<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 8, 1999
REGISTRATION NO. 333-69261
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INTRAWARE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7375 68-0389976
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
--------------------------
25 ORINDA WAY
ORINDA, CA 94563
(925) 253-4500
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
--------------------------
PETER JACKSON
CHIEF EXECUTIVE OFFICER
25 ORINDA WAY
ORINDA, CA 94563
(925) 253-4500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
DAVID J. SEGRE STEVEN M. SPURLOCK
ROBERT M. TARKOFF WILLIAM A. HOLMES
LINDA M. CUNY KEVIN A. LUCAS
DAVID R. BOWMAN Gunderson Dettmer Stough
Wilson Sonsini Goodrich & Rosati Villenueve Franklin & Hachigian, LLP
Professional Corporation 155 Constitution Drive
650 Page Mill Road Menlo Park, California 94025
Palo Alto, California 94304 (650) 321-2400
(650) 493-9300
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
--------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 8, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE CANNOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
Shares
[LOGO]
Common Stock
-----------
Prior to this offering, there has been no public market for our Common Stock.
The initial public offering price is expected to be between $ and $ per
share. Application has been made to list our Common Stock on The Nasdaq
National Market under the symbol "ITRA."
Investing in our Common Stock involves certain risks. See "Risk Factors"
starting on page 6.
Neither the Securities and Exchange Commission nor any state securities
commission
has approved or disapproved of these securities or determined if this
prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Intraware
---------------- ---------------- ----------------
<S> <C> <C> <C>
Per Share............................................. $ $ $
Total(1).............................................. $ $ $
</TABLE>
(1) Intraware and certain stockholders have granted the underwriters an
option, exercisable for 30 days from the date of this prospectus, to
purchase a maximum of additional shares to cover over-allotments of
shares.
Delivery of the shares of Common Stock will be made on or about
, 1999, against payment in immediately available funds.
Credit Suisse First Boston
BancBoston Robertson Stephens
Hambrecht & Quist
Prospectus dated , 1999.
<PAGE>
[INSIDE FRONT COVER]
A split screen with depictions of IT professionals on one side and software
vendors on the other and the challenges (described in written text) they each
face in managing their software assets and product distribution, respectively.
[INSIDE GATEFOLD (2-PAGE)]
A flow chart depicting the needs of IT professionals and software vendors
and how Intraware addresses these needs. Benefits of our products to these
constituencies are also listed in text. On the right side aligned vertically are
screen-shots of the Company's several Web-site pages.
[BACK INSIDE COVER]
Logos of software vendors on the right side and IT professional and vendor
testimonials for the Company's services on the left side.
IT PROFESSIONAL AND VENDOR TESTIMONIALS
"Intraware's services have saved us considerable time and effort. Tailored
to the specific software we use, SUBSCRIBNET provides information to us, rather
than us having to cull through each vendor's site and obtain it ourselves.
COMPARISCOPE is used whenever we're making a "buy" decision based on our unique
requirements. For instance, we were able to evaluate and select a Java
Development Environment in a fraction of the time it would previously have taken
us, because the evaluation criteria has already been defined within
COMPARISCOPE. For Longs Drugs, this translates into a huge savings of staff time
and expense."
- --Dave Klinzman, Director of Enterprise Operations Services, Longs Drugs
"The Intraware SUBSCRIBNET service is a software update and license
management service that notifies us directly about updates specific to our
environment. It takes the labor out of doing the research ourselves, and
provides information about the known incompatibilities and benefits of each
update. In our experience, Intraware's services are a far better and faster
method of keeping customers updated with current software revisions than
traditional methods."
- --Scott Langdoc, CIO, Raley's Inc.
"The primary value to Starbucks is that the Intraware SUBSCRIBNET service
provides us with instant updates on bug fixes and new releases. Intraware
ensures we keep a constant pulse on software products, without us having to hunt
for this information. I only wish more vendors would get on board with
Intraware, so that we can have more software applications delivered this
effectively."
- --Michael Hall, Lead Application Architect, MIS Group, Starbucks Coffee Company
"Netscape strongly benefits from the INTRAWARE.SHOP service by its ability
to market the breadth of our server software products in an online environment.
By capitalizing on the Intraware SUBSCRIBNET service, we have entrusted to
Intraware the electronic software update delivery and maintenance of Netscape's
entire product line to our customers worldwide. We recognize Intraware's
expertise in delivering IT knowledge management content. As a result,
Intraware's resource-rich knowledge content prominently resides in our Netcenter
portal. Both companies have benefited from this relationship by
cross-referencing qualified members of the IT community."
- --James Barksdale, President and CEO, Netscape Communications Corp.
"Selecting Intraware's distribution service as our electronic delivery
vehicle was an important element of our program to reach the Linux and NT
software developer community. In the past, we have distributed software to our
developers using CD's. Now, Intraware provides us with an electronic
distribution service that is a cost-effective and a highly efficient way to
communicate and work closely
<PAGE>
with our developer community. Intraware's service enables developers to download
the software and receive software updates proactively, eliminating the waiting
period associated with physical media updates. Taking advantage of distribution
and update technology from Intraware plays a key role in our ability to maintain
strong relationships with our developer community."
- --Diane Fraiman, Vice President of Marketing, Informix Corporation
<PAGE>
------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY................ 3
RISK FACTORS...................... 6
USE OF PROCEEDS................... 17
DIVIDEND POLICY................... 17
CERTAIN INFORMATION............... 17
CAPITALIZATION.................... 18
DILUTION.......................... 19
SELECTED FINANCIAL DATA........... 20
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS....... 21
BUSINESS.......................... 30
MANAGEMENT........................ 44
CERTAIN TRANSACTIONS.............. 54
PRINCIPAL AND SELLING
STOCKHOLDERS.................... 55
DESCRIPTION OF CAPITAL STOCK...... 58
SHARES ELIGIBLE FOR FUTURE SALE... 61
ADDITIONAL INFORMATION............ 63
UNDERWRITING...................... 64
NOTICE TO CANADIAN RESIDENTS...... 66
LEGAL MATTERS..................... 67
EXPERTS........................... 67
INDEX TO FINANCIAL STATEMENTS..... F-1
</TABLE>
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
"INTRAWARE" is a service mark of Intraware, Inc. We have applied for federal
registration of the marks "ASK JAMES," "COMPARISCOPE," "INTRAWARE.SHOP," "IT
KNOWLEDGE CENTER," "RADARSCOPE," "SUBSCRIBNET," "SUBSCRIBNEWS," and
"VIRTUALEXPRESS." All other trademarks or service marks appearing in this
prospectus are trademarks or service marks of the respective companies that use
them.
------------------------
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 1999 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
THIS SUMMARY IS NOT COMPLETE AND DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD
CONSIDER BEFORE BUYING SHARES IN THE OFFERING. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY.
INTRAWARE, INC.
Intraware is a leading provider of Internet-based business-to-business software
services for IT professionals and business software vendors. Through our
electronic software delivery and outsourcing technologies, we act as an
objective intermediary in the software decision-making process. Our branded,
integrated service offerings enable software decision-makers to evaluate,
purchase, deploy and maintain their business software assets more effectively.
Our online services also allow business software vendors to effectively market,
sell and distribute products to a targeted customer base of IT professionals.
Our core service offerings include IT KNOWLEDGE CENTER, INTRAWARE.SHOP and
SUBSCRIBNET. IT KNOWLEDGE CENTER is a Web site targeted at corporate IT
professionals and containing information services, including COMPARISCOPE, that
helps them research and evaluate business software decisions. A co-branded
version of IT KNOWLEDGE CENTER is available on the Computing & Internet channel
of Netscape's Netcenter portal. The INTRAWARE.SHOP service is an online
procurement and delivery service for business software. SUBSCRIBNET is an online
software update and license management service. Through SUBSCRIBNET, IT
professionals can track their software licenses and manage the software update
process throughout a corporate network. We offer our SUBSCRIBNET update and
license management capabilities as an outsourcing solution to business software
vendors and have entered into an agreement with Netscape to provide Intraware's
SUBSCRIBNET service to Netscape customers worldwide.
Our strategic objective is to be the leading online intermediary for the
business software industry, aggregating information, software and services for
IT professionals and software vendors. We provide an online community of content
and services for software decision makers, and we seek to significantly expand
this community by rapidly increasing both our IT professional memberships and
software vendor partnerships. We seek to enhance our revenue streams through
further development of our existing services and introduction of additional
online services as well as by targeting international markets. We believe that
it is critical to our business to continue to promote our brands through a
variety of media and through co-marketing arrangements with software vendors.
We have a broad base of members and customers in the IT departments of
medium to large corporations. As of December 1998, we had over 60,000 registered
members. In addition, Intraware's SUBSCRIBNEWS digest of news, information and
opinions for the IT professional community is emailed to over 35,000 subscribers
on a weekly basis. Our 1700 customers include the following companies: 3Com
Corporation, AT&T Corporation, Boeing Corporation, Charles Schwab Company,
Daimler Chrysler AG Corporation, GTE Corporation, Knight Ridder, Inc., Lycos,
Inc. and Reuters Group PLC. In addition, we have established relationships with
leading business software vendors including Netscape Communications Corporation,
Informix Corporation, RealNetworks, Inc., OpenText Corporation, and NetDynamics,
a wholly-owned subsidiary of Sun Microsystems, Inc.
3
<PAGE>
INTRAWARE, INC.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered........................ shares
Common Stock to be outstanding
after this offering....................... shares (1)
Use of proceeds............................. For general corporate purposes, principally
working capital, capital expenditures,
potential acquisitions, geographic
expansion and additional sales and
marketing efforts.
Proposed Nasdaq National Market symbol...... ITRA
</TABLE>
- ------------------------
(1) Based on shares outstanding as of November 30, 1998. Excludes (1) 6,200,000
shares of Common Stock reserved for issuance under our 1996 Stock Option
Plan as of December 18, 1998, of which 2,017,050 shares were subject to
outstanding options at a weighted average price of $0.51 per share at
November 30, 1998, (2) 150,000 shares of Common Stock available for issuance
under our 1998 Director Stock Option Plan, which was approved by the Board
of Directors on December 17, 1998 and recommended to the stockholders for
adoption and (3) 600,000 shares available for issuance under our 1998
Employee Stock Purchase Plan, which was approved by the Board of Directors
on December 17, 1998 and recommended to the stockholders for adoption.
------------------------
EXCEPT AS OTHERWISE NOTED HEREIN, INFORMATION IN THIS PROSPECTUS ASSUMES (1) THE
CONVERSION OF EACH OUTSTANDING SHARE OF CONVERTIBLE PREFERRED STOCK INTO TWO
SHARES OF COMMON STOCK IMMEDIATELY PRIOR TO THE CLOSING OF THIS OFFERING (BASED
ON SHARES OUTSTANDING AS OF NOVEMBER 30, 1998), (2) A TWO-FOR-ONE FORWARD STOCK
SPLIT IMMEDIATELY PRIOR TO THE EFFECTIVENESS OF THIS OFFERING, (3) NO EXERCISE
OF THE UNDERWRITERS' OVER- ALLOTMENT OPTION AND (4) THE FILING, UPON THE
APPROVAL OF OUR STOCKHOLDERS, OF THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION (THE "RESTATED CERTIFICATE").
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 14, NINE MONTHS ENDED
1996
(INCEPTION) TO YEAR ENDED NOVEMBER 30,
FEBRUARY 28, FEBRUARY 28, --------------------
1997 1998 1997 1998
-------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total net revenues.................................................. $ 6 $ 10,387 $ 5,331 $ 24,556
Total cost of net revenues.......................................... 5 8,348 4,346 19,891
Gross profit........................................................ 1 2,039 985 4,665
Loss from operations................................................ (952) (3,900) (2,672) (7,863)
Net loss............................................................ (944) (3,982) (2,715) (7,840)
Net loss per share:
Basic and diluted................................................. $ (1.36) $ (2.02) $ (1.53) $ (2.25)
------- ------------ --------- ---------
------- ------------ --------- ---------
Weighted average shares........................................... 694 1,972 1,776 3,492
------- ------------ --------- ---------
------- ------------ --------- ---------
Pro forma net loss per share:
Basic and diluted (unaudited)..................................... $ (0.51) $ (0.53)
------------ ---------
------------ ---------
Weighted average shares (unaudited)............................... 7,763 14,765
------------ ---------
------------ ---------
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30, 1998
-------------------------
ACTUAL AS ADJUSTED(2)
--------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................................................. $ 5,413
Working capital........................................................................ 3,379
Total assets........................................................................... 38,921
Lease obligations, long-term........................................................... 225
Total stockholders' equity............................................................. 5,061
</TABLE>
- ------------------------
(1) See Note 1 of Notes to Financial Statements for an explanation of the
determination of the number of shares used in computing per share data.
(2) As adjusted to give effect to receipt of the net proceeds from the sale of
the shares of Common Stock offered hereby by Intraware at an assumed
public offering price of $ per share after deducting the underwriting
discount and estimated offering expenses payable by Intraware. See "Use of
Proceeds" and "Capitalization."
5
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE BUYING SHARES
IN THIS OFFERING. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY
RISKS WE FACE. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR
THAT WE CURRENTLY DEEM IMMATERIAL MAY IMPAIR OUR BUSINESS OPERATIONS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL
CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED, THE
TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MIGHT LOSE ALL OR PART
OF YOUR INVESTMENT.
THIS PROSPECTUS ALSO CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. WE USE WORDS SUCH AS "ANTICIPATES," "BELIEVES," "PLANS,"
"EXPECTS," "FUTURE" AND "INTENDS" AND SIMILAR EXPRESSIONS TO IDENTIFY
FORWARD-LOOKING STATEMENTS. THIS PROSPECTUS ALSO CONTAINS FORWARD-LOOKING
STATEMENTS ATTRIBUTED TO CERTAIN THIRD PARTIES RELATING TO THEIR ESTIMATES
REGARDING THE GROWTH OF CERTAIN ELECTRONIC-COMMERCE, ELECTRONIC SOFTWARE
DELIVERY ("ESD"), SOFTWARE AND RELATED SERVICE MARKETS AND SPENDING. YOU SHOULD
NOT PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH APPLY ONLY
AS OF THE DATE OF THIS PROSPECTUS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS FOR MANY REASONS,
INCLUDING THE RISKS FACED BY US DESCRIBED BELOW AND ELSEWHERE IN THIS
PROSPECTUS.
WE HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES.
We incurred net losses of $944,000 for the period from August 14, 1996
(inception) through February 28, 1997, $4.0 million for the year ended February
28, 1998, and $7.8 million for the nine months ended November 30, 1998. As of
November 30, 1998, we had an accumulated deficit of $12.8 million. We have not
achieved profitability and expect to incur net losses for the forseeable future.
Net losses have increased for each of our quarters since inception and we cannot
assure you this trend will not continue. We expect to continue to increase our
sales and marketing, product development and administrative expenses. As a
result we will need to generate significant additional revenues to achieve and
maintain profitability. Our limited operating history makes it difficult to
forecast our future operating results. Although our revenues have grown in
recent quarters, we cannot be certain that such growth will continue or that we
will achieve sufficient revenues for profitability. If we do achieve
profitability in any period, we cannot be certain that we will sustain or
increase profitability on a quarterly or annual basis. See "Selected Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
WE ARE SUBSTANTIALLY DEPENDENT ON NETSCAPE COMMUNICATIONS CORPORATION.
For the nine months ended November 30, 1998, we generated over 90% of our
software product revenues from the sale of Netscape software, and 87% of our
online service revenues from the outsourcing of Intraware SUBSCRIBNET services
to Netscape. As a result, transactions with Netscape and the sale of Netscape
products accounted for over 90% of our total net revenues in the nine months
ended November 30, 1998. While we expect that revenues derived from sales of
Netscape software products will decrease as a percentage of total revenues in
future periods, we will remain substantially dependent on such sales for the
foreseeable future. We cannot assure you that Netscape will continue to sell its
software through us. If Netscape were to discontinue selling its software
through Intraware, there would be a material adverse effect on our business,
revenues and other operating results.
We provide online software update and license management services to
Netscape customers through our SUBSCRIBNET service under a one-year agreement
with Netscape entered into effective October 1, 1998. Netscape has the right,
however, to terminate this agreement upon 90 days notice. We cannot assure you
that Netscape will not terminate this agreement or that they will renew it on
satisfactory terms at the end of the current one year term. Substantially all of
our SUBSCRIBNET revenues to date have been generated through this Netscape
contract, and our failure to renew this contract at the end of the one year term
could have a material adverse effect on our SUBSCRIBNET revenues and on our
business as a whole.
6
<PAGE>
Recently, Netscape entered into agreements to be acquired by America Online,
Inc. and to strengthen its relationship with Sun Microsystems, Inc. We do not
currently know whether this proposed acquisition, or Netscape's relationship
with Sun Microsystems will have an adverse effect on our relationship with
Netscape. Unless and until we are able to derive substantially increased
revenues from sales of software of other vendors and our related online
services, we will continue to be substantially dependent on our relationship
with Netscape. If Netscape chose to offer its own electronic software delivery,
tracking, maintenance or other services, which it is permitted to do under the
current agreement, it would have a substantial and immediate adverse effect on
our business, results of operations and financial condition.
OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS.
Our operating results have varied widely in the past, and we expect that
they will continue to vary significantly from quarter to quarter due to a number
of factors, including:
- demand for our online services and the products of our software vendors;
- the timing of sales of our online services and the products of our
software vendors;
- loss of strategic relationships with major software vendors;
- the mix of our proprietary online services vs. software products sold;
- delays in introducing our online services or our vendors' software
products according to planned release schedules;
- our ability to retain existing customers and attract new customers;
- changes in our pricing policies or the pricing policies of our software
vendors;
- changes in the growth rate of Internet usage and acceptance by customers
of ESD for large software purchases, particularly for international
customers;
- technical difficulties, system failures or Internet downtime;
- the mix of domestic and international sales;
- certain government regulations;
- our ability to upgrade and develop our IT systems and infrastructure;
- costs related to acquisitions of technology or businesses; and
- general economic conditions as well as those specific to the Internet and
related industries.
We have experienced declining gross margins on revenues derived from
software product sales and anticipate that such declines may continue. In
addition, as we broaden our sales and marketing efforts to support our recently
introduced online services, such as SUBSCRIBNET and COMPARISCOPE, we may
experience one or more quarters of reduced software product sales. Any shortfall
in our revenues would directly adversely affect our operating income or loss,
and these fluctuations could affect the market price of our Common Stock.
We plan to significantly increase our operating expenses to expand our sales
and marketing operations, broaden our customer support capabilities, and fund
greater levels of product development. Our operating expenses, which include
sales and marketing, product development and general and administrative
expenses, are based on our expectations of future revenues and are relatively
fixed in the short term. If revenues fall below our expectations, we will not be
able to quickly reduce our spending in response to such a shortfall, which would
adversely affect our operating results. We do not operate with a significant
sales backlog, and, consequently, our sales revenues for each quarter depend on
sales completed in that quarter.
Due to the foregoing factors, we believe that quarter-to-quarter comparisons
of our operating results are not a good indication of our future performance. It
is likely that in some future quarter our operating results may be below the
expectations of public market analysts and investors. In this event, the price
of our Common Stock may fall.
7
<PAGE>
OUR NEWLY INTRODUCED ONLINE SERVICES MAY NOT BE ABLE TO GENERATE ANTICIPATED
REVENUES.
We have only recently started selling a number of online services such as
SUBSCRIBNET and COMPARISCOPE. We had no significant online services revenues
until the quarter ended November 30, 1998, and for the nine months ended
November 30, 1998, revenues from these online services totaled only $1.5
million, which constituted 6.2% of our total revenues for that period. We do not
expect these online services to constitute a significant portion of our total
revenues in any given quarter until at least the second half of calendar 1999.
This projection, however, is a forward-looking statement and our actual results
could differ materially from those anticipated as a result of a number of
factors, including demand for our online services and the competitive service
offerings of others. These online services are not only important to improving
our operating results but also to continuing to attract and retain both our
software vendor and corporate IT professional customers, and in differentiating
our online service offerings from those of our competitors. We cannot assure you
that these online services will result in additional customers and customer
loyalty, significant revenues, or improved operating margins in future periods.
Additionally, we cannot assure you software vendors will continue to find it
strategically or economically justifiable for us to deliver these services,
particularly SUBSCRIBNET, to their customers.
WE ARE AN EARLY STAGE COMPANY.
Intraware was founded in August 1996 and therefore has a limited operating
history. Before investing, you should consider the risks and difficulties we
will face in our new and evolving markets and also those risks and difficulties
frequently encountered by early stage companies. These risks include our:
- dependence on our relationship with Netscape;
- need to broaden our existing services;
- need to provide additional services;
- customer concentration;
- need to maintain and increase our customer base;
- competition;
- need to expand our sales and support organizations;
- need to manage changing operations;
- dependence upon key personnel;
- need to continue to develop and upgrade our technology and transaction
processing systems; and
- reliance on strategic relationships with major software vendors.
We cannot assure you that our business strategy will be successful or that
we will address these risks successfully. See "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
OUR INDUSTRY IS HIGHLY COMPETITIVE.
The market for selling software products and related on-line services is
highly competitive. We expect competition to intensify as current competitors
expand their product offerings and new competitors enter the market. Our current
competitors include a number of companies offering one or more solutions for the
evaluation, purchase, deployment and maintenance of business software. We
currently face or expect to face competition from the following entities:
SOFTWARE RESELLERS
We expect to face competition from a variety of software resellers,
specifically with respect to our ESD offerings. We may experience reduced sales
if such software resellers enter the ESD market. Such software resellers may
have more developed distribution channels and could provide a broader product
offering, a better pricing model, and a greater level of service than we
currently provide.
SOFTWARE VENDORS
We may face competition from our current or other software vendors. We
cannot predict whether software vendors will begin to seek additional revenue
streams by offering similar services that compete with our services or through
enhanced or alternative solutions to ESD and maintenance services.
8
<PAGE>
These software vendors have more extensive knowledge of their products and
potential complimentary services. As a result, these companies may be in a
better position to devote significant resources toward the development,
promotion and sale of these services.
KNOWLEDGE SERVICE PROVIDERS
We may face competition from a number of technology consulting or
information service providers. Certain of these firms possess significant
expertise with respect to specific types of business software and favorable
reputations or relationships with potential customers. While certain of these
firms may utilize our knowledge services (such as COMPARISCOPE) during their
evaluation stage of the purchase process, we cannot assure you that they will
continue to use our services or that they will not develop similar services.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, better name recognition, and a larger installed base of customers
than we do. Many of our competitors may also have well-established relationships
with our existing and prospective customers.
Our current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their products to address customer needs. Accordingly, it is possible
that new competitors or alliances among competitors may emerge and rapidly
acquire significant market share. We also expect that the competition will
increase as a result of software industry consolidations. In addition, because
these are relatively low barriers to entry in the software and Internet services
markets, we expect additional competition from other established and emerging
companies. Increased competition is likely to result in price reductions,
reduced gross margins and loss of market share, any of which could materially
adversely affect our business, financial condition and results of operations. We
cannot assure you that we will be able to compete successfully against current
or future competitors, or that competitive pressures faced by us will not
materially adversely affect our business, financial condition and results of
operations.
THERE ARE CERTAIN RISKS ASSOCIATED WITH ELECTRONIC SOFTWARE DELIVERY.
Our success will depend, in large part, on acceptance by IT professionals of
ESD as a method of buying business software. ESD is a relatively new method of
selling software products and the growth and market acceptance of ESD is highly
uncertain and subject to a number of factors. These factors include:
- the potential for state and local authorities to levy taxes on Internet
transactions;
- the availability of sufficient network bandwidth to enable purchasers to
rapidly download software;
- the number of software packages that are available for purchase through
ESD as compared to those available through traditional delivery methods;
- the level of customer confidence in the process of downloading software;
and
- the relative ease of such a process and concerns about transaction
security.
If ESD does not achieve widespread market acceptance, our business will be
adversely affected. Even if ESD achieves widespread acceptance, we cannot be
sure that we will overcome the substantial existing and future technical
challenges associated with electronically delivering software reliably and
consistently on a long-term basis. Furthermore, the proliferation of software
viruses poses a risk to our industry. Any well-publicized transmission of a
computer virus by us or another company using ESD could deter IT professionals
from utilizing ESD technology and our business could be adversely affected.
WE ARE DEPENDENT ON THE INTERNET AND INTERNET INFRASTRUCTURE DEVELOPMENT.
The widespread acceptance and adoption of the Internet by traditional
businesses for conducting business and exchanging information is likely only in
the event that the Internet provides these businesses with greater efficiencies
and improvements in the areas of commerce and communication. The failure of
9
<PAGE>
the Internet to continue to develop as a commercial or business medium would
adversely affect our business.
