-----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, PZkUFzzDhsg534gOh6ZC6oFkmTN9AXdkYf60rtGFlnNVdFtJ7awls5hLKecF/Lp/ Q4ClZ0fbVKaov9+7HWAt7g== 0001012870-99-003170.txt : 19990915 0001012870-99-003170.hdr.sgml : 19990915 ACCESSION NUMBER: 0001012870-99-003170 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19990914 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AGILE SOFTWARE CORP CENTRAL INDEX KEY: 0001088653 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770397905 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27071 FILM NUMBER: 99711344 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 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________ Form 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 1999 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number 333-81387 AGILE SOFTWARE CORPORATION (Exact name of registrant as specified in its charter) Delaware 77-0397905 (State of incorporation) (IRS Employer Identification No.) One Almaden Boulevard San Jose, Ca 95113-2253 (Address of principal executive offices, including ZIP code) (408) 975-3900 (Registrant's telephone number, including area code) None (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) Yes X No ___, and (2) has --- been subject to such filing requirements for the past 90 days. Yes ___ No X. --- The number of shares outstanding of the Registrant's Common Stock as of July 31, 1999 was 4,574,683 ================================================================================ AGILE SOFTWARE CORP. INDEX Page No. ------- Part I. Financial Information Item 1. Financial Statements (unaudited) Condensed Consolidated Balance Sheets at July 31, 1999 and April 30, 1999 1 Condensed Consolidated Statements of Operations for the Three Months Ended July 31, 1999 and 1998 2 Condensed Consolidated Statements of Cash Flows for the Three Months Ended July 31, 1999 and 1998 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II. Other Information Item 1. Legal Proceedings 28 Item 2. Changes in Securities and Use of Proceeds 28 Item 3. Defaults Upon Senior Securities 28 Item 4. Submission of Matters to a Vote of Security Holders 28 Item 5. Other Information 29 Item 6. Exhibits and Reports on Form 8-K 29 Signature 30 Exhibit Index 31 Part 1 - Financial Information Item 1. Financial Statements AGILE SOFTWARE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts)
July 31, April 30, 1999 1999 ----------- ---------- (unaudited) ASSETS Current assets: Cash and cash equivalents........................... $ 9,639 $ 10,003 Accounts receivable, net............................ 3,131 4,980 Other current assets................................ 643 624 -------- -------- Total current assets............................. 13,413 15,607 Property and equipment, net........................... 2,668 1,973 Other assets.......................................... 341 368 -------- -------- $ 16,422 $ 17,948 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.................................... $ 2,079 $ 1,287 Accrued expenses and other liabilities.............. 3,653 3,618 Deferred revenue.................................... 5,353 5,107 Current portion of capital lease obligations........ 766 735 Current portion of notes payable.................... 937 686 -------- -------- Total current liabilities........................ 12,788 11,433 Capital lease obligations, noncurrent................. 811 871 Notes payable, noncurrent............................. 2,102 2,353 -------- -------- Total liabilities................................ 15,701 14,657 -------- -------- Stockholders' equity: Convertible Preferred Stock, $0.001 par value; 31,176 shares authorized; 11,874 shares issued and outstanding.............................. 12 12 Common Stock, $0.001 par value; 100,000 authorized; 4,575 shares and 4,200 shares issued and outstanding............................. 5 4 Additional paid-in capital............................ 42,006 35,503 Notes receivable from stockholders.................... (1,701) (748) Unearned stock compensation........................... (8,992) (4,947) Accumulated deficit................................... (30,609) (26,533) -------- -------- Total stockholders' equity....................... 721 3,291 -------- -------- $ 16,422 $ 17,948 ======== ========
See accompanying notes to these condensed consolidated financial statements. 1 AGILE SOFTWARE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)
Three Months Ended July 31, ----------------------------- 1999 1998 -------------- ------------- (unaudited) Revenues: License.................................................. $ 3,654 $ 2,270 Professional services.................................... 1,159 655 Maintenance.............................................. 1,077 316 ------- ------- Total revenues 5,890 3,241 ------- ------- Cost of revenues: License.................................................. 223 165 Professional services.................................... 921 756 Maintenance.............................................. 482 237 ------- ------- Total cost of revenues 1,626 1,158 ------- ------- Gross profit 4,264 2,083 ------- ------- Operating expenses: Sales and marketing...................................... 4,546 2,756 Research and development................................. 1,486 1,076 General and administrative............................... 753 431 Amortization of stock compensation....................... 1,428 444 ------- ------- Total operating expenses............................. 8,213 4,707 ------- ------- Loss from operations........................................ (3,949) (2,624) Interest and other income................................... 90 102 Interest expense............................................ (217) (50) ------- ------- Net loss.................................................... $(4,076) $(2,572) ======= ======= Net loss per share: Basic and diluted......................................... $ (1.23) $ (0.94) ======= ======= Weighted average shares................................... 3,324 2,724 ======= =======
See accompanying notes to these condensed consolidated financial statements. 2 AGILE SOFTWARE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Three Months Ended July 31, ---------------------------------- 1999 1998 ---------------- ---------------- (unaudited) Cash flows from operating activities: Net loss.......................................................... $(4,076) $(2,572) Adjustments to reconcile net loss to net cash provided by (used in)operating activities: Provision for doubtful accounts................................. 38 47 Depreciation.................................................... 357 212 Amortization of stock compensation.............................. 1,428 444 Warrant expense................................................. 21 - Changes in assets and liabilities: Accounts receivable............................................ 1,811 567 Other assets, current and non-current.......................... (13) (200) Accounts payable............................................... 792 (413) Accrued expenses and other liabilities......................... 35 339 Deferred revenue............................................... 246 (199) ------- ------- Net cash provided by (used in)operating activities 639 (1,775) ------- ------- Cash flows from investing activities: Acquisition of property and equipment............................. (888) (30) ------- ------- Net cash used in investing activities........................... (888) (30) ------- ------- Cash flows from financing activities: Proceeds from bank line of credit................................ - 900 Repayment of bank line of credit................................. - (1,900) Repayment of capital lease obligations (193) (134) Proceeds from issuance of Common Stock, net of repurchase....................................................... 64 8 Repayment of notes receivable from stockholders.................. 14 2 Proceeds from issuance of Convertible Preferred Stock, net...................................................... - 11,977 ------- ------- Net cash provided by (used in)financing activities (115) 10,853 ------- ------- Net increase (decrease)in cash and cash equivalents....................................................... (364) 9,048 Cash and cash equivalents at beginning of period................... 10,003 2,160 ------- ------- Cash and cash equivalents at end of period......................... $ 9,639 $11,208 ======= ======= Supplemental disclosure: Cash paid for interest............................................ $ 114 $ 40 ======= ======= Noncash investing and financing activities: Common Stock issued in exchange for notes receivable....................................................... $ 967 $ 66 ======= ======== Property and equipment acquired under capital lease............................................................ $ 164 $ 84 ======= ========
See accompanying notes to these condensed consolidated financial statements. 3 AGILE SOFTWARE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying condensed consolidated financial statements as of July 31, 1999 and for the three months ended July 31, 1999 and 1998 are unaudited and reflect all normal recurring adjustments which are, in the opinion of management, necessary for their fair presentation. These condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto included in the Company's Registration Statement on Form S-1 for the fiscal year ended April 30, 1999. The results of operations for the three months ended July 31, 1999 are not necessarily indicative of results to be expected for the full year or any other period. 2. 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. When contracts contain multiple elements, and vendor specific objective evidence exists for all undelivered elements, the Company accounts for the delivered elements in accordance with the "Residual Method" prescribed by Statement of Position ("SOP") 98-9. License revenues are recognized when persuasive evidence of an arrangement exists, the fee is fixed or determinable, collectibility is probable, and delivery and customer acceptance, if required under the terms of the contract, of the software products have occurred. In the event the Company grants its customers the right to specified upgrades, license revenue is deferred until delivery of the specified upgrade. If vendor-specific objective evidence of fair value exists for the specified upgrade, then an amount equal to this fair value is deferred. If vendor-specific objective evidence of fair value does not exist, then the entire license fee is deferred until the delivery of the specified upgrade. A provision for the estimated losses on fixed-price contracts is recognized in the period in which the loss becomes known. 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 contracts include the right to unspecified upgrades on a when-and-if available basis, and ongoing support. Maintenance revenues are recognized ratably over the term of the maintenance contract, which is generally twelve months. 3. Net Loss Per Share Basic 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. Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of Common Stock number and potential shares of Common Stock. The calculation of diluted net loss per share excludes potential shares of Common Stock if their effect is antidilutive. Potential shares of Common Stock consist of unvested restricted Common Stock, incremental shares of Common Stock issuable upon the exercise of stock options and warrants and shares of Common Stock issuable upon the conversion of the Company's Series A, Series B, Series C, Series D and Series F Convertible Preferred Stock. The following table sets forth the computation of basic and diluted net loss per share for the periods indicated (in thousands, except per share amounts): 4
Three Months Ended July 31, ------------------------------------ 1999 1998 ---------------- --------------- (unaudited) Numerator Net loss................................................................. $ (4,076) $ (2,572) ============ =============== Denominator Weighted average shares.................................................. 4,397 4,015 Weighted average unvested shares of Common Stock subject to repurchase... (1,073) (1,291) ------------ --------------- Denominator for basic and diluted calculation............................ 3,324 2,724 ============ =============== Net loss per share: Basic and diluted........................................................ $ (1.23) $ (0.94) ============ ===============
