this Agreement, all notices or demands by either party on the other relating to this Agreement shall be in writing and sent by regular United States mail, postage prepaid, properly addressed to Borrower or to Bank at the addresses stated in this Agreement, or to such other addresses as Borrower or Bank may from time to time specify to the other in writing. Requests to Borrower by Bank hereunder may be made orally. 13. AUTHORIZATION TO DISBURSE. ------------------------- Bank is hereby authorized to make loans and advances hereunder upon telephonic or other instructions received from anyone purporting to be an officer, employee, or representative of Borrower, or at the discretion of Bank if said loans and advances are necessary to meet any Obligations of Borrower to Bank. Bank shall have no duty to make inquiry or verify the authority of any such party, and Borrower shall hold Bank harmless from any damage, claims or liability by reason of Bank's honor of, or failure to honor, any such instructions. 14. DESTRUCTION OF BORROWER'S DOCUMENTS. ----------------------------------- Any documents, schedules, invoices or other papers delivered to Bank, may be destroyed or otherwise disposed of by Bank six (6) months after they are delivered to or received by Bank, unless Borrower requests, in writing, the return of the said documents, schedules, invoices or other papers and makes arrangements, at Borrower's expense, for their return. 15. CHOICE OF LAW. ------------- The validity of this Agreement, its construction, interpretation and enforcement, and the rights of the parties hereunder and concerning the Collateral, shall be determined according to the laws of the State of California. The parties agree that all actions or proceedings arising in connection with this Agreement shall be tried and litigated only in the state and federal courts in the Northern District of California or County of Santa Clara. 16. GENERAL PROVISIONS. ------------------- 16.1 This Agreement shall be binding and deemed effective when executed by the Borrower and accepted and executed by Bank at its Headquarter Office. 16.2 This Agreement shall bind and inure to the benefit of the respective successors and assign of each of the parties, provided, however, that Borrower may not assign this Agreement or any rights hereunder without Bank's prior written consent and any prohibited assignment shall be absolutely void. No consent to an assignment by Bank shall release Borrower or any guarantor from their Obligations to Bank. Bank may assign this Agreement and its rights and duties hereunder. Bank reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in Bank's rights and benefits hereunder. In connection therewith, Bank may disclose all documents and information which Bank now or hereafter may have relating to Borrower or Borrower's business. 16.3 Paragraph headings and paragraph numbers have been set forth herein for convenience only; unless the contrary is compelled by the context, everything contained in each paragraph applies equally to this entire Agreement. 16.4 Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Bank or Borrower, whether under any rule of construction or otherwise; on the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto. When permitted by the context, the singular includes the plural and vice versa. 14. REVOLVING LOAN & SECURITY AGREEMENT (Accounts & Inventory) 16.5 Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision. 16.6 This Agreement cannot be changed or terminated orally. Except as to currently existing Obligations owing by Borrower to Bank, all prior agreements, understandings, representations, warranties, and negotiations, if any, with respect to the subject matter hereof, are merged into this Agreement. 16.7 The parties intend and agree that their respective rights, duties, powers liabilities, obligations and discretions shall be performed, carried out, discharged and exercised reasonably and in good faith. IN WITNESS WHEREOF, the parties hereto have caused this Revolving Credit Loan & Security Agreement (Accounts and Inventory) to be executed as of the date first hereinabove written. ATTEST: BORROWER: AGILE SOFTWARE CORPORATION ___________________________________ By: /s/ Bryan D. Stolle ------------------------------------- Title: Signature of Bryan D. Stolle Accepted and effective as of Title: President & CEO DECEMBER 11, 1996 at Bank's ---------------------------------- - --------------------- Headquarter Office By:_____________________________________ Signature of (Bank) Title:__________________________________ By:________________________________ By:_____________________________________ Signature of CLAY JONES Signature of Title: VICE PRESIDENT Title:__________________________________ ----------------------------- By:_____________________________________ Signature of Title:__________________________________ 15. Comerica Bank-California 75 East Trimble Road San Jose, California 95131 (408) 556-5000 MODIFICATION TO REVOLVING CREDIT LOAN & SECURITY AGREEMENT ---------------------------------------------------------- This First Modification to Revolving Credit Loan & Security Agreement (this "Modification") is entered into by and between AGILE SOFTWARE CORPORATION -------------------------- ("Borrower") and Comerica Bank-California ("Bank") as of this 24TH day of ---- September 1997 at San Jose, California. - -------------- RECITALS -------- A. Bank and Borrower have previously entered into or are concurrently herewith entering into a Revolving Credit Loan & Security Agreement (Accounts & Inventory) (the "Agreement") dated December 11, 1996. ----------------- B. Borrower has requested, and Bank has agreed, to modify the Agreement as set forth below. AGREEMENT --------- For good and valuable consideration, the parties agree as set forth below: Incorporation by Reference. The Agreement as modified hereby and the -------------------------- Recitals are incorporated herein by this reference. Section 1.5 "Borrowing Base" as used in this Agreement means the sum ----------- of: (1) Seventy-five percent (75.00%) of the net amount of Eligible Accounts after deducting therefrom all payments, adjustments and credits applicable thereto ("Accounts Receivable Borrowing Base"); and (2) the amount, if any, of the advances against inventory agreed to be made pursuant to any Inventory Rider ("Inventory Borrowing Base"), or other rider, amendment or modification to this Agreement, that may now or hereafter be entered into by Bank and Borrower. Up to $500,000.00 can be advanced without regard to formula; Upon borrowings exceeding $500,000.00 (including Letters