The recent growth in Internet traffic has caused frequent periods of
decreased performance, requiring Internet service providers and users of the
Internet to upgrade their infrastructures. If Web usage continues to grow
rapidly, the Internet infrastructure may not be able to support the demands
placed on it by this growth and its performance and reliability may decline. If
these outages or delays on the Internet occur frequently, overall Web usage, as
well as usage of our Web site in particular, could grow more slowly or decline.
Our ability to increase the speed with which we provide services to customers
and to increase the scope of such services is ultimately limited by and
dependent upon the speed and reliability of both the Internet and our customers'
internal networks, each of which is operated by third parties. Consequently, the
emergence and growth of the market for our services is dependent on improvements
being made to the entire Internet as well as to our customers' networking
infrastructure to alleviate overloading and congestion.
In addition, our operations depend upon our ability to maintain and protect
our computer systems, all of which are located in our principal headquarters in
Orinda, California and at an offsite location managed by a third party in Santa
Clara, California. Although the outside facility, which hosts our primary Web
and database servers, is designed to be fault tolerant, the system is vulnerable
to damage from fire, floods, earthquakes, power loss, telecommunications
failures, and similar events. The occurrence of such an event could have a
material adverse effect on our business. Although we maintain insurance against
fires, floods, earthquakes and general business interruptions, there can be no
assurance that the amount of coverage will be adequate in any particular case.
We currently do not have a disaster recovery plan in effect and do not have
fully redundant systems for our service at an alternate site.
MOST OF OUR REVENUE IS GENERATED BY A FEW CUSTOMERS.
We focus on selling software of third party vendors and providing our online
services to corporate IT professionals. For the nine-month period ended November
30, 1998, sales to our top ten corporate and government IT customers comprised
approximately 60% of our total revenues. In addition, we believe that a
substantial amount of revenue from software product sales in any given future
period may come from a relatively small number of customers. If one or more
major customers were to substantially cut back software purchases or stop using
our products or services, our operating results would be materially adversely
affected. We do not have long-term contractual relationships with any of these
customers because our customers purchase software on a transaction by
transaction basis. We cannot assure you that any of our customers who purchase
software through us will purchase from us in future periods.
INCREASED SECURITY RISKS OF ONLINE COMMERCE MAY DETER FUTURE USE OF OUR
SERVICES.
The need to securely transmit confidential information over the Internet has
been a significant barrier to electronic commerce and communications over the
Web. We rely on encryption and authentication technology from third parties to
provide for the secure transmission of confidential information. We cannot be
certain that advances in computer capabilities, new discoveries in the field of
cryptography, or other events or developments will not result in a compromise or
breach of the algorithms we use to protect our customers' transaction data or
our software vendors' products. Any well-publicized compromise of security could
deter people from using the Web or from using it to conduct transactions that
involve transmitting confidential information or downloading sensitive
materials.
A party who is able to circumvent our security measures could misappropriate
proprietary information or cause interruptions in our operations. We may be
required to incur significant costs to protect against security breaches or to
alleviate problems caused by such
10
<PAGE>
breaches. Concerns over the security of transactions conducted on the Internet
and the privacy of users may also inhibit the growth of the Internet and other
online services generally, and online commerce in particular. For these reasons,
our failure to prevent security breaches could significantly harm our business
and results of operations.
WE NEED TO MANAGE OUR GROWTH AND EXPAND OUR TECHNOLOGY RESOURCES.
Our ability to successfully offer products and services and implement our
business plan in a rapidly evolving market requires an effective planning and
management process. We have increased, and plan to continue to increase, the
scope of our operations domestically and internationally. As a result, our
headcount has grown and will continue to grow substantially. At November 30,
1997, we had a total of 53 employees and at November 30, 1998, we had a total of
126 employees. In particular, we will need to expand our technology
infrastructure, which will include making certain key employee hires in product
development. These hires historically have been difficult. This growth has
placed, and our anticipated future growth, if any, will continue to place a
significant strain on our management systems and resources. We expect that we
will need to continue to improve our financial and managerial controls and
reporting systems and procedures, and will need to continue to expand, train and
manage our workforce. Furthermore, we expect that we will be required to manage
multiple relationships with various software vendors, customers and other third
parties. We cannot assure you that we will be able to successfully manage our
growth.
WE NEED TO EXPAND OUR SALES AND MARKETING EFFORTS AND UNDERLYING SUPPORT
ORGANIZATION.
We need to substantially expand our sales operations and marketing efforts,
both domestically and internationally, in order to increase market awareness and
sales of the products and services we offer. These products and services require
a sophisticated sales effort targeted at several people within the IT
departments of our prospective customers. We have recently expanded our direct
sales force and plan to hire additional sales personnel. Competition for
qualified sales and marketing personnel is intense, and we might not be able to
hire and retain sufficient numbers of qualified sales and marketing personnel.
We currently have a small customer service and support organization and will
need to increase our staff to support new customers and the expanding needs of
existing customers. Hiring customer service and support personnel is very
competitive in our industry due to the limited number of people available with
the necessary technical skills and understanding of the Internet. We cannot
assure you that we will be able to hire and retain sufficient numbers of
qualified customer service and support personnel.
WE ARE DEPENDENT ON CERTAIN KEY PERSONNEL.
Our future success depends upon the continued service of our executive
officers and other key technology, sales, marketing and support personnel. If we
lost the services of one or more of our key employees, or if one or more of our
executive officers or employees decided to join a competitor or otherwise
compete directly or indirectly with us, this could have a material adverse
effect on our business. In particular, the services of Peter Jackson, Chief
Executive Officer, and Paul Martinelli, Chief Technology Officer, would be
difficult to replace. None of our officers or key employees is bound by an
employment agreement for any specific term. Our employment relationships with
these officers and key employees are at will. We do not have "key person" life
insurance policies covering any of our employees.
OUR PLANNED INTERNATIONAL OPERATIONS FACE SPECIAL RISKS.
To date, we have not received substantial revenues from sales to
international customers. We intend to expand the scope of sales to international
customers in future periods. In calendar 1999, we intend to open international
offices and hire international sales personnel, including the establishment of
at least one European office. We have only limited experience in marketing,
selling and supporting our services and our vendors' software products overseas.
Additionally, we do not have any experience in developing foreign language
11
<PAGE>
versions of our services. Such development may be more difficult or take longer
than we anticipate, especially due to localization problems (such as language
barriers or currency exchange) and the fact that the Internet infrastructure in
such foreign countries may be less advanced than the domestic Internet
infrastructure and may result in longer response time and less accurate or
consistent ESD.
We may not be able to successfully market, sell, deliver and support our
services and our vendors' software products internationally. If we are unable to
expand our international operations successfully and in a timely manner, this
could adversely affect our business and operating results. Our international
expansion will require significant management attention and financial resources.
In particular, we will have to attract experienced management, marketing and
sales personnel for our international offices. Competition for such personnel is
intense and we may be unable to attract qualified staff.
In addition, our contracts with Netscape currently do not allow us to market
or sell Netscape products (other than pursuant to our SUBSCRIBNET service) in
Europe. Revenues from European customers may not be able to grow as planned
unless we can obtain the rights to market Netscape products in Europe.
International operations are subject to a variety of additional risks
associated with conducting business internationally that could materially
adversely affect our business, including the following:
- problems in collecting accounts receivable;
- the impact of recessions in economies outside the United States;
- longer payment cycles;
- unexpected changes in regulatory requirements;
- fluctuations in currency exchange rates;
- restrictions on the import/export of certain technologies;
- reduced protection for intellectual property rights in some countries;
- seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world;
- potentially adverse tax consequences; and
- increases in tariffs, duties, price controls or other restrictions on
foreign currencies or trade barriers imposed by foreign countries.
OUR ACQUISITION STRATEGY INVOLVES RISKS.
We currently intend to make investments in complementary companies, services
and technologies. If we acquire a company, we could face difficulties in
assimilating that company's personnel and operations. In addition, the key
personnel of the acquired company may decide not to work for us. Acquisitions of
additional services or technologies also involve risks of incompatibility and
the need for integration into our existing services and marketing, sales and
support efforts. These difficulties could disrupt our ongoing business, distract
our management and employees and increase our expenses. Furthermore, if we
finance the acquisitions by incurring debt or issuing equity securities, this
could dilute our existing stockholders. Any amortization of goodwill or other
assets, or other charges resulting from the costs of such acquisitions, could
adversely affect our operating results.
WE MAY BE EXPOSED TO RISKS OF INTELLECTUAL PROPERTY INFRINGEMENT.
Our services operate in part by making software products and other digital
content available to end-users. This creates the potential for claims to be made
against us (either directly or through contractual indemnification provisions
with vendors) for defamation, negligence, copyright or trademark infringement,
personal injury, invasion of privacy or other legal theories based on the
nature, content or copying of these materials. Although we carry general
liability insurance, our insurance may not cover all potential claims or may not
be adequate to protect us from all liability that may be imposed.
Our success and ability to compete are substantially dependent upon our
internally developed technology, which we protect through a combination of
copyright, trade secret and trademark law. We have no patents issued or applied
for to date on our technology. We are aware that certain other companies are
using or
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<PAGE>
may have plans to use the name "Intraware" as a company name or as a trademark
or servicemark. While we have received no notice of any claims of trademark
infringement, we cannot assure you that certain of these companies may not claim
superior rights to "Intraware" or to other marks we use. We generally enter into
confidentiality agreements with our employees, consultants and corporate
partners, and generally control access to and distribution of our vendors'
software and documentation as well as to our services and other proprietary
information. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy or otherwise obtain and use our services or
technology. Policing unauthorized use of our services is difficult, and we
cannot be certain that the steps we have taken will prevent misappropriation of
our technology, particularly in foreign countries where the laws may not protect
our intellectual property and proprietary rights as fully as in the United
States.
Litigation regarding intellectual property rights is common in the Internet
and software industries. We expect that Internet technologies and software
products and services may be increasingly subject to third-party infringement
claims as the number of competitors in our industry segment grows and the
functionality of products in different industry segments overlaps. There can be
no assurance that our services do not infringe on the intellectual property
rights of third parties. In addition, we may be involved in litigation involving
the software of third party vendors that we electronically distribute. Any
claims, with or without merit, could result in costly litigation and be
time-consuming to defend, divert management's attention and resources, cause
delays in releasing new or upgrading existing services or require us to enter
into royalty or licensing agreements. These royalty or licensing agreements, if
required, may not be available on acceptable terms, if at all. A successful
claim of infringement against us and our failure or inability to license the
infringed or similar technology could adversely affect our business.
In addition, we sell certain high encryption software domestically. Federal
regulations prohibit the exportation of these types of encryption software to
certain countries. We have established internal procedures to ensure that the
high encryption software is sold only to domestic customers. However, if these
procedures are not followed by our personnel, or are otherwise circumvented,
resulting in the sale by us of high encryption software to a prohibited foreign
customer, then we could be at risk for violating these federal export
regulations.
WE MAY BE EXPOSED TO THE YEAR 2000 COMPLIANCE RISKS.
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. Beginning in the year
2000, these code fields will need to accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, computer systems and/or
software products used by many companies may need to be upgraded to comply with
such year 2000 requirements.
Our online services, including IT KNOWLEDGE CENTER, COMPARISCOPE,
INTRAWARE.SHOP, VIRTUALEXPRESS, SUBSCRIBNET and their associated and supporting
tools, Web sites, and infrastructure were designed and developed to be year 2000
compliant. Our internal systems, including those used to deliver our services,
utilize third-party hardware and software. We have contacted these
infrastructure products' vendors in order to gauge their year 2000 compliance.
Based on our vendors' representations, we believe that the third-party hardware
and software we use is year 2000 compliant.
We cannot assure you that we will not experience unanticipated negative
consequences, including material costs caused by undetected errors or defects in
the technology used in our internal systems. If, in the future, it comes to our
attention that certain of our services need modification, or certain of our
third-party hardware and software is not year 2000 compliant, then we will seek
to make modifications to our services and systems on a timely basis and we do
not believe that the cost of such modifications will have a material effect on
our operating results. We cannot assure you,
13
<PAGE>
however, that we will be able to modify such products, services and systems in a
timely and successful manner to comply with the year 2000 requirements, which
could have a material adverse effect on our operating results.
Further, while we typically receive warranties and indemnities from our
software vendors with respect to year 2000 compliance of the software products
we resell, we have not independently verified the year 2000 compliance of these
products. If such software products nevertheless require modification to be year
2000 compliant, demand for them could decline if such modifications are not
timely made by the software vendors. This, in turn, could adversely affect our
business and results of operations. In addition, if software products we resell
were not year 2000 compliant and were installed at customer sites, we cannot
assure you that the indemnities we receive from our vendors would protect us
from customer claims and any such claims could divert significant management,
financial and other resources and our commercial insurance coverages may not be
adequate to cover such claims.
Year 2000 compliance issues also could cause a significant number of
companies, including our current customers, to reevaluate their current system
needs and, as a result, consider switching to other systems and suppliers. Any
of the foregoing could result in a material adverse effect on our business,
operating results and financial condition. Additionally, during the next twelve
months there is likely to be an increased customer focus on addressing year 2000
compliance issues, creating the risk that customers may reallocate capital
expenditures to fix year 2000 problems of existing systems. Although we have not
experienced the effects of such a trend to date, if customers defer purchases of
business software and related services because of such a reallocation, it would
adversely affect our operating results.
OUR MARKET MAY UNDERGO RAPID TECHNOLOGICAL CHANGE.
Our market is characterized by rapidly changing technology, evolving
industry standards and frequent new product announcements. These factors are
exacerbated by the recent growth of the Web as a vehicle for conducting
electronic commerce and the intense competition in our industry. To be
successful, we must adapt to our rapidly changing market by continually
improving the performance, features and reliability of our services. We could
also incur substantial costs to modify our services or infrastructure in order
to adapt to these changes. Our business could be adversely affected if we incur
significant costs without adequate results, or find ourselves unable to adapt
rapidly to these changes.
GLOBAL ECONOMIC UNCERTAINTY MAY AFFECT THE CAPITAL EXPENDITURES OF OUR
PROSPECTIVE CUSTOMERS.
The business software market could be negatively affected by certain
factors, including global economic difficulties, uncertainty and currency
issues. Business software purchasers could reduce their expenditures due to
internal difficulties or uncertainties. This could in turn give rise to longer
sales cycles, deferral or delay of customer purchasing decisions, and increased
price competition. The presence of such factors could adversely affect our
operating results.
EMERGING GOVERNMENT REGULATIONS CREATE LEGAL UNCERTAINTIES.
Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. The most recent session of the United
States Congress resulted in Internet laws regarding children's privacy,
copyrights and taxation. The European Union has enacted its own data protection
and privacy directive, which required all 15 European Union ("EU") Member States
to implement laws relating to the processing and transmission of personal data
by October 25, 1998. We must comply with these new regulations in both Europe
and the United States, as well as any other regulations adopted by other
countries where we may do business.
The law governing Internet transactions, however, remains largely unsettled,
even in areas where there has been some legislative action. It may take years to
determine whether and how existing laws such as those governing intellectual
14
<PAGE>
property, privacy, libel and taxation apply to the Internet. In addition, the
growth and development of the market for online commerce may prompt calls for
more stringent consumer protection laws, both in the United States and abroad,
that may impose additional burdens on companies conducting business online. The
adoption or modification of laws or regulations relating to the Internet could
adversely affect our business.
THE ADOPTION OF THE EURO PRESENTS UNCERTAINTIES FOR OUR COMPANY.
On January 1, 1999, the new "Euro" currency was introduced in 11 of the
Member States of the European Monetary Union ("EMU"). It is expected that some
other European countries will also adopt the Euro at a later date. A significant
amount of uncertainty exists as to the effect the Euro will have on the
marketplace generally.
We are currently assessing the effect the introduction of the Euro will have
on our internal accounting systems and the sales of our software vendors'
products and our services. We are not aware of any material operational issues
or costs associated with preparing our internal systems for the Euro. However,
we do utilize third party vendor equipment and software products that may or may
not be EMU compliant. Although we are currently taking steps to address the
impact, if any, of EMU compliance for such third party products, the failure of
any critical components to operate properly following the introduction of the
Euro may have an adverse effect on the business or results of operations of our
Company, and require us to incur expenses to remedy such problems.
OUR OFFICERS AND DIRECTORS MAY BE ABLE TO EXERT ADDITIONAL CONTROL THROUGH THEIR
EQUITY OWNERSHIP.
Executive officers, directors and entities affiliated with them will, in the
aggregate, beneficially own approximately % of our outstanding Common Stock
following the completion of this offering. These stockholders, if acting
together, would be able to significantly influence all matters requiring
approval by our stockholders, including the election of directors and the
approval of mergers or other business combination transactions.
WE HAVE BROAD DISCRETION TO USE THE OFFERING PROCEEDS.
Our management can spend most of the proceeds from this offering in ways
with which the stockholders may not agree. We cannot predict that the proceeds
will be invested to yield a favorable return. See "Use of Proceeds."
OUR SECURITIES HAVE NO PRIOR MARKET.
Before this offering, there has not been a public market for our Common
Stock. The initial public offering price will be determined by negotiations
between Intraware and the representatives of the underwriters. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price. An active public market for Intraware Common
Stock may not develop or be sustained after this offering. The market price of
the Common Stock may decline below the initial public offering price.
OUR CHARTER DOCUMENTS DISCOURAGE OUR ACQUISITION BY OTHERS.
Provisions of our Amended and Restated Certificate of Incorporation, Bylaws,
and Delaware law could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders. See "Description of
Capital Stock."
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
After this offering, we will have outstanding shares of Common Stock.
The remaining shares of Common Stock outstanding after this offering will
be available for sale (assuming the effectiveness of certain lock-up
15
<PAGE>
arrangements with the Underwriters) in the public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE OF AVAILABILITY FOR SALE
- ----------------- -----------------------------------
<S> <C>
0 January 8, 1999 (date of this
prospectus)
0 April 8, 1999 (90 days after the
date of this prospectus)
19,534,778 July 7, 1999 (180 days after the
date of this prospectus) at various
times thereafter upon the
expiration of one-year holding
periods
</TABLE>
If our stockholders sell substantial amounts of Common Stock (including
shares issued upon the exercise of outstanding options) in the public market,
the market price of our Common Stock could fall. See "Shares Eligible for Future
Sale" and "Underwriting."
WE DO NOT INTEND TO PAY DIVIDENDS.
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future. See
"Dividend Policy."
16
<PAGE>
USE OF PROCEEDS
The net proceeds to us from the sale of the shares of Common Stock
offered by us are estimated to be $ at an assumed public offering price
of $ per share, after deducting the underwriting discount and estimated
offering expenses (assuming no exercise of the underwriters' over-allotment
option to purchase shares from us and shares from certain of
our stockholders).
We expect to use the net proceeds for working capital and general corporate
purposes. In addition, we may use a portion of the net proceeds to acquire
complementary products, technologies or businesses; however, we currently have
no commitments or agreements and are not involved in any negotiations with
respect to any such transactions. Pending use of the net proceeds of this
offering, we intend to invest the net proceeds in interest-bearing, investment-
grade securities. We will not receive any proceeds from the sale of the shares,
if any, to be sold by the selling stockholders pursuant to the exercise of the
underwriters' over-allotment option. See "Principal and Selling Stockholders."
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future. Our existing bank line of credit prohibits the payment of
dividends.
CERTAIN INFORMATION
Our principal executive offices are located at 25 Orinda Way, Orinda,
California 94563 and our telephone number is (925) 253-4500. Our Web site is
located at http//www.intraware.com. Information contained on our Web site does
not constitute part of this prospectus.
Our logo and certain titles and logos of our publications and products
mentioned in this prospectus are our service marks or trademarks. Each
trademark, trade name or service mark of any other company appearing in this
prospectus belongs to its holder.
17
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of Intraware as
of November 30, 1998, (ii) the pro forma capitalization of Intraware after
giving effect to the conversion of all outstanding shares of convertible
preferred stock into 12,045,628 shares of Common Stock and (iii) the pro forma
as adjusted capitalization to give effect to the sale of shares of Common
Stock at $ per share in this offering (less underwriting discounts and
commissions the Company expects to pay in connection with this offering).
<TABLE>
<CAPTION>
NOVEMBER 30, 1998
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C> <C>
Lease obligations, long-term portion........................................ $ 225 $ 225 $
Stockholders' equity:
Convertible Preferred Stock; issuable in series, $0.0001 par value,
8,000,000 shares authorized, 6,022,814 shares issued and outstanding,
actual; 10,000,000 shares authorized, pro forma and as adjusted, none
issued and outstanding.................................................... -- --
Common Stock, $0.0001 par value; 40,000,000 shares authorized; 6,929,550
shares issued and outstanding, actual; 250,000,000 shares authorized pro
forma and as adjusted, 18,975,178 shares issued and outstanding, pro
forma; shares issued and outstanding, as adjusted................. -- --
Additional paid-in capital.................................................. 19,860 19,860
Unearned compensation....................................................... (2,033) (2,033) ()
Accumulated deficit......................................................... (12,766) (12,766) ()
---------- -----------
Total stockholders' equity.................................................. 5,061 5,061
---------- -----------
Total capitalization........................................................ $ 5,286 $ 5,286
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Excludes 6,950,000 shares of Common Stock reserved for issuance under
Intraware's stock option, director stock option and employee stock purchase
plans as of December 18, 1998, and 2,017,050 shares subject to outstanding
options as of November 30, 1998, and 129,056 shares of Common Stock issuable
upon exercise of outstanding warrants. See "Management--Incentive Stock
Plans," "Description of Capital Stock" and Notes 5 and 11 of Notes to
Financial Statements.
18
<PAGE>
DILUTION
The pro forma net tangible book value of Intraware as of November 30, 1998
was $5,061,000 or approximately $0.27 per share. Pro forma net tangible book
value per share represents the amount of Intraware's total tangible assets less
total liabilities, divided by the number of shares of Common Stock outstanding.
Dilution in net tangible book value per share represents the difference between
the amount per share paid by purchasers of shares of Common Stock in the
offering made hereby and the net tangible book value per share of Common Stock
immediately after the completion of this offering. After giving effect to the
sale of the shares of Common Stock offered by Intraware hereby at an
assumed public offering price of $ per share and after deducting the
underwriting discount and estimated offering expenses payable by Intraware, the
net tangible book value of Intraware at November 30, 1998 would have been
$ or approximately $ per share. This represents an immediate increase
in net tangible book value of $ per share to existing stockholders and an
immediate dilution in net tangible book value of $ per share to new
investors of Common Stock in this offering. The following table illustrates this
dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed public offering price per share....................................... $
Pro forma net tangible book value per share as of November 30, 1998......... $ 0.27
Increase per share attributable to new investors(1)......................... $
---------
Pro forma net tangible book value per share after the offering(1)............. $
---------
Dilution in pro forma net tangible book value per share to new investors(1)... $
---------
---------
</TABLE>
- ------------------------
(1) The foregoing table excludes shares of Common Stock reserved for
issuance under Intraware's stock option and stock purchase plans, of which
shares were subject to outstanding options as of November 30, 1998,
and shares of Common Stock were issuable upon exercise of outstanding
warrants. See "Capitalization", "Management-Incentive Stock Plans",
"Description of Capital Stock" and Notes 8 and 11 of Notes to Financial
Statements.
The following table sets forth, as of November 30, 1998, the differences
between the number of shares of Common Stock purchased from Intraware, the total
consideration paid and the average price per share paid by existing holders of
Common Stock and by the new investors, before deducting the underwriting
discount and estimated offering expenses payable by Intraware, at an assumed
public offering price of $ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
------------------------ AMOUNT ------------------------
NUMBER PERCENTAGE (IN THOUSANDS) PERCENTAGE PER SHARE
----------- ----------- ------------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)........................ $ $
New investors...................................
----- ----- ------ -----
Total....................................... 100.0% $ 100.0%
----- ----- ------ -----
----- ----- ------ -----
</TABLE>
- ------------------------
(1) If the Underwriters over-allotment option is exercised in full, sales by the
selling stockholders pursuant thereto will reduce the number of shares of
Common Stock held by existing stockholders to or approximately %
of the total number of shares of Common Stock outstanding upon the closing
of this offering and the number of shares held by new public investors will
be or approximately % ( shares) of the total number of
shares of Common Stock outstanding after this offering. See "Principal and
Selling Stockholders."