At July 31, 1999 14,374,000 potential common shares are excluded from the determination of diluted net loss per share as the effect of such shares is antidilutive. 4. Comprehensive Income The Company reports components of comprehensive income (loss) in its annual consolidated statement of stockholders' equity. 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. 5. Segment Information The Company identifies its operating segments based on business activities, management responsibility and geographical location. During the quarters ended July 31, 1999 and 1998, the Company operated in a single business segment, primarily in the United States. Through July 31, 1999, foreign operations were not significant in either revenue or investment in long-lived assets. 6. Initial Public Offering In August 1999, the Company completed its initial public offering of 3,450,000 shares of Common Stock (including the exercise of the underwriters' overallotment option)at $21.00 per share. Net proceeds to the Company, before offering expenses, were $67.4 million or $19.53 per share. Simultaneous with the closing of the initial public offering, the Company sold an aggregate of 665,641 shares of Common Stock at $19.53 per share in private placements to Dell Computer Corporation, Flextronics International Ltd., and Marshall Industries. 7. Stock Option Grants During the period from August 1, 1999 through its initial public offering, the Company granted options to purchase an aggregate of 639,500 shares of Common Stock at exercise prices ranging from $10.00 to $19.00 per share. The Company expects to record additional unearned stock compensation with respect to these stock option grants of approximately $1.2 million. In addition, during August 1999, the Company granted 65,000 options to consultants. The Company will account for these options under variable plan accounting and has calculated the fair value of these options on the date of grant of at least $1.1 million using the Black-Scholes option pricing model as prescribed by SFAS No. 123 with the following underlying assumptions: expected volatility of 50%, risk-free interest rate of 5.9% and option terms of ten years. The Company will record an expense relating to these options each quarter over the five-year vesting period of the options. 5 8. Borrowings At July 31, 1999 the Company had $3.0 million outstanding of subordinated notes payable which bear interest at an annual rate of 11.75% and are payable through fiscal 2002. The Company used a portion of the proceeds from its initial public offering to prepay these subordinated notes payable in their entirety on August 31, 1999. At July 31, 1999, the Company had unamortized interest of $232,000 related to warrants issued in connection with these subordinated notes payable. As a result of the repayment of the subordinated notes payable, we will recognize the unamortized interest balance as an expense in the quarter ended October 31, 1999. On July 17, 1999, the company renewed its existing line of credit through august 2000 and increased the line of credit to provide for borrowings of up to $5,000,000, including $500,000 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 July 31, 1999. Borrowings under the line of credit are secured by the assets of the Company. As of July 31, 1999 no amount was outstanding under the line. 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 July 31, 1999, the Company was in compliance with all financial covenants. 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a discrepancy include, but are not limited to, those discussed in "Other Factors Affecting Operating Results" and "Liquidity and Capital Resources" below, as well as Risk Factors included in the our Rule 424(b)(3) prospectus dated August 20, 1999, as filed with the Securities and Exchange Commission. The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto appearing elsewhere in this report. Overview We develop and market product content management software for the use within and among companies in a manufacturing supply chain over the Internet. Our suite of software products is designed to improve the ability of all members of the supply chain to communicate and collaborate with one another about new or changing information concerning the manufacture, source or supply of products or components. 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 user licenses at the time of the initial license of the software products and may purchase additional user licenses 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. As of July 31, 1999, over 98% of our customers who licensed our products had purchased maintenance contracts, which provide unspecified software upgrades, on a when-and-if available basis, and technical support over a stated term, which is generally a twelve-month period, and over 90% of our customers had renewed their maintenance contracts. We cannot assure you that we will continue to experience these rates of purchases of maintenance agreements or renewals. We recognize revenue under Statement of Position, or SOP, 97-2, Software Revenue Recognition, and SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain Transactions. When contracts contain multiple elements and vendor-specific objective evidence exists for all undelivered elements, we account for the delivered elements in accordance with the "Residual Method" prescribed by SOP 98-9. Software licenses sold to new customers are recognized as revenue upon installation and acceptance by the customer. Software licenses sold to existing customers, or add-on sales, do not include acceptance provisions and are recognized as revenue upon shipment of the software product. In the event we grant our customers the right to specified upgrades, license revenue is deferred until delivery of the specified upgrade. If vendor-specific objective evidence of fair value exists for the specified upgrade, then an amount equal to this fair value is deferred. If vendor-specific objective evidence of fair value does not exist for the specified upgrade, then the entire license fee is deferred until the delivery of the specified upgrade. 7 For the quarter ended July 31, 1999, 53% of our license revenue was generated from new customers, with the remaining license revenues attributable to existing customers. For the quarter ended July 31, 1998, 81% of our license revenue was generated from new customers, with the remaining license revenues attributable to existing customers. 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 includes royalties due to third parties for integrated technology, the cost of manuals and product documentation, production media used to deliver our products and packaging costs. Our cost of professional services revenues includes 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 includes salaries and related expenses for the customer support organization and an allocation of our overhead expenses. The cost of professional services can fluctuate depending upon whether more or less of the professional services are provided to our customers by us rather than by third-party service providers. We generally provide implementation services to our customers on a fixed-price basis. If we have to engage independent contractors or third parties to provide these services on our behalf, it is generally at higher cost resulting in a lower gross margin than if we had provided the services to our customers ourselves. Therefore, our gross margin from professional services may fluctuate based on who performs the services and the actual cost to provide these services. Although services revenues may increase in absolute dollars if we increase the professional services we provide, services revenues have lower gross margins than license revenues. Our overall gross profit can therefore 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 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 $13.6 million through July 31, 1999, of which approximately $5.5 million was recorded in the quarter ended July 31, 1999. As of July 31, 1999, approximately $9.0 million of total unearned compensation expense recorded to date remains to be amortized. In addition, we expect to record approximately $5.9 million of unearned stock compensation in connection with the granting of stock options to our employees from August 1, 1999 through the date of our initial public offering. Unearned stock compensation 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 $1.4 million for the quarter ended July 31, 1999 and $444,000 for the quarter ended July 31, 1998. The amortization of the remaining unearned stock compensation at July 31, 1999 will result in additional charges to operations through fiscal 2005. 8 In addition, we granted options to consultants in August 1999 to purchase 65,000 shares of common stock. We expect to record at least $1.1 million in expense related to the options over their related vesting period. We calculated the minimum fair value of options granted to consultants on the date of grant using the Black-Scholes option pricing model as prescribed by SFAS No. 123 with the following underlying assumptions: expected volatility of 50%, risk-free interest rate of 5.9% and option terms of ten years. We are accounting for options granted to consultants under variable plan accounting. The expense associated with these options may fluctuate significantly from quarter to quarter through fiscal 2005 based upon the fluctuation of our common stock price. The amortization of stock compensation, both to employees and consultants, 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. We intend to continue to incur significant sales and marketing, research and development and general and administrative expenses. We had 170 full-time employees as of July 31, 1999 compared to 156 full-time employees as of April 30, 1999. 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. Results of Operations For the three months ended July 31, 1999 and 1998 The following table sets forth selected consolidated financial data for the periods indicated, expressed as a percentage of total revenues:
Three Months Ended July 31, ------------------------------------ 1999 1998 ----------------- ---------------- Revenues: License..................................... 62 % 70 % Services.................................... 20 20 Maintenance................................. 18 10 ------ ------ Total revenues............................ 100 100 ------ ------ Cost of revenues: License..................................... 4 5 Services.................................... 16 23 Maintenance................................. 8 8 ------ ------ Total cost of revenues.................... 28 36 ------ ------ Gross profit.................................. 72 64 ------ ------
9 Operating expenses: Sales and marketing......................... 77 85 Research and development.................... 25 33 General and administrative.................. 13 13 Amortization of stock compensation.......... 24 14 ------ ------ Total operating expenses.................. 139 145 ------ ------ Loss from operations.......................... (67) (81) Interest income (expense), net................ (2) 2 ------ ------ Net loss...................................... (69)% (79)%
Revenues Our total revenues were $5.9 million for the quarter ended July 31, 1999 compared to $3.2 million for the quarter ended July 31, 1998, representing an increase of $2.7 million or 82%. We had no customer that accounted for more than 10% of our total revenues for the quarter ended July 31, 1999 or 1998. License Revenues. Our license revenues were $3.7 million for the quarter ended July 31, 1999 compared to $2.3 million for the quarter ended July 31, 1998, representing an increase of $1.4 million or 61%. The increase in our license revenues from the prior year's quarter was due to increased market acceptance of our suite of products, including new versions of our products. During the quarter ended July 31, 1999, we offered specified upgrade rights to certain customers. As a result of offering these specified upgrade rights, we deferred $238,000 of license revenue at July 31, 1999. Professional Services Revenues. Our professional services revenues were $1.2 million for the quarter ended July 31, 1999 compared to $655,000 for the quarter ended July 31, 1998, representing an increase of $504,000 or 77%. Professional services revenues as a percentage of total revenues was 20% in each of the quarters ended July 31, 1999 and 1998. The absolute dollar increase in professional services revenues is due to increased license revenues and an increased range of services, consisting of additional data migration and integration 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 $1.1 million for the quarter ended July 31, 1999 compared to $316,000 for the quarter ended July 31, 1998, representing an increase of $761,000 or 240%. Maintenance revenues as a percentage of total revenues were 18% for the quarter ended July 31, 1999 and 10% for the quarter ended July 31, 1998. The increase in maintenance revenues and maintenance revenues as a percentage of total revenues for the quarter ended July 31, 1999 compared to the quarter ended July 31, 1998 was attributed to increased licenses for our products. Cost of Revenues Cost of License Revenues. Cost of license revenues were $223,000 for the quarter ended July 31, 1999 compared to $165,000 for the quarter ended July 31, 1998, representing an increase of $58,000 or 35%. 10 Cost of license revenues increased for the quarter ended July 31, 1999 compared to the quarter ended July 31, 1998 due to increased expenses associated with the sub-licensing of third-party software used in our 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 $921,000 for the quarter ended July 31, 1999 compared to $756,000 for the quarter ended July 31, 1998, representing an increase of $165,000 or 22%. The increase in cost for the quarter ended July 31, 1999 compared to the quarter ended July 31, 1998 was 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, primarily 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 $482,000 for the quarter ended July 31, 1999 compared to $237,000 for the quarter ended July 31, 1998, representing an increase of $245,000 or 103%. Cost of maintenance revenues as a percentage of maintenance revenues were 45% for the quarter ended July 31, 1999 and 75% for the quarter ended July 31, 1998. The decrease in cost of maintenance revenues as a percentage of maintenance revenues for the quarter ended July 31, 1999 compared to the quarter ended July 31, 1998 was due to economies of scale realized as a result of increased management personnel and experienced maintenance personnel. Operating Expenses Sales and Marketing. Sales and marketing expenses were $4.6 million for the quarter ended July 31, 1999 compared to $2.5 million for the quarter ended July 31, 1998, representing an increase of $2.1 million or 84%. Sales and marketing expenses as a percentage of total revenues were 77% for the quarter ended July 31, 1999 and 85% for the quarter ended July 31, 1998. The increase in sales and marketing expenses for the quarter ended July 31, 1999 compared to the quarter ended July 31, 1998 reflect 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. 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 $1.5 million for the quarter ended July 31, 1999 compared to $1.1 million for the quarter ended July 31, 1998, representing an increase of $410,000 or 38%. Research and development expenses as a percentage of total revenues were 25% for the quarter ended July 31, 1999 and 33% for the quarter ended July 31, 1998. The increase in research and development expenses for the quarter ended July 31, 1999 compared to the quarter ended July 31, 1998 was due to the increase in the number of our software developers, 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. 