of Credit) and potential letter of credit obligations, advance on Accounts Receivable will be limited, in aggregate, to 75% of eligible Accounts Receivable and 100% of pledged cash. Section 1.31 LETTER OF CREDIT SUB-FEATURE - The amount of $250,000.00 ------------ for the issuance of Letters of Credit is to be allowed within the Borrowing Base and within the Line amount. Letters of Credit are allowed to expire up to 180 days past the expiration of the Line. If the Line is not renewed, Letters of Credit must be cash secured. Section 2.1 Upon the request of Borrower, made at any time and from ----------- time to time during the term hereof, and so long as no Event of Default has occurred, Bank shall lend to Borrower an amount equal to the Borrowing Base; provided, however, that in no event shall Bank be obligated to make advances to Borrower under this Section 2.1 whenever the Daily Balance exceeds, at any time, either the Borrowing Base or the sum of TWO MILLION AND NO/100 DOLLARS ($2,000.000.00), such amount being ------------------------------ --------------- referred to herein as an "Overadvance". Section 2.4 A fee of 1.5% Per Annum of the Line ($30,000.00) is to ----------- be paid as follows: 1/3 ($10,000.00) due on acceptance and 2/3 ($20,000.00) due upon the earlier of the Maturity date or a Capital Raising Event. Section 3.1 This Agreement shall remain in full force and effect ----------- until August 31, 1998, or until terminated by notice by Borrower. Notice of such --------------- termination by Borrower shall be effectuated by mailing of a registered or certified letter not less than thirty (30) days prior to the effective date of such termination, addressed to the Bank at the address set forth herein and the termination shall be effective as of the date so fixed in such notice. Notwithstanding the foregoing, should borrower be in default of one or more of the provisions of this Agreement, Bank may terminate this Agreement at any time without notice. Notwithstanding the foregoing, should either Bank or Borrower become insolvent or unable to meet its debts as they mature, or fail, suspend, or go out of business, the other party shall have the right to terminate this Agreement at any time without notice. On the date of termination all Obligations shall become immediately due and payable without notice or demand; no notice of termination by Borrower shall be effective until Borrower shall have paid all Obligations to Bank in full. Notwithstanding termination, until all obligations have been fully satisfied, Bank shall retain its security interest in all existing Collateral and Collateral arising thereafter, and Borrower shall continue to perform all of its Obligations. Section 6.16c In addition to the financial statements requested above, ------------- the Borrower agrees to provide Bank with the following schedules: X Accounts Receivable Agings on a MONTHLY basis * - ---------- ------- X Accounts Payable Agings on a MONTHLY basis * - ---------- ------- X Borrowing Base Certificates on a MONTHLY basis * - ---------- ------- X Compliance Certificate within 30 days of month end; - ---------- X Other reports as reasonably requested. - ---------- *within 15 days of month end Section 6.17(b) is ELIMINATED. --------------- Section 6.17(d) A quick ratio of 1.25:1.00 to be calculated as Cash + --------------- Accounts Receivable/Current Liabilities excluding Deferred Revenue tested monthly. Section 6.17(e) is ELIMINATED. --------------- Section 6.17(g) Net Income after taxes of Q4 ending 4/30/98, maximum --------------- loss of $500,000.00; Quarterly Profitability (after taxes)of $50,000.00 or more beginning with the quarter ending 7/31/98 and thereafter - OR - to complete a Capital Raising Event by 7/31/98 of $2,000,000.00 or greater. Section 6.17(i) Upon a capital raising event of $2,000,000.00 or --------------- greater, the financial covenants will be renegotiated. Section 6.17(j) Borrower to provide "Comfort Letters" from Mohr --------------- Davidow Ventures & Sequoia Capital indicating a willingness of continued support if needed. Legal Effect. Except as specifically set forth in this Modification, ------------ all of the terms and conditions of the Agreement remain in full force and effect. Integration. This is an integrated Modification and supersedes all ----------- prior negotiations and agreements regarding the subject matter hereof. All amendments hereto must be in writing and signed by the parties. IN WITNESS WHEREOF, the parties have agreed as of the date first set forth above. COMERICA BANK-CALIFORNIA By:_________________________________ R. Clay Jones Title: Vice President ----------------------------- BORROWER: AGILE SOFTWARE CORPORATION By: /s/ --------------------------------- Title: CFO (Acting) ------------------------------ the manner specified in said promissory note(s) in the event Bank exercises the aforementioned option, and in the event Bank does not, such loans shall bear interest at the rate and be payable in the manner specified in the Agreement. 4. Borrower represents and warrants to Bank that: (a) it has good and indefeasible title to the Equipment; (b) the Equipment is and will be free and clear of all liens, security interests, encumbrances and claims, except as held by Bank, (c) the Equipment shall be kept only at the following locations:__________ _____________________________________________________________________. (d) the owners or mortgagees of the respective locations are: AGILE ----- SOFTWARE CORPORATION --------------------------------------------------------------------------. (e) Bank shall have the right upon demand now and/or at all times hereafter, during Borrower's usual business hours to inspect and examine the Equipment and Borrower agrees to reimburse Bank for its reasonable costs and expenses in so doing. 5. Borrower shall keep and maintain the Equipment in good operating condition and repair, make all necessary replacements thereto so that the value and operating efficiency thereof shall at all times be maintained and preserved. Borrower shall not permit any items of Equipment to become a fixture to real estate or accession to other property, and the Equipment is now and shall at all times remain and be personal property. 