19
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and are qualified by reference to the Financial Statements and
Notes thereto and appearing elsewhere in this prospectus. The statement of
operations data set forth below for the period from August 14, 1996 (inception)
to February 28, 1997, the year ended February 28, 1998 and the nine months ended
November 30, 1998 and the balance sheet data at February 28, 1997, February 28,
1998 and November 30, 1998 are derived from, and are qualified by reference to,
the audited financial statements of Intraware included elsewhere in this
prospectus. The historical results are not necessarily indicative of results to
be expected for any future period. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
AUGUST 14, 1996
(INCEPTION) NINE MONTHS ENDED
THROUGH YEAR ENDED NOVEMBER 30,
FEBRUARY 28, FEBRUARY 28, --------------------
1997 1998 1997 1998
--------------- ------------ --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Revenues:
Software product sales..................................... $ 6 $ 10,383 $ 5,331 $ 23,027
Online services............................................ -- 4 -- 1,529
------ ------------ --------- ---------
Total net revenues....................................... 6 10,387 5,331 24,556
------ ------------ --------- ---------
Cost of net revenues:
Software product sales..................................... 5 8,348 4,346 19,421
Online services............................................ -- -- -- 470
------ ------------ --------- ---------
Total cost of net revenues............................... 5 8,348 4,346 19,891
------ ------------ --------- ---------
Gross profit................................................. 1 2,039 985 4,665
------ ------------ --------- ---------
Operating expenses
Sales and marketing........................................ 233 3,496 2,037 8,738
Product development........................................ 253 951 604 1,298
General and administrative................................. 467 1,492 1,016 2,492
------ ------------ --------- ---------
Total operating expenses................................. 953 5,939 3,657 12,528
------ ------------ --------- ---------
Loss from operations......................................... (952) (3,900) (2,672) (7,863)
Interest expense............................................. (12) (103) (52) (154)
Interest and other income, net............................... 20 21 9 177
------ ------------ --------- ---------
Net loss..................................................... $ (944) $ (3,982) $ (2,715) $ (7,840)
------ ------------ --------- ---------
------ ------------ --------- ---------
Basic and diluted net loss per share(1)...................... $ (1.36) $ (2.02) $ (1.53) $ (2.25)
------ ------------ --------- ---------
------ ------------ --------- ---------
Weighted average shares(1) (2)............................... 694 1,972 1,776 3,492
------ ------------ --------- ---------
------ ------------ --------- ---------
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 28,
-------------------- NOVEMBER 30,
1997 1998 1998
--------- --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................................... $ 303 $ 612 $ 5,413
Working capital (deficit)...................................................... 86 (220) 3,379
Total assets................................................................... 1,026 15,384 38,921
Lease obligations, long-term................................................... 189 105 225
Total stockholders' equity..................................................... 582 770 5,061
</TABLE>
- ------------------------
(1) See Note 1 of Notes to Financial Statements for an explanation of the
determination of the weighted average shares used to compute net loss per
share.
(2) All share information has been adjusted to reflect a two-for-one stock split
effective upon consummation of this offering.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THE ACCURACY OF WHICH
INVOLVES RISKS AND UNCERTAINTIES. WE USE WORDS SUCH AS "ANTICIPATES,"
"BELIEVES," "PLANS," "EXPECTS," "FUTURE" AND "INTENDS" AND SIMILAR EXPRESSIONS
TO IDENTIFY FORWARD-LOOKING STATEMENTS. THIS PROSPECTUS ALSO CONTAINS
FORWARD-LOOKING STATEMENTS ATTRIBUTED TO CERTAIN THIRD PARTIES RELATING TO THEIR
ESTIMATES REGARDING THE GROWTH OF CERTAIN ELECTRONIC-COMMERCE, ESD, SOFTWARE AND
RELATED SERVICE MARKETS AND SPENDING. PROSPECTIVE INVESTORS SHOULD NOT PLACE
UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH APPLY ONLY AS OF THE
DATE OF THIS PROSPECTUS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS FOR MANY REASONS,
INCLUDING THE RISKS FACED BY THE COMPANY DESCRIBED IN "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
Intraware is a leading provider of online business-to-business software
services, and acts as an objective intermediary to address the needs of both
purchasers and vendors of business software. Intraware was incorporated in
August 1996, and, from inception until February 1997, the Company's operations
consisted primarily of various start-up activities, including development of
technologies central to its business, recruiting personnel and raising capital.
In February 1997, the Company began providing online software distribution
services, later branded as INTRAWARE.SHOP, and began providing online software
update and license management services through its SUBSCRIBNET service. In April
1998, the Company introduced the COMPARISCOPE service to provide IT
professionals with comprehensive, objective online analysis of various types of
software. In September 1998, the Company added IT KNOWLEDGE CENTER to its online
service offerings, providing corporate IT professionals with proprietary
content, aggregated technical information and related resources. The Company
incurred net losses of $944,000, $4.0 million and $7.8 million in the period
from August 1996 (inception) through February 28, 1997, the year ended February
28, 1998 and the nine months ended November 30, 1998, respectively. The Company
expects to incur net losses for the foreseeable future. See "Risk Factors--We
Have a History of Losses and Expect Future Losses."
Intraware generates revenues from sales of third-party software vendors'
products through INTRAWARE.SHOP, and from sales of its online services
SUBSCRIBNET and COMPARISCOPE. Historically, Intraware has derived the
substantial majority of its revenue from software product sales and did not
recognize material online service revenues until the quarter ended November 30,
1998. The Company first recognized revenues from software product sales in
February 1997, and software product sales revenues constituted 100%, 100% and
94% of the Company's total net revenues for the period from inception through
February 28, 1997, the year ended February 28, 1998 and the nine months ended
November 30, 1998, respectively. Intraware expects that software product sales
will continue to represent the substantial majority of its total net revenues
for the foreseeable future. See "Risk Factors--Our Newly Introduced Value-Added
Services May Not Be Able to Generate Anticipated Revenues."
The Company generates software product revenues from the sale of third party
software and related maintenance products. Of these revenues, sales of software
licenses are recognized when there is evidence of an arrangement for a fixed and
determinable fee that is probable of collection and the software is available
for customer download through INTRAWARE.SHOP. Related maintenance revenues are
recognized ratably over the terms of the underlying service contract. Online
services revenues are derived primarily from delivery of SUBSCRIBNET, and other
fee-based information services. Online services revenues are recognized ratably
over the term of the underlying service contracts. See Note 1 of Notes to
Financial Statements.
During the nine month period ended November 30, 1998, the Company generated
over 90% of its software product revenues from the sale of Netscape software
products. While
21
<PAGE>
the Company expects that net revenues derived from the sale of Netscape products
will decrease as a percentage of total revenues in future periods, the Company
believes that it will remain substantially dependent on such sales for the
foreseeable future. The Company has no assurance that Netscape will continue to
sell software products through the Company. If Netscape were to discontinue
selling its software through the Company, there would be a material adverse
effect on the Company's software product revenues and other operating results,
its financial condition, and its business. Recently, Netscape entered into an
agreement to be acquired by America Online, Inc. and there can be no assurance
that this proposed transaction will not have an adverse effect on Intraware's
relationship with Netscape. See "Risk Factors-- We Are Substantially Dependent
on Netscape Communications Corporation."
Intraware first generated significant revenues from sales of its online
services in the quarter ended November 30, 1998. For the nine months ended
November 30, 1998, the Company generated 87% of its online service revenues from
the sale of SUBSCRIBNET services to Netscape. Under a one-year agreement with
Netscape effective on October 1, 1998, the Company provides online software
update and license management services to Netscape customers through the
Company's SUBSCRIBNET service. Netscape has the right, however, to terminate
this agreement upon 90 days notice. Accordingly, the Company has no assurance
that Netscape will not terminate this agreement or, at the end of the current
term, renew the agreement on satisfactory terms. To date, substantially all of
the Company's SUBSCRIBNET revenues have been generated through this Netscape
agreement, and if the Company were not able to renew the agreement on
satisfactory terms, there could be a material adverse effect on the Company's
online service revenues and upon the Company's business. See "Risk Factors--We
Are Substantially Dependent on Netscape Communications Corporation."
Intraware's limited operating history makes it difficult to forecast its
future operating results. Although the Company's net revenues have grown in
recent quarters, the Company cannot be certain that its net revenues will
increase at a rate sufficient to achieve and maintain profitability. Even if the
Company were to achieve profitability in any period, the Company cannot be
certain that it would sustain or increase profitability on a quarterly or annual
basis. See "Risk Factors--We Have a History of Losses and Expect to Incur Future
Losses."
RESULTS OF OPERATIONS
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1998
NET REVENUES
Net revenues increased from $5.3 million for the nine months ended November
30, 1997 to $24.6 million for the nine months ended November 30, 1998. This
increase was primarily due to an increase in sales of third-party software
products. In addition, during the nine months ended November 30, 1998, the
Company recognized $1.5 million in initial sales of its online services.
Approximately $1.3 million of these initial online service revenues was
attributable to the Company's agreement with Netscape to provide SUBSCRIBNET
services.
COST OF NET REVENUES
Cost of net revenues consists primarily of the cost of third-party software
and maintenance products sold, costs for content development and acquisition,
and Internet connectivity and allocated overhead charges. The Company purchases
software products at a discount to the software vendors' established list prices
pursuant to standard reseller terms. Total cost of net revenues increased from
$4.3 million for the nine months ended November 30, 1997 to $19.9 million for
the nine months ended November 30, 1998. This increase in total cost of net
revenues was primarily attributable to increases in the volume of third-party
software and maintenance products sold by the Company.
The Company's gross margin increased from 18.5% for the nine months ended
November 30, 1997 to 19.0% for the nine months ended November 30, 1998. The
increased margins on the Company's software product sales due to increased
competitive pricing pressures, particularly on large sale transactions, were
more
22
<PAGE>
than offset by the effects of an increase in online service revenues having
substantially higher gross margins. Gross margins on software product sales
decreased from 18.5% for the nine months ended November 30, 1997 to 15.7% for
the nine months ended November 30, 1998. The Company anticipates that it will
continue to experience declining gross margins on software product sales. Gross
margins on the Company's online service revenues were 69.3% for the nine months
ended November 30, 1998.
SALES AND MARKETING EXPENSES
Sales and marketing expenses consist primarily of employee salaries,
benefits and commissions, advertising, promotional materials and trade show
exhibit expenses. Sales and marketing expenses increased from $2.0 million for
the nine months ended November 30, 1997 to $8.7 million for the nine months
ended November 30, 1998. This increase was primarily attributable to an overall
increase in the scope of the Company's marketing and branding efforts.
Additionally, during the 1998 nine month period, the Company increased the
number of internal and external sales personnel, which in turn increased
salaries and related expenses. The number of employees engaged in sales and
marketing increased from 27 at November 30, 1997 to 71 at November 30, 1998.
Management expects that the dollar amount of sales and marketing expenses will
continue to increase due to the planned growth of its sales force, including the
establishment of sales offices in additional domestic and international
locations, and from expected additional increases in advertising and promotional
activities.
In September 1998, the Company entered into an agreement with Netscape in
which the Company's IT KNOWLEDGE CENTER is featured on the Netcenter Computer
and Internet Channel. Under the agreement, Intraware receives advertising banner
space and text links across the Netcenter site. Advertising and marketing
expenses in connection with this agreement totaled $1.7 million for the nine
months ended November 30, 1998. The advertising fee paid to Netscape by the
Company under this agreement is being expensed based on the actual number of
impressions delivered in a given period. In addition, the fees paid by the
Company to be featured on the Netcenter site are being amortized over the one
year term of the agreement. See "Business--Strategic Relationship With
Netscape."
PRODUCT DEVELOPMENT EXPENSES
Product development expenses consist primarily of personnel and related
costs associated with the Company's development and technical support efforts.
Product development expenses increased from $604,000 for the nine months ended
November 30, 1997 to $1.3 million for the nine months ended November 30, 1998.
The increase was primarily due to an increase in the number of product
development personnel employed to support expansion of the Company's SUBSCRIBNET
online service and its other online service offerings. The number of employees
engaged in product development increased from 11 at November 30, 1997 to 23 at
November 30, 1998. The Company believes significant investment in product
development is essential to its future success and expects that the dollar
amount of product development expenses will increase in future periods.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses consist primarily of employee salaries
and related expenses for executive, administrative and accounting personnel,
facility costs, operations, recruiting fees, insurance costs and professional
fees. General and administrative expenses increased from $1.0 million for the
nine months ended November 30, 1997 to $2.5 million for the nine months ended
November 30, 1998. This increase was primarily attributable to overall business
growth and to increased salary and related expenses in accounting, operations
and administration. The number of employees engaged in general and
administrative functions increased from 13 at November 30, 1997 to 26 at
November 30, 1998. Management expects general and administrative expenses to
increase in dollar amount in future periods.
23
<PAGE>
INTEREST EXPENSE
Interest expense relates to borrowings under a bank line of credit
arrangement and from obligations under capital leases. The changes in interest
expense in each period result from changes in the outstanding principal
obligations during each period.
INTEREST AND OTHER INCOME, NET
Interest and other income, net consists primarily of interest earned on cash
and cash equivalents offset by miscellaneous non-operating expenses. The changes
in other income, net in each period result primarily from changes in the amount
and mix of interest-bearing investments outstanding during each period.
INCOME TAXES
From inception through November 30, 1998, the Company incurred net losses
for federal and state tax purposes and has not recognized any tax provision or
benefit. As of November 30, 1998, the Company had approximately $11.7 million of
federal and $11.5 million of state net operating loss carryforwards to offset
future taxable income which expire in varying amounts beginning in 2012 and
2005, respectively. Given the Company's limited operating history, losses
incurred to date and the difficulty in accurately forecasting the Company's
future results, management does not believe that the realization of the related
deferred income tax asset meets the criteria required by generally accepted
accounting principles and, accordingly, a 100% valuation allowance has been
recorded. Furthermore, as a result of changes in the Company's equity ownership
from the Company's Convertible Preferred Stock financings and this offering,
utilization of the net operating losses and tax credits is subject to
substantial annual limitations due to the ownership change limitations provided
by the Internal Revenue Code of 1986, as amended, and similar state provisions.
The annual limitation may result in the expiration of net operating losses and
tax credits before utilization. See Note 4 of Notes to Financial Statements.
STOCK-BASED COMPENSATION
In the year ended February 28, 1998 and the nine months ended November 30,
1998, the Company recorded aggregate unearned compensation totaling $2.3 million
in connection with certain stock option grants. In addition, subsequent to
November 30, 1998, the Company recorded additional unearned compensation
totaling $865,000 for employee stock options granted on December 2, 1998. The
unearned compensation is being amortized over the four-year vesting period of
the related options and is being allocated among the operating expense
categories based upon the primary activity of the related employee. During the
nine months ended November 30, 1998, amortization of unearned compensation
totaled $264,000, and was allocated in the amounts of $132,000 to sales and
marketing, $66,000 to product development, and $66,000 to general and
administrative expenses. Amortization of unearned compensation was considered
immaterial in the year ended February 28, 1998. See Note 9 of Notes to Financial
Statements.
THE PERIOD FROM AUGUST 14, 1996 (INCEPTION) THROUGH FEBRUARY 28, 1997 AND
THE YEAR ENDED FEBRUARY 28, 1998
NET REVENUES
Total net revenues increased from $6,000 for the period from inception
through February 28, 1997 to $10.4 million for the year ended February 28, 1998.
This increase resulted primarily from the sale of third-party software products
upon the Company's launch of its electronic software delivery service in
February 1997. Software sales increased from $6,000 for the period from
inception through February 28, 1997 to $10.4 million for the year ended February
28, 1998.
COST OF NET REVENUES
Cost of net revenues increased from $5,000 for the period from August 14,
1996 (inception) through February 28, 1997 to $8.3 million for the year ended
February 28, 1998. This increase reflected the increased software product sales
of the Company.
24
<PAGE>
SALES AND MARKETING EXPENSES
Sales and marketing expenses increased from $233,000 for the period from
August 14, 1996 through February 28, 1997 to $3.5 million for the year ended
February 28, 1998. This increase was primarily due to an increase in the number
of sales and marketing personnel employed and to expenses incurred in connection
with attending trade shows following the launch of INTRAWARE.SHOP.
PRODUCT DEVELOPMENT EXPENSES
Product development expenses increased from $253,000 for the period from
August 14, 1996 through February 28, 1997 to $951,000 for the year ended
February 28, 1998. The increase resulted primarily from an increase in the
number of product development personnel required to support expansion of the
Company's SUBSCRIBNET and other online service offerings.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased from $467,000 for the period
from August 14, 1996 through February 28, 1997 to $1.5 million for the year
ended February 28, 1998. This increase was due primarily to an increase in the
number of general and administrative personnel and operational costs as the
Company expanded its operations.
STOCK-BASED COMPENSATION
In the year ended February 28, 1998, the Company recorded aggregate unearned
compensation totaling $2.3 million in connection with certain stock option
grants. Amortization of unearned compensation was considered immaterial in the
year ended February 28, 1998. See Note 9 of Notes to Financial Statements.
QUARTERLY RESULTS OF OPERATION
The following table sets forth, for the periods presented, certain data from
the Company's statement of operations and such data as a percentage of net
revenues (except for costs of software product sales and costs of online
services which are expressed as a percentage of software product sales and
online service revenues, respectively). The statement of operations data has
been derived from the Company's unaudited financial statements that, in
management's opinion, have been prepared on substantially the same basis as the
audited financial statements and include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
information for the periods presented. This information should be read in
conjunction with the Financial Statements and Notes thereto included elsewhere
in this Prospectus. The operating results in any quarter are not necessarily
indicative of the results that may be expected for the future period.
25
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
MAY 31, AUGUST 31, NOVEMBER 30, FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30,
1997 1997 1997 1998 1998 1998 1998
------- ---------- ------------ ------------ ------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES:
Software product sales........... $ 311 $2,346 $ 2,673 $ 5,053 $5,002 $ 8,183 $ 9,842
Online services.................. -- -- -- 4 16 63 1,450
------- ---------- ------------ ------------ ------- ---------- ------------
Total net revenues............. 311 2,346 2,673 5,057 5,018 8,246 11,292
------- ---------- ------------ ------------ ------- ---------- ------------
COST OF NET REVENUES:
Software product sales........... 241 1,974 2,131 4,002 3,939 6,832 8,650
Online services.................. -- -- -- -- 68 109 293
------- ---------- ------------ ------------ ------- ---------- ------------
Total cost of net revenues..... 241 1,974 2,131 4,002 4,007 6,941 8,943
------- ---------- ------------ ------------ ------- ---------- ------------
Gross profit................. 70 372 542 1,055 1,011 1,305 2,349
------- ---------- ------------ ------------ ------- ---------- ------------
OPERATING EXPENSES:
Sales and marketing.............. 338 711 988 1,459 1,684 2,321 4,733
Product development.............. 131 191 282 347 361 444 493
General and administrative....... 257 353 406 476 593 763 1,136
------- ---------- ------------ ------------ ------- ---------- ------------
Total operating expenses....... 726 1,255 1,676 2,282 2,638 3,528 6,362
------- ---------- ------------ ------------ ------- ---------- ------------
Loss from operations............... (656) (883) (1,134) (1,227) (1,627 ) (2,223) (4,013)
Interest expense................... (14) (12) (26) (51) (62 ) (47) (45)
Interest and other income, net..... 1 2 6 12 17 94 66
------- ---------- ------------ ------------ ------- ---------- ------------
Net loss........................... $(669) $ (893) $(1,154) $(1,266) $(1,672) $(2,176) $(3,992)
------- ---------- ------------ ------------ ------- ---------- ------------
------- ---------- ------------ ------------ ------- ---------- ------------
NET REVENUES:
Software product sales........... 100% 100% 100% 100% 100% 99% 87%
Online services.................. -- -- -- -- -- 1 13
------- ---------- ------------ ------------ ------- ---------- ------------
Total revenues................. 100 100 100 100 100 100 100
------- ---------- ------------ ------------ ------- ---------- ------------
COST OF NET REVENUES:
Software product sales........... 77 84 80 79 78 83 77
Online services.................. -- -- -- -- 1 1 3
------- ---------- ------------ ------------ ------- ---------- ------------
Total cost of net revenues.....
Gross profit................. 23 16 20 21 21 16 20
------- ---------- ------------ ------------ ------- ---------- ------------
OPERATING EXPENSES:
Sales and marketing.............. 108 30 37 29 34 28 42
Product development.............. 42 8 11 7 7 5 4
General and administrative....... 83 15 15 9 12 9 10
------- ---------- ------------ ------------ ------- ---------- ------------
Total operating expenses....... 233 53 63 45 53 42 56
------- ---------- ------------ ------------ ------- ---------- ------------
Loss from operations............... (210) (37) (43) (24) (32 ) (26) (36)
Interest expense................... (5) -- (1) (1) (1 ) -- --
Interest and other income, net..... -- -- -- -- 1 --
------- ---------- ------------ ------------ ------- ---------- ------------
Net loss........................... (215)% (37)% (44)% (25)% (33 )% (25)% (36)%
------- ---------- ------------ ------------ ------- ---------- ------------
------- ---------- ------------ ------------ ------- ---------- ------------
</TABLE>
The Company's revenues and operating results could vary significantly from
quarter to quarter due to the following factors, among others, (i) the demand
for the services the Company offers and vendor software products it sells; (ii)
the timing of sales of the Company's services and the products of its software
vendors; (iii) the losses of strategic relationships with major vendors (such as
Netscape); (iv) the mix of the Company's value-added services and vendor
software products sold; (v) delays in introducing the Company's value-added
services, or delays in vendors' software release schedules; and (vi) the
Company's ability to retain existing customers and attract new customers.
The Company has incurred net losses in each quarter since inception and
expects to continue to incur losses for the foreseeable
26
<PAGE>
future. The Company's net loss has increased each quarter since inception and
there can be no assurance that this trend will not continue.
The Company has experienced declining gross margins on software product
sales and anticipates that such declines will continue. In addition, the Company
intends to broaden its sales and marketing efforts to support its recently
introduced online services, SUBSCRIBNET and COMPARISCOPE, and, as a result, the
Company may experience one or more quarters of reduced software product revenue.
If this were to occur, Intraware's operating results would be adversely
affected, which could result in a decline of the market price of the Company's
Common Stock.
The Company plans to significantly increase its operating expenses to expand
its sales and marketing operations, broaden its customer support capabilities,
and fund greater levels of product development. Intraware's planned level of
operating expenses, including sales and marketing, administrative and
development expenses, are based on expectations of future revenues and are
relatively fixed in the short term. If revenues were to fall below these
expectations, the Company may not be able to quickly reduce its operating
expenses in response to such a shortfall. Due to the nature of the Company's
sales, there is no significant sales backlog. Consequently, for each quarter,
the Company's sales revenues are dependent on sales made in that quarter.
Due to the foregoing factors, the Company's quarterly revenue and operating
results are difficult to forecast, and the Company believes that
period-to-period comparisons of its operating results will not necessarily be
meaningful and should not be relied upon as an indication of future performance.
It is likely that in one or more future quarters the Company's operating
results may fall below the expectations of securities analysts and investors. In
such event, the trading price of the Common Stock would likely be materially
adversely affected. See "Risk Factors--Our Quarterly Financial Results Are
Subject to Significant Fluctuations."
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically satisfied its cash requirements primarily
through private placements of equity securities, bank borrowings and lease
financings. To date, the Company has raised approximately $17.4 million through
equity financings. See Notes 6 and 7 of Notes to Financial Statements.
Net cash used in operating activities totaled $779,000 for the period from
August 14, 1996 (inception) through February 28, 1997, $4.9 million for the year
ended February 28, 1998, and $5.9 million for the nine months ended November 30,
1998. Cash used in operating activities in the period from inception through
February 28, 1997 was primarily attributable to initial product development
efforts and general and administrative expenses. The increase in the year ended
February 28, 1998 was primarily attributable to a net operating loss of $4.0
million and increases in prepaid licenses and services and accounts receivable,
partially offset by increases in accounts payable and deferred revenue, as well
as depreciation and amortization of fixed assets. Cash used in operating
activities for the first nine months of 1998 resulted primarily from a net loss
of $7.8 million.
Net cash used in investing activities totaled $428,000 million for the
period from inception through February 27, 1997, $686,000 for the year ended
February 28, 1998 and $477,000 for the nine months ended November 30, 1998. The
increases in each period resulted primarily from purchases of computer equipment
and other fixed assets.
Net cash provided by financing activities totaled $1.5 million for the
period from inception through February 28, 1997, $5.9 million for the year ended
February 28, 1998 and $11.1 for the nine months ended November 30, 1998. The
increases in each period resulted primarily from the net proceeds from issuances
of Convertible Preferred Stock and from bank line of credit borrowings.
As of November 30, 1998, the Company's principal sources of liquidity
included $5.4 million of cash and cash-equivalents and
27
<PAGE>
$3.8 million available under the Company's bank line of credit. Although the
Company has no material long-term commitments for capital expenditures, it
anticipates a substantial increase in its capital expenditures and lease
commitments consistent with anticipated growth in operations, infrastructure and
personnel. See Notes 5 and 6 of Notes to Financial Statements.