11 General and Administrative. General and administrative expenses were $753,000 for the quarter ended July 31, 1999 compared to $431,000 for the quarter ended July 31, 1998, representing an increase of $322,000 or 75%. General and administrative expenses as a percentage of total revenues were 13% for each of the quarters ended July 31, 1999 and July 31, 1998. The increase in general and administrative expense for the quarter ended July 31, 1999 compared to the quarter ended July 31, 1998 was 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. We recognized amortization of stock compensation of approximately $1.4 million for the quarter July 31, 1999 compared to $444,000 for the quarter ended July 31, 1998. Interest Income(Expense), Net Interest income (expense), net, was $(127,000)for the quarter ended July 31, 1999 compared to $52,000 for the quarter ended July 31, 1998. This decrease was due primarily to higher interest expense generated from the increase in notes payable during late fiscal 1999. At July 31, 1999, we had unamortized interest of $232,000 related to warrants issued in connection with the subordinated notes payable. We used a portion of the proceeds from our initial public offering to repay these subordinated notes payable in their entirety on August 31, 1999. As a result, we will recognize the remaining unamortized interest balance as an expense in the quarter ended October 31, 1999. Provision for Income Taxes The Company's operating losses are generated domestically, and amounts attributable to its foreign operations have been insignificant for all periods presented. No provision for income taxes has been recorded since our inception because we have incurred net losses in all periods. Liquidity and Capital Resources In August 1999, we completed an initial public offering of 3,450,000 shares of Common Stock (including the exercise of the underwriters' overallotment option) at $21.00 per share. Net proceeds to us, before offering expenses, were $67.4 million or $19.53 per share. Simultaneous with the closing of the initial public offering, we sold an aggregate of 665,641 shares of common stock at $19.53 per share in a private placement to Dell Computer Corporation, Flextronics International Ltd., and Marshall Industries. Net proceeds from sales of stock in the private placement were $13.0 million. The primary purposes of the initial public offering were to obtain additional equity capital, create a public market for our common stock, and facilitate future access to public markets. We have used, and continue to expect to use the proceeds from the offering for general corporate purposes, including working capital and note payable repayment. A portion of the proceeds may also be used for the acquisition of businesses that are complimentary to ours, although we do not currently have any commitments or agreements with respect to any acquisitions. Pending such uses, we have invested the net proceeds of the offering in investment grade, interest-bearing securities. Prior to our initial public offering, we raised $26.2 million of equity capital from the sale of preferred stock, net of issuance costs, which was the primary source of financing for our operations. As of July 31, 1999, we had cash and cash equivalents of $9.6 million, compared to $10.0 million of cash and cash equivalents held as of April 30, 1999. Our working capital at July 31, 1999 was $625,000, compared to working capital of $4.2 million at April 30, 1999. 12 In July 1999 we amended our senior line of credit facility with a bank that bears interest at 8.5% to increase the available borrowing amount from $2.0 million to $5.0 million and extended the expiration date to August 31, 2000. At July 31, 1999, no balance was outstanding under this line of credit. This line of credit is secured by accounts receivable and certain other assets. At July 31, 1999 we also had $3.0 million outstanding of subordinated notes payable which bear interest at an annual rate of 11.75% and are payable through fiscal 2002. These notes were paid in full on August 31, 1999. In addition, capital lease obligations including both short-term and long-term portions, were $1.6 million at July 31, 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 July 31, 1999. We also have noncancelable operating leases for office space and equipment of approximately $2.2 million at July 31, 1999 which are payable through fiscal 2003. Our operating activities resulted in cash generated for the quarter ended July 31, 1999 of $639,000 and net cash outflows of $1.8 million for the quarter ended July 31, 1998. Investing activities consisted of capital expenditures of $888,000 for the quarter ended July 31, 1999 and for $30,000 the quarter ended July 31, 1998. These expenditures were primarily for property and equipment. We expect that capital expenditures will continue to increase to the extent we continue to increase our headcount or expand our operations. Financing activities used cash of $115,000 for the quarter ended July 31, 1999 through repayments of capital lease obligations offset by proceeds from the issuance of common stock. Financing activities provided cash of $10.9 million for the quarter ended July 31, 1998, primarily through proceeds from the issuance of preferred and common stock and net proceeds from debt and capital lease borrowings. We anticipate that 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 financing, 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. Recent Accounting Pronouncement In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard or SFAS No. 133, "Accounting for Derivatives and Hedging Activities" and in June 1999 the FASB issued SFAS No. 137, "Accounting for Derivatives and Hedging Activities - Deferral of the Effective Date of SFAS No. 133" SFAS 133 establishes accounting and reporting standards of derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. We will adopt SFAS 133 in its quarter ending July 31, 2000 as allowed under SFAS 137 and do not expect such adoption to have a material impact on our results of operations, financial position or cash flows. 13 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 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. 14 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. 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. 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. Other Factors Affecting Operating Results 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 the following: . we have only one product suite, and will need to successfully introduce new products and enhance existing products to this suite, including Agile Anywhere, a new version which has been available only since July 1999; . we need to increase sales to achieve profitability, requiring us to sell additional licenses and software products to our existing customers and expand our customer base outside of the electronics and medical device industries; 15 . we need to expand our sales and marketing, customer support and professional services organizations, build strategic relationships and expand our international operations in order to increase sales; and . we need to effectively manage our anticipated growth which could lead to management distractions and increased operating expenses, and will require us to attract and retain key personnel. Our business strategy may not be successful and we may not be able to successfully address these risks. 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, We Expect to Incur Losses in the Future and We May Not Achieve or Maintain Profitability We incurred net losses of approximately $4.1 million for the quarter ended July 31, 1999, $11.4 million for fiscal 1999, $8.9 million for fiscal 1998 and $4.8 million for fiscal 1997. As of July 31, 1999, we had an accumulated deficit of approximately $30.6 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. 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, including the following: . fluctuations in demand for Internet product content management software; . size and timing of sales and installations of our products; . entry of new competitors into our market, or the announcement of new products or product enhancements by competitors; . our ability to successfully expand our direct sales force and our international sales organization; . changes in our sales force incentives; . unexpected delays in developing or introducing new and enhanced products; . unexpected decline in purchases by our existing customers, including purchases of 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; and 16 . our ability to establish and maintain relationships with our third-party implementation partners. 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; for example, in fiscal 1999, revenues generated each quarter that was recognized in the last month of the quarter ranged from 35% to 51%. This increase in revenues earned in the last month of each quarter is driven primarily by quarter-end commissions payable and the time required to implement software installations. A high percentage of our operating expenses are essentially fixed in the short term and we may be unable to adjust spending to compensate for an unexpected shortfall in our revenues. 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. As a result, if we experience delays in recognizing revenue, or if our revenues do not grow faster than the increase in these expenses, we could experience significant variations in operating results from quarter to quarter. If, in response to market pressures or other demands, we introduce new pricing structures for our existing products, we could experience customer dissatisfaction and loss of sales. In addition, if we introduce products that are sold in a manner different from how we currently market our products, or we could recognize revenue differently than under our current accounting policies. Depending on the manner in which we sell existing or 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 May Not Achieve Anticipated Revenues if the Introduction and Customer Acceptance of Our New Release, Agile Anywhere, or Any Upgrades or Enhancements to Our Products, Is Unsuccessful Our future financial performance will depend on the successful introduction and customer acceptance of Agile Anywhere and any upgrades or enhancements that we may make to our products in the future. 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, has only been available since July 1999. We believe that revenues from Agile Anywhere, together with revenues from maintenance and support contracts from Agile Anywhere and prior versions of our suite, will account for a substantial portion of our revenues for the foreseeable future. If we are unable to ship or implement any upgrades or enhancements when planned, or if the introduction of upgrades or enhancements causes customers to defer orders for our existing products, we may not achieve anticipated revenues. 17 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. Implementation of Our Products By Large Customers May Be Complex and Customers Could Become Dissatisfied if Implementation of Our Products Proves Difficult, Costly or Time-Consuming Our products must integrate with many 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 decline. If We Do Not Sell Additional Licenses or Enhanced Versions or Upgrades of Our Products to Existing Customers, We May Not Achieve Revenue Growth The size of a new customer's initial order is relatively small and may include a limited number of user licenses. In later orders, customers often add user licenses or additional products designed for specific functions, such as the AML Server targeted at manufacturers. In order to grow revenues, we depend on sales of additional user licenses to our existing customers as well as sales of new licenses to new customers. Therefore, it is important that our customers are satisfied with their initial product implementations and that they believe that expanded use of the product they purchased will provide them with additional benefits. Customers could choose not to purchase any new 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. If We Do Not Establish and Maintain Relationships With Key Partners, We May Encounter Difficulty in Providing Implementation and Customer Support of 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 18 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. We May Experience Customer Dissatisfaction and Lost Sales if Our Products Do Not Scale to Accommodate Substantial Increases in the Number of Concurrent Users 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 across their entire organization. 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 May Not Be Able to Increase Sales of Our Products if We Do Not 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 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 we may experience a shortfall in revenues. Our Lengthy and Variable Sales Cycle Makes it Difficult For Us to Predict When or if Sales Will Be Made Our products have an unpredictable sales cycle that contributes to the uncertainty of our future operating results. Our product content management software is a new category of products, and customers often view the purchase of our products as a significant and strategic decision. As a result, customers may take time to evaluate our products, resulting in a sales cycle that has historically 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. 19 We may expend significant sales and marketing expenses during this evaluation period before the customer places an order with us. Customers may initially purchase a smaller number of user licenses before expanding the order to allow a greater number of users to benefit from the application. Larger customers may purchase our products as part of multiple simultaneous purchasing decisions, which may result in additional unplanned administrative processing and other delays in our product sales. If sales forecasted from a specific customer for a particular quarter are not realized, we may experience an unplanned shortfall in revenues. 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, Whose Knowledge of Our Business and Technical Expertise Would Be Difficult to Replace 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. We do not have key-man life insurance on Mr. Stolle. If one or more members of our senior management or any of our key employees were to resign, the loss of personnel could result in delays to product development, loss of sales, and diversion of management resources. See "Management" for additional information on our key personnel. Because of Competition for Additional Qualified Personnel, We May Not Be Able to Recruit or Retain Necessary Personnel, Which Could Impact Development or Sales of Our Products Our success depends on our ability to attract and retain qualified, experienced employees. 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. 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. 