6. Borrower, at its expense, shall keep and maintain: the Equipment insured against loss or damage by fire, theft, explosion, sprinklers and all other hazards and risks ordinarily insured against by other owners who use such properties and interest in properties in similar businesses for the full insurable value thereof; and business interruption insurance and public liability and property damage insurance relating to Borrowers ownership and use of its assets. All such policies of insurance shall be in such form, with such companies and in such amounts as may be satisfactory to Bank. Borrower shall deliver to Bank certified copies of such policies of insurance and evidence of the payment of all premiums thereof. All such policies of insurance (except those of public liability and property damage) shall contain an endorsement in a form satisfactory to Bank showing loss payable to Bank and all proceeds payable thereunder shall be payable to Bank and upon receipt by Bank shall be applied on the account of Borrower's Obligations. To secure the payment of Borrower's Obligations, Borrower grants Bank a security interest in and to all such policies of insurance (except those of public liability and property damage) and the proceeds thereof and directs all insurers under such policies of insurance to pay all proceeds thereof directly to Bank. Borrower hereby irrevocably appoints Bank (and any of Bank's officers, employees or agents designated by Bank) as Borrower's attorney-in-fact for the purpose of making, settling and adjusting claims under such policies of insurance and for making all determinations and decisions with respect to such policies of insurance. Each such insurer shall agree by endorsement upon the policy or policies of insurance issued by it to Borrower as required above, or by independent instruments furnished to Bank that it will give Bank at least ten (10) days written notice before any such policy or policies of insurance shall be altered or canceled, and that no act or default of Borrower, or any other person, shall affect the right of Bank to recover under such policy or policies of insurance required above or to pay any premium in whole or in part relating thereto. Bank, without waiving or releasing any obligations or defaults by Borrower hereunder, may at any time or times hereafter, but shall have no obligations to do so, obtain and maintain such policies of insurance and pay such premiums and take any other action with respect to such policies which Bank deems advisable. All sums so disbursed by Bank, including reasonable attorney's fees, court costs, expenses and other charges relating thereto, shall be a part of Borrower's Obligations and payable on demand. 7. Until default by Borrower under the Agreement or this Rider, Borrower may, subject to the provisions of the Agreement and this Rider and consistent therewith, remain in possession thereof and use the Equipment referred to herein in the ordinary course of business at the location or locations hereinabove designated. 8. All of the terms, conditions, warranties, covenants, agreements and representations of the Agreement are incorporated herein and reaffirmed. 9. Upon a default by Borrower under the Agreement or this Rider, Borrower upon request of Bank to do so, agrees to assemble and make the Equipment or any part thereof available to Bank at a place designated by Bank. 10. Borrower shall upon demand by Bank immediately deliver to Bank and properly endorse, any and all evidences of ownership, certificates of title or applications for titles to any of the aforesaid items of Equipment. 11. Bank shall not in any way or manner be liable or responsible for (a) the safekeeping of the Equipment; (b) any loss or damage thereto occurring or arising in any manner or fashion from any cause; (c) any diminution in the value thereof or (d) any act or default by any person whomsoever. All risk of Loss, damage or destruction of the Equipment shall be borne by Borrower. Borrower(s): AGILE SOFTWARE CORPORATION By: /s/ By:________________________________ -------------------------------- By:________________________________ By:________________________________ Accepted this 24TH day of SEPTEMBER 1997 at Bank's place of business in SAN ---- -------------- --- JOSE, CA 95113 - ------------------- By:________________________________ R. CLAY JONES, VICE PRESIDENT EX-10.8 8 FIFTH AMENDED & RESTATED INVESTORS' RIGHTS AGREEMENT EXHIBIT 10.8 AGILE SOFTWARE CORPORATION FIFTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT June 4, 1998 TABLE OF CONTENTS -----------------
Page ---- 1. Registration Rights........................................ 1 1.1 Definitions.......................................... 1 1.2 Request for Registration............................. 2 1.3 Company Registration................................. 4 1.4 Obligations of the Company........................... 4 1.5 Furnish Information.................................. 6 1.6 Expenses of Demand Registration...................... 6 1.7 Expenses of Company Registration..................... 6 1.8 Underwriting Requirements............................ 6 1.9 Delay of Registration................................ 7 1.10 Indemnification...................................... 7 1.11 Reports Under Securities Exchange Act of 1934........ 9 1.12 Form S-3 Registration................................ 10 1.13 Assignment of Registration Rights.................... 11 1.14 Limitations on Subsequent Registration Rights........ 11 1.15 "Market Stand-Off" Agreement......................... 11 1.16 Termination of Registration Rights................... 12 2. Covenants of the Company................................... 12 2.1 Delivery of Financial Statements..................... 12 2.2 Inspection........................................... 13 2.3 Termination of Information and Inspection Covenants.. 13 2.4 Right of First Offer................................. 14 3. Miscellaneous.............................................. 15 3.1 Successors and Assigns............................... 15 3.2 Governing Law........................................ 16 3.3 Counterparts......................................... 16 3.4 Titles and Subtitles................................. 16 3.5 Notices.............................................. 16 3.6 Expenses............................................. 16 3.7 Amendments and Waivers............................... 16 3.8 Severability......................................... 16 3.9 Aggregation of Stock................................. 16 3.10 Entire Agreement; Amendment; Waiver.................. 17 3.11 Termination of Prior Agreement....................... 17