The Company believes that the net proceeds from this offering, combined with
its current cash and short-term investments and its available bank line of
credit, will be sufficient to meet its anticipated liquidity needs for working
capital and capital expenditures for at least twelve months from the date of
this Prospectus. The Company's future liquidity and capital requirements will
depend upon numerous factors, including the pace of expansion of the Company's
operations, the timing of development of new and enhanced services, responses to
competitive pressures, acquisitions of complementary businesses or technologies,
or to take advantage of unanticipated opportunities. The Company's forecast of
the period of time through which its financial resources will be adequate to
support its operations is a forward-looking statement that involves risks and
uncertainties, and actual results could vary materially as a result of the
foregoing factors. If the Company requires additional capital resources, the
Company may seek to sell additional equity or debt securities or to increase its
bank line of credit. The sale of additional equity or convertible debt
securities could result in additional dilution to the Company's stockholders.
There can be no assurance that any financing arrangements will be available in
amounts or on terms acceptable to the Company, if at all.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. Beginning in the year
2000, these code fields will need to accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, computer systems and/or
software products used by many companies may need to be upgraded to comply with
such year 2000 requirements. The Company's services, including SUBSCRIBNET,
INTRAWARE.SHOP, COMPARISCOPE, IT KNOWLEDGE CENTER, VIRTUALEXPRESS and their
associated and supporting tools, Web sites, and infrastructure were designed and
developed to be year 2000 compliant. The Company's internal systems used to
deliver its services, however, utilize third-party hardware and software.
Intraware has contacted these infrastructure products' vendors in order to gauge
their year 2000 compliance. Based on these vendors' representations, Intraware
believes that the third-party hardware and software it uses are year 2000
compliant. There can be no assurance, however, that the Company will not
experience unanticipated negative consequences, including material costs caused
by undetected errors or defects in the technology used in its internal systems.
If, in the future, it comes to Intraware's attention that certain of its
services need modification, or certain of its third-party hardware and software
is not year 2000 compliant, then Intraware will seek to make modifications to
its systems. In such case, Intraware expects such modifications to be made on a
timely basis and Intraware does not believe that the cost of such modifications
will have a material effect on its operating results. There can be no assurance,
however, that Intraware will be able to modify such products, services and
systems in a timely and successful manner to comply with the year 2000
requirements, which could have a material adverse effect on its business and
operating results.
Further, while the Company typically has received warranties and indemnities
from its software vendors with respect to year 2000 compliance of the software
products, the Company resells but does not independently verify the year 2000
compliance of these products. If such software products nevertheless require
modification to be year 2000 compliant, demand for such products could decline
if such modifications are not timely made by the software vendors. This, in
turn, could adversely affect Intraware's business and results of operations.
Year 2000 issues also could cause a significant number of companies,
including our current customers, to reevaluate their current
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system needs and, as a result, consider switching to other systems and
suppliers. Any of the foregoing could result in a material adverse effect on our
business, operating results and financial condition. Additionally, during the
next twelve months there is likely to be an increased customer focus on
addressing year 2000 issues, creating the risk that customers may reallocate
capital expenditures to fix year 2000 problems of existing systems. Although we
have not experienced the effects of such a trend to date, if customers defer
purchases of business software and related services because of such a
reallocation, it would adversely affect our operating results. See "Risk
Factors--We May Be Exposed to the Year 2000 Compliance Risks."
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS No. 131"), which establishes standards for reporting information about
operating segments in annual financial statements. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. SFAS No. 131 is effective for fiscal years beginning after December
15, 1997. The Company will adopt the provisions of SFAS No. 131 in connection
with the preparation of its financial statements for the fiscal year ending
February 28, 1999.
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
is effective for financial statements for years beginning after December 15,
1998. SOP 98-1 provides guidance over accounting for computer software developed
or obtained for internal use including the requirement to capitalize specified
costs and amortization of such costs. The Company will adopt the provisions of
SOP 98-1 in its year ending February 28, 2000, and does not expect such adoption
to have a material effect on the Company's financial statements.
In March 1998, AIPCA issued Statement of Position 98-4, "Deferral of the
Effective Date of a provision of SOP 97-2" ("SOP 98-4"). SOP 98-4 defers for one
year the application of certain provisions of Statement of Position 97-2
"Software Revenue Recognition" ("SOP 97-2"). Different informal and
non-authoritative interpretations of certain provisions of SOP 97-2 have arisen
and, as a result, the AICPA issued SOP 98-9 in December 1998 which is effective
for period beginning on or after March 15, 1999. SOP 98-9 extends the effective
date of SOP 98-4 and provides additional interpretive guidance. The adoption of
SOP 97-2, SOP 98-4, and SOP 98-9 have not had and are not expected to have
material impact on the Company's results of operations, financial position or
cash flows. However, due to the uncertainties related to the outcome of these
amendments, the impact on the future financial results of the Company is not
currently determinable.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivates and
Hedging Activities" ("SFAS 133"), which establishes accounting and reporting
standards of derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The adoption of SFAS
No. 133 is not expected to have an impact on the Company's results of
operations, financial position or cash flows upon the adoption of this standard.
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BUSINESS
INTRAWARE, INC.
Intraware is a leading provider of Internet-based business-to-business
software services for IT professionals and business software vendors. Through
the Company's electronic software delivery and outsourcing services, the Company
acts as an objective intermediary in the software decision-making process. The
Company's branded, integrated service offerings enable software decision-makers
to evaluate, purchase, deploy and maintain their business software assets more
effectively. The Company's online services also allow business software vendors
to effectively market, sell and distribute products to a targeted customer base
of IT professionals.
The Company's core service offerings include IT KNOWLEDGE CENTER,
INTRAWARE.SHOP and SUBSCRIBNET. IT KNOWLEDGE CENTER is a Web site targeted at
corporate IT professionals and containing information services, including
COMPARISCOPE that helps them research and evaluate business software decisions.
A co-branded version of IT KNOWLEDGE CENTER is available on the Computing &
Internet channel of Netscape's Netcenter portal. The INTRAWARE.SHOP service is
an online procurement and delivery service for business software. SUBSCRIBNET is
an online software update and license management service. Through SUBSCRIBNET,
IT professionals can track their software licenses and manage the software
update process throughout a corporate network. The Company offers its
SUBSCRIBNET update and license management capabilities as an outsourcing
solution to business software vendors and have entered into an agreement with
Netscape to provide Intraware's SUBSCRIBNET service to Netscape customers
worldwide.
The Company has a broad base of members and customers in the IT departments
of medium to large corporations. As of December 1998, the Company had over
60,000 registered members. In addition, Intraware's SUBSCRIBNEWS digest of news,
information and opinion for the IT professional community is emailed to over
25,000 subscribers on a weekly basis. The Company's customers include the
following companies: 3Com Corporation, AT&T Corporation, Boeing Corporation,
Charles Schwab Company, Daimler Chrysler AG Corporation, GTE Corporation, Knight
Ridder, Inc., Lycos, Inc., and Reuters Group PLC. In addition, the Company has
established relationships with leading business software vendors including
Netscape, Informix, RealNetworks, OpenText, and NetDynamics, a wholly-owned
subsidiary of Sun Microsystems, Inc.
INDUSTRY BACKGROUND
Corporations today rely heavily upon information technology ("IT") to be
competitive, and software is a critical element of a corporation's IT
infrastructure. Corporations are spending increasingly large amounts on software
evaluation, purchase and maintenance. International Data Corporation ("IDC")
estimates that sales of software worldwide will increase from approximately $119
billion in 1997 to $231 billion in 2002. IDC further estimates that the market
for total worldwide software support will grow from approximately $19.6 billion
in 1997 to $38.5 billion in 2002.
SOFTWARE EVALUATION, PURCHASE, DEPLOYMENT AND MAINTENANCE BY CORPORATIONS
Corporate IT professionals are responsible for evaluating, purchasing,
deploying and maintaining software assets across the enterprise. The process of
evaluating business software for deployment can be costly and time-consuming, as
the information is widely dispersed and often biased. To evaluate software for
purchase, IT professionals typically review the product literature and Web sites
of numerous vendors, read a variety of online and printed publications and
attend industry seminars and trade shows. Once a purchase decision is made, IT
professionals must often test the software's effect on the existing IT
infrastructure before deploying it across the enterprise. Full scale deployment
often involves time-consuming physical installation on computers located at
geographically dispersed sites. As a result of
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these factors, corporate IT professionals often find themselves unable to
evaluate potential software purchases quickly and efficiently, or deploy them in
a timely manner throughout the enterprise.
Following deployment, a corporation will typically spend significant
additional resources on annual maintenance programs to support and maintain its
software assets. These programs provide corporations with the right to receive
subsequent releases of software to optimize existing functionality, incorporate
enhanced features and correct prior programming deficiencies. These maintenance
contracts, however, typically provide limited mechanisms for notifying IT
professionals of new and enhanced releases, or for managing the deployment of
such releases across the enterprise.
As a result of competitive pressures, software vendors are increasingly
seeking to reduce time to market, thereby compressing the release cycles for
their products. Forrester Research, Inc. ("Forrester") estimates that nearly 60%
of software vendors have product release cycles of three months or less. In
addition to the compressed release cycles associated with existing software
packages, corporations continue to install new business software on their
networks. These factors have made it increasingly difficult for IT professionals
to evaluate, deploy and track software updates, upgrades, new releases and other
lifecycle improvements to the many software assets used within their
organizations. As a result, corporations often do not realize the value they
anticipated when making the initial software purchase decision.
SOFTWARE SALE AND MAINTENANCE BY BUSINESS SOFTWARE VENDORS
Business software vendors typically rely on a combination of direct and
indirect methods to market and sell their products. Direct sales and marketing
efforts, including the use of targeted marketing campaigns and the creation and
management of a dedicated sales force, enable vendors to develop one-to-one
relationships with customers but can often be time-consuming and expensive.
Software vendors may reduce costs by using indirect marketing and sales
approaches, such as broad-based advertising campaigns and the use of resellers
and other intermediaries. Their ability to create relationships with and receive
feedback from corporate customers, however, is often compromised. Regardless of
the methods employed, business software vendors are challenged by the costs,
logistical complexities and administrative burden of marketing, selling and
distributing software products to a typically large and dispersed user base.
Vendors must also address their customers' needs to maintain software
assets. Because a corporation's user base for a typical software package may be
large, widely distributed and supported by numerous IT professionals, vendors
often have limited information about their customers' software deployments.
Without collecting adequate customer data, software vendors may be unable to
effectively track licensing programs, fully assess customer satisfaction,
determine feature requirements for subsequent releases, make program updates
quickly available, capture additional sale opportunities, or develop a proactive
maintenance management system. The Company believes the inefficiencies faced by
business software vendors will become more pronounced as these vendors
increasingly address the needs of a greater number of small to medium-sized
businesses.
THE INTERNET AS A MEDIUM FOR SOFTWARE PROCUREMENT, DELIVERY AND MAINTENANCE
The Internet and the World Wide Web have emerged as revolutionary global
communications media, enabling millions of consumers and business users to share
information and conduct business electronically. Forrester estimates that the
business-to-business electronic commerce market will grow nearly 100% annually,
from $43 billion in 1998 to $1.3 trillion by 2003. Business software vendors are
expected to benefit from this trend by utilizing the Internet as a more
effective medium to market, sell and support their software products. As a
result, IDC estimates the ESD market will grow from approximately $200 million
in 1997 to approximately $5.9 billion in 2001. Software
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support and maintenance services are also expected to be increasingly conducted
online. IDC estimates that the market for electronic support and software update
and license management services will grow from approximately $1.5 billion in
1997 to $10.5 billion in 2002.
Although the Internet is increasingly utilized to solve many inefficiencies
associated with the business software market, the Internet also brings new
challenges to the relationships between software vendors and their corporate
customers. The Web substantially increases the amount of information available
to IT professionals for researching and evaluating software purchase decisions,
but this information is still not typically aggregated by a central, organized
source. Moreover, the majority of the information available on the Web is
located on software vendors' own Web sites, which often do not provide complete
or unbiased content.
Vendors selling business software over the Internet can leverage the unique
features of the Web to enhance existing sales and marketing efforts and create a
more effective one-to-one relationship with the customer. However, the Company
believes that the challenges vendors face in using the Web as a software sales
and delivery vehicle require additional capabilities and skills outside the
vendors' traditional competencies. Specifically, vendors must contend with
enhanced Web site development and performance requirements, increased customer
demand for electronic software availability and support, integration of the Web
site with existing internal software systems, electronic licensing demands and
constantly changing export restrictions.
The Company believes that many corporations are attempting to utilize the
Web to improve their ability to efficiently evaluate, purchase and maintain
software, but they lack an objective, centralized online resource for such
activities. The Company similarly believes that software vendors seek the
benefits of using the Web to improve customer interaction, information
management, and sales, but have not been able to justify the resources required
to independently build and maintain their own system.
INTRAWARE SOLUTION
Intraware is a leading provider of online business-to-business software
services and acts as an objective intermediary to address the needs of both
purchasers and vendors of business software. The Company's integrated service
offerings enable software decision-makers to evaluate, purchase, deploy and
maintain their business software assets more effectively. At the same time,
Intraware's online services allow software vendors to effectively market, sell
and distribute products to a highly targeted customer base of IT professionals.
In addition, Intraware's online software maintenance services provide a
centralized solution for software publishers seeking to assist customers in the
maintenance of their software assets.
BENEFITS TO CORPORATE IT PROFESSIONALS
FACILITATES A MORE INFORMED EVALUATION AND PURCHASE DECISION. Intraware's
knowledge services allow IT professionals to obtain in-depth and objective
information about business software products to assist them in their software
purchasing decisions. Using the resources on the Intraware Web site, corporate
IT professionals can evaluate software license pricing models in real-time,
experience product features through interactive product demonstrations and
obtain comprehensive product information.
STREAMLINES DEPLOYMENT AND MAINTENANCE. Intraware's ESD capabilities are
tailored to corporate purchasing, deployment and tracking requirements. In
addition, the Company's information management services provides corporations
with a central online source to easily and efficiently track software licenses,
monitor which versions are installed in different locations, and install
upgrades using a central, online repository.
PROVIDES THE PLATFORM FOR A UNIQUE IT PROFESSIONAL COMMUNITY. Intraware's
unique market position allows the Company to objectively mediate and enhance the
relationship between IT professionals and software vendors.
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The Company has focused on improving the quality of information available to
both IT professionals and software vendors, thereby increasing communication
among technology professionals regarding software industry trends, opinions, and
product experiences.
BENEFITS TO SOFTWARE VENDORS
Rather than build their own online software delivery, license management and
maintenance capabilities, software vendors can leverage Intraware's service
offerings. By outsourcing the management of these services to Intraware,
software vendors can eliminate the time-to-market risks associated with building
these services themselves.
IMPROVES MARKETING AND SALES EFFORTS. Through the Company's online services,
software vendors can centralize their online sales and marketing activities and
improve the quality of their customer interactions. By capturing direct customer
feedback, vendors can make improvements to their products and services to meet
customer needs, capitalize on incremental revenue opportunities through
follow-on software sales and ultimately decrease the time-to-market of their
software products.
IMPROVES SOFTWARE DELIVERY AND MAINTENANCE. Intraware's ESD engine reduces
the costs and logistical complexities associated with software distribution. The
Company's maintenance services allow vendors to assist their customers in
monitoring software licenses and tracking installations of new releases and
upgrades through a central, online repository.
IMPROVES CUSTOMER INFORMATION MANAGEMENT. Using Intraware's online services,
software vendors can extract more detailed, comprehensive and valuable customer
data through the extensive customer resources offered by the Company. By
outsourcing the management of customer maintenance programs, software vendors
can capture rich data from an objective online source about the acceptance and
performance of their software products.
INTRAWARE STRATEGY
Intraware's objective is to be the leading online intermediary for the
business software industry, aggregating information, software and services for
IT professionals and software vendors. Key elements of the Company's strategy
include:
DEVELOP A BROAD-BASED IT COMMUNITY CONSISTING OF CORPORATE IT PROFESSIONALS
AND SOFTWARE VENDORS. Through its position as an objective resource for
software decision making, Intraware helps meet the information needs of IT
professionals. Intraware provides an online community of content and services,
including career information, product information and tutorials, and links to
third-party information of interest to IT professionals. The Company's services
for software evaluation, purchasing, deployment and maintenance further enhance
the Intraware community experience for IT professionals, and drives them to
Intraware's site. Intraware believes this approach deepens its relationship with
IT professionals and, as a result, can more effectively market and sell its
services and its existing vendors' software products, as well as develop new
software vendor partnerships.
EXTEND CURRENT SERVICE OFFERINGS AND INTRODUCE NEW SERVICE
OFFERINGS. Intraware seeks to maintain, develop and enhance existing and new
revenue streams from both its software vendor and corporate IT professional
customers through the further development of existing services and introduction
of additional online services. The Company initially introduced SUBSCRIBNET, a
service that provides IT professionals with pro-active and centralized update
and licensed management services. The Company also recently introduced
COMPARISCOPE, a premium subscription service designed to provide IT
professionals with leading enterprise software evaluation tools. Although these
services as well as the other subscription-based services of the Company have
not generated significant revenues to date, Intraware anticipates that these
services will represent an increasing proportion of its revenue base. The
Company believes that its market position and integrated service offerings will
enable it to
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continue to develop, market and sell service offerings that address the needs of
the IT professional community. The Company plans to develop additional service
and content offerings through both internal resources as well as the acquisition
of complementary businesses, services and content.
LEVERAGE CUSTOMER BASE AND SERVICE FUNCTIONALITY TO CAPTURE SOFTWARE VENDOR
OUTSOURCING OPPORTUNITIES. Intraware has positioned itself to provide IT
professionals with services to objectively evaluate, select and maintain
software products. As Intraware further adds functionality to its services and
aggregates a targeted community of IT professionals, the Company believes that
software vendors will benefit from new outsourcing services offered by the
Company. In addition, software vendors may benefit from improved features and
functionality of the Company's existing services. The Company plans to continue
forging relationships with software vendors to provide its IT professionals with
a broader selection of software products and complementary Intraware services.
PROMOTE INTRAWARE BRAND AWARENESS. The Company believes that, due to the
competitive nature of online commerce and services targeted at the IT
professional, it is critical to continue to brand Intraware as an objective
intermediary in order to continue to grow its business. To facilitate this,
Intraware intends to continue promoting its brands and services through an
extensive PR campaign, advertising in print media and Web sites targeted at IT
professionals. In addition, the Company promotes its brand through its placement
on Netscape's Netcenter site and through a variety of co-marketing arrangements
with other software vendors.
MAINTAIN LEADING EDGE TECHNOLOGY FOCUS. Intraware plans to continually
enhance its technology to enable additional online services, high throughput and
secure delivery of software products through its ESD engine by using leading
edge technologies. Intraware's development group is able to rapidly add new
services and features to the Company's existing service offerings. By developing
on open standards, the Company can more easily integrate with vendor and partner
systems for expanded services and outsource implementation.
EXPAND GLOBALLY. The online nature of Intraware's business enables the
Company to offer its services to a worldwide community of IT professionals and
software vendors. Although the Company had not actively targeted the
international IT community until recently and has not generated any significant
revenues internationally to date, approximately half of Intraware's registered
membership is based in international markets. The Company believes that the
global opportunity to market its services will continue to grow rapidly. The
Company intends to address this opportunity by selectively enhancing its global
pricing, currency and language capabilities. In addition, the Company intends to
access international markets through a combination of global online services,
online and traditional marketing efforts, partnerships and direct investments
and acquisitions of complementary businesses.
SERVICES
Intraware's service offerings are designed to address all stages of the
business software lifecycle, from evaluation and purchase, to deployment and
online maintenance management.
INFORMATION SERVICES: IT KNOWLEDGE CENTER
The IT KNOWLEDGE CENTER is a Web site containing focused content for IT
professionals. It includes featured articles, career information, online
library, and tutorials. The IT KNOWLEDGE CENTER was recently introduced and has
not generated significant revenue to date. The individual services and features
of the IT KNOWLEDGE CENTER are described below:
COMPARISCOPE is an online research service that permits customers to perform
objective, in-depth, technical evaluations of over twenty categories of business
software. The analysis can be tailored to match individual requirements by
enabling IT professionals to rank the importance of and compare various software
product features. COMPARISCOPE is available for a fee.
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PREMIERE CONTENT is a collection of tools, models, templates and other
resources available to facilitate the evaluation and selection of software
products. PREMIERE CONTENT is available for a fee.
"ASK JAMES" is an online service designed to provide personalized answers to
customers' IT-related concerns or questions. This service also provides an
archive of previously answered questions. "ASK JAMES" is free for all registered
members, but to receive expedited service, in which a customer's question will
be answered within 24 hours of receipt, a customer must pay a fee.
SUBSCRIBNEWS is an email based weekly digest of news, information, and
opinions focused on Internet technology. SUBSCRIBNEWS is currently available
free of charge.
RADARSCOPE is an interactive service providing information on over 1,000
business software products. RADARSCOPE allows customers to efficiently search
for business software products by vendor, product, or keyword. The Company does
not currently charge for the use of RADARSCOPE.
PURCHASE AND DELIVERY SERVICES: INTRAWARE.SHOP
The INTRAWARE.SHOP service is an online service designed to simplify the
purchase and delivery of business software for corporations. This service
provides in-depth product information, simplifies complex bundling and pricing
options, accepts online purchase orders and credit evaluations, enables the
electronic delivery of large software products, and supports deployment to
multiple servers and locations. The INTRAWARE.SHOP service also offers customers
online self-service quotations, evaluations, live interactive software
demonstrations and several financing options. Customers can use INTRAWARE.SHOP
for the purchase of new software packages, as well as additional licenses,
renewals and add-on products.
Currently, the Company does not charge its IT professional customers for
access to INTRAWARE.SHOP, but does typically charge software vendors for the
inclusion of their products in the INTRAWARE.SHOP. The Company receives a
negotiated percentage of the purchase price of all software products it sells.
The individual services and features of INTRAWARE.SHOP are described below.
PRODUCT CATALOG is an online software catalog focused on software from
leading Internet technology vendors. Currently the Company's software product
selection includes more than 1,000 products from 25 software vendors, including
Netscape, Informix and NetDynamics. PRODUCT CATALOG contains a simple format for
searching, browsing and researching, and gives customers precise information
concerning software products offered by the Company.
DEMO CENTER provides potential customers an interactive experience through
either screen shots or online demonstrations. DEMO CENTER is a method for
software purchasers to determine the user and administrative features of
selected software products.
TRY AND BUY allows potential customers to download the evaluation version of
a software product and use that version in their own IT environment before
making a final purchasing decision. Potential customers can interact with
systems engineers and sales consultants to enhance the TRY AND BUY service.
VIRTUALEXPRESS SOFTWARE DELIVERY is a fault-tolerant online software
delivery engine through which a customer purchases software online.
VIRTUALEXPRESS is also used to deliver subsequent updates and upgrades.
VIRTUALEXPRESS contains features such as encryption, compression and
multi-location deployment. Customer service representatives work with customers
to assist in the download process. VIRTUALEXPRESS streamlines the software
delivery and distribution process to multiple servers and locations. The Company
is able to track the type and version of software products licensed to
customers.
MAINTENANCE SERVICES: SUBSCRIBNET
The Company provides online update and license management services for
certain software products through the use of SUBSCRIBNET, a Web-based,
multi-vendor software update service that provides end-users with proactive,
customized
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email notification of software updates with on-demand access to software
downloads. SUBSCRIBNET can help alleviate the burden of tracking and retrieving
the software to which a corporate customer is entitled.
For IT professionals, SUBSCRIBNET provides proactive notification, on-demand
downloads, and a central repository for software licenses, subscriptions and
product release archiving. SUBSCRIBNET automatically notifies appropriate IT
professionals within 24 hours of any product update, including bug patches and
other major and minor releases. These notifications are personalized to the
user's product, version and platform. IT professionals can then download these
product updates electronically through the use of VIRTUALEXPRESS. SUBSCRIBNET
contains a personalized release archive containing all versions entitled to each
user, including enhancements and bug and security patches. Account history, such
as asset reports, quotes, order status, and purchase history, and account
activity, such as download and notification logs, enable the Company to monitor
purchasing activity and software upgrade downloads. SUBSCRIBNET was introduced
in February 1997 and has only recently begun to generate revenues.
In addition to servicing end users, SUBSCRIBNET is targeted at software
vendors. For software vendors, SUBSCRIBNET is a vehicle through which they can
provide their customers with a higher level of service, while also facilitating
and improving the flow and quality of customer data available to them. By
outsourcing subscription services to the Company, software vendors can off-load
some of the costs and burdens associated with physical distribution of updates,
minimize technical support resources devoted to updates and patches and increase
the productivity of their own IT and sales departments by reducing after-sales
management efforts.
The SUBSCRIBNET update and license management service supports all of the
software products sold by the Company. SUBSCRIBNET may be purchased with any
software product offered by the Company, for an additional fee. Additionally,
the Company is seeking contracts with software vendors whose products the
Company does not sell in order to achieve broader and more comprehensive
coverage.