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 products like ours 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 software products that allow companies to collaborate with suppliers on product information and change is newly emerging. Companies have not traditionally automated this product content management process throughout the supply chain. We cannot be certain that this market will continue to develop and grow or that companies 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 information as well as for collaboration among supply chain participants. Companies that have already invested substantial resources in other methods of sharing product information during the manufacturing and supply process may be reluctant to adopt a new approach that may replace, limit or compete with their existing systems or methods. 20 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. Competition Among Providers of Software Enabling Collaboration in a Manufacturing Supply Chain May Increase, Which Could Cause Us to Reduce Prices, and Result in Reduced Gross Margins or Loss of Market Share The market for products that enable companies to interactively manage and share information relating to the manufacture and supply of products is new, highly fragmented, rapidly changing and increasingly competitive. We expect competition to intensify, which could result in price reductions for our products, reduced gross margins and loss of market share. 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 software designed for management of engineering information, and developers of general purpose groupware software addressing only limited technology components involved in managing data generated by changes to the engineering process. 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. Accordingly, we may not be able to maintain or expand our sales if competition increases and we are unable to respond effectively. We May Experience Difficulties in Introducing New Products and Upgrades Which Could Result in Negative Publicity, Loss of Sales, Delay in Market Acceptance or Customer Dissatisfaction 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. 21 We expect to add new products to our supply chain applications by acquisition or internal development and by developing enhancements to our existing products. 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. 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 computer hardware and software 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. If We Are Unable to Timely Expand Our International Operations, We May Not Achieve Anticipated Revenue Growth We believe that expansion of our international operations will be necessary for our future success, and a key aspect to our business strategy is to expand our sales and support organizations internationally. Therefore, we believe that we will need to commit significant resources to expand our international operations. 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, we may not be able to achieve anticipated revenue growth. 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 for our software in multiple time zones; 22 . need to develop our software in multiple foreign languages; . longer sales cycles associated with educating foreign customers on the benefits of using our products; . greater difficulty in collecting accounts receivable from customers located abroad; . political and economic instability, particularly in Asia; . difficulties in enforcing agreements through foreign legal systems; and . unexpected changes in regulatory requirements that may limit our ability to export our software or sell into particular jurisdictions or impose 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 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 the Loss or Inability to Maintain These Technology Licenses Could Result in Increased Cost or Delays in Sales of Our Products We license technology on a non-exclusive basis from several businesses for use with our products, including licenses from RSA Data Security, Inc. for security and encryption technology software, Actuate Corporation for reporting capability 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. Defects in Our Software Products 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, delay in market acceptance and sales, diversion of development resources, injury to our reputation or increased service and warranty costs. 23 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. If We Become Subject to Product Liability Litigation, It Could Be Time Consuming and Costly to Defend 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. 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 our administrative, operational and financial resources. For example, we have grown from 65 employees at April 30, 1997 to 156 employees at April 30, 1999 and to 170 employees for July 31, 1999. If we are unable to manage our growth and expansion in an efficient or timely manner, 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 Protect Our Intellectual Property We May Lose a Valuable Asset, Experience Reduced Market Share or Incur Costly Litigation to Protect Our Rights Our success and ability to compete depend upon our proprietary technology, including our brand and logo and the technology underlying our products. We rely on trademark, trade secret and copyright laws to protect our intellectual property. 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. 24 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. We May Be Subject to Intellectual Property Infringement Claims That, With or Without Merit, Could Be Costly to Defend or Settle We may from time to time be subject to claims of infringement of other parties' proprietary rights or claims that our own intellectual property rights are invalid. 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 infringement claims made against us, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or negative publicity. In addition, 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. 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. Future Acquisitions May Be Difficult to Integrate, Disrupt Our Business, Dilute Stockholder Value or Divert Management Attention 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: 25 . 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 our 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. Any future acquisitions, even if successfully completed, may not generate any additional revenue or provide any benefit to our business. Risks Related to the Internet on Our Business and Prospects If Use of the Internet Does Not Continue to Develop and Reliably Support the Demands Placed on It by Electronic Commerce, We May Experience Loss of Sales 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 companies and their supply chain partners may not adopt or continue to use the Internet as a medium of exchanging product content information. 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, Resulting in Decreased Demand For Our Products The Internet infrastructure may not be able to support the demands placed on it by increased usage or the limited capacity of networks to transmit large amounts of data. Other risks associated with commercial use of the Internet could slow its growth, including: . outages and other delays resulting from the inadequate reliability of the network infrastructure; . slow development of enabling technologies and complementary products; and . limited availability of cost-effective, high-speed access. 26 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 manufacturers and their supply chain partners. If these or any other factors cause use of the Internet for commerce to slow or decline, the Internet may not prove viable as a commercial marketplace, resulting in decreased demand for our products. 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. 27 PART II. OTHER INFORMATION Item 1. Legal Proceedings. We are currently involved in litigation with Facilities Management International, 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 court has set the case for a bench trial on February 7, 2000. 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 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. Item 2. Changes in Securities and Use of Proceeds. The effective date of the Registration Statement for the Company's initial public offering, filed on Form S-1 under the Securities Act of 1933 (File No. 333-81387), was August 19, 1999. The class of securities registered was Common Stock. The offering commenced and completed on August 20, 1999. Pursuant to the Registration Statement, the Company registered and sold 3,450,000 shares of its Common Stock to an underwriting syndicate at an initial public offering price of $21.00 per share for aggregate gross proceeds of $72.5 million. The managing underwriters for the offering were Morgan Stanley Dean Witter, Deutsche Banc Alex. Brown, and Hambrecht & Quist. The Company incurred expenses of approximately $6.5 million, of which approximately $5.1 million represented underwriting discounts and commissions and approximately $1.4 million represented other expenses related to the offering. The net proceeds to the Company after total expenses was approximately $66.0 million. Simultaneous with the closing of the initial public offering, the Company sold an aggregate of 665,641 shares of common stock at $19.53 per share in a private placement to Dell Computer Corporation, Flextronics International Ltd., and Marshall Industries. We have used, and continue to expect to use, the proceeds from the sale of stock for general corporate purposes, including working capital. A portion of the proceeds may also be used or the acquisition of businesses that are complimentary to ours. Pending such uses, we have invested the net proceeds from the sale of stock in investment grade, interest-bearing securities. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. Agile solicited the written consent of its stockholders as of July 27, 1999 to approve the following: (1) An amendment to its 1995 Stock Option Plan to increase the number of shares reserved for issuance under the Option Plan from shares of our common stock to 5,375,000 shares of our common stock, subject to automatic increase on the first day of each fiscal year beginning May 1, 2000 by the lesser of 500,000 shares per year, 5% of the number of shares f common stock issued and outstanding on the last day of the preceding fiscal year, or a lesser number of shares determined by the board of directors. For Against Abstain --- ------- ------- 14,229,367 0 0 28 (2) The 1999 Employee Stock Purchase Plan with a share reserve of 500,000 shares of our common stock, subject to automatic increase on the first day of each fiscal year beginning May 1, 2000 by the lesser of 500,000 shares per year, 2% of the number of shares f common stock issued and outstanding on the last day of the preceding fiscal year, or a lesser number of shares determined by the board of directors. For Against Abstain --- ------- ------- 14,229,367 0 0 (3) Our reincorporation into the state of Delaware. For Against Abstain --- ------- ------- 14,229,367 0 0 (4) The form of Indemnity agreement to be entered into by Agile and each of our officers and directors. For Against Abstain --- ------- ------- 14,229,367 0 0 Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit - ------- No. Description - --- ----------- 2.1 Agreement and Plan of Merger dated as of August 17, 1999 by and between Agile Software Corporation and Delaware Agile Software Corporation 3.1* Certificate of Incorporation of Agile Software Corporation, as amended to date. 3.2* Certificate of Elimination and Certificate of Amendment. 3.3* Bylaws of Agile Software Corporation. 10.1* Amended and Restated 1995 Stock Option Plan 10.2* 1999 Employee Stock Purchase Plan 10.3* Form of Indemnity Agreement between Agile Software Corporation and its directors and officers 10.6* Revolving Credit Loan and Security Agreement (Accounts and Inventory) dated December 11, 1996 between Comerica Corporation, as modified Bank--California and Agile Software through July 19, 1999. 10.15 Sixth Amended and Restated Investor Rights Agreement dated as of August 16, 1999 by and among Agile Software Corporation and the investors listed on Schedule A thereto. 10.16 Common Stock Purchase Agreement dated August 2, 1999 between Agile Software Corporation, Dell U.S.A. L.P., a Texas Limited Partnership, and Flextronics International Ltd. 10.17 Common Stock Purchase Agreement dated August 16, 1999 between Agile Software Corporation and Marshall Industries. 27.1 Financial Data Schedule (filed only with the electronic submission of Form 10-Q in accordance with the Edgar requirements) ____________ * Incorporated herein by reference to the exhibit of the same number in the Registrant's Registration Statement on Form S-1 (File No. 333-81387) declared effective on August 19, 1999 (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the three months ended July 31, 1999. 29 AGILE SOFTWARE CORPORATION SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AGILE SOFTWARE CORPORATION Date: September 14, 1999 By: /s/ Thomas P. Shanahan --------------------------------- Thomas P. Shanahan Chief Financial Officer, Executive Vice President 30 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 2.1 Agreement and Plan of Merger dated as of August 17, 1999 by and between Agile Software Corporation and Delaware Agile Software Corporation 3.1* Certificate of Incorporation of Agile Software Corporation, as amended to date. 3.2* Certificate of Elimination and Certificate of Amendment. 3.3* Bylaws of Agile Software Corporation. 10.1* Amended and Restated 1995 Stock Option Plan 10.2* 1999 Employee Stock Purchase Plan 10.3* Form of Indemnity Agreement between Agile Software Corporation and its directors and officers 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 through July 19, 1999. 10.15 Sixth Amended and Restated Investor Rights Agreement dated as of August 16, 1999 by and among Agile Software Corporation and the investors listed on Schedule A thereto. 10.16 Common Stock Purchase Agreement dated August 2, 1999 between Agile Software Corporation, Dell U.S.A. L.P., a Texas Limited Partnership, and Flextronics International Ltd. 10.17 Common Stock Purchase Agreement dated August 16, 1999 between Agile Software Corporation and Marshall Industries. 