Schedule A Schedule of Investors i. FIFTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT ------------------------------------------------------ THIS FIFTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the "Agreement") is made as of the 4th day of June 1998, by and among Agile Software Corporation, a California corporation (the "Company") and the investors listed on Schedule A hereto (the "Investors"). RECITALS -------- WHEREAS, certain of the Investors (the "Prior Investors") possess registration rights, information rights, rights of first offer and other rights pursuant to that certain Fourth Amended and Restated Investors' Rights Agreement, dated as of November 14, 1998, among the Company and such Prior Investors (the "Prior Agreement"); WHEREAS, certain of the Investors (the "Series F Investors") are a party to the Series F Preferred Stock Purchase Agreement of even date herewith (the "Series F Agreement") between the Company and the Series F Investors, pursuant to which the Series F Investors are purchasing shares of Series F Preferred Stock of the Company; WHEREAS, in order to induce the Company to enter into the Series F Agreement and to induce the Series F Investors to invest funds in the Company pursuant to the Series F Agreement, the Prior Investors hereby agree to waive their rights under the Prior Agreement, and the Investors and the Company hereby agree that this Agreement shall govern the rights of the Investors to cause the Company to register shares of Common Stock issued or issuable to such persons and certain other matters as set forth herein; NOW, THEREFORE, in consideration of the promises, covenants and conditions set forth herein, the parties hereto hereby agree as follows: 1. Registration Rights. The Company covenants and agrees as follows: ------------------- 1.1 Definitions. For purposes of this Section 1: ----------- (a) The term "Securities Act" means the Securities Act of 1933, as amended. (b) The term "Form S-3" means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. (c) The term "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.13 hereof. (d) The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (e) The terms "register," "registered" and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document. (f) The term "Registrable Securities" means (i) the Common Stock issuable or issued upon conversion of the Series A Preferred Stock, (ii) the Common Stock issuable or issued upon conversion of the Series B Preferred Stock, (iii) the Common Stock issuable or issued upon conversion of the Series C Preferred Stock, (iv) the Common Stock issuable or issued upon conversion of the Series D Preferred Stock, (v) the Common Stock issuable or issued upon conversion of the Series E Preferred Stock, (vi) the Common Stock issuable or issued upon conversion of the Series F Preferred Stock, (vii) any shares of Common Stock issuable or issued upon the conversion of the Preferred Stock issued upon conversion of the Series C, Series D, Series E, Series F or any successive series of Preferred Stock and (viii) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in (i), (ii), (iii), (iv), (v), (vi) and (vii) above, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which his or her rights under this Section 1 are not properly assigned as provided herein; provided, however, that Common Stock and other securities shall only be treated as Registrable Securities if and so long as (A) they have not been sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction and (B) the registration rights associated with such securities have not been terminated pursuant to Section 1.16 hereof. (g) The number of shares of "Registrable Securities then outstanding" shall be determined by the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities. (h) The term "SEC" shall mean the Securities and Exchange Commission. 1.2 Request for Registration. ------------------------ (a) If the Company shall receive at any time after the earlier of (i) June 2, 1999 or (ii) three months after the effective date of the first registration statement for a public offering of securities of the Company (other than a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase or similar plan or a SEC Rule 145 transaction) a written request from the Holders of at least 30% of the Registrable Securities then outstanding that the Company file a registration statement under the Securities Act covering the registration of at least 30% of the Registrable Securities then outstanding (or a lesser percent if the anticipated aggregate offering price, net of underwriting discounts and commissions, would exceed $10,000,000), then the Company shall: 2. (i) within ten days of the receipt thereof, give written notice of such request to all Holders; and (ii) effect as soon as practicable, and in any event within 60 days of the receipt of such request, the registration under the Securities Act of all Registrable Securities which the Holders request to be registered, subject to the limitations of subsection 1.2(b), within 20 days of the mailing of such notice by the Company in accordance with Section 3.5. (b) If the Holders initiating the registration request hereunder (the "Initiating Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to subsection 1.2(a) and the Company shall include such information in the written notice referred to in subsection 1.2(a). The underwriter will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include his or her Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed to by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 1.4(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder; provided, however, that the number of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. (c) Notwithstanding the foregoing, if the Company shall furnish to the Holders requesting a registration statement pursuant to this Section 1.2 a certificate signed by the Chief Executive Officer of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer taking action with respect to such filing for a period of not more than 120 days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any 12-month period. (d) In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2: 3. (i) after the Company has effected two registrations pursuant to this Section 1.2 and such registrations have been declared or ordered effective; (ii) during the period starting with the date 60 days prior to the Company's good faith estimate of the date of filing of, and ending on a date 180 days after the effective date of, a registration subject to Section 1.3 hereof; provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 1.12 below. 