SOFTWARE VENDOR PARTNERS
Listed below are the software vendors whose products are offered through one
or more of the Company's services as of November 30, 1998.
Allegis Corporation
Avesta Technologies, Inc.
Applix, Inc.
Bluestone Software, Inc.
Check Point Software Technologies Ltd.
Diffusion, Inc.
Elemental Software
EnCommerce, Inc.
Extensity Inc.
grapeVINE Technologies, LLC
Informix Corporation
Marimba, Inc.
Mercury Interactive Corporation
Netegrity, Inc.
net.Genesis Corporation
Netmosphere Inc.
Netscape Communications Corporation
Oblix Inc.
Open Text Inc.
Real Networks Inc.
Reasonate, Inc.
Segue Software Inc.
Sun Microsystems, Inc.
Symantec Corporation
WindDance Networks Corporation
Although the Company has entered into license agreements with these vendors
which allows the Company to offer these vendors' software products through one
or more of the Company's services, these agreements generally are terminable on
short or no notice. There can be no assurance that any of these software vendors
will continue to offer their software products through the Company. For the nine
months ended November 30, 1998, Intraware generated over 90% of its total net
revenues from the sale of Netscape software products and the outsourcing of
SUBSCRIBNET services to Netscape. See "Risk Factors--We Are Substantially
Dependent on Netscape Communications Corporation."
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CUSTOMERS
As of November 30, 1998, the Company served almost 1,700 organizations in a
wide range of industries, including finance, retail, high technology,
telecommunications and transportation. The following is a list of our customers
who have purchased over $100,000 of software products or online services from
Intraware:
TECHNOLOGY
3Com Corporation
Loral Space Systems
LSI Logic*
Lycos, Inc.
Mentor Graphics
National Semiconductor
Progress Software Corporation
Seagate Technology*
United Webs, Inc.
Zilog, Inc.
TELECOMMUNICATIONS
AT&T Corporation
AT&T Local Services
Frontier Corporation*
GTE Enterprise Solutions
INFORMATION SERVICES
Gentrobe
Knight-Ridder, Inc.
Reuters Information Technology
SRI
When.Com*
MANUFACTURING
Boeing--Materials and Support Service
DaimlerChrysler AG*
International Rectifier*
Modus Media International
Raytheon Aircraft Company
FINANCIAL SERVICES
Banc One Services Corporation*
Charles Schwab & Co., Inc.*
First American Title
Franklin Resources
HEALTH CARE
Boston Medical Center
Medaphis Corporation
OTHER
Kinko's, Inc.*
Raley's/Bel Air
State of New York
* Denotes IT KNOWLEDGE CENTER, INTRAWARE.SHOP and SUBSCRIBNET customers that
have purchased all three online services from the Company.
SALES STRATEGY
The Company sells its services into to major customer constituencies: IT
professionals and software vendors. The sales approach to each customer
constituency differs due to the nature of the respective sales processes. Sales
of business software and Intraware's online knowledge services are characterized
by reasonably short sales cycles and are targeted at IT professionals. Sales of
software vendor outsourcing services, such as SUBSCRIBNET, tend to be
characterized by longer sales cycles and are targeted at marketing, sales,
customer satisfaction, operations and general management professionals at the
executive level. The Company currently uses two distinct sales organizations to
accomplish these goals.
SALES TO IT PROFESSIONALS
As of November 30, 1998, the Company's direct sales force consisted of 43
commissioned salespeople. Of these, the telemarketing and inside sales personnel
are primarily focused on building initial relationships with corporate
customers, selling subscriptions to the Company's knowledge services, including
Gold Membership, and generating software product sales opportunities for the
Company's field sales force. Intraware's field sales professionals interact
directly with IT decision-makers at large corporations to promote both the
Company's services and its software vendors' products.
The Company's regional sales teams consist of field and inside sales
professionals and dedicated systems engineers who provide a high level of
strategic technical support to their customers. In addition to its principal
sales office
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in Orinda, California, the Company has established sales offices in ten major
cities in the United States, including Boston, Chicago, Cleveland, Dallas,
Detroit, Los Angeles, New York, Salt Lake City, Seattle, and Washington, D.C.
Intraware's sales to IT professional customers have grown as a result of its
coordinated sales effort, combining the benefits of online sales opportunities
with a direct salesforce.
SALES TO SOFTWARE VENDORS
The Company manages sales of its SUBSCRIBNET outsourcing update and license
management services through its product marketing and business development
group. This sales process effort is in its early stages, and as of November 30,
1998, the Company employed ten business development professionals focused in
this area. The process of getting vendors to outsource their update and license
management functions to the Company is lengthy, as many of the features of the
services need to be tailored to the specific requirements of the Company's
software vendor partners. The Company intends to hire additional specialized
outsourcing sales professionals to address this sales effort.
CO-MARKETING RELATIONSHIPS
Partnerships are an integral part of Intraware's sales strategy. The Company
has established relationships with each of the vendors whose products are
offered through INTRAWARE.SHOP. The Company's product marketing group continues
to target additional software vendors to expand the number of software products
offered through INTRAWARE.SHOP.
In addition, Intraware has an established relationship with Netscape to
prominently display its IT KNOWLEDGE CENTER service on Netscape's Netcenter
Computer and Internet Channel. This relationship provides additional
opportunities to reach a broader audience of IT Professionals. The Company
intends to develop additional partnerships with Internet traffic aggregators to
offer its services to a large, targeted group of IT professionals.
The Company also intends to develop relationships with IT content providers
who are of interest to Intraware's targeted user base, so as to enhance the
value of the Company's IT KNOWLEDGE CENTER service offerings. The Company's
partnership with EarthWeb, Inc. allows IT KNOWLEDGE CENTER subscribers access to
EarthWeb's content through Intraware's Web site. The Company intends to leverage
partnerships with IT consultants to establish an indirect sales channel for its
services.
Intraware has also established a relationship with Informix Software, Inc.
whereby Intraware manages Informix's online store. Several of Informix's
products and promotional programs have generated a large interest among IT
professionals which has contributed to additional Intraware membership
registrations.
Intraware has recently entered into an agreement with Nettgain Solutions
Limited, a United Kingdom based consulting firm, to offer the Company's services
to prospective United Kingdom-customer base, and intends to develop additional
partnerships to address international markets.
MARKETING
The Company employs a broad range of marketing activities to promote its
brands, develop name recognition and visibility, and drive traffic to its Web
site in an effort to build its membership base and expand its community appeal.
The Company has an active public relations program in place, and also utilizes
print and online advertising, trade shows, seminars, direct mail, online
promotions, and regional marketing development in an attempt to expand its
penetration within the IT professional community in mid-to-large-sized
corporations and governmental agencies. The Company also distributes
SUBSCRIBNEWS, its weekly Web technology news and product information email
subscription newsletter, to over 30,000 IT professionals and other interested
members. The Company markets its SUBSCRIBNET service both to corporate software
decision makers and to business software developers.
As of November 30, 1998, the Company's marketing department consisted of ten
individuals, all of whom are located at the Company's Orinda, California
headquarters. The
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marketing department supports both domestic and international marketing efforts.
Domestically, efforts are focused on stimulating demand for the Company's
Web-based services and generating sales leads for its direct sales force. Lead
generation activities internationally are designed to assist consulting and
distribution partners in the resale of the COMPARISCOPE service.
The Company promotes its products and outsourcing services through a variety
of fixed and variable fee programs. The Company promotes its IT KNOWLEDGE CENTER
services in part through its Gold Membership program, an annual subscription
service. By bundling many of its free services with paid services, the Company
has been able to integrate and aggregate its comprehensive mix of interactive
services and dynamic content into a format of interest and value to individual
IT professionals within corporate and governmental IT departments.
The Company markets its Gold Membership through a number of vehicles
including its own Web site, the Netcenter IT KNOWLEDGE CENTER site, co-branded
with Netscape, traditional direct mail, online advertising and Internet-based
direct marketing.
The Company's sales force and systems engineers provide ongoing customer
service to the Company's customers. The customer service group responds to
inquiries regarding product downloads, product installation, and order
processing. The customer service department communicates with Intraware
customers primarily through email, although a toll-free phone number is also
available. Customer service professionals post frequently asked questions,
reference documents, and links to useful information on relevant parts of its
Web sites.
STRATEGIC RELATIONSHIP WITH NETSCAPE
Intraware plans to pursue strategic relationships to expand the Company's
product and service offerings, increase access to customers, and build brand
recognition. To date, the Company has established a strategic relationship with
Netscape as described below:
Intraware and Netscape entered into an agreement effective September, 1998
pursuant to which Intraware provides its IT KNOWLEDGE CENTER services as a
co-branded site within the Computing and Internet Channel of the Netcenter
portal. Intraware receives significant exposure across Netcenter in the form of
banner advertising and text links. Furthermore, the IT KNOWLEDGE CENTER site
hosts aggregated content and links to Intraware's interactive services. The
Company generates direct revenue from the co-branded site in the form of banner
advertisement revenue sharing. This agreement has a one year term, subject to a
one year renewal option on terms to be mutually agreed. This agreement is
terminable on 90 days notice.
SUBSCRIBNET
Effective October, 1998, Intraware entered into an agreement with Netscape
to provide SUBSCRIBNET software update and license management services, and
other maintenance services, to Netscape's customers worldwide for the entire
Netscape product line. Netscape serves as a key customer reference for
Intraware's SUBSCRIBNET service. This agreement has a one year term, subject to
a one year renewal option on similar terms unless terminated by either party.
This agreement is terminable on 90 days notice.
IT KNOWLEDGE CENTER
Under the terms of the Company's IT KNOWLEDGE CENTER agreement with Netscape
entered into in September 1998, Intraware provides all of the public IT
KNOWLEDGE CENTER content, within the framework of Netscape's Netcenter Computing
and Internet Channel. This agreement calls for the site to be "co-branded" with
Intraware's content surrounded by Netscape's Netcenter frame, and provides for
Intraware to be the premier sponsor of the IT KNOWLEDGE CENTER. In the event the
agreement is terminated after the one year term, Netscape may build a
substantially similar service.
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TECHNOLOGY
OVERVIEW
Intraware uses a combination of third party software, such as Sun, Netscape,
Informix, and Infoseek, as well as internally developed technology to enable its
services. Customers, members and partners each access and use Intraware's
services via the Internet. The Company's services, including SUBSCRIBNET,
INTRAWARE.SHOP, VIRTUALEXPRESS, COMPARISCOPE, RADARSCOPE, and IT KNOWLEDGE
CENTER, are developed, enhanced, and maintained by Intraware's internal IT
group. Intraware's technologies and services use a common set of underlying data
structures including companies, contacts, products, documents, and orders. They
also make use of the Company's ESD engine, library of content, email list
management, and common reporting tools. The Company has developed the capability
to use template-based styles to enable the same service application to have
different graphical user interfaces. Additionally, these service applications
can be co-branded with partners and customers with a customized look and feel.
ELECTRONIC SOFTWARE DELIVERY ENGINE. The Company's internally developed ESD
engine is the mechanism used to deliver software over the Internet and is used
by several of the Company's services, including SUBSCRIBNET, VIRTUALEXPRESS, and
INTRAWARE.SHOP. Intraware's ESD engine utilizes FTP and HTTP protocols and is
compatible with a wide range of customer firewalls and client/server platforms.
Software integrity and security is maintained by storing all of the software
files in a relational database system. The ESD engine encrypts and compresses
software files from the database before delivering them to the customer. The
encryption and compression formats are compatible with all major client and
server operating systems. The system supports large file sizes and also multiple
software images per SKU. Serial numbers and license keys can be uniquely
generated and included in each customer's download image. Intraware's ESD engine
allows customers to schedule downloads, retry downloads automatically or
manually and pick up partially completed downloads in the exact byte of the file
where the previous attempt left off. The engine also enables the Company to
track download effectiveness and throughput, scale network connectivity or
server capacity, and verify delivery.
ARCHITECTURE AND SCALABILITY. The Company uses object-oriented methods and
"open" programming languages--HTML, JavaScript, Java, and SQL--to develop its
services. Third party software from Sun, Netscape, Informix, and Infoseek is
used as the foundation to run applications and manage information. Substantial
investments in server hardware systems and networking equipment from Sun
Microsystems and Cisco Systems, respectively, provide Intraware with high
reliability, performance, and scalability.
Intraware's internal systems identify Internet bandwidth bottlenecks
continuously and manage complex Internet connectivity options in order to
maximize realized throughput and enhance the customer experience. Intraware
currently uses Exodus Communications as its primary data center and Internet
connection point, with replicated servers and services connected to the Internet
via Level 3 Communications. The Company intends to continue partnering with
leading Internet connectivity and hosting providers to maintain and enhance the
scalability of the Company's services.
CONTENT MANAGEMENT. The Company's content, including product information,
software images, documents, URLs, member/customer profiles, and orders, is
maintained through a suite of intranet/extranet applications developed by the
Intraware IT department. These applications, accessible to internal and external
users, feed the data sources that are accessed through the Company's services.
The Company uses Infoseek software, integrated into its database, for Library
URL content management and retrieval.
REPORTING. The Company's ability to generate relevant and accurate
information about customer and member software assets, interests, preferences
and user experiences is an important aspect of its competitive position.
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Using third-party software from Business Objects and Net Genesis, the Company
has developed reports drawn from its transactional databases, data warehouses,
and Web server activities. Information about competitive vendors and customers
are strictly separated and access to such information is limited to those
Intraware personnel that have access rights. The Company is currently evaluating
third party software to further enhance its financial and sales force automation
reporting capabilities. Should Intraware choose to upgrade these systems, there
can be no assurance that it will be able to do so without interruption of these
internal capabilities.
COMPETITION
The online commerce market is new, rapidly evolving and intensely
competitive, and the Company expects competition to intensify in the future,
particularly in the area of electronic sale and distribution of software
products. Barriers to entry are minimal, and current and new competitors can
launch new Web sites at a relatively low cost. We believe that we compete
effectively as a result of our centralized, IT-focused, Internet-enabled
solution coupled with our commitment to providing high-quality solutions that
yield a rapid return on investment for our corporate IT professional customers.
The Company's current and potential competitors in the market include: (i)
information providers to IT professionals; (ii) online distributors, resellers
and VARs; and (iii) software update and license management services and
technology providers. The Company's competitors may operate in one or more of
these areas.
With respect to information providers, the Company competes with research
firms as well as other content and software vendor companies who have particular
sections of their Web sites directed at certain segments or sub-segments of the
IT professional community (various Web sites and publications). The Company
believes the competitive factors in this marketplace include the following:
objectivity, timeliness and comprehensiveness of information, breadth of product
and service offerings targeted at IT professionals and expertise in
Internet-based technologies. The Company is building competitive advantages by
providing not only relevant, high end content, but also by making its site
functional with interactive services and useful tools.
In addition, the software reselling industry is intensely competitive. The
Company believes the competitive factors in this market segment include product
selection, additional service offerings, price, customer service and technical
support. With respect to selling software, the Company currently competes
primarily with traditional software resellers, other online software resellers
and other vendors. In the online market, the Company competes with companies
that sell and distribute software products via the Internet as well as vendors
that maintain commercial Web sites that sell their software products directly
online. In addition there is indirect competition with other transaction
processing providers and enablers and indirect competition with other providers
of electronic commerce solutions. The Company believes that it is well
positioned with its electronic commerce and software delivery services being
tailored to high-end enterprise products, the need for in-depth information, and
corporate purchasing needs. There can be no assurance that consumer-focused
online resellers and retail enablers will not decide to move more aggressively
into the corporate market and corporate resellers could implement more robust
online commerce efforts, each of which could adversely affect the Company's
business and operating results.
In the update and license management market, the Company primarily competes
with software vendors that do not outsource these services. Principal
competitive factors in this market include the existing relationships software
vendors have with their customers, the comprehensiveness of the services offered
and price. The Company believes it competes effectively in this market on the
basis of its comprehensive service offerings, although it faces significant
competition due to its less established customer relationships.
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Many of our competitors have already established supplier relationships with
divisions of our current or potential customers. These competitors may be able
to leverage their existing relationships to discourage these customers from
purchasing additional Intraware products or persuade them to replace our
products with their products. Many of our competitors have longer operating
histories, significantly greater resources and name recognition and a larger
installed base of customers than we have. As a result, these competitors may
have greater credibility with our existing and potential customers. They also
may be able to devote greater resources to the development, promotion and sale
of their products than we can to ours, which would allow them to respond more
quickly than we can to new or emerging technologies and changes in customer
requirements.
INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES
Intraware's ability to compete and continue to provide technological
innovation is substantially dependent upon internally developed technology.
Internally developed applications include the following externally branded
services and extranet content administration tools - SUBSCRIBNET,
VIRTUALEXPRESS, COMPARISCOPE, ESD Engine, INTRAWARE.SHOP, IT KNOWLEDGE CENTER,
RADARSCOPE, ADMINISCOPE, ITEM MAGIC, QUOTETOOL, and REPORTMART. While the
Company relies on copyright, trade secret and trademark law to protect its
technology, the Company believes that factors such as the technological and
creative skills of its personnel, new product developments, frequent product
enhancements and reliable product maintenance are more essential to establishing
and maintaining a technology leadership position. The Company has no patents
issued or applied for to date on its technology. There can be no assurance that
others will not develop technologies that are similar or superior to the
Company's technology. The Company is aware that certain other companies are
using or may have plans to use in the future the name "Intraware" as a company
name or as a trademark or service mark. While the Company does not believe it
has infringed any rights, and it has received no notice of any claims of
infringement, the Company can make no assurance that certain of these companies
may not claim superior rights to "Intraware" or other marks used in the
Company's business.
The Company generally enters into confidentiality or license agreements with
its employees, consultants and corporate partners, and generally controls access
to and distribution of its software, documentation and other proprietary
information. Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use the
Company's products or technology. Policing unauthorized use of the Company's
products is difficult, and there can be no assurance that the steps taken by the
Company will prevent misappropriation of its technology, particularly in foreign
countries where the laws may not protect the Company's proprietary rights as
fully as do the laws of the United States.
Substantial litigation regarding intellectual property rights exists in the
software industry, and the Company expects that software products may be
increasingly subject to third-party infringement claims as the number of
competitors in the Company's industry segments grows and the functionality of
products in different industry segments overlaps. Any such claims, with or
without merit, could be time-consuming to defend, result in costly litigation,
divert management's attention and resources, cause product and service delays or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company, if at all. A successful claim of infringement against the
Company and failure or inability of the Company to license the infringed or
similar technology could have a material adverse effect on the Company's
business, financial condition and results of operations.
EMPLOYEES
As of November 30, 1998, the Company had 126 full-time employees, 23 of whom
were
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engaged in product development, 71 in sales and marketing, and 26 in finance,
administration and operations. The Company's future performance depends in
significant part upon the continued service of its key technical, sales and
senior management personnel, none of whom is bound by an employment agreement
requiring service for any defined period of time. The loss of the services of
one or more of the Company's key employees could have a material adverse effect
on the Company's business, financial condition and results of operations. The
Company's future success also depends on its continuing ability to attract,
train and retain highly qualified technical, sales and managerial personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company can retain its key personnel in the future. None of the Company's
employees is represented by a labor union. The Company has not experienced any
work stoppages and considers its relations with its employees to be good.
FACILITIES
The Company leases approximately 18,000 square feet of office space in a
single office building located in Orinda, California. The Company believes its
current facilities, combined with adjacent space it is currently negotiating to
sublease, will be adequate through calendar year 1999 and is currently in the
process of locating additional space to meet its expected requirements
thereafter.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
executive officers and directors of Intraware as of November 30, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Peter H. Jackson.......................... 40 Founder, President, Chief Executive Officer and Director
Paul A. Martinelli........................ 34 Founder, Senior Vice President and Chief Technology Officer
Donald M. Freed........................... 47 Founder, Executive Vice President and Chief Financial Officer
Terence J. Healey......................... 34 Senior Vice President of Marketing
Norman A. Pensky.......................... 49 Vice President of Sales
Cynthia H. Mascheroni..................... 38 Vice President of Business Development
Anita A. Youmans-Trone.................... 48 Vice President of Finance
Manfred J. Krikke......................... 29 Vice President of Intraware International
James A. Brentano......................... 39 Vice President of Knowledge Services
David L. Dunlap........................... 31 Vice President of Operations
Mark B. Hoffman(2)........................ 52 Director, Chairman of the Board
Charles G. Davis, Jr.(1).................. 64 Director, Vice Chairman of the Board
Laurence M. Baer.......................... 41 Director
John V. Balen(1).......................... 38 Director
Mary Ann Byrnes(2)........................ 42 Director
</TABLE>
- ------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
PETER A. JACKSON co-founded the Company in August 1996 and has served as
President and Chief Executive Officer since its inception. From May 1996 to
August 1996, Mr. Jackson served as a Vice President of Vanstar Corporation, a
computer hardware and services company. From May 1994 to May 1996, Mr. Jackson
served as President and COO of Dataflex Corporation, a value-added reseller of
computer hardware and services. From January 1986 to May 1994, Mr. Jackson
served as Founder and President of Granite Computer Products, Inc., a corporate
computer hardware reseller and services provider. Mr. Jackson holds an A.B. in
History from the University of California, Berkeley. Mr. Jackson currently
serves as a director of ONSALE, Inc., a public Internet company.
PAUL A. MARTINELLI co-founded the Company in August 1996 and has served as
Senior Vice President and Chief Technology Officer since its inception. From May
1994 to May 1996, Mr. Martinelli served as Vice President of Information Systems
for Dataflex Corporation, a value-added reseller of computer hardware and
services. From February 1991 to May 1994, Mr. Martinelli served as Director of
Information Systems for Granite Computer Products, Inc., a corporate computer
hardware reseller and services provider. Mr. Martinelli holds a B.A. in Computer
Science from the University of California, San Diego.
DONALD M. FREED co-founded the Company in August 1996 and has served as
Executive Vice President and Chief Financial Officer since its inception. From
May 1996 to August 1996, Mr. Freed served as a business development director for
Vanstar Corporation, a computer hardware and services company. From May 1994 to
May 1996, Mr. Freed served as Senior Vice President of Business Development for
Dataflex Corporation, a value-added reseller of computer hardware and services.
From May 1989 to May
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1994, Mr. Freed served as CFO of Granite Computer Products, Inc., a corporate
computer hardware reseller and services provider. Mr. Freed is a certified
public accountant and holds a B.S. in Accounting and a B.A. in Journalism from
San Francisco State University.
TERENCE J. HEALEY has served as Senior Vice President of Marketing of the
Company since its inception in August 1996. From May 1994 to August 1988, Mr.
Healey served as Regional Vice President of Marketing, and later National Vice
President of Marketing for Dataflex Corporation, a value-added reseller of
computer hardware and services. From August 1990 to May 1994, Mr. Healey served
successively as a product manager, marketing manager and Director of Marketing
for Granite Computer Products, Inc., a corporate computer hardware reseller and
services provider. Mr. Healey holds a B.A. in Political Science from the
University of California at Berkeley.
NORMAN A. PENSKY joined the Company as Vice President of Sales in December
1996. From July 1991 to November 1996, Mr. Pensky served as Senior Director of
Strategic Accounts for Macromedia, Inc., an Internet publishing company. Mr.
Pensky holds an M.B.A. from Golden Gate University and a B.S. in Business from
the University of Southern California.
CYNTHIA H. MASCHERONI joined the Company as Director of Marketing in
February 1997 and as Vice President of Business Development in April 1997. From
February 1993 to February 1997, Ms. Mascheroni served as Director of Business
Development and Director of Marketing for Graphix Zone, a computer and data
processing company. Ms. Mascheroni holds an M.B.A. from Northwestern University
and a B.A. in Psychology from the University of California, Los Angeles.
ANITA A. YOUMANS-TRONE joined the Company as the Vice President of Finance
in November 1996. From May 1996 to November 1996, Ms. Youmans-Trone served as
Regional Vice President of Finance of Vanstar Corporation, a computer hardware
and services company. From May 1994 to May 1996, Ms. Youmans-Trone served
successively as Director--Process Planning and Development--Information Systems
and Regional Vice President of Finance for Dataflex Corporation, a value-added
reseller of computer hardware and services. From January 1988 to May 1994 Ms.
Youmans-Trone served as Controller for Granite Computer Products, Inc., a
corporate computer hardware reseller and services provider.
MANFRED J. KRIKKE joined the Company as Vice President of Intraware
International in August 1998. From December 1997 to February 1998, Mr. Krikke
served as Vice President, Software and Internet Investment Banking for
NationsBanc Montgomery Securities, a national investment banking firm. From
August 1994 to December 1997, Mr. Krikke served first as an Analyst and then as
an Associate for Montgomery Securities, a national investment banking firm. In
1994, Mr. Krikke received a Doctorandus Degree in Business Economics from the
Vrije University, Amsterdam, The Netherlands.