27.1 Financial Data Schedule (filed only with the electronic submission of Form 10-Q in accordance with the Edgar requirements) - -------------------------------------------------------------------------------- * Incorporated herein by reference to the exhibit of the same number in the Registrant's Registration Statement on Form S-1 (File No. 333-81387) declared effective on August 19, 1999 31 EX-2.1 2 AGREEMENT AND PLAN OF MERGER DATED 8/17/99 EXHIBIT 2.1 AGREEMENT AND PLAN OF MERGER ---------------------------- THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is entered into as of August 17, 1999 by and between Agile Software Corporation, a California corporation ("Agile California"), and Delaware Agile Software Corporation, a Delaware corporation ("Agile Delaware"). WITNESSETH: ---------- WHEREAS, Agile Delaware is a corporation duly organized and existing under the laws of the State of Delaware; WHEREAS, Agile California is a corporation duly organized and existing under the laws of the State of California; WHEREAS, on the date of this Merger Agreement, Agile Delaware has authority to issue 100,000,000 shares of Common Stock, par value $0.001 per share (the "Agile Delaware Common Stock"), of which 1,000 shares are issued and outstanding and owned by Agile California and 31,175,556 shares of Preferred Stock, par value $0.001 per share (the "Agile Delaware Preferred Stock), of which no shares are issued or outstanding; WHEREAS, on the date of this Merger Agreement, Agile California has authority to issue 25,000,000 shares of Common Stock (the "Agile California Common Stock"), of which 4,200,025 shares are issued and outstanding, and 21,175,556 shares of Preferred Stock (the "Agile California Preferred Stock"), of which 11,873,273 shares are issued and outstanding; WHEREAS, the respective Boards of Directors for Agile Delaware and Agile California have determined that, for the purpose of effecting the reincorporation of Agile California in the State of Delaware, it is advisable and to the advantage of said two corporations and their shareholders that Agile California merge with and into Agile Delaware upon the terms and conditions herein provided; and WHEREAS, the respective Boards of Directors of Agile Delaware and Agile California, the shareholders of Agile California, and the sole stockholder of Agile Delaware have adopted and approved this Merger Agreement; NOW, THEREFORE, in consideration of the mutual agreements and covenants set forth herein, Agile California and Agile Delaware hereby agree to merge as follows: 1. Merger. Agile California shall be merged with and into Agile Delaware, ------ and Agile Delaware shall survive the merger ("Merger"), effective upon the date when this Merger Agreement is made effective in accordance with applicable law (the "Effective Date"). 2. Governing Documents. The Certificate of Incorporation of Agile ------------------- Delaware shall continue to be the Certificate of Incorporation of Agile Delaware as the surviving Corporation. Article FIRST of the Restated Certificate of Incorporation of Agile Delaware shall be amended to read as follows: 1 FIRST: The name of the Corporation is Agile Software Corporation. ----- The Bylaws of Agile Delaware, in effect on the Effective Date, shall continue to be the Bylaws of Agile Delaware as the surviving Corporation without change or amendment until further amended in accordance with the provisions thereof and applicable laws. 3. Directors and Officers. The directors and officers of Agile California ---------------------- shall become the directors and officers of Agile Delaware upon the Effective Date and any committee of the Board of Directors of Agile California shall become the members of such committees for Agile Delaware. 4. Succession. On the Effective Date, Agile Delaware shall succeed to ---------- Agile California in the manner of and as more fully set forth in Section 259 of the General Corporation Law of the State of Delaware. 5. Further Assurances. From time to time, as and when required by Agile ------------------ Delaware or by its successors and assigns, there shall be executed and delivered on behalf of Agile California such deeds and other instruments, and there shall be taken or caused to be taken by it such further and other action, as shall be appropriate or necessary in order to vest, perfect or confirm, of record or otherwise, in Agile Delaware the title to and possession of all the property, interests, assets, rights, privileges, immunities, powers, franchises and authority of Agile California, and otherwise to carry out the purposes of this Merger Agreement and the officers and directors of Agile Delaware are fully authorized in the name and on behalf of Agile California or otherwise to take any and all such action and to execute and deliver any and all such deeds and other instruments. 6. Stock of Agile California. ------------------------- a. Common Stock. Upon the Effective Date, by virtue of the Merger ------------ and without any action on the part of the holder thereof, each share of Agile California Common Stock outstanding immediately prior thereto shall be changed and converted into one fully paid and nonassessable share of Agile Delaware Common Stock. b. Preferred Stock. Upon the Effective Date, by virtue of the Merger --------------- and without any action on the part of the holder thereof, each share of each series of Agile California Preferred Stock outstanding immediately prior thereto shall be changed and converted into one fully paid and nonassessable share of Agile Delaware Preferred Stock of an equivalent series. 7. Stock Certificates. On and after the Effective Date, all of the ------------------ outstanding certificates which prior to that time represented shares of Agile California stock shall be deemed for all purposes to evidence ownership of and to represent the shares of Agile Delaware stock into which the shares of Agile California stock represented by such certificates have been converted as herein provided. The registered owner on the books and records of Agile Delaware or its transfer agent of any such outstanding stock certificate shall, until such certificate shall have been surrendered for transfer or otherwise accounted for to Agile Delaware or its transfer agent, have and be entitled to exercise any voting and other rights with respect to and to receive any dividend and other distributions upon the shares of Agile Delaware stock evidenced by such outstanding certificate as above provided. 2 8. Options and Warrants. Upon the Effective Date, each outstanding -------------------- option, warrant or other right to purchase shares of Agile California stock, including those options granted under the 1995 Stock Option Plan (the "Option Plan") of Agile California, shall be converted into and become an option, warrant, or right to purchase the identical number of shares of Agile Delaware stock, at a price per share equal to the exercise price of the option, warrant or right to purchase Agile California stock, and upon the same terms and subject to the same conditions as set forth in the Option Plans and other agreements entered into by Agile California pertaining to such options, warrants, or rights. A number of shares of Agile Delaware stock shall be reserved for purposes of such options, warrants, and rights equal to the number of shares of Agile California stock so reserved as of the Effective Date. As of the Effective Date, Agile Delaware shall assume all obligations of Agile California under agreements pertaining to such options, warrants, and rights, including the Option Plans, and the outstanding options, warrants, or other rights, or portions thereof, granted pursuant thereto. 9. Other Employee Benefit Plans. As of the Effective Date, Agile ---------------------------- Delaware hereby assumes all obligations of Agile California under any and all employee benefit plans in effect as of said date or with respect to which employee rights or accrued benefits are outstanding as of said date. 10. Outstanding Common Stock of Agile Delaware. Forthwith upon the ------------------------------------------ Effective Date, the One Thousand (1,000) shares of Agile Delaware Common Stock presently issued and outstanding in the name of Agile California shall be canceled and retired and resume the status of authorized and unissued shares of Agile Delaware Common Stock, and no shares of Agile Delaware Common Stock or other securities of Agile Delaware shall be issued in respect thereof. 11. Covenants of Agile Delaware. Agile Delaware covenants and agrees that --------------------------- it will, on or before the Effective Date: a. Qualify to do business as a foreign corporation in the State of California, and in all other states in which Agile California is so qualified and in which the failure so to qualify would have a material adverse impact on the business or financial condition of Agile Delaware. In connection therewith, Agile Delaware shall irrevocably appoint an agent for service of process as required under the provisions of Section 2105 of the California Corporations Code and under applicable provisions of state law in other states in which qualification is required hereunder. b. File any and all documents with the California Franchise Tax Board necessary to the assumption by Agile Delaware of all of the franchise tax liabilities of Agile California. 12. Amendment. At any time before or after approval and adoption by the --------- stockholders of Agile California, this Merger Agreement may be amended in any manner as may be determined in the judgment of the respective Boards of Directors of Agile Delaware and Agile California to be necessary, desirable or expedient in order to clarify the intention of the parties hereto or to effect or facilitate the purposes and intent of this Merger Agreement. 3 13. Abandonment. At any time before the Effective Date, this Merger ----------- Agreement may be terminated and the Merger may be abandoned by the Board of Directors of either Agile California or Agile Delaware or both, notwithstanding approval of this Merger Agreement by the sole stockholder of Agile Delaware and the shareholders of Agile California. 14. Counterparts. In order to facilitate the filing and recording of this ------------ Merger Agreement, the same may be executed in any number of counterparts, each of which shall be deemed to be an original. IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved by resolution of the Board of Directors of Agile California and Agile Delaware, is hereby executed on behalf of each of said two corporations by their respective officers thereunto duly authorized. DELAWARE AGILE SOFTWARE CORPORATION, a Delaware corporation By: /s/ Bryan D. Stolle ---------------------------------- Bryan D. Stolle, President AGILE SOFTWARE CORPORATION, a California corporation By: /s/ Bryan D. Stolle ---------------------------------- Bryan D. Stolle, President 4 EX-10.15 3 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT EXHIBIT 10.15 SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT ------------------------------------------------------ THIS SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS (the "Agreement") is made as of the 16th day of August 1999, 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 Fifth Amended and Restated Investors' Right Agreement, dated as of June 4, 1998, among the Company and such Prior Investors(the "Prior Agreement"); WHEREAS, certain of the Investors (the "Common Stock Investors") are a party to the Common Stock Purchase Agreements dated August 2, 1999 and August 16, 1999 (collectively the "Common Stock Agreements") between the Company and the Common Stock Investors, pursuant to which the Common Stock Investors are purchasing shares of Common Stock of the Company; WHEREAS, in order to induce the Company to enter into the Common Stock Agreements and to induce the Common Stock Investors to invest funds in the Company pursuant to the Common Stock Agreements, the Prior Investors hereby agree (i) to waive their rights under the Prior Agreement, and (ii) agree that the Common Stock Investors be granted rights pursuant to Section 1.3 hereof, 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 matter 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 the upon 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, (viii) the Common Stock issued to the Common Stock Investors, and (ix) 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), (vii) or (viii) 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) Excluding for all purposes hereunder the Excluded Securities, which shall have no rights pursuant to this subsection 1.2, 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 (excluding for this purpose the Common Stock held by the Common Stock Investors (the "Excluded Securities")) then outstanding that the Company file a registration statement under the Securities Act covering the 2 registration of at least 30% of the Registrable Securities (excluding the Excluded 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: (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 (other than Excluded 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 fair 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. 3 (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: (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 (including the holders of Excluded Securities) written notice of such registration. Upon the written request of each Holder (including for this purpose holders of Excluded Securities) 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 (including Excluded 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 4 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. (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 5 underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities. 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 6 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 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 7 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 reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement containd 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 8 liability to the indemnified party under this Section 1.10, but the omission so to deliver written notice to the indemnifying party will not 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 to 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 qualities as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it 9 so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such 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 (other than a holder of Excluded Securities) 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 other than holders of Excluded Securities; 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 (other than Excluded Securities) as are specified in such request, together with all or such portion of the Registrable Securities (other than Excluded 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 (other than Excluded 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 10 Section 1.12 shall not be counted as demands for registration or registrations effected pursuant to Sections 1.2 or 1.3, respectively. 