1.3 Company Registration. If (but without any obligation to do so) -------------------- the Company proposes to register (including for this purpose a registration effected by the Company for shareholders other than the Holders) any of its stock or other securities under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan, a registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within 20 days after mailing of such notice by the Company in accordance with Section 3.5, the Company shall, subject to the provisions of Section 1.8, cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered. 1.4 Obligations of the Company. Whenever required under this Section -------------------------- 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to 120 days or until the distribution contemplated in the Registration Statement has been completed; provided, however, that such 120-day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Company. (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement. 4. (c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (g) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange or other trading market on which similar securities issued by the Company are then listed. (h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration. (i) Use its best efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 1, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 1, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities. 5. 1.5 Furnish Information. -------------------- (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. (b) The Company shall have no obligation with respect to any registration requested pursuant to Section 1.2 or Section 1.12 if, due to the operation of subsection 1.5(a), the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Company's obligation to initiate such registration as specified in subsection 1.2(a) or subsection 1.12(b)(2), whichever is applicable. 1.6 Expenses of Demand Registration. All expenses other than ------------------------------- underwriting discounts and commissions incurred in connection with registrations, filings or qualifications pursuant to Section 1.2, including (without limitation) all registration, filing and qualification fees, printers' and accounting fees, reasonable fees and disbursements of counsel for the Company (including fees and disbursements of counsel for the Company in its capacity as counsel to the selling Holders hereunder; if Company counsel does not make itself available for this purpose, the Company will pay the reasonable fees and disbursements of one counsel for the selling Holders) shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 1.2. 1.7 Expenses of Company Registration. The Company shall bear and pay -------------------------------- all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to registrations pursuant to Section 1.3 for each Holder (which right may be assigned as provided in Section 1.13), including (without limitation) all registration, filing and qualification fees, printers' and accounting fees relating or apportionable thereto and the reasonable fees and disbursements of counsel for the Company in its capacity as counsel to the selling Holders hereunder (if Company counsel does not make itself available for this purpose, the Company will pay the reasonable fees and disbursements of one counsel for the selling Holders selected by them), but excluding underwriting discounts and commissions relating to Registrable Securities. 1.8 Underwriting Requirements. In connection with any offering ------------------------- involving an underwriting of shares of the Company's capital stock, the Company shall not be required under Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by 6. the Company. If the total amount of securities, including Registrable Securities, requested by shareholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling shareholders according to the total amount of securities entitled to be included therein owned by each selling shareholder or in such other proportions as shall mutually be agreed to by such selling shareholders) but in no event shall (i) the amount of securities of the selling Holders included in the offering be reduced below 20% of the total amount of securities included in such offering, unless such offering is the initial public offering of the Company's securities in which case the selling shareholders may be entirely excluded if the underwriters make the determination described above and no other shareholder's securities are included or (ii) notwithstanding (i) above, any shares being sold by a shareholder exercising a demand registration right similar to that granted in Section 1.2 be excluded from such offering. For purposes of the preceding parenthetical concerning apportionment, for any selling shareholder which is a holder of Registrable Securities and which is a partnership or corporation, the partners, retired partners and shareholders of such holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling shareholder," and any pro-rata reduction with respect to such "selling shareholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling shareholder," as defined in this sentence. 1.9 Delay of Registration. No Holder 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. 1.10 Indemnification. In the event any Registrable Securities are --------------- included in a registration statement under this Section 1: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses 7. reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 1.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 1.10(b) in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 1.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, however, that in no event shall any indemnity under this subsection 1.10(b) exceed the gross proceeds from the offering received by such Holder. (c) Promptly after receipt by an indemnified party under this Section 1.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.10, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.10, but the omission so to deliver written notice to the indemnifying party will not 8. relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.10. (d) If the indemnification provided for in this Section 1.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. (f) The obligations of the Company and Holders under this Section 1.10 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1 and otherwise. 