JAMES A. BRENTANO joined the Company as Director of Systems Engineering in
June 1997 and as Vice President of Knowledge Services in June 1998. From January
1996 to June 1997, Mr. Brentano served as Director of LAN Services for Pacific
Bell. From March 1991 to December 1995, Mr. Brentano served as an IT Strategic
Architect for Pacific Gas & Electric, a regional natural gas and electric power
utility. Mr. Brentano holds an M.S. in Computer Science from the University of
California, Davis and an A.B. in Letters and Sciences from the University of
California, Berkeley.
DAVID L. DUNLAP joined the Company as the Director of Product Lines in
September 1997 and as Vice President of Operations in May 1998. From September
1996 to September 1997, Mr. Dunlap served as a Financial Systems Project Manager
for PeopleSoft, Inc. a software development company. From May 1996 to September
1996, Mr. Dunlap served as Director of Purchasing for Vanstar Corporation, a
computer hardware and services company. From May 1994 to May 1996, Mr. Dunlap
served as Vice President of National Operations for Dataflex Corporation, a
value-added reseller of computer hardware and services. From
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September 1986 to May 1994, Mr. Dunlap served as Vice President of Operations
for Granite Computer Products, Inc., a corporate computer hardware reseller and
services provider. Mr. Dunlap holds a B.A. in Government from Cornell
University.
MARK B. HOFFMAN has served as Chairman of the Board of Directors of the
Company since August 1996. Since September 1996, Mr. Hoffman has served as
President of Commerce One, an e-commerce procurement and supplier-management
solutions company. In 1984, Mr. Hoffman co-founded Sybase, Inc., a database
software company, and served as President until July 1996. Mr. Hoffman holds an
M.B.A. from the University of Arizona and a B.S. in Engineering from the U.S.
Military Academy. Mr. Hoffman serves on the Board of Directors of several
privately held companies.
CHARLES G. DAVIS, JR. has served as Vice Chairman of the Board of Directors
of the Company since September 1996. Since 1992 Mr. Davis has served as
President and Chief Executive Officer of the Montclair Group, an advisory group
specializing in energy and techonology companies. Mr. Davis received a B.S. in
Geology from Stanford University. Mr. Davis serves on the Board of Directors of
several privately held companies.
LAURENCE M. BAER has served as a director of the Company since January 1998.
Mr. Baer has served as the Executive Vice President and Chief Operating Officer
of the San Francisco Giants professional baseball team since December 1992. Mr.
Baer holds an M.B.A. from Harvard University and an A.B. in Political Science
from the University of California, Berkeley.
JOHN V. BALEN has served as a Director of the Company since April 1998.
Since September 1995 Mr. Balen has served as a Principal at Canaan Partners, a
national private venture capital firm. From June 1985 to June 1995, Mr. Balen
served as an Associate and a Managing Director of Horsley Bridge Partners, a
private equity investment management firm. Mr. Balen has an M.B.A. and a B.S. in
Electrical Engineering from Cornell University. Mr. Balen serves on the Board of
Directors of several privately held companies.
MARY ANN BYRNES has served as a Director of the Company since January 1998.
Ms. Byrnes founded Corsair Communications, a provider of real-time system
solutions for the wireless industry, in December 1994, and has served as its
President and Chief Executive Officer since its inception. From June 1987 to
November 1994, Ms. Byrnes served as Vice President of Sales and Marketing and
Vice President of Operations for Cellular One, a regional mobile phone and
communications company. Ms. Byrnes holds an M.B.A. from Harvard Business School
and a B.A. in Economics from Wellesley College. Ms. Byrnes serves on the Board
of Directors of Corsair Communications.
CLASSIFIED BOARD
The Company's Certificate of Incorporation provides for a classified Board
of Directors consisting of three classes of directors, each serving staggered
three-year terms. As a result, a portion of the Company's Board of Directors
will be elected each year. To implement the classified structure, prior to the
consummation of the offering, two of the nominees to the Board will be elected
to one-year terms, two will be elected to two-year terms and three will be
elected to three-year terms. Thereafter, directors will be elected for
three-year terms. Charles G. Davis and Mary Ann Byrnes have been designated
Class I directors whose term expires at the 1999 annual meeting of stockholders.
John Balen and Laurence Baer have been designated Class II directors whose term
expires at the 2000 annual meeting of stockholders. Peter Jackson and Mark
Hoffman have been designated Class III directors whose term expires at the 2001
annual meeting of stockholders. See "Description of Capital Stock--Antitakeover
Effects of Provisions of Certain Charter Provisions, Bylaws and Delaware Law."
Executive officers are appointed by the Board of Directors on an annual
basis and serve until their successors have been duly elected and qualified.
There are no family relationships among any of the directors, officers or key
employees of the Company.
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BOARD COMMITTEES
The Company established the Audit Committee and Compensation Committee in
December 1998.
The Audit Committee consists of Messrs. Balen and Davis. The Audit Committee
reviews the internal accounting procedures of Intraware and consults with and
reviews the services provided by the Company's independent accountants.
The Compensation Committee consists of Mr. Hoffman and Ms. Byrnes. The
Compensation Committee reviews and recommends to the Board of Directors the
compensation and benefits of employees of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to establishing the Compensation Committee, the Board of Directors as
a whole performed the functions delegated to the Compensation Committee. No
member of the Board of Directors or the Compensation Committee serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of the Company's Board of
Directors or Compensation Committee.
DIRECTOR COMPENSATION
Directors do not currently receive any cash compensation from the Company
for their service as members of the Board of Directors. Under the Company's 1996
Stock Option Plan, directors are eligible to receive stock option grants at the
discretion of the Board of Directors or other administrator of the plan. See
"--Incentive Stock Plans."
Currently, the Board of Directors provides option grants to each director
upon their appointment to the Board and upon each anniversary of service
thereafter. During 1997 and 1998, the Board granted options to purchase an
aggregate of 40,000 shares to each of Messrs. Davis and Hoffman. During 1998,
the Board granted options to purchase an aggregate of 30,000 shares to each of
Mr. Baer and Ms. Byrnes in connection with their appointment to Intraware's
Board of Directors.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION. The following table sets forth the compensation
earned for services rendered to Intraware in all capacities for the fiscal years
ended February 28, 1997 and February 28, 1998 by Intraware's Chief Executive
Officer and Intraware's next most highly compensated executive officers who
earned more than $100,000 during the fiscal year ended February 28, 1998
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL -------------
COMPENSATION SECURITIES
-------------------------- UNDERLYING
NAME AND PRINCIPAL POSITIONS YEAR SALARY($) BONUS($) OPTIONS(#)
- ------------------------------------------------------------ --------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Peter H. Jackson............................................ 1998 $ 230,833 60,000 100,000
President and Chief Executive Officer 1997(1) 103,125 -- --
Paul A. Martinelli.......................................... 1998 101,250 5,000 60,000
Senior Vice President and Chief Technology Officer 1997(1) 48,750 -- --
Donald M. Freed............................................. 1998 115,417 5,000 60,000
Executive Vice President and Chief Financial Officer 1997(1) 56,250 -- --
Norman A. Pensky............................................ 1998 125,000 37,500 30,000
Vice President of Sales 1997(1) 31,250 12,500 220,000
</TABLE>
- ------------------------
(1) Fiscal year 1997 compensation figures are for the seven month period
beginning August 13, 1996 (inception) and ending February 28, 1998.
48
<PAGE>
OPTION GRANTS. The following table sets forth certain information with
respect to stock options granted to each of the Named Executive Officers in the
fiscal year ended February 28, 1998. In accordance with the rules of the
Securities and Exchange Commission, also shown below is the potential realizable
value over the term of the option (the period from the grant date to the
expiration date) based on assumed rates of stock appreciation of 5% and 10%,
compounded annually. These amounts are based on certain assumed rates of
appreciation and do not represent Intraware's estimate of future stock price.
Actual gains, if any, on stock option exercises will be dependent on the future
performance of the Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM (4)
OPTIONS IN LAST PRICE EXPIRATION --------------------
NAME GRANTED (#) FISCAL YEAR(2) ($/SHARE)(3) DATE 5% 10%
- -------------------------------------- ----------- --------------- ----------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Peter H. Jackson(5)................... 100,000 5.2% $ 0.125 10/21/2007 $ 7,861 $ 19,922
Paul A. Martinelli(5)................. 60,000 3.1 0.125 10/21/2007 4,717 11,953
Donald M. Freed(5).................... 60,000 3.1 0.125 10/21/2007 4,717 11,953
Norman A. Pensky(5)................... 30,000 1.6 0.125 10/21/2007 2,358 5,977
</TABLE>
- ------------------------
(1) On September 23, 1998, each of the Named Executive Officers were granted
options at an exercise price of $1.00 per share. Specifically, the following
number of options were granted: Mr. Jackson - 50,000; Mr. Freed - 30,000 and
Mr. Martinelli - 30,000.
(2) Based on an aggregate of 1,909,000 options granted by Intraware during the
fiscal year ended February 28, 1998 to employees of and consultants to
Intraware, including the Named Executive Officers.
(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board of
Directors. The exercise price may be paid in cash, in shares of Common Stock
valued at fair market value on the exercise date or in the form of a
promissory note.
(4) The potential realizable value is based on the term of the option at its
time of grant (ten years), and assumes that the fair market value of
Intraware's Common Stock on the date of grant appreciates at the indicated
annual rate compounded annually for the entire term of the option and that
the option is exercised and sold on the last day of its term for the
appreciated stock price.
(5) All options were granted under the Company's 1996 Stock Option Plan. All
shares under the options are immediately exercisable; however, as a
condition of exercise the optionee must enter into a stock restriction
agreement giving the Company the right to repurchase all such shares at cost
in the event of the optionee's termination of employment. The shares vest at
a rate of 25% after twelve months following the vesting commencement date
and an additional one forty-eighth each month thereafter; provided however,
that in the event of a merger or sale of assets of the Company each
outstanding option shall vest and become exercisable to the extent of the
shares that would have vested upon December 31 of the year in which the
merger or sale of assets is consummated.
49
<PAGE>
AGGREGATE OPTION EXERCISES AND OPTION VALUES. The following table sets forth
information with respect to the Named Executive Officers concerning option
exercises for the fiscal year ended February 28, 1998, and exercisable and
unexercisable options held as of February 28, 1998. No options were exercised by
the Named Executive Officers during the fiscal year ended February 28, 1998.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-
UNEXERCISED OPTIONS AT MONEY OPTIONS AT
FEBRUARY 28, 1998 (#) FEBRUARY 28, 1998 ($)(1)
-------------------------- --------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Peter H. Jackson(2)....................................... 100,000 -- $ 2,500 --
Paul A. Martinelli(2)..................................... 60,000 -- 1,500 --
Donald M. Freed(2)........................................ 60,000 -- 1,500 --
Norman A. Pensky(2)....................................... 250,000 -- 22,750 --
</TABLE>
- ------------------------
(1) Based on a value of $0.15 per share, the fair market value of Intraware's
stock as of February 28, 1998, as determined by the Board of Directors,
minus the per share exercise price, multiplied by the number of shares
issued upon exercise of the option.
(2) All options were granted under the Company's 1996 Stock Option Plan. All
shares under the options are immediately exercisable; however, as a
condition of exercise the optionee must enter into a stock restriction
agreement giving the Company the right to repurchase all such shares at cost
in the event of the optionee's termination of employment. The shares vest at
a rate of 25% after twelve months following the vesting commencement date
and an additional one forty-eighth each month thereafter; provided however,
that in the event of a merger or sale of assets of the Company each
outstanding option shall vest and become exercisable to the extent of the
shares that would have vested upon December 31 of the year in which the
merger or sale of assets is consummated.
INCENTIVE STOCK PLANS
401(K) PLAN
In 1996, Intraware adopted the Intraware 401(k) Plan (the "401(k) Plan")
covering Intraware's full-time employees located in the United States. The
401(k) Plan is intended to qualify under Section 401(k) of the Internal Revenue
Code of 1986, as amended (the "Code"), so that contributions to the 401(k) Plan
by employees or by Intraware, and the investment earnings thereon, are not
taxable to employees until withdrawn from the 401(k) Plan, and so that
contributions by Intraware, if any, will be deductible by Intraware when made.
Pursuant to the 401(k) Plan, employees may elect to reduce up to 20% of their
current compensation by up to the statutorily prescribed annual limit ($10,000
in 1998) and to have the amount of such reduction contributed to the 401(k)
Plan. The 401(k) Plan permits, but does not require, additional matching
contributions to the 401(k) Plan by Intraware on behalf of all participants in
the 401(k) Plan. To date, Intraware has not made any contributions to the 401(k)
Plan.
1996 STOCK OPTION PLAN (AS AMENDED ON DECEMBER 17, 1998)
The Company's 1996 Stock Option Plan (as amended on December 17, 1998) (the
"1996 Plan") provides for the granting to employees of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), and for the granting to employees and
consultants of nonstatutory stock options. The 1996 Plan was approved by the
Board of Directors and the Stockholders in October 1996. Unless terminated
sooner, the 1996 Plan will terminate automatically in 2006. A total of 6,200,000
shares of Common Stock is reserved for issuance pursuant to the 1996 Plan, plus
annual increases equal to the lesser of
50
<PAGE>
(i) 750,000 shares, (ii) 2% of the outstanding shares on such date or (iii) a
lesser amount determined by the Board.
The 1996 Plan may be administered by the Board of Directors or a committee
of the Board (as applicable, the "Administrator"). The Administrator has the
power to determine the terms of the options granted, including the exercise
price, the number of shares subject to each option, the exercisability thereof,
and the form of consideration payable upon such exercise. In addition, the
Administrator has the authority to amend, suspend or terminate the 1996 Plan,
provided that no such action may affect any share of Common Stock previously
issued and sold or any option previously granted under the 1996 Plan.
Options granted under the 1996 Plan are not generally transferable by the
optionee, and each option is exercisable during the lifetime of the optionee
only by such optionee. Options granted under the 1996 Plan must generally be
exercised within three months of the end of optionee's status as an employee or
consultant of the Company, or within twelve months after such optionee's
termination by death or disability, but in no event later than the expiration of
the option's ten year term. The exercise price of all incentive stock options
granted under the 1996 Plan must be at least equal to the fair market value of
the Common Stock on the date of grant. The exercise price of nonstatutory stock
options granted under the 1996 Plan is determined by the Administrator. With
respect to any participant who owns stock possessing more than 10% of the voting
power of all classes of the Company's outstanding capital stock, the exercise
price of any incentive stock option granted must equal at least 110% of the fair
market value on the grant date and the term of such incentive stock option must
not exceed five years. The term of all other options granted under the 1996 Plan
may not exceed ten years.
The 1996 Plan provides that in the event of a merger of the Company with or
into another corporation, or the sale of substantially all of the Company's
assets, each outstanding option will be assumed or substituted for by the
successor corporation. In addition, whether or not the options are assumed or
substituted in the merger, each outstanding option will vest and become
exercisable to the extent of the shares that would have vested upon December 31
of the year in which the merger is consummated.
1998 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1998 Employee Stock Purchase Plan (the "1998 Purchase Plan")
was adopted by the Board of Directors in December 1998 and by the stockholders
in December 1998. A total of 600,000 shares of Common Stock has been reserved
for issuance under the 1998 Purchase Plan, plus annual increases equal to the
lesser of (i) 400,000 shares, (ii) 1% of the outstanding shares on such date or
(iii) a lesser amount determined by the Board on the first day of each fiscal
year starting in 2000.
The 1998 Purchase Plan, which is intended to qualify under Section 423 of
the Internal Revenue Code of 1986, as amended, contains successive twenty-four
month offering periods. The offering periods generally start on the first
trading day on or after April 15 and October 15 of each year, except for the
first such offering period which commences on the first trading day on or after
the effective date of this Offering and ends on the last trading day on or
before October 15, 2000.
Employees are eligible to participate if they are customarily employed by
the Company or any participating subsidiary for at least 20 hours per week and
more than five months in any calendar year. However, any employee who (i)
immediately after grant owns stock possessing 5% or more of the total combined
voting power or value of all classes of the capital stock of the Company, or
(ii) whose rights to purchase stock under all employee stock purchase plans of
the Company accrues at a rate which exceeds $25,000 worth of stock for each
calendar year may be not be granted an option to purchase stock under the 1998
Purchase Plan. The 1998 Purchase Plan permits participants to purchase Common
Stock through payroll deductions of up to 15% of the participant's
"compensation." Compensation is defined as the participant's base straight time
gross earnings and commissions but exclusive of payments for overtime, profit
sharing payments, shift premium
51
<PAGE>
payments, incentive compensation, incentive payments and bonuses. The maximum
number of shares a participant may purchase during a single offering period is
5,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of Common Stock at the end of each offering period. The price of stock
purchased under the 1998 Purchase Plan is 85% of the lower of the fair market
value of the Common Stock at the beginning of the offering period and the end of
each purchase period. Participants may end their participation at any time
during an offering period, and they will be paid their payroll deductions to
date. Participation ends automatically upon termination of employment with the
Company.
Rights granted under the 1998 Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the 1998 Purchase Plan. The 1998 Purchase Plan provides
that, in the event of a merger of the Company with or into another corporation
or a sale of substantially all of the Company's assets, each outstanding option
may be assumed or substituted for by the successor corporation. If the successor
corporation refuses to assume or substitute for the outstanding options, the
offering period then in progress will be shortened and a new exercise date will
be set, which will occur before the proposed sale or merger. The 1998 Purchase
Plan will terminate in 2008. The Board of Directors has the authority to amend
or terminate the 1998 Purchase Plan, except that no such action may adversely
affect any outstanding rights to purchase stock under the 1998 Purchase Plan.
1998 DIRECTOR OPTION PLAN
Non-employee directors are entitled to participate in the 1998 Director
Option Plan (the "Director Plan"). The Director Plan was adopted by the Board of
Directors in December 1998 and approved by the stockholders in December 1998,
but it will not become effective until the date of this Offering. The Director
Plan has a term of ten years, unless terminated sooner by the Board. A total of
150,000 shares of Common Stock have been reserved for issuance under the
Director Plan.
The Director Plan provides for the automatic grant of 15,000 shares of
Common Stock (the "First Option") to each non-employee director on the date on
which such person first becomes a non-employee director. After the First Option
is granted to the non-employee director, he or she shall automatically be
granted an option to purchase 7,500 shares (a "Subsequent Option") each year on
the date of the annual stockholder's meeting of the Company, if on such date he
or she shall have served on the Board for at least six months. Each First Option
and each Subsequent Option shall have a term of 10 years. The First Option shall
vest as to 12.5% of the shares subject to the option on the six-month
anniversary of the date of grant and monthly thereafter over the following four
year period. The Subsequent Option shall vest as to 25% of the shares subject to
the option on the six-month anniversary of the date of grant and monthly
thereafter over the following two year period. The exercise price of all Options
shall be 100% of the fair market value per share of the Common Stock, generally
determined with reference to the closing price of the Common Stock as reported
on the Nasdaq National Market on the date of grant.
In the event of a merger of the Company or the sale of substantially all of
the assets of the Company, if the option is not assumed or substituted, each
option shall become fully vested and exercisable for a period of thirty days
from the date the Board notifies the optionee of the option's full
exercisability, after which period the option shall terminate. If an option is
assumed or substituted and the optionee's service as a director is terminated,
other than upon a voluntary resignation, the option becomes fully vested.
Options granted under the Director Plan must be exercised within three months of
the end of the optionee's tenure as a director of the Company, or within twelve
months after such director's termination by death or disability, but in no event
later than the expiration of the option's ten year term. No option granted under
the Director Plan is transferable by the optionee other than by will or the laws
of descent and distribution, and each
52
<PAGE>
option is exercisable, during the lifetime of the optionee, only by such
optionee.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
The Company has not entered into employment agreements with its executive
officers, and their employment may be terminated at any time at the discretion
of the Company's Board of Directors.
Under the 1996 Stock Option Plan, whether or not the options are assumed or
substituted in a merger or asset sale, each outstanding option will vest and
become exercisable to the extent of the shares that would have vested upon
December 31 of the year in which the merger is consummated.
LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION
Intraware's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for (i) any
breach of their duty of loyalty to the corporation or its stockholders, (ii)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) unlawful payments of dividends or unlawful stock
repurchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit. Such limitation of liability does not
apply to liabilities arising under the federal securities laws and does not
affect the availability of equitable remedies such as injunctive relief or
rescission.
Intraware's Certificate of Incorporation and Bylaws provide that Intraware
shall indemnify its directors and executive officers and may indemnify its other
officers and employees and other agents to the fullest extent permitted by law.
Intraware believes that indemnification under its Bylaws covers at least
negligence and gross negligence on the part of indemnified parties. Intraware's
Bylaws also permit it to secure insurance on behalf of any officer, director,
employee or other agent for any liability arising out of his or her actions in
such capacity, regardless of whether the Bylaws would permit indemnification.
Intraware has entered into agreements to indemnify its directors and
executive officers, in addition to indemnification provided for in Intraware's
Bylaws. These agreements, among other things, provide for indemnification of
Intraware's directors and executive officers for certain expenses (including
attorneys' fees), judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
Intraware, arising out of such person's services as a director or executive
officer of Intraware, any subsidiary of Intraware or any other company or
enterprise to which the person provides services at the request of Intraware.
Intraware believes that these provisions and agreements are necessary to attract
and retain qualified persons as directors and executive officers.
53
<PAGE>
CERTAIN TRANSACTIONS
The information on this page does not reflect the two-for-one forward stock
split effective immediately prior to the effectiveness of this offering.
In June and July 1997, Intraware issued a total of 1,650,999 shares of
Series B Preferred Stock to various investors at a purchase price of $1.60 per
share. Of the total number of shares of Series B Preferred Stock issued, 312,500
shares were issued to The Hoffman Family Trust and 500,000 shares were issued to
entities affiliated with WI Harper Group. The balance of the shares were
purchased by accredited investors. On July 28, 1997, the Company also granted
The Hoffman Family Trust a warrant to purchase 15,625 shares of Series B
Preferred Stock in connection with a bridge loan. Mr. Hoffman is the Chairman of
the Board of Directors of Intraware and beneficially owns over 5% of the
Company's Common Stock. WI Harper Group, as a result of this transaction, became
beneficial owner of over 5% of the Company's outstanding capital stock.
In December 1997, Intraware issued 666,667 shares of Series C Preferred
Stock at a purchase price of $2.25 per share to entities affiliated with Kleiner
Perkins Caufield & Byers ("KPCB") which through this transaction became a
beneficial owner of over 5% of the Company's outstanding capital stock.
In April 1998, Intraware issued an aggregate of 2,189,523 shares of Series D
Preferred Stock to various investors at a purchase price of $5.35 per share.
Entities affiliated with Attractor Ventures LLC ("Attractor") purchased 560,748
shares, entities affiliated with Canaan Equity Partners, L.L.C. ("Canaan")
purchased 560,748 shares, entities affiliated with KPCB purchased 93,458 shares
and Technology Crossover Ventures ("TCV") purchased 560,748 shares. Mr. Balen, a
partner of Canaan, is a member of the Company's Board of Directors. KPCB
beneficially owned more than 5% of the Company's outstanding capital stock at
the time of this financing while each of Attractor, Canaan and TCV became
beneficial owners of more than 5% of the Company's outstanding capital stock as
a result of this transaction. The holders of Series D Preferred Stock are
entitled through agreement with the Company to participate in any directed share
program in connection with this offering.
In July 1998, Intraware loaned to Mr. Jackson $300,000 secured, in part, by
the pledge of 1,744,900 shares of Intraware Common Stock held by Mr. Jackson.
Mr. Jackson is President, Chief Executive Officer and a director of the Company.
The note bears interest at the rate of 8%, and interest and principal on the
note are due and payable on the earlier of (i) 30 days following this offering,
(ii) 90 days following his last day of employment with the Company or (iii) 60
days following the sale of his shares in Intraware in connection with a change
in control of Intraware. Unless earlier repaid, the note otherwise matures in
July 2000.
All future transactions, including any loans from Intraware to its officers,
directors, principal stockholders or affiliates, will be approved by a majority
of the Board of Directors, including a majority of the independent and
disinterested members of the Board of Directors or, if required by law, a
majority of disinterested stockholders, and will be on terms no less favorable
to Intraware than could be obtained from unaffiliated third parties.
54
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information known to Intraware with respect
to the beneficial ownership of its Common Stock as of November 30, 1998, and as
adjusted to reflect the sale of Common Stock offered hereby by (i) each
stockholder known by Intraware to own beneficially more than 5% of its Common
Stock, (ii) each of the Named Executive Officers, (iii) each director of
Intraware, (iv) all directors and executive officers as a group, and (v) all
other selling stockholders. As of November 30, 1998, there were 18,975,178
shares of Common Stock outstanding, as adjusted to reflect the conversion of all
outstanding shares of Preferred Stock upon closing of this offering. Except as
otherwise indicated, the Company believes that the beneficial owners of the
Common Stock listed below, based on the information furnished by such owners,
have sole voting power and investment power with respect to such shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING(1) AFTER OFFERING(1)(2)
------------------------- -------------------------
NUMBER PERCENTAGE NUMBER PERCENTAGE
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Peter H. Jackson(3)............................................. 3,639,800 19.1% 3,639,800
Entities Associated with Mark B. Hoffman(4) 1,866,250 9.8 1,866,250
c/o Intraware, Inc.