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: 11 (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; (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 other than the Common Stock Investors: 12 (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 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 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 other than the ---------- Common Stock Investors, 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. 13 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 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 Stock Purchase Agreement dated June 4, 1998 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 14 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 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 15 other than the parties hereto or their respective successors and assigns any rights, remedies, 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 (excluding the Excluded Securities) then outstanding. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities (including Excluded 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 Fifth Amended and Restated Investors' Rights Agreement among the Company and the Prior Investors, dated June 4, 1998. 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 SIXTH AMENDED INVESTORS' RIGHTS AGREEMENT] 18 EX-10.16 4 COMMON STOCK PURCHASE AGREMENT DATED 8/2/99 EXHIBIT 10.16 AGILE SOFTWARE CORPORATION COMMON STOCK PURCHASE AGREEMENT AUGUST 12, 1999 COMMON STOCK PURCHASE AGREEMENT ------------------------------- THIS COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the 16/th/ day of August, 1999, by and among Agile Software Corporation, a California corporation (the "Company") and the investors listed on Schedule A hereto (collectively, the "Investors" and individually, an "Investor"). Prior to the consummation of this Agreement, the Company intends to reincorporate in the State of Delaware and to assign all of its rights and obligations under this Agreement to the Delaware corporation. All references to the Company herein are deemed to include both the Company as a California corporation, and the Delaware corporation subsequent to the reincorporation. THE PARTIES HEREBY AGREE AS FOLLOWS: 1. Purchase and Sale of Stock. -------------------------- 1.1 Sale and Issuance of Common Stock. Subject to the terms and --------------------------------- conditions of this Agreement, each Investor agrees to purchase at the Closing, and the Company agrees to sell and issue to each Investor at the Closing, that number of shares of the Company's Common Stock (the "Common Stock") equal to the quotient obtained by dividing the aggregate estimated purchase price set forth opposite each Investor's name on Schedule A hereto by the Net Offering Price, as ---------- defined herein. The purchase price per share of Common Stock purchased by each Investor (the "Net Offering Price") shall be the price per share paid by the public in an initial public offering of the Company's Common Stock completed prior to December 15, 1999, less the per share underwriting fees and discounts paid by the Company in such initial public offering (but before the deduction of offering expenses payable by the Company). No fractional shares shall be issued, and the number of shares issuable to each Investor shall be rounded down to the nearest 100 shares. 1.2 Closing. The purchase and sale of the Common Stock shall take ------- place at the offices of Gray Cary Ware & Freidenrich LLP, 400 Hamilton Avenue, Palo Alto, California 94301-1825, at 10:00 A.M., on the date and at the time of the closing of the Company's initial public offering, or at such other time and place as the Company and the Investors purchasing a majority of the Common Stock may mutually agree upon orally or in writing (which time and place are designated as the "Closing"). At the Closing, the Company shall deliver to each Investor a certificate representing the number of shares of Common Stock that such Investor is purchasing against payment of the purchase price therefor by check or wire transfer to an account specified by the Company. 2. Representations, Warranties and Covenants of the Company. The Company -------------------------------------------------------- hereby represents, warrants and covenants to the Investors that, except as set forth on a Schedule of Exceptions (the "Schedule of Exceptions") furnished to the Investors, which exceptions shall be deemed to be representations and warranties as if made hereunder: 2.1 Organization, Good Standing and Qualification. The Company is a --------------------------------------------- corporation duly organized, validly existing and in good standing under the laws of the State of California, and upon reincorporation will be duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite corporate power and authority to carry on its business as now conducted and as currently proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties. 2.2 Capitalization and Voting Rights. The authorized capital of the -------------------------------- Company is as set forth in the Registration Statement on Form S-1 filed by the Company with the Securities and Exchange Commission pursuant to the rules and regulations of the Securities Act of 1933, as amended, a copy of which is attached hereto as Exhibit A (such Registration Statement, as amended at the --------- time it becomes effective and including the information deemed to be a part of the registration statement at the time of effectiveness, being hereinafter referred to as the "Registration Statement"). 2.3 Subsidiaries. The Company has such subsidiaries as disclosed in ------------ the Registration Statement, including the exhibits thereto. 2.4 Authorization. All corporate action on the part of the Company, ------------- its officers, directors and shareholders necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder and thereunder, and the authorization, issuance (or reservation for issuance), sale and delivery of the Common Stock being sold hereunder has been taken or will be taken prior to the Closing, and this Agreement constitutes valid and legally binding obligations of the Company, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) to the extent the indemnification provisions contained in this Agreement may be limited by applicable federal or state securities laws. 2.5 Valid Issuance of Common Stock. The Common Stock that is being ------------------------------ purchased by the Investors hereunder, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Agreement and under applicable state and federal securities laws. 2.6 Governmental Consents. No consent, approval, order or --------------------- authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for any filings that may be required pursuant to state or federal securities laws. 2.7 Litigation. There is no action, suit, proceeding or ---------- investigation pending or currently threatened against the Company that questions the validity of this Agreement, or the right of the Company to enter into such agreements, or to consummate the transactions contemplated hereby. The only material litigation in which the Company is involved is described in the Registration Statement. 2 2.8 Patents and Trademarks. 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 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. 2.9 Compliance with Other Instruments. The Company is not in --------------------------------- violation or default in any material respect of any provision of its Restated Articles or Bylaws, or in any material respect of any instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound, or, to the best of its knowledge, of any provision of any federal or state statute, rule or regulation applicable to the Company. The execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby and thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment order, writ, decree or contract or an event that results in the creation of any lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any material permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties. 2.10 Permits. The Company has all franchises, permits, licenses and ------- any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which could materially and adversely affect the business, properties, prospects or financial condition of the Company, and the Company believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as currently planned to be conducted. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority. 2.11 Disclosure. The Company has provided the Investors with a copy ---------- of the Registration Statement as filed, and will provide the Investors with a copy of any and all amendments to the Registration Statement filed by the Company with the Securities and Exchange Commission prior to the Closing Date. To the best of its knowledge, neither this Agreement nor any other statements or certificates made or delivered in connection herewith or therewith contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading. 2.12 Registrations Rights. Except as provided in the Investors' -------------------- Rights Agreement, a copy of which is attached hereto as Exhibit B the Company --------- has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity. 2.13 Offering. Subject to the accuracy of the Investors' -------- representations in Section 3 of this Agreement and in written responses to the Company's inquiries, the offer, sale and issuance of the Common Stock to be issued in conformity with the terms of this Agreement 3 constitutes transactions exempt from the registration requirements of Section 5 of the Securities Act. 3. Representations and Warranties-of the Investors. Each Investor hereby ----------------------------------------------- represents and warrants that: 3.1 Authorization. The Investor has full power and authority to ------------- enter into this Agreement and such agreement constitutes its valid and legally binding obligation, enforceable against such Investor in accordance with its terms. 3.2 Purchase Entirely for Own Account. This Agreement is made with --------------------------------- such Investor in reliance upon such Investor's representation to the Company, which by such Investor's execution of this Agreement such Investor hereby confirms, that the Common Stock to be received by such Investor (sometimes referred to in this Section 3 as the "Securities") will be acquired for investment for such Investor's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that such Investor has no present intention of selling, granting any participation in or otherwise distributing the same. By executing this Agreement, such Investor further represents that such Investor does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person with respect to any of the Securities. 3.3 Disclosure of Information. Such Investor believes it has ------------------------- received all the information it considers necessary or appropriate for deciding whether to purchase the Common Stock. Such Investor further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Common Stock and the business, properties, prospects and financial condition of the Company. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of each Investor to rely thereon. 3.4 Investment Experience. Such Investor is an investor in --------------------- securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Common Stock. If other than an individual, such Investor also represents it has not been organized for the purpose of acquiring the Common Stock. 3.5 Accredited Investor. Such Investor is an "accredited investor" ------------------ within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of Regulation D, as presently in effect. 3.6 Restricted Securities. Such Investor understands that the -------------------- Securities it is purchasing are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances. In this connection, such Investor represents that it is familiar with SEC Rule 144, as presently in effect and understands the resale limitations imposed thereby and by the Securities Act. 4 3.7 Further Limitations on Disposition. Without in any way limiting ---------------------------------- the representations set forth above, such Investor further agrees not to make any disposition of all or any portion of the Securities unless and until the transferee has agreed in writing for the benefit of the Company to be bound by this Section 3, provided and to the extent this Section 3 is then applicable, and: (a) There is then in effect a Registration Statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement; or (b) (i) Such Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition and (ii) if reasonably requested by the Company, such Investor shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Securities Act. (c) Notwithstanding the provisions of paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be necessary for a transfer by an Investor that is a partnership to a partner of such partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or retired partner or the transfer by gift, will or intestate succession of any partner to his or her spouse or to the siblings, lineal descendants or ancestors of such partner or his or her spouse, if the transferee agrees in writing to be subject to the terms hereof to the same extent as if he or she were an original Investor hereunder. 3.8 Legends. It is understood that the certificates evidencing the ------- Securities may bear one or all of the legends in substantially the form specified below: (a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT." (b) Any legend required by the laws of the State of California, including any legend required by the California Department of Corporations and Sections 417 and 418 of the California Corporations Code. 4. Registration Rights. The Company shall grant to each Investor piggy- ------------------- back registration rights only, pursuant to the same terms and conditions as is set forth in Section 1.3 of the Fifth Amended and Restated Investors' Rights Agreement dated as of June 4, 1998 by and between the Company and the investors listed on schedule A thereto (the "Investors' Rights Agreement"), in the form attached hereto as Exhibit B. --------- 5 5. Conditions of Investors' Obligations at Closing. The obligations of ----------------------------------------------- the Investors under subsection 1.1 of this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions : 5.1 Representations and Warranties. The representations and ------------------------------ warranties of the Company contained in Section 2 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of such Closing. 