1.11 Reports Under Securities Exchange Act of 1934. With a view to --------------------------------------------- making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after 90 days after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public; (b) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after 90 days after the effective date of the first registration statement filed by the Company), the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such 9. other reports and documents so filed by the Company and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 1.12 Form S-3 Registration. In case the Company shall receive from any --------------------- Holder or Holders a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will: (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and (b) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within 15 days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 1.12: (1) if Form S-3 is not available for such offering by the Holders; (2) if the Holders, 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 $500,000; (3) if the Company shall furnish to the Holders a certificate signed by the President of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than 90 days after receipt of the request of the Holder or Holders under this Section 1.12; provided, however, that the Company shall not utilize this right more than once in any 12 month period; (4) if the Company has, within the 12 month period preceding the date of such request, already effected two registrations on Form S-3 for the Holders pursuant to this Section 1.12; or (5) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. (c) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. All expenses incurred in connection with a registration requested pursuant to Section 1.12, including (without limitation) all registration, filing and qualification fees, printers' and accounting fees and the reasonable fees and disbursements of counsel for the selling Holder or Holders and counsel for the Company, shall be borne pro rata by the Holder or Holders participating in the Form S-3 Registration. Registrations effected pursuant to this Section 1.12 shall not be counted as demands for registration or registrations effected pursuant to Sections 1.2 or 1.3, respectively. 10. 1.13 Assignment of Registration Rights. The rights to cause the --------------------------------- Company to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such securities who acquires all of the Registrable Securities previously held by such Holder, or who, after such assignment or transfer, holds at least 100,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations and other recapitalizations), provided that: (a) the Company is, within 20 days after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including without limitation the provisions of Section 1.15 below; and (c) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Securities Act. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee, the holdings of transferees and assignees of a partnership who are partners or retired partners of such partnership (including spouses and ancestors, lineal descendants and siblings of such partners or spouses who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with the partnership; provided that all assignees and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under this Section 1. 1.14 Limitations on Subsequent Registration Rights. From and after the --------------------------------------------- date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 1.2 or Section 1.3 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his or her securities will not reduce the amount of the Registrable Securities of the Holders which is included or (b) to make a demand registration which could result in such registration statement being declared effective prior to the earlier of either of the dates set forth in subsection 1.2(a) or within 120 days of the effective date of any registration effected pursuant to Section 1.2. 1.15 "Market Stand-Off" Agreement. Each Investor hereby agrees that, ---------------------------- during the period of duration specified by the Company and an underwriter of Common Stock or other securities of the Company, following the effective date of a registration statement of the Company filed under the Securities Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it at any time during such period except Common Stock included in such registration; provided, however, that: (a) such agreement shall be applicable only to the first such registration statement of the Company which covers Common Stock (or other securities) to be sold on its behalf to the public in an underwritten offering; 11. (b) all officers and directors of the Company and all other persons with registration rights (whether or not pursuant to this Agreement) enter into similar agreements; (c) such market stand-off time period shall not exceed 180 days; and (d) such market stand-off shall not apply to securities purchased in an underwritten public offering or in the open market following the Company's initial public offering. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Investor (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. Notwithstanding the foregoing, the obligations described in this Section 1.15 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated in the future, or to a registration relating solely to a Commission Rule 145 transaction on Form S-14 or Form S-15 or similar forms which may be promulgated in the future. 1.16 Termination of Registration Rights. ---------------------------------- (a) No Holder shall be entitled to exercise any right provided for in this Section 1 after three years following the consummation of the sale of securities pursuant to a registration statement filed by the Company under the Securities Act in connection with the initial firm commitment underwritten offering of its securities to the general public. (b) In addition, the right of any Holder to request registration pursuant to Section 1.2 or inclusion in any registration pursuant to Section 1.3 shall terminate on the closing of the first Company-initiated registered public offering of Common Stock of the Company if all shares of Registrable Securities held or entitled to be held upon conversion by such Holder may immediately be sold under Rule 144 during any 90-day period, or on such date after the closing of the first Company-initiated registered public offering of Common Stock of the Company as all shares of Registrable Securities held or entitled to be held upon conversion by such Holder may immediately be sold under Rule 144 during any 90- day period; provided, however, that the provisions of this Section 1.16(b) shall not apply to any Holder who owns more than 2% of the Company's outstanding stock until such time as such Holder owns less than 2% of the outstanding stock of the Company. 