25 Orinda Way
Orinda, CA 94563..............................................
Entities Affiliated with Kleiner Perkins Caufield & Byers 1,520,250 8.0 1,520,250
2750 Sand Hill Road
Menlo Park, CA 94025..........................................
Entities Associated with Charles G. Davis, Jr.(5) 1,290,000 6.8 1,290,000
c/o Intraware, Inc.
25 Orinda Way
Orinda, CA 94563..............................................
Entities Affiliated with Attractor Ventures L.L.C. 1,121,496 5.9 1,121,496
110 Burlingame Avenue
Burlingame, CA 94010..........................................
Entities Affiliated with Canaan Equity Partners, L.L.C.(6) 1,121,496 5.9 1,121,496
2884 Sand Hill Road, Suite 115
Menlo Park, CA 94025..........................................
Technology Crossover Ventures 1,121,496 5.9 1,121,496
56 Main Street, Suite 210
Milburn, NJ 07041.............................................
Entities Affiliated with WI Harper Group 1,000,000 5.3 1,000,000
50 California Street, Suite 2920
San Francisco, CA 94111.......................................
Paul A. Martinelli(7)........................................... 840,000 4.4 840,000
Donald M. Freed(8).............................................. 598,346 3.1 598,346
Norman A. Pensky(9)............................................. 250,000 1.3 250,000
Laurence M. Baer(10)............................................ 30,000 * 30,000
Mary Ann Byrnes(11)............................................. 30,000 * 30,000
John V. Balen(12)............................................... -- -- --
All directors and officers as a group (15 persons)(13).......... 9,481,872 49.1 9,481,872
</TABLE>
- ------------------------
* Less than 1% of the outstanding shares of Common Stock.
55
<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options or warrants held by that person
that are currently exercisable or will become exercisable within 60 days
after November 30, 1998 are deemed outstanding, while such shares are not
deemed outstanding for purposes of computing percentage ownership of any
other person. Unless otherwise indicated in the footnotes below, the persons
and entities named in the table have sole voting and investment power with
respect to all shares beneficially owned, subject to community property laws
where applicable. Unless otherwise indicated in the table above, the address
of each of the individuals listed in the table is Intraware, Inc., 25 Orinda
Way, Orinda, California 94563.
(2) Assumes no exercise of underwriters' over-allotment option. In addition to
that portion ( shares) of the underwriters' over-allotment option
granted by the Company, each of Messrs. Jackson and Davis has granted the
underwriters an option to purchase and shares of Common
Stock, respectively, to cover over-allotments, if any. If the underwriters
exercise this over-allotment option in full, Messrs. Jackson and Davis will
beneficially own shares ( %) and shares ( % ) of the
outstanding Common Stock after the offering.
(3) Includes 50,000 shares issuable upon exercise of stock options exercisable
within 60 days of November 30, 1998. As of November 30, 1998, 122,916 of the
shares held by Mr. Jackson pursuant to the Company's 1996 Stock Option Plan
were subject to repurchase by the Company, at cost, in the event Mr. Jackson
ceases to be an employee of the Company. The right of repurchase of shares
granted pursuant to the 1996 Stock Option Plan lapses at the rate of 1/4
upon the expiration of one year from the date of grant and 1/48 each month
thereafter. The right of repurchase lapses in part upon consummation of a
merger of the Company or a sale of substantially all of its assets. In
addition, as of November 30, 1998, 583,334 shares are subject to repurchase
by the Company, at cost, pursuant to a Founder's Stock Purchase Agreement
between Mr. Jackson and the Company, which repurchase right lapses at the
rate of 1/36th of the initial number of shares purchased subject to such
right upon the expiration of each full month after the date of purchase.
(4) Includes 40,000 shares issuable upon exercise of stock options exercisable
within 60 days of November 30, 1998. As of November 30, 1998, 34,584 of the
shares held by Mr. Hoffman were subject to repurchase by the Company, at
cost, in the event Mr. Hoffman ceases to be an employee of the Company. The
right of repurchase lapses at the rate of 1/4 upon the expiration of one
year from the date of grant and 1/48 upon the expiration of each month
thereafter. The right of repurchase lapses in part upon consummation of a
merger of the Company or a sale of substantially all of its assets. Includes
1,826,250 shares held by Mark B. Hoffman, trustee of The Hoffman Family
Trust. Excludes 40,000 shares held by the Annie Eleanor Hoffman 1993
Revocable Trust of which Mr. Hoffman disclaims beneficial ownership.
Excludes 40,000 shares held by the Andrew Mark Hoffman 1993 Revocable Trust
of which Mr. Hoffman disclaims beneficial ownership.
(5) Includes 40,000 shares issuable upon exercise of stock options exercisable
within 60 days of November 30, 1998. As of November 30, 1998, 34,584 of the
shares held by Mr. Davis were subject to repurchase by the Company, at cost,
in the event Mr. Davis ceases to be an employee of the Company. The right of
repurchase lapses at the rate of 1/4 at one year from the date of grant and
1/48 each month thereafter. The right of repurchase lapses in part upon
consummation of a merger of the Company or a sale of substantially all of
its assets. Includes 400,000 shares held by Charles G. Davis, Jr., Trustee
of the Charles G. Davis, Jr., Trust Agreement dated 1/90 and 600,000 shares
held by the Davis Family-54447-LLC. Also, includes 40,000 shares issuable
upon exercise of stock options exercisable within 60 days of November 30,
1998
(6) John V. Balen is a principal of Canaan Equity Partners, L.L.C. the general
partner of Canaan Equity, L.P. Mr. Balen disclaims benficial ownership of
the shares held by Canaan Equity, L.P., except to the extent of his
pecuniary interest arising from his interest as a principal of Canaan Equity
Partners, L.L.C., the general partner of Canaan Equity Partners, L.P. Mr.
Balen is a member of the Board of Directors of the Company.
(7) Includes 30,000 shares issuable upon exercise of stock options exercisable
within 60 days of November 30, 1998. As of November 30, 1998, 73,750 of the
shares held by Mr. Martinelli
56
<PAGE>
pursuant to the Company's 1996 Stock Option Plan were subject to repurchase
by the Company, at cost, in the event Mr. Martinelli ceases to be an
employee of the Company. The right of repurchase of shares granted pursuant
to the 1996 Stock Option Plan lapses at the rate of 1/4 upon the expiration
of one year from the date of grant and 1/48 upon the expiration of each
month thereafter. The right of repurchase lapses in part upon consummation
of a merger of the Company or a sale of substantially all of its assets. In
addition, as of November 30, 1998, 187,500 shares are subject to repurchase
by the Company, at cost, pursuant to a Founder's Stock Purchase Agreement
between Mr. Martinelli and the Company, which repurchase right lapses at the
rate of 1/36th of the initial number of shares purchased upon expiration of
each full month after the date of purchase.
(8) Includes 30,000 shares issuable upon exercise of stock options exercisable
within 60 days of November 30, 1998. As of November 30, 1998, 73,750 of the
shares held by Mr. Freed pursuant to the Company's 1996 Stock Option Plan
were subject to repurchase by the Company, at cost, in the event Mr. Freed
ceases to be an employee of the Company. The right of repurchase of shares
granted pursuant to the 1996 Stock Option Plan lapses at the rate of 1/4 at
one year from the date of grant and 1/48 each month thereafter. The right or
repurchase lapses in part upon consummation of a merger of the Company or a
sale of substantially all of its assets. In addition, as of November 30,
1998, 125,000 shares are subject to repurchase by the Company, at cost,
pursuant to a Founder's Stock Purchase Agreement between Mr. Freed and the
Company, which repurchase right lapses at the rate of 1/36th of the initial
number of shares purchased upon expiration of each full month after the date
of purchase.
(9) As of November 30, 1998, 136,460 of the shares held by Mr. Pensky were
subject to repurchase by the Company, at cost, in the event Mr. Pensky
ceases to be an employee of the Company. The right of repurchase lapses at
the rate of 1/4 at one year from the date of grant and 1/48 each month
thereafter. The right or repurchase lapses in part upon consummation of a
merger of the Company or a sale of substantially all of its assets.
(10) Includes 30,000 shares issuable upon exercise of stock options exercisable
within 60 days of November 30, 1998. As of November 30, 1998, 30,000 of the
shares held by Mr. Baer were subject to repurchase by the Company, at cost,
in the event Mr. Baer ceases to be an employee of the Company. The right of
repurchase lapses at the rate of 1/4 upon the expiration of one year from
the date of grant and 1/48 upon the expiration of each month thereafter. The
right or repurchase lapses in part upon consummation of a merger of the
Company or a sale of substantially all of its assets.
(11) As of November 30, 1998, 30,000 of the shares held by Ms. Byrnes were
subject to repurchase by the Company, at cost, in the event Ms. Byrnes
ceases to be an employee of the Company. The right of repurchase lapses at
the rate of 1/4 upon the expiration of one year from the date of grant and
1/48 upon the expiration of each month thereafter. The right or repurchase
lapses in part upon consummation of a merger of the Company or a sale of
substantially all of its assets.
(12) Mr. Balen did not hold any shares of the Company's capital stock as of
November 30, 1998 and does not hold any options exercisable within 60 days
of November 30, 1998. Mr. Balen is a principal of Canaan Equity Partners,
L.L.C. the general partner of Canaan Equity, L.P. Mr. Balen disclaims
benficial ownership of the shares held by Canaan Equity L.P., except to the
extent of his pecuniary interest arising from his interest as a principal of
Canaan Equity Partners, L.L.C., the general partner of Canaan Equity
Partners, L.P. Mr. Balen is a member of the Board of Directors of the
Company.
(13) Includes an aggregate of 355,000 shares exercisable within 60 days of
November 30, 1998. Certain of these shares are subject to repurchase at
cost, which right of repurchase lapses at the rate of 1/4th at the end of
one year from the date of grant and 1/48th of each month thereafter. The
right of repurchase lapses in part upon consummation of a merger of the
Company or a sale of substantially all of its assets.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon the completion of this offering, Intraware will be authorized to issue
250,000,000 shares of Common Stock, $0.0001 par value, and 10,000,000 shares of
undesignated Preferred Stock, $0.0001 par value. The following description of
Intraware's capital stock does not purport to be complete and is subject to and
qualified in its entirety by Intraware's Certificate of Incorporation and
Bylaws, which are included as exhibits to the Registration Statement of which
this Prospectus forms a part, and by the provisions of applicable Delaware law.
COMMON STOCK
As of November 30, 1998, there were 18,975,178 shares of Common Stock
outstanding which were held of record by approximately 155 stockholders, as
adjusted to the forward two-for-one stock split of all outstanding Common Stock,
and conversion of all outstanding shares of convertible preferred stock into an
aggregate of 12,045,628 shares of Common Stock, which will occur upon the
closing of this offering.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available for that
purpose. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of Intraware, the holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
distribution rights of Preferred Stock, if any, then outstanding. The holders of
Common Stock have no preemptive or conversion rights or other subscription
rights. There are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are fully paid and
nonassessable, and the shares of Common Stock to be issued upon the closing of
this offering will be fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without action by the
stockholders, to designate and issue Preferred Stock in one or more series and
to designate the rights, preferences and privileges of each series, any or all
of which may be greater than the rights of the Common Stock. It is not possible
to state the actual effect of the issuance of any shares of Preferred Stock upon
the rights of holders of the Common Stock until the Board of Directors
determines the specific rights of the holders of such Preferred Stock. However,
the effects might include, among other things, restricting dividends on the
Common Stock, diluting the voting power of the Common Stock, impairing the
liquidation rights of the Common Stock and delaying or preventing a change in
control of Intraware without further action by the stockholders. Immediately
prior to the closing no shares of Preferred Stock will be outstanding, and
Intraware has no present plans to issue any shares of Preferred Stock.
WARRANTS
At November 30, 1998, there were warrants outstanding to purchase 24,000
shares of Series A Preferred Stock, 31,250 shares of Series B Preferred Stock,
and 8,878 shares of Series D Preferred Stock, which are convertible in the
aggregate into 128,256 shares of Common Stock.
REGISTRATION RIGHTS
The holders of 16,783,428 shares of Common Stock and the holders of warrants
to purchase Preferred Stock convertible into 128,256 shares of Common Stock (the
"registrable securities") or their permitted transferees are entitled to certain
rights with respect to registration of such shares under the Securities Act.
These rights are provided under the terms of an agreement between Intraware and
the holders of registrable securities. Under these registration rights,
beginning 180 days following the date of this Prospectus, holders of at least
50% of the then outstanding registrable securities (or at least 60% of the then
outstanding registrable securities issued upon
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conversion of the Series D Preferred Stock) may require on up to two occasions
that Intraware register their shares for public resale. Intraware is obligated
to register these shares if the holders of at least 50% of such shares (or at
least 60% of the then outstanding registrable securities issued upon conversion
of the Series D Preferred Stock) request registration and only if the
outstanding registrable securities have an anticipated public offering price of
at least $10,000,000. In addition, holders of registrable securities may require
on four separate occasions that Intraware register their shares for public
resale on Form S-3 or similar short-form registration, provided Intraware is
eligible to use Form S-3 or similar short-form registration and provided further
that the value of the securities to be registered is at least $1,000,000.
Furthermore, in the event Intraware elects to register any of its shares of
Common Stock for purposes of effecting any public offering, the holders of
registrable securities are entitled to include their shares of Common Stock in
the registration, subject however to the right of Intraware to reduce the number
of shares proposed to be registered in view of market conditions. These
registration rights have been waived with respect to the offering made hereby.
All expenses in connection with any registration (other than underwriting
discounts and commissions) will be borne by Intraware. All registration rights
will terminate four years following the consummation of this offering, or, with
respect to each holder of registrable securities, at such time as Intraware's
shares are publicly traded and the holder is entitled to sell all of its shares
in any 90 day period under Rule 144 of the Securities Act.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
Certain provisions of Delaware law and Intraware's Certificate of
Incorporation and Bylaws could make more difficult the acquisition of Intraware
by means of a tender offer, a proxy contest or otherwise and the removal of
incumbent officers and directors. These provisions, summarized below, are
expected to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control of
Intraware to first negotiate with Intraware. Intraware believes that the
benefits of increased protection of Intraware's potential ability to negotiate
with the proponent of an unfriendly or unsolicited proposal to acquire or
restructure Intraware outweigh the disadvantages of discouraging such proposals
because, among other things, negotiation of such proposals could result in an
improvement of their terms.
ELECTION AND REMOVAL OF DIRECTORS. Effective with the first annual meeting
of stockholders following this offering, the Company's Restated Articles provide
for the division of the Company's Board of Directors into three classes, as
nearly equal in number as possible, with the directors in each class serving for
a three-term, and one class being elected each year by the Company's
stockholders. See "Management-Board of Directors and Executive Officers." This
system of electing and removing directors may tend to discourage a third party
from making a tender offer or otherwise attempting to obtain control of the
Company and may maintain the incumbency of the Board of Directors, as it
generally makes it more difficult for stockholders to replace a majority of the
directors.
STOCKHOLDER MEETINGS. Under the Company's Restated Bylaws, only the Board
of Directors, the Chairman of the Board and the President may call special
meetings of stockholders.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATIONS AND
PROPOSALS. The Company's Restated Bylaws establish advance notice procedures
with respect to stockholder proposals and the nomination of candidates for
election as directors, other than nominations made by or at the direction of the
Board of Directors or a committee thereof.
DELAWARE ANTITAKEOVER LAW. Intraware is subject to Section 203 of the
Delaware General Corporation Law, an anti-takeover law. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
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following the date the person became an interested stockholder, unless (with
certain exceptions) the "business combination" or the transaction in which the
person became an interested stockholder is approved in a prescribed manner.
Generally, a "business combination" includes a merger, asset or stock sale, or
other transaction resulting in a financial benefit to the interested
stockholder. Generally, an "interested stockholder" is a person who, together
with affiliates and associates, owns (or within three years prior to the
determination of interested stockholder status, did own) 15% or more of a
corporation's voting stock. The existence of this provision would be expected to
have an anti-takeover effect with respect to transactions not approved in
advance by the Board of Directors, including discouraging attempts that might
result in a premium over the market price for the shares of Common Stock held by
stockholders.
ELIMINATION OF STOCKHOLDER ACTION BY WRITTEN CONSENT. The Company's
Restated Certificate of Incorporation eliminates the right of stockholders to
act by written consent without a meeting.
ELIMINATION OF CUMULATIVE VOTING. The Company's Restated Certificate of
Incorporation and Bylaws do not provide for cumulative voting in the election of
directors.
UNDESIGNATED PREFERRED STOCK. The authorization of undesignated Preferred
Stock makes it possible for the Board of Directors to issue Preferred Stock with
voting or other rights or preferences that could impede the success of any
attempt to change control of Intraware. These and other provisions may have the
effect of deferring hostile takeovers or delaying changes in control or
management of Intraware.
AMENDMENT OF RESTATED CHARTER. The amendment of any of the above provisions
would require approval by holders of at least 66 2/3% of the outstanding Common
Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Harris Trust
Company of California.
NASDAQ NATIONAL MARKET LISTING
The Common Stock has been approved for listing on the Nasdaq National Market
under the symbol "ITRA," subject to official notice of issuance.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of
Intraware, and there can be no assurance that a significant public market for
the Common Stock will develop or be sustained after this offering. Future sales
of substantial amounts of Common Stock (including shares issued upon exercise of
outstanding options and warrants) in the public market following this offering
could adversely affect market prices prevailing from time to time and could
impair Intraware's ability to raise capital through sale of its equity
securities. As described below, no shares currently outstanding will be
available for sale immediately after this offering because of certain
contractual restrictions on resale. Sales of substantial amounts of Common Stock
of Intraware in the public market after the restrictions lapse could adversely
affect the prevailing market price and the ability of Intraware to raise equity
capital in the future.
Upon completion of this offering, Intraware will have outstanding
shares of Common Stock (based upon shares outstanding as of December 1, 1998),
assuming no exercise of the Underwriters' over-allotment option and no exercise
of outstanding options or warrants that do not expire prior to completion of
this offering. Of these shares, the shares sold in this offering will be
freely tradable without restriction under the Securities Act except for any
shares purchased by "affiliates" of Intraware as that term is defined in Rule
144 under the Securities Act. The remaining 19,534,778 shares of Common Stock
held by existing stockholders are "Restricted Shares" as that term is defined in
Rule 144. All such Restricted Shares are subject to lock-up agreements providing
that, with certain limited exceptions, the stockholder will not offer, sell,
contract to sell or otherwise dispose of any securities of Intraware that are
substantially similar to the Common Stock, including but not limited to any
securities that are convertible into or exchangeable for, or that represent the
right to receive, Common Stock or any such substantially similar securities
(other than pursuant to employee stock option plans existing on, or upon the
conversion or exchange of convertible or exchangeable securities outstanding as
of, the date of the lock-up agreement) for a period of 180 days after the date
of this Prospectus without the prior written consent of Credit Suisse First
Boston. As a result of these lock-up agreements, notwithstanding possible
earlier eligibility for sale under the provisions of Rules 144, 144(k) and 701,
none of these shares will be salable until 181 days after the date of this
Prospectus. Beginning 181 days after the date of this Prospectus, approximately
19,534,778 Restricted Shares will be eligible for sale in the public market, all
of which are subject to volume limitations under Rule 144, except
shares eligible for sale under Rule 144(k) and 2,250,350 shares eligible for
sale under Rule 701 (subject in some cases to repurchase rights in favor of
Intraware). In addition, as of December 1, 1998, there were outstanding
1,494,450 options and warrants to purchase Preferred Stock convertible into
128,256 shares of Common Stock, some of which will be exercised prior to this
offering. All such options and warrants are subject to lock-up agreements.
Credit Suisse First Boston may, in their sole discretion and at any time without
notice, release all or any portion of the securities subject to lock-up
agreements, however any release shall apply pro-rata to all stockholders subject
to such lock-up agreements.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least one year (including
the holding period of any prior owner except an affiliate) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of: (i) 1% of the number of shares of Common Stock then outstanding
(which will equal approximately shares immediately after this offering);
or (ii) the average weekly trading volume of the Common Stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions and
notice requirements and to the availability of
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current public information about Intraware. Under Rule 144(k), a person who is
not deemed to have been an affiliate of Intraware at any time during the three
months preceding a sale, and who has beneficially owned the shares proposed to
be sold for at least two years (including the holding period of any prior owner
except an affiliate), is entitled to sell such shares without complying with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144.
Rule 701, as currently in effect, permits resales of shares in reliance upon
Rule 144 but without compliance with certain restrictions, including the holding
period requirement, of Rule 144. Any employee, officer or director of or
consultant to Intraware who purchased shares pursuant to a written compensatory
plan or contract may be entitled to rely on the resale provisions of Rule 701.
Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell such shares in reliance on Rule 144
without having to comply with the holding period, public information, volume
limitation or notice provisions of Rule 144. All holders of Rule 701 shares are
required to wait until 90 days after the date of this Prospectus before selling
such shares. However, all Rule 701 shares are subject to lock-up agreements and
will only become eligible for sale at the earlier of the expiration of the
180-day lock-up agreements or no sooner than 90 days after the offering upon
obtaining the prior written consent of Credit Suisse First Boston.
Within 90 days following the effectiveness of this offering, Intraware will
file a Registration Statement on Form S-8 registering shares of Common
Stock subject to outstanding options or reserved for future issuance under its
stock plans. As of December 1, 1998, options to purchase a total 1,454,450
shares were outstanding and 103,400 shares were reserved for future issuance
under Intraware's stock plan. Common Stock issued upon exercise of outstanding
vested options or issued pursuant to the Purchase Plan, other than Common Stock
issued to affiliates of Intraware is available for immediate resale in the open
market.
Also beginning six months after the date of this offering, holders of
16,783,428 Restricted Shares and holders of warrants to purchase Preferred Stock
convertible into 128,256 shares of Common Stock will be entitled to certain
rights with respect to registration of such shares for sale in the public
market. See "Description of Capital Stock--Registration Rights." Registration of
such shares under the Securities Act would result in such shares becoming freely
tradable without restriction under the Securities Act (except for shares
purchased by affiliates) immediately upon the effectiveness of such
registration.
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ADDITIONAL INFORMATION
Intraware has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement on Form S-1 under the
Securities Act with respect to the shares of Common Stock offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to Intraware and such Common Stock, reference is made to the
Registration Statement and to the exhibits and schedules filed therewith.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. A copy of the Registration Statement may be
inspected by anyone without charge at the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of all or any portion of the Registration Statement may be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, upon payment of prescribed fees. The Commission
maintains a Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.
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UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1999 (the "Underwriting Agreement"), the
underwriters named below (the "Underwriters"), for whom Credit Suisse First
Boston Corporation, BancBoston Robertson Stephens Inc. and Hambrecht & Quist LLC
are acting as representatives (the "Representatives"), have severally but not
jointly agreed to purchase from Intraware the following respective numbers of
shares of Common Stock:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
Credit Suisse First Boston Corporation.........................................................
BancBoston Robertson Stephens Inc..............................................................
Hambrecht & Quist LLC..........................................................................
-------
Total......................................................................................
-------
-------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all the shares of Common Stock offered hereby (other than
those shares covered by the over-allotment option described below) if any are
purchased. The Underwriting Agreement provides that, in the event of a default
by an Underwriter, in certain circumstances the purchase commitments of
nondefaulting Underwriters may be increased or the Underwriting Agreement may be
terminated.
Intraware and the Selling Stockholders have granted to the Underwriters an
option, expiring at the close of business on the 30th day after the date of this
prospectus to purchase up to additional shares at the initial public
offering price less the underwriting discounts and commissions, all as set forth
in the table below. Such option may be exercised only to cover over-allotments
in the sale of shares of Common Stock. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Common
Stock as it was obligated to purchase pursuant to the Underwriting Agreement.
Intraware has been advised by the Representatives that the Underwriters
propose to offer the shares to the public initially at the public offering price
set forth on the cover page of this prospectus and, through the Representatives,
to certain dealers at such price less a concession of $ per share, and the
Underwriters and such dealers may allow a discount of $ per share on sales
to certain other dealers. After the initial public offering, the public offering
price and concession and discount to dealers may be changed by the
Representatives.
The following table summarizes the compensation to be paid to the
Underwriters by Intraware and the Selling Stockholders, and the expenses payable
by Intraware.