5.2 Performance. The Company shall have performed and complied with ----------- all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing. 5.3 Compliance Certificate. The President of the Company shall ---------------------- deliver to the Investors at the Closing a certificate stating that the conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating that there shall have been no adverse change in the business, affairs, operations, properties, assets or condition of the Company since the date of this Agreement. 5.4 Qualifications. All authorizations, approvals or permits, if -------------- any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be duly obtained and effective as of the Closing. 5.5 Effectiveness of the Registration Statement. The Registration ------------------------------------------- Statement shall have been declared effective by the Securities and Exchange Commission and the sale of the shares thereunder has been consummated. 6. Conditions of the Company's Obligations at Closing. The obligations -------------------------------------------------- of the Company to the Investors under this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions by the Investors, the waiver of which shall not be effective against the Company unless in writing and signed on behalf of the Company: 6.1 Representations and Warranties. The representations and ------------------------------ warranties of each Investor contained in Section 3 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing. 6.2 Payment of Purchase Price. Each Investor shall have delivered ------------------------- the purchase price specified in Section 1.1. 6.3 Qualifications. All authorizations, approvals or permits, if -------------- any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be duly obtained and effective as of the Closing. 6.4 Waivers of Right of First Offer and Registration Rights. Each ------------------------------------------------------- Major Investor (as defined in the Investors' Rights Agreement) shall have waived (i) the right of first offer granted to such Investor thereunder and (ii) the granting of registration rights to the Investors hereunder. 6 7. Termination. Subject to the provisions of Section 7.4 below, this ----------- Agreement may be terminated at any time prior to the Closing Date as to any Investor: 7.1 by the mutual written agreement of the Investor and the Company; 7.2 by the Company in its sole absolute discretion; 7.3 by either the Company or the Investor if the initial public offering of the Company's Common Stock has not been completed and consummated on or prior to December 15, 1999. 7.4 Any termination of this Agreement pursuant to Section 7.1, 7.2 or 7.3 shall be without further obligation or liability upon any party in favor of any other party hereto. 8. Miscellaneous. ------------- 8.1 Survival of Warranties. The warranties, representations and ---------------------- covenants of the Company and each Investor contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing for a period of two years. 8.2 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 Securities and including the successor to the Company upon its reincorporation in Delaware). 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, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 8.3 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. 8.4 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. 8.5 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. 8.6 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. 7 8.7 Finder's Fee. Each party represents that it neither is nor will ------------ be obligated for any finders' fee or commission in connection with this transaction. Each Investor agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finders' fee (and the costs and expenses of defending against such liability or asserted liability) for which such Investor or any of its officers, partners, employees or representatives is responsible. The Company agrees to indemnify and hold harmless each Investor from any liability for any commission or compensation in the nature of a finders' fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible. 8.8 Expenses. Each party shall bear its own costs and expenses -------- incurred in connection with the negotiation, execution, delivery and performance of this Agreement, including the costs and expenses of legal counsel. 8.9 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. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any securities purchased under this Agreement at the time outstanding (including securities into which such securities are convertible), each future holder of all such securities and the Company. 8.10 Severability. If one or more provisions of this Agreement are ------------ 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. 8.11 Aggregation of Stock. All shares of Common Stock 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. 8.12 Arbitration. Any disputes arising out of or related to this ----------- Agreement shall be resolved by final, binding arbitration in San Jose, California pursuant to the commercial arbitration rules of the American Arbitration Association ("AAA"). A single arbitrator shall be appointed pursuant to the AAA rules within thirty (30) days of submission of the dispute to the AAA. The arbitrator shall conduct the arbitration in accordance with the commercial arbitration rules of the AAA then in effect. Any judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction over the subject matter thereof. The arbitrator shall have the authority to grant any equitable and legal remedies that would be available in any judicial proceeding instituted to resolve such dispute. Each party shall pay its own costs and attorneys' fees, and the parties shall share the cost of the arbitration (including the arbitrator's fee) equally. Notwithstanding the foregoing, the parties irrevocably submit to the non-exclusive jurisdiction of the Superior Court of the State of California, Santa Clara County, and the United States District Court for the Northern District of California, San Jose Branch, in any action to enforce an arbitration award. 8 8.13 Entire Agreement. This Agreement, the exhibits hereto and the ---------------- documents referred to herein constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants, except as specifically set forth herein or therein. 8.14 Disclosure. The Investors hereby acknowledge and agree that the ---------- Company shall be entitled to disclose the existence and terms of this Agreement in any registration statement, prospectus, report or other document filed by the Company pursuant to any state or federal securities laws or other applicable laws. 9 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 Address: One Almaden Boulevard, 12th Floor San Jose, California 95113 [SIGNATURE PAGE TO COMMON STOCK PURCHASE AGREEMENT] 10 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "Investor" _________________________________ Print name of Investor By: /s/ ----------------------------- Title:___________________________ Address:_________________________ _________________________________ _________________________________ [SIGNATURE PAGE TO COMMON STOCK PURCHASE AGREEMENT] 11 SCHEDULE A ---------- Investor Name Aggregate Investment - ------------- -------------------- Dell USA, LP, a Texas Limited Partnership $4,999,992.50 (256,016 shares) Flextronics International, Ltd. $4,999,992.50 (256,016 shares) ---------------------------------- $9,999,985.00 (512,032 shares) ---------------------------------- 12 EX-10.17 5 COMMON STOCK PURCHASE AGREEMENT DATED 8/16/99 EXHIBIT 10.17 AGILE SOFTWARE CORPORATION COMMON STOCK PURCHASE AGREEMENT August 16, 1999 COMMON STOCK PURCHASE AGREEMENT ------------------------------- THIS COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the 16/th/ day of August, 1999, by and among Agile Software Corporation, a California corporation (the "Company") and the investors listed on Schedule A hereto (collectively, the "Investors" and individually, an "Investor"). Prior to the consummation of this Agreement, the Company intends to reincorporate in the State of Delaware and to assign all of its rights and obligations under this Agreement to the Delaware corporation. All references to the Company herein are deemed to include both the Company as a California corporation, and the Delaware corporation subsequent to the reincorporation. THE PARTIES HEREBY AGREE AS FOLLOWS: 1. Purchase and Sale of Stock. -------------------------- 1.1 Sale and Issuance of Common Stock. Subject to the terms and --------------------------------- conditions of this Agreement, each Investor agrees to purchase at the Closing, and the Company agrees to sell and issue to each Investor at the Closing, that number of shares of the Company's Common Stock (the "Common Stock") equal to the quotientobtained by dividing the aggregate estimated purchase price set forth opposite each Investor's name on Schedule A hereto by the Net Offering Price, as ---------- defined herein. The purchase price per share of Common Stock purchased by each Investor (the "Net Offering Price") shall be the price per share paid by the public in an initial public offering of the Company's Common Stock completed prior to December 15, 1999, less the per share underwriting fees and discounts paid by the Company in such initial public offering (but before the deduction of offering expenses payable by the Company). No fractional shares shall be issued, and the number of shares issuable to each Investor shall be rounded down to the nearest 100 shares. 1.2 Closing. The purchase and sale of the Common Stock shall take ------- place at the offices of Gray Cary Ware & Freidenrich LLP, 400 Hamilton Avenue, Palo Alto, California 94301-1825, at 10:00 A.M., on the date and at the time of the closing of the Company's initial public offering, or at such other time and place as the Company and the Investors purchasing a majority of the Common Stock may mutually agree upon orally or in writing (which time and place are designated as the "Closing"). At the Closing, the Company shall deliver to each Investor a certificate representing the number of shares of Common Stock that such Investor is purchasing against payment of the purchase price therefor by check or wire transfer to an account specified by the Company. 2. Representations, Warranties and Covenants of the Company. The Company -------------------------------------------------------- hereby represents, warrants and covenants to the Investors that, except as set forth on a Schedule of Exceptions (the "Schedule of Exceptions") furnished to the Investors, which exceptions shall be deemed to be representations and warranties as if made hereunder: 2.1 Organization, Good Standing and Qualification. The Company is a --------------------------------------------- corporation duly organized, validly existing and in good standing under the laws of the State of California, and upon reincorporation will be duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite corporate power and authority to carry on its business as now conducted and as currently proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties. 2.2 Capitalization and Voting Rights. The authorized capital of the -------------------------------- Company is as set forth in the Registration Statement on Form S-1 filed by the Company with the Securities and Exchange Commission pursuant to the rules and regulations of the Securities Act of 1933, as amended, a copy of which is attached hereto as Exhibit A (such Registration Statement, as amended at the --------- time it becomes effective and including the information deemed to be a part of the registration statement at the time of effectiveness, being hereinafter referred to as the "Registration Statement"). 2.3 Subsidiaries. The Company has such subsidiaries as disclosed in ------------ the Registration Statement, including the exhibits thereto. 2.4 Authorization. All corporate action on the part of the Company, ------------- its officers, directors and shareholders necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder and thereunder, and the authorization, issuance (or reservation for issuance), sale and delivery of the Common Stock being sold hereunder has been taken or will be taken prior to the Closing, and this Agreement constitutes valid and legally binding obligations of the Company, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) to the extent the indemnification provisions contained in this Agreement may be limited by applicable federal or state securities laws. 2.5 Valid Issuance of Common Stock. The Common Stock that is being ------------------------------ purchased by the Investors hereunder, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Agreement and under applicable state and federal securities laws. 2.6 Governmental Consents. No consent, approval, order or --------------------- authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for any filings that may be required pursuant to state or federal securities laws. 2.7 Litigation. There is no action, suit, proceeding or ---------- investigation pending or currently threatened against the Company that questions the validity of this Agreement, or the right of the Company to enter into such agreements, or to consummate the transactions contemplated hereby. The only material litigation in which the Company is involved is described in the Registration Statement. 2 2.8 Patents and Trademarks. 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 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. 