2. Covenants of the Company. ------------------------ 2.1 Delivery of Financial Statements. The Company shall deliver to -------------------------------- each Investor: (a) as soon as practicable, but in any event within 90 days after the end of each fiscal year of the Company, an income statement for such fiscal year, a balance sheet of the Company and statement of shareholders' equity as of the end of such year, and a schedule as to 12. the sources and applications of funds for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles ("GAAP"), and audited and certified by independent public accountants of nationally recognized standing selected by the Company; (b) as soon as practicable, but in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Company, an unaudited profit or loss statement, schedule as to the sources and application of funds for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter; (c) (i) so long as such Investor holds at least 100,000 shares of Preferred Stock (either in the form of Preferred Stock or Common Stock issued upon conversion thereof, and as adjusted for subsequent stock splits, recombinations, reclassifications or the like), within 30 days of the end of each month, an unaudited income statement and schedule as to the sources and application of funds and balance sheet for and as of the end of such month, in reasonable detail, and (ii) so long as such Investor holds at least 250,000 shares of Preferred Stock (either in the form of Preferred Stock or Common Stock issued upon conversion thereof, and as adjusted for subsequent stock splits, recombinations, reclassifications or the like), upon request, Board of Directors' packages; (d) the financial statements called for in subsections (b) and (c) of this Section 2.1 shall be prepared in accordance with GAAP consistently applied with prior practice for earlier periods (with the exception of footnotes that may be required by GAAP) and shall fairly present the financial condition of the Company and its results of operations for the period specified, subject to year- end audit adjustment; and (e) such other information relating to the financial condition, business, prospects or corporate affairs of the Company as such Investor or any assignee of such Investor may from time to time request, provided, however, that the Company shall not be obligated under this subsection (e) or any other subsection of Section 2.1 to provide information which it deems in good faith to be a trade secret or similar confidential information. (f) Each Investor agrees that information obtained by such Investor pursuant to this Section 2.1 that is or would reasonably be perceived to be proprietary to the Company will not be disclosed by such Investor without the prior written consent of the Company. 2.2 Inspection. The Company shall permit each Investor, at such ---------- Investor's expense, to visit and inspect the Company's properties, to examine its books of account and records and to discuss the Company's affairs, finances and accounts with its officers, all at such reasonable times as may be requested by such Investor; provided, however, that the Company shall not be obligated pursuant to this Section 2.2 to provide access to any information which it reasonably considers to be a trade secret or similar confidential information. 2.3 Termination of Information and Inspection Covenants. The --------------------------------------------------- covenants set forth in Sections 2.1 and 2.2 shall terminate as to the Investors and be of no further force or effect when the first sale of securities pursuant to a registration statement filed by the Company 13. under the Securities Act in connection with the firm commitment underwritten offering of its securities to the general public is consummated or when the Company first becomes subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the Exchange Act, whichever event shall first occur. 2.4 Right of First Offer. Subject to the terms and conditions -------------------- specified in this Section 2.4, the Company hereby grants to each Major Investor (as hereinafter defined) a right of first offer with respect to future sales by the Company of its Shares (as hereinafter defined). For purposes of this Section 2.4, a "Major Investor" shall mean (i) any Investor who holds at least 100,000 shares of the original investment such Investor made or makes in the Company pursuant to the Series A Preferred Stock Purchase Agreement dated April 7, 1995 (the "Series A Agreement"), the Series B Preferred Stock Purchase Agreement dated June 2, 1995 (the "Series B Agreement"), the Series C Preferred Stock Purchase Agreement dated January 16, 1996 (the "Series C Agreement"), the Series D Preferred Stock Purchase Agreement dated February 6, 1997 (the "Series D Agreement"), the Series E Preferred Stock Purchase Agreement dated November 14, 1997 (the "Series E Agreement") or the Series F Agreement and (ii) any person who acquires at least 100,000 shares of the Series A Preferred Stock (or the Common Stock issued upon conversion thereof), the Series B Preferred Stock (or the Common Stock issued upon conversion thereof), the Series C Preferred Stock (or the Common Stock issued upon conversion thereof), the Series D Preferred Stock (or the Common Stock issued upon conversion thereof), the Series E Preferred Stock (or the Common Stock issued upon conversion thereof) or the Series F Preferred Stock (or the Common Stock issued upon conversion thereof) issued pursuant to the Series A Agreement, the Series B Agreement, the Series C Agreement, the Series D Agreement, the Series E Agreement or the Series F Agreement, as applicable. For purposes of this Section 2.4, an Investor includes any general partners and affiliates of an Investor. An Investor shall be entitled to apportion the right of first offer hereby granted it among itself and its partners and affiliates in such proportions as it deems appropriate. Each time the Company proposes to offer any shares of, or securities convertible into or exercisable for any shares of, any class of its capital stock (the "Shares"), the Company shall first make an offering of such Shares to each Major Investor in accordance with the following provisions: (a) The Company shall deliver a notice (the "Notice") to the Major Investors stating (i) its bona fide intention to offer such Shares, (ii) the number of such Shares to be offered and (iii) the price and terms, if any, upon which it proposes to offer such Shares. (b) By written notification received by the Company, within 20 calendar days after giving of the Notice, each Major Investor may elect to purchase or obtain, at the price and on the terms specified in the Notice, up to that portion of such Shares which equals the proportion that the number of shares