2.9 Compliance with Other Instruments. The Company is not in --------------------------------- violation or default in any material respect of any provision of its Restated Articles or Bylaws, or in any material respect of any instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound, or, to the best of its knowledge, of any provision of any federal or state statute, rule or regulation applicable to the Company. The execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby and thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment order, writ, decree or contract or an event that results in the creation of any lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any material permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties. 2.10 Permits. The Company has all franchises, permits, licenses and ------- any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which could materially and adversely affect the business, properties, prospects or financial condition of the Company, and the Company believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as currently planned to be conducted. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority. 2.11 Disclosure. The Company has provided the Investors with a copy ---------- of the Registration Statement as filed, and will provide the Investors with a copy of any and all amendments to the Registration Statement filed by the Company with the Securities and Exchange Commission prior to the Closing Date. To the best of its knowledge, neither this Agreement nor any other statements or certificates made or delivered in connection herewith or therewith contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading. 2.12 Registrations Rights. Except as provided in the Investors' -------------------- Rights Agreement, a copy of which is attached hereto as Exhibit B the Company has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity. 2.13 Offering. Subject to the accuracy of the Investors' -------- representations in Section 3 of this Agreement and in written responses to the Company's inquiries, the offer, sale and issuance of the Common Stock to be issued in conformity with the terms of this Agreement 3 constitutes transactions exempt from the registration requirements of Section 5 of the Securities Act. 3. Representations and Warranties-of the Investors. Each Investor hereby ----------------------------------------------- represents and warrants that: 3.1 Authorization. The Investor has full power and authority to ------------- enter into this Agreement and such agreement constitutes its valid and legally binding obligation, enforceable against such Investor in accordance with its terms. 3.2 Purchase Entirely for Own Account. This Agreement is made with --------------------------------- such Investor in reliance upon such Investor's representation to the Company, which by such Investor's execution of this Agreement such Investor hereby confirms, that the Common Stock to be received by such Investor (sometimes referred to in this Section 3 as the "Securities") will be acquired for investment for such Investor's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that such Investor has no present intention of selling, granting any participation in or otherwise distributing the same. By executing this Agreement, such Investor further represents that such Investor does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person with respect to any of the Securities. 3.3 Disclosure of Information. Such Investor believes it has received ------------------------- all the information it considers necessary or appropriate for deciding whether to purchase the Common Stock. Such Investor further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Common Stock and the business, properties, prospects and financial condition of the Company. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of each Investor to rely thereon. 3.4 Investment Experience. Such Investor is an investor in securities --------------------- of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Common Stock. If other than an individual, such Investor also represents it has not been organized for the purpose of acquiring the Common Stock. 3.5 Accredited Investor. Such Investor is an "accredited investor" ------------------- within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of Regulation D, as presently in effect. 3.6 Restricted Securities. Such Investor understands that the --------------------- Securities it is purchasing are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances. In this connection, such Investor represents that it is familiar with SEC Rule 144, as presently in effect and understands the resale limitations imposed thereby and by the Securities Act. 4 3.7 Further Limitations on Disposition. Without in any way limiting ---------------------------------- the representations set forth above, such Investor further agrees not to make any disposition of all or any portion of the Securities unless and until the transferee has agreed in writing for the benefit of the Company to be bound by this Section 3, provided and to the extent this Section 3 is then applicable, and: (a) There is then in effect a Registration Statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement; or (b) (i) Such Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition and (ii) if reasonably requested by the Company, such Investor shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Securities Act. (c) Notwithstanding the provisions of paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be necessary for a transfer by an Investor that is a partnership to a partner of such partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or retired partner or the transfer by gift, will or intestate succession of any partner to his or her spouse or to the siblings, lineal descendants or ancestors of such partner or his or her spouse, if the transferee agrees in writing to be subject to the terms hereof to the same extent as if he or she were an original Investor hereunder. 3.8 Legends. It is understood that the certificates evidencing the ------- Securities may bear one or all of the legends in substantially the form specified below: (a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT." (b) Any legend required by the laws of the State of California, including any legend required by the California Department of Corporations and Sections 417 and 418 of the California Corporations Code. 4. Registration Rights. The Company shall grant to each Investor piggy- ------------------- back registration rights only, pursuant to the same terms and conditions as is set forth in Section 1.3 of the Fifth Amended and Restated Investors' Rights Agreement dated as of June 4, 1998 by and between the Company and the investors listed on schedule A thereto (the "Investors' Rights Agreement"), in the form attached hereto as Exhibit B. --------- 5 5. Conditions of Investors' Obligations at Closing. The obligations of ----------------------------------------------- the Investors under subsection 1.1 of this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions: 5.1 Representations and Warranties. The representations and ------------------------------ warranties of the Company contained in Section 2 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of such Closing. 5.2 Performance. The Company shall have performed and complied with ----------- all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing. 5.3 Compliance Certificate. The President of the Company shall ---------------------- deliver to the Investors at the Closing a certificate stating that the conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating that there shall have been no adverse change in the business, affairs, operations, properties, assets or condition of the Company since the date of this Agreement. 5.4 Qualifications. All authorizations, approvals or permits, if -------------- any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be duly obtained and effective as of the Closing. 5.5 Effectiveness of the Registration Statement. The Registration ------------------------------------------- Statement shall have been declared effective by the Securities and Exchange Commission and the sale of the shares thereunder has been consummated. 6. Conditions of the Company's Obligations at Closing. The obligations of -------------------------------------------------- the Company to the Investors under this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions by the Investors, the waiver of which shall not be effective against the Company unless in writing and signed on behalf of the Company: 6.1 Representations and Warranties. The representations and ------------------------------ warranties of each Investor contained in Section 3 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing. 6.2 Payment of Purchase Price. Each Investor shall have delivered the ------------------------- purchase price specified in Section 1.1. 6.3 Qualifications. All authorizations, approvals or permits, if -------------- any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be duly obtained and effective as of the Closing. 6.4 Waivers of Right of First Offer and Registration Rights. Each ------------------------------------------------------- Major Investor (as defined in the Investors' Rights Agreement) shall have waived (i) the right of first offer granted to such Investor thereunder and (ii) the granting of registration rights to the Investors hereunder. 6 7. Termination. Subject to the provisions of Section 7.4 below, this ----------- Agreement may be terminated at any time prior to the Closing Date as to any Investor: 7.1 by the mutual written agreement of the Investor and the Company; 7.2 by the Company in its sole absolute discretion; 7.3 by either the Company or the Investor if the initial public offering of the Company's Common Stock has not been completed and consummated on or prior to December 15, 1999. 7.4 Any termination of this Agreement pursuant to Section 7.1, 7.2 or 7.3 shall be without further obligation or liability upon any party in favor of any other party hereto. 8. Miscellaneous. ------------- 8.1 Survival of Warranties. The warranties, representations and ---------------------- covenants of the Company and each Investor contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing for a period of two years. 8.2 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 Securities and including the successor to the Company upon its reincorporation in Delaware). 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, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 8.3 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. 8.4 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. 8.5 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. 8.6 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. 7 8.7 Finder's Fee. Each party represents that it neither is nor will ------------ be obligated for any finders' fee or commission in connection with this transaction. Each Investor agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finders' fee (and the costs and expenses of defending against such liability or asserted liability) for which such Investor or any of its officers, partners, employees or representatives is responsible. The Company agrees to indemnify and hold harmless each Investor from any liability for any commission or compensation in the nature of a finders' fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible. 8.8 Expenses. Each party shall bear its own costs and expenses -------- incurred in connection with the negotiation, execution, delivery and performance of this Agreement, including the costs and expenses of legal counsel. 8.9 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. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any securities purchased under this Agreement at the time outstanding (including securities into which such securities are convertible), each future holder of all such securities and the Company. 8.10 Severability. If one or more provisions of this Agreement are ------------ 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. 8.11 Aggregation of Stock. All shares of Common Stock 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. 8.12 Arbitration. Any disputes arising out of or related to this ----------- Agreement shall be resolved by final, binding arbitration in San Jose, California pursuant to the commercial arbitration rules of the American Arbitration Association ("AAA"). A single arbitrator shall be appointed pursuant to the AAA rules within thirty (30) days of submission of the dispute to the AAA. The arbitrator shall conduct the arbitration in accordance with the commercial arbitration rules of the AAA then in effect. Any judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction over the subject matter thereof. The arbitrator shall have the authority to grant any equitable and legal remedies that would be available in any judicial proceeding instituted to resolve such dispute. Each party shall pay its own costs and attorneys' fees, and the parties shall share the cost of the arbitration (including the arbitrator's fee) equally. Notwithstanding the foregoing, the parties irrevocably submit to the non-exclusive jurisdiction of the Superior Court of the State of California, Santa Clara County, and the United States District Court for the Northern District of California, San Jose Branch, in any action to enforce an arbitration award. 8 8.13 Entire Agreement. This Agreement, the exhibits hereto and the ---------------- documents referred to herein constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants, except as specifically set forth herein or therein. 8.14 Disclosure. The Investors hereby acknowledge and agree that the ---------- Company shall be entitled to disclose the existence and terms of this Agreement in any registration statement, prospectus, report or other document filed by the Company pursuant to any state or federal securities laws or other applicable laws. 9 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 Address: One Almaden Boulevard, 12th Floor San Jose, California 95113 [SIGNATURE PAGE TO COMMON STOCK PURCHASE AGREEMENT] 10 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "Investor" ____________________________ Print name of Investor By: /s/ ------------------------- Title:______________________ Address:____________________ ____________________________ ____________________________ ____________________________ [SIGNATURE PAGE TO COMMON STOCK PURCHASE AGREEMENT] 11 SCHEDULE A ----------
Investor Name Aggregate Investment - ------------- -------------------- Marshall Industries $2,999,983.80 (153,609 shares) $2,999,983.80 (153,609 shares)
12 EX-27.1 6 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS APR-30-2000 MAY-01-1999 JUL-31-1999 9,639 0 3,664 533 0 13,413 5,140 2,472 16,422 12,788 0 0 12 5 704 16,422 3,654 5,890 223 1,626 8,213 0 127 (4,076) 0 (4,076) 0 0 0 (4,076) (1.23) (1.23)
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