of Common Stock issued and held, or issuable upon conversion of the Preferred Stock then held, by such Major Investor bears to the total number of shares of Common Stock of the Company then outstanding (assuming full conversion of all convertible securities). The Company shall promptly, in writing, inform each Major Investor which decides to purchase all the shares available to it (the "Fully-Exercising Investor") of any other Major Investor's failure to do likewise. During the ten-day period commencing after such 14. information is given, each Fully-Exercising Investor shall be entitled to obtain that portion of the Shares for which Major Investors were entitled to subscribe but which were not subscribed for by the Major Investors which is equal to the proportion that the number of shares of Common Stock issued and held, or issuable upon conversion of the Preferred Stock then held, by such Fully- Exercising Investor bears to the total number of shares of Common Stock issued and held, or issuable upon conversion of the Preferred Stock then held, by all Fully-Exercising Investors who wish to purchase some of the unsubscribed shares. (c) With respect to Shares referred to in the Notice that are not elected to be obtained as provided in subsection 2.4(b) hereof, the Company may, during the 30-day period following the expiration of the period provided in subsection 2.4(b) hereof, offer the remaining unsubscribed portion of such Shares to any person or persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Notice. If the Company does not enter into an agreement for the sale of the Shares within such period, or if such agreement is not consummated within 30 days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Shares shall not be offered unless first reoffered to the Major Investors in accordance herewith. (d) The right of first offer in this Section 2.4 shall not be applicable (i) to the issuance or sale of shares of Common Stock (or options therefor) to consultants, directors, officers, advisors or employees for the primary purpose of soliciting or retaining their employment, (ii) to or after consummation of a bona fide, firmly underwritten public offering of shares of Common Stock registered under the Securities Act pursuant to a registration statement filed on Form S-1 which results in gross cash proceeds to the Company in excess of $20,000,000 and a public offering price of not less than $8.78 per share (as adjusted for any subsequent stock dividends, stock splits, recapitalizations or the like), (iii) to the issuance of securities pursuant to the conversion or exercise of convertible or exercisable securities, (iv) to the issuance of securities in connection with a bona fide business acquisition of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise, (v) to the issuance of stock, warrants or other securities or rights to persons or entities with which the Company has business relationships or (vi) to the sale and issuance of the Series F Preferred Stock. (e) The right of first offer set forth in this Section 2.4 may not be assigned or transferred, except that (i) such right is assignable by each Holder to any wholly owned subsidiary or parent of, or to any corporation or entity that is, within the meaning of the Securities Act, controlling, controlled by or under common control with any such Holder and (ii) such right is assignable between and among any of the Holders. 3. Miscellaneous. ------------- 3.1 Successors and Assigns. Except as otherwise provided herein, the ---------------------- terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any shares of Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, 15. obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 3.2 Governing Law. This Agreement shall be governed by and construed ------------- under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California. 3.3 Counterparts. This 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. 3.4 Titles and Subtitles. The titles and subtitles used in this -------------------- Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 3.5 Notices. Unless otherwise provided, any notice required or ------- permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or upon deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed to the party to be notified at the address indicated for such party on the signature page hereof, or at such other address as such party may designate by ten days advance written notice to the other parties. 3.6 Expenses. If any action at law or in equity is necessary to -------- enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 3.7 Amendments and Waivers. Any term of this Agreement may be amended ---------------------- and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities and the Company. 3.8 Severability. If one or more provisions of this Agreement is held ------------ to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 3.9 Aggregation of Stock. All shares of Registrable Securities held -------------------- or acquired by affiliated entities or persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. 16. 3.10 Entire Agreement; Amendment; Waiver. This Agreement (including ----------------------------------- the exhibits hereto, if any) constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. 3.11 Termination of Prior Agreement. This Agreement amends, restates ------------------------------ and supersedes the Fourth Amended and Restated Investors' Rights Agreement among the Company and the Prior Investors, dated November 14, 1997. 17. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. AGILE SOFTWARE CORPORATION By: /s/ Bryan D. Stolle --------------------------------------- Bryan D. Stolle President and Chief Executive Officer [SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT] EX-21.1 9 SUBSIDIARIES OF AGILE SOFTWARE CORPORATION EXHIBIT 21.1 LIST OF SUBSIDIARIES -------------------- Agile Software International Corporation (A Delaware Corporation) EX-23.1 10 CONSENT OF PRICEWATERHOUSECOOPERS LLP Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form S-1 of our report dated May 28, 1999 relating to the consolidated financial statements of Agile Software Corporation, which appears in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement. PricewaterhouseCoopers LLP San Jose, California June 23, 1999 EX-27.1 11 FINANCIAL DATA SCHEDULE
5 1,000 YEAR APR-30-1999 MAY-01-1998 APR-30-1999 10,003 0 5,475 495 0 15,607 4,088 2,115 17,948 11,433 3,224 0 12 4 3,275 17,948 10,859 16,807 819 5,985 22,428 0 178 (11,428) 0 (11,428) 0 0 0 (11,428) (.78) (.78)
-----END PRIVACY-ENHANCED MESSAGE-----