<TABLE>
<CAPTION>
TOTAL
------------------------------
WITHOUT OVER- WITH OVER-
PER SHARE ALLOTMENT ALLOTMENT
---------- -------------- --------------
<S> <C> <C> <C>
Underwriting Discounts and Commissions paid by Intraware.............. $ $ $
Expenses payable by the Intraware..................................... $ $ $
Underwriting Discounts and Commissions paid by Selling Stockholders... $ $ $
Expenses payable by the Selling Stockholders.......................... $ $ $
</TABLE>
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The Representatives have informed Intraware that they do not expect
discretionary sales by the Underwriters to exceed 5% of the shares being offered
hereby.
Intraware, its officers and directors and certain other shareholders have
agreed that they will not offer, sell, contract to sell, announce their
intention to sell, pledge or otherwise dispose of, directly or indirectly, or
file with the Commission a registration statement under the Securities Act
relating to, any additional shares of common stock or securities convertible
into or exchangeable or exercisable for any shares of Intraware without the
prior written consent of Credit Suisse First Boston Corporation for a period of
180 days after the date of this prospectus, except in the case of issuances by
Intraware pursuant to the exercise of employee stock options outstanding on the
date hereof.
Of the shares of Common Stock to be sold in this offering, the
Underwriters have reserved for sale, at the price to public set forth on the
cover page of this prospectus, up to shares for certain holders of
Intraware Preferred Stock in connection with a preexisting contractual right
between Intraware and such holders. See "Certain Transactions" and "Principal
Shareholders." As a result, the number of shares of Common Stock available for
sale to the general public will be reduced to the extent such persons purchase
the reserved shares. The Underwriters will offer to the general public (on the
same basis as the other shares to be sold in this offering) any reserved shares
that are not so purchased.
Intraware has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or to
contribute to payments which the Underwriters may be required to make in respect
thereof.
Intraware has applied to list the shares of Common Stock on The Nasdaq
National Market under the symbol "INTR".
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiation
between Intraware and the Representatives. The principal factors to be
considered in determining the public offering price include: the information set
forth in this prospectus and otherwise available to the Representatives; the
history and the prospects for the industry in which Intraware will compete; the
ability of Intraware's management; the prospects for future earnings of
Intraware; the present state of Intraware's development and its current
financial condition; the general condition of the securities markets at the time
of this offering; and the recent market prices of, and the demand for, publicly
traded common stock of generally comparable companies.
The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act. Over-
allotment involves syndicate sales in excess of the offering size, which creates
a syndicate short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the securities in
the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Representatives to reclaim a
selling concession from a syndicate member when the securities originally sold
by such syndicate members are purchased in a syndicate covering transaction to
cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the Common Stock
to be higher than it would otherwise be in the absence of such transactions.
These transactions may be effected on the Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.
Hambrecht & Quist LLC purchased an aggregate of 186,916 shares of Series D
Preferred Stock of Intraware which are convertible into 373,832 shares of Common
Stock on the same terms as other investors in the private placement, for a total
purchase price of $1,000,000.60. The purchase of such shares has been deemed by
the National Association of Securities Dealers, Inc. to constitute underwriting
compensation. As a result, such
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affiliates of Hambrecht & Quist LLC have agreed that they will not sell,
transfer, assign or hypothecate such shares for a period of one year from
, 1998, except to officers or partners (not directors) of the
underwriter and members of the selling group and/or their officers or partners.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of Common Stock are effected. Accordingly, any resale of the Common
Stock in Canada must be made in accordance with applicable securities laws which
will vary depending on the relevant jurisdiction, and which may require resales
to be made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company, the certain selling
stockholders, as applicable, and the dealer from whom such purchase confirmation
is received that (1) such purchaser is entitled under applicable provincial
securities laws to purchase such Common Stock without the benefit of a
prospectus qualified under such securities laws, (2) where required by law, such
purchaser is purchasing as principal and not as agent, and (3) such purchaser
has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the SECURITIES ACT (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein and the certain selling stockholders, as applicable, may be located
outside of Canada and, as a result, it may not be possible for Canadian
purchasers to effect service of process within Canada upon the issuer or such
persons. All or a substantial portion of the assets of the issuer and such
persons may be located outside of Canada and, as a result, it may not be
possible to satisfy a judgment against the issuer or such persons in Canada or
to enforce a judgment obtained in Canadian courts against such issuer or persons
outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Common Stock to whom the SECURITIES ACT (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Common Stock acquired on the same date
and under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Common Stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the Common Stock for investment by the purchaser under relevant Canadian
legislation.
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LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
Intraware by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Certain legal matters will be passed upon for the Underwriters
by Gunderson Dettmer Stough Villenueve Franklin & Hachigian, LLP, Menlo Park,
California. As of the date of this prospectus, WS Investment Company 97A, an
investment partnership composed of certain current and former members of and
persons associated with Wilson Sonsini Goodrich & Rosati, Professional
Corporation as well as certain individual attorneys of this firm, beneficially
own an aggregate of 116,842 shares of Intraware's Common Stock.
EXPERTS
The financial statements as of February 28, 1997 and 1998 and November 30,
1998, and for the period from August 14, 1996 (inception) through February 28,
1997, the year ended February 28, 1998 and the nine month periods ended November
30, 1997 and 1998 included in this Prospectus have been so included in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
67
<PAGE>
INTRAWARE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Balance Sheet.............................................................................................. F-3
Statement of Operations.................................................................................... F-4
Statement of Stockholders' Equity.......................................................................... F-5
Statement of Cash Flows.................................................................................... F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The recapitalization described in Note 11 to the financial statements has
not been consummated at December 18, 1998. When it has been consummated, we will
be in a position to furnish the following report:
"To the Board of Directors and Stockholders of
Intraware, Inc.
In our opinion, the accompanying balance sheet and the related
statements of operations, of stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of Intraware, Inc.
at February 28, 1997 and 1998 and November 30, 1998, and the results of its
operations and its cash flows for the period from August 14, 1996
(inception) through February 28, 1997, the year ended February 28, 1998 and
the nine month periods ended November 30, 1997 and 1998 in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above."
PricewaterhouseCoopers LLP
San Jose, California
December 14, 1998
F-2
<PAGE>
INTRAWARE, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FEBRUARY 28, NOVEMBER
-------------------- 30,
ASSETS 1997 1998 1998
--------- --------- ----------- PRO FORMA
STOCKHOLDERS'
EQUITY AT
NOVEMBER
30,
1998
-----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 303 $ 612 $ 5,413
Accounts receivable, net......................... 2 3,126 11,096
Prepaid license and services..................... 5 10,354 16,770
Other current assets............................. 31 197 3,735
--------- --------- -----------
Total current assets........................... 341 14,289 37,014
Property and equipment, net........................ 662 1,078 1,555
Other assets....................................... 23 17 352
--------- --------- -----------
Total assets $ 1,026 $ 15,384 $ 38,921
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings.................................. $ -- $ 1,754 $ 1,171
Accounts payable................................. 80 9,440 17,779
Accrued expenses................................. 104 781 1,800
Deferred revenue................................. -- 2,450 12,685
Lease obligations, current....................... 71 84 200
--------- --------- -----------
Total current liabilities...................... 255 14,509 33,635
Lease obligations, long-term....................... 189 105 225
--------- --------- -----------
Total liabilities.............................. 444 14,614 33,860
--------- --------- -----------
Commitments (Note 6)
Stockholders' equity:
Convertible Preferred Stock; issuable in series,
$0.0001 par value; 8,000 shares authorized,
actual, 1,500, 3,834 and 6,023 actual shares
issued and outstanding, respectively; 10,000
shares authorized, no shares issued and
outstanding, pro forma (unaudited)............. -- -- -- $ --
Common Stock, $0.0001 par value; 40,000 shares
authorized, actual, 5,250, 5,376 and 6,930
actual shares issued and outstanding,
respectively; 250,000 shares authorized, 18,976
shares issued and outstanding, pro forma
(unaudited).................................... -- -- -- --
Additional paid-in capital....................... 1,526 6,188 19,860 19,860
Unearned compensation............................ -- (492) (2,033) (2,033)
Accumulated deficit.............................. (944) (4,926) (12,766) (12,766)
--------- --------- ----------- -----------
Total stockholders' equity..................... 582 770 5,061 $ 5,061
--------- --------- ----------- -----------
-----------
$ 1,026 $ 15,384 $ 38,921
--------- --------- -----------
--------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
INTRAWARE, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AUGUST 14, 1996
(INCEPTION) NINE MONTHS ENDED
THROUGH YEAR ENDED NOVEMBER 30,
FEBRUARY 28, FEBRUARY 28, --------------------
1997 1998 1997 1998
--------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
Net revenues:
Software product sales..................................... $ 6 $ 10,383 $ 5,331 $ 23,027
Online services............................................ -- 4 -- 1,529
------ ------------ --------- ---------
Total net revenues..................................... 6 10,387 5,331 24,556
------ ------------ --------- ---------
Cost of net revenues:
Software product sales..................................... 5 8,348 4,346 19,421
Online services............................................ -- -- -- 470
------ ------------ --------- ---------
Total cost of net revenues............................. 5 8,348 4,346 19,891
------ ------------ --------- ---------
Gross profit....................................... 1 2,039 985 4,665
------ ------------ --------- ---------
Operating expenses:
Sales and marketing........................................ 233 3,496 2,037 8,738
Product development........................................ 253 951 604 1,298
General and administrative................................. 467 1,492 1,016 2,492
------ ------------ --------- ---------
Total operating expenses............................... 953 5,939 3,657 12,528
------ ------------ --------- ---------
Loss from operations......................................... (952) (3,900) (2,672) (7,863)
Interest expense............................................. (12) (103) (52) (154)
Interest and other income, net............................... 20 21 9 177
------ ------------ --------- ---------
Net loss..................................................... $ (944) $ (3,982) $ (2,715) $ (7,840)
------ ------------ --------- ---------
------ ------------ --------- ---------
Net loss per share:
Basic and diluted.......................................... $ (1.36) $ (2.02) $ (1.53) $ (2.25)
------ ------------ --------- ---------
------ ------------ --------- ---------
Weighted average shares.................................... 694 1,972 1,776 3,492
------ ------------ --------- ---------
------ ------------ --------- ---------
Pro forma net loss per share:
Basic and diluted (unaudited).............................. $ (0.51) $ (0.53)
------------ ---------
------------ ---------
Weighted average shares (unaudited)........................ 7,763 14,765
------------ ---------
------------ ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
INTRAWARE, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED
STOCK COMMON STOCK ADDITIONAL
------------------------ ---------------------- PAID-IN UNEARNED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT
----------- ----------- --------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Common Stock to Founders.... -- $ -- 5,250 $ -- $ 26 $ -- $ --
Issuance of Series A Convertible
Preferred Stock....................... 1,500 -- -- -- 1,500 -- --
Net loss................................ -- -- -- -- -- -- (944)
----- ----- --------- ----- ----------- ------------- ------------
Balance at February 28, 1997............ 1,500 -- 5,250 -- 1,526 -- (944)
Issuance of Series B Convertible
Preferred Stock....................... 1,651 -- -- -- 2,642 -- --
Issuance of Series C Convertible
Preferred Stock....................... 667 -- -- -- 1,500 -- --
Exercise of Series B warrant............ 16 -- -- -- 25 -- --
Exercise of stock options............... -- -- 126 -- 3 -- --
Unearned compensation................... -- -- -- -- 492 (492) --
Net loss................................ -- -- -- -- -- -- (3,982)
----- ----- --------- ----- ----------- ------------- ------------
Balance at February 28, 1998............ 3,834 -- 5,376 -- 6,188 (492) (4,926)
Issuance of Series D Convertible
Preferred Stock....................... 2,189 -- -- -- 11,714 -- --
Exercise of stock options............... -- -- 1,554 -- 153 -- --
Unearned compensation................... -- -- -- -- 1,805 (1,805) --
Amortization of unearned compensation... -- -- -- -- -- 264 --
Net loss................................ -- -- -- -- -- -- (7,840)
----- ----- --------- ----- ----------- ------------- ------------
Balance at November 30, 1998............ 6,023 $ -- 6,930 $ -- $ 19,860 $ (2,033) $ (12,766)
----- ----- --------- ----- ----------- ------------- ------------
----- ----- --------- ----- ----------- ------------- ------------
<CAPTION>
TOTAL
---------
<S> <C>
Issuance of Common Stock to Founders.... $ 26
Issuance of Series A Convertible
Preferred Stock....................... 1,500
Net loss................................ (944)
---------
Balance at February 28, 1997............ 582
Issuance of Series B Convertible
Preferred Stock....................... 2,642
Issuance of Series C Convertible
Preferred Stock....................... 1,500
Exercise of Series B warrant............ 25
Exercise of stock options............... 3
Unearned compensation................... --
Net loss................................ (3,982)
---------
Balance at February 28, 1998............ 770
Issuance of Series D Convertible
Preferred Stock....................... 11,714
Exercise of stock options............... 153
Unearned compensation................... --
Amortization of unearned compensation... 264
Net loss................................ (7,840)
---------
Balance at November 30, 1998............ $ 5,061
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
INTRAWARE, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 14, 1996
(INCEPTION) NINE MONTHS ENDED
THROUGH YEAR ENDED NOVEMBER 30,
FEBRUARY 28, FEBRUARY 28, --------------------
1997 1998 1997 1998
--------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................... $ (944) $ (3,982) $ (2,715) $ (7,840)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization........................... 42 270 182 384
Amortization of unearned compensation................... -- -- -- 264
Provision for doubtful accounts......................... -- 32 25 --
Changes in assets and liabilities:
Accounts receivable................................... (2) (3,156) (1,768) (7,970)
Prepaid license and services.......................... (5) (10,349) (5,105) (6,416)
Other current assets.................................. (31) (166) (261) (3,538)
Other assets.......................................... (23) 6 9 (335)
Accounts payable...................................... 80 9,360 4,486 8,339
Accrued expenses...................................... 104 677 668 1,019
Deferred revenue...................................... -- 2,450 1,338 10,235
------- ------------ --------- ---------
Net cash used in operating activities......................... (779) (4,858) (3,141) (5,858)
------- ------------ --------- ---------
Cash flows from investing activities:
Purchase of property and equipment.......................... (428) (686) (444) (477)
------- ------------ --------- ---------
Cash flows from financing activities:
Proceeds from bank borrowings, net.......................... -- 1,754 750 (583)
Proceeds from Preferred Stock, net.......................... 1,500 4,142 2,642 11,714
Proceeds from Common Stock.................................. 26 28 -- 153
Proceeds from exercise of warrant........................... -- -- 25 --
Principal payments on capital lease obligation.............. (16) (71) (52) (148)
------- ------------ --------- ---------
Net cash provided by financing activities..................... 1,510 5,853 3,365 11,136
------- ------------ --------- ---------
Increase (decrease) in cash and cash equivalents.............. 303 309 (220) 4,801
Cash and cash equivalents at beginning of period.............. -- 303 303 612
------- ------------ --------- ---------
Cash and cash equivalents at end of period.................... $ 303 $ 612 $ 83 $ 5,413
------- ------------ --------- ---------
------- ------------ --------- ---------
Supplemental disclosure of cash flow information:
Cash paid for interest...................................... $ 12 $ 87 $ 52 $ 154
Non-cash investing activities:
Property and equipment leases............................... $ 276 $ -- $ -- $ 368
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:
THE COMPANY
Intraware, Inc. (the "Company") was incorporated in Delaware on August 14,
1996. Intraware is a leading provider of Internet-based business-to-business
software services for IT professionals and business software vendors. Through
the Company's electronic software delivery and outsourcing services
technologies, the Company acts as an objective intermediary in the software
decision-making process. The Company's branded, integrated service offerings
enable software decision-makers to evaluate, purchase, deploy and maintain their
business software assets more effectively. The Company's online services allow
business software vendors to effectively market, sell and distribute products to
a targeted customer base of IT professionals.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Cash equivalents are
composed primarily of short-term certificates of deposit.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash, cash equivalents and accounts
receivable. Cash and cash equivalents are deposited with high credit quality
financial institutions. The Company's accounts receivable are derived from
revenue earned from customers located primarily in the U.S. The Company performs
ongoing credit evaluations of its customers' financial condition and, generally,
requires no collateral from its customers. The Company maintains an allowance
for doubtful accounts receivable based upon its historical experience and the
expected collectibility of all accounts receivable.
During the period from August 14, 1996 (inception) through February 28, 1997
and the year ended February 28, 1998, no customers accounted for greater than
10% of the total net revenues. During the nine month periods ended November 30,
1997 and November 30, 1998, no customers and one customer accounted for greater
than 10% of the total net revenue, respectively. As of February 28, 1997, no
customers accounted for greater than 10% of the Company's accounts receivable.
As of February 28, 1998 and November 30, 1998, four and three customers
accounted for greater than 10% of the Company's accounts receivable,
respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable, debt, and capital lease obligations, are
carried at cost, which approximates their fair value because of the short-term
maturity of these instruments.
F-7
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY AND EQUIPMENT
Property, equipment and leasehold improvements are stated at historical
cost. Depreciation and amortization is computed using the straight-line method
over the estimated useful lives of the assets, generally three to five years or
the lease term of the respective assets, if shorter.
REVENUE RECOGNITION
Software product sales revenue results from the sale of third party software
products to corporate customers and is recognized when there is evidence of an
arrangement for a fixed and determinable fee that is probable of collection and
the software is available for customer download through intraware.shop. Software
maintenance revenue results from the sale of third-party software maintenance
agreements and is recognized ratably over the service period.
Online services revenue results from software maintenance outsourcing
arrangements with third-party software vendors delivered through SUBSCRIBNET and
from various fee-base subscription research services. Such revenues are
recognized ratably over the service period.
Deferred revenue consists primarily of billings or payments received in
advance of revenue recognition from the sale of maintenance, SUBSCRIBNET and IT
KNOWLEDGE CENTER services.
PRODUCT DEVELOPMENT COSTS
Product development costs include expenses incurred by the Company to
develop, enhance, manage, monitor and operate the Company's website and delivery
services. Product development costs are expensed as incurred.
ADVERTISING EXPENSE
The Company utilizes print and online advertising, trade shows, seminars,
direct mail, online promotions and regional marketing development to expand
brand and product awareness in the IT professional community. Costs incurred for
presence on third-party web sites are recognized ratably over the term of the
arrangements. Costs incurred for Internet page impressions are recognized as
such impressions are delivered. All other advertising costs are expensed as
incurred.
STOCK-BASED COMPENSATION
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," ("APB No. 25") and complies with the
disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation." Under APB No. 25, compensation expense is based on the
difference, if any, on the date of the grant between the fair value of the
Company's stock and the exercise price.
INCOME TAXES
Income taxes are accounted for using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current year and
deferred tax liabilities and assets for the future tax consequences of events
that have been recognized in the Company's financial statements or tax returns.
The measurement of current and deferred tax liabilities and assets are based on
provisions of the enacted tax law; the effects of future changes in tax laws or
rates are not anticipated.
F-8
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
The measurement of deferred tax assets is reduced, if necessary, by the amount
of any tax benefits that, based on available evidence, are not expected to be
realized.
PRO FORMA STOCKHOLDERS' EQUITY (UNAUDITED)
Immediately prior to the effective date of the offering, the conversion rate
for all outstanding shares of Series A, Series B, Series C and Series D
Preferred Stock will automatically change to a ratio of two shares of Common
Stock for each share of Preferred Stock. Simultaneously, the shares of Preferred
Stock will convert into shares of Common Stock at such two-for-one conversion
rate. The pro forma effects of these transactions are unaudited and have been
reflected in the accompanying pro forma Stockholders' Equity at November 30,
1998.
NET LOSS PER SHARE
The Company computes net loss per share in accordance with SFAS No. 128,
"Earnings per Share" and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under
the provisions of SFAS No. 128 and SAB 98, basic and diluted net loss per share
is computed by dividing the net loss available to common stockholders for the
period by the weighted average number of shares of Common Stock outstanding
during the period. The calculation of diluted net loss per share excludes
potential common shares if the effect is antidilutive. Potential common shares
are composed of Common Stock subject to repurchase rights and incremental shares
of Common Stock issuable upon the exercise of stock options and warrants and
upon conversion of Series A, Series B, Series C and Series D Convertible
Preferred Stock.
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Pro forma net loss per share for the year ended February 28, 1998 and the
nine months ended November 30, 1998, is computed using the weighted average
number of common shares outstanding, including the pro forma effects of the
automatic change in conversion rate to one share of Preferred Stock for two
shares of Common Stock and conversion of the Company's Series A, Series B,
Series C and Series D Convertible Preferred Stock into shares of the Company's
Common Stock effective upon the closing of the Company's initial public
offering, as if such change in conversion rate and conversion occurred on March
1, 1997 or at date of original issuance, if later. The resulting pro forma
adjustment includes an increase in the weighted average shares used to compute
basic and diluted net loss per share of 5,791,000 and 11,273,000 for the year
ended February 28, 1998 and the nine months ended November 30, 1998,
respectively. The calculation of diluted net loss per share excludes potential
common shares as the effect would be antidilutive. Pro forma potential common
shares are composed of Common Stock subject to repurchase rights and incremental
common shares issuable upon the exercise of stock options and warrants.
INTERIM RESULTS
The interim financial statements as of November 30, 1998 and for the nine
months ended November 30, 1997 and 1998, have been prepared on the same basis as
the annual financial statements and, in the opinion of management, reflect all
adjustments, which include only normal recurring adjustments, necessary to
present fairly the Company's financial position, results of operations and cash
flows as of November 30, 1998 and for the nine months ended November 30, 1997
and 1998. The
F-9
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
results for the nine months ended November 30, 1998 are not necessarily
indicative of the results to be expected for the year ending February 28, 1999.
COMPREHENSIVE INCOME
Effective March 1, 1998, the Company adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes in equity (net assets)
during a period from non-owner sources. To date, the Company has not had any
transactions that are required to be reported in comprehensive income.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS No. 131"), which establishes standards for reporting information about
operating segments in annual financial statements. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. SFAS No. 131 is effective for fiscal years beginning after December
15, 1997. The Company will adopt the provisions of SFAS No. 131 in connection
with the preparation of its financial statements for the fiscal year ending
February 28, 1999.
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
is effective for financial statements for years beginning after December 15,
1998. SOP 98-1 provides guidance over accounting for computer software developed
or obtained for internal use including the requirement to capitalize specified
costs and amortization of such costs. The Company will adopt the provisions of
SOP 98-1 in its fiscal year ending February 28, 2000, and does not expect such
adoption to have a material effect on the Company's financial statements.
In March 1998, AIPCA issued Statement of Position 98-4, "Deferral of the
Effective Date of a provision of SOP 97-2 ("SOP 98-4"). SOP 98-4 defers for one
year the application of certain provisions of Statement of Position 97-2
"Software Revenue Recognition" ("SOP 97-2"). Different informal and
non-authoritative interpretations of certain provisions of SOP 97-2 have arisen
and, as a result, the AICPA issued SOP 98-9 in December 1998 which is effective
for periods beginning after March 15, 1999. SOP 98-9 extends the effective date
of SOP 98-4 and provides additional interpretive guidance. The adoption of SOP
97-2, SOP 98-4 and SOP 98-9 have not had and are not expected to have a material
impact on the Company's results of operations, financial position or cash flows.
However, due to the uncertainties related to the outcome of proposed amendments,
the impact on the future financial results of the Company is not currently
determinable.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities." ("SFAS 133"), which establishes accounting and reporting
standards of derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The adoption of
F-10
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
SFAS No. 133 is not expected to have an impact on the Company's results of
operations, financial position or cash flows upon the adoption of this standard.
NOTE 2--NETSCAPE COMMUNICATIONS CORP.
ELECTRONIC DISTRIBUTION LICENSE AGREEMENT
Under an Electronic Distribution License Agreement ("Distribution
Agreement"), as amended on October 20, 1998, the Company is authorized to
reproduce, use and electronically distribute Netscape products to end user
customers in the United States and Canada. The Company purchases Netscape
products under standard reseller terms on both a prepaid and per unit basis. The
Distribution Agreement has an initial term of two years and may be renewed by
mutual agreement of the parties for an additional one year period.
NETCENTER SERVICES AGREEMENT
Under a Netcenter Services Agreement ("Netcenter Agreement") effective
September 3, 1998, the Company obtained the right to maintain a content channel
within the Netcenter area of Netscape's Web site targeted at the IT professional
community.
In exchange for the content channel right, the Company paid Netscape $1
million, which is being recognized ratably over the one year term of the
arrangement. In addition, in exchange for a $4 million payment, Netscape agreed
to deliver a minimum cumulative number of impressions or page views promoting
the content channel within Netcenter. The $4 million payment is being recognized
as advertising expense over the one year term of the arrangement as such
impressions or page views are delivered.
SUBSCRIBNET SERVICES AGREEMENT
Under a Services Agreement ("Services Agreement") effective October 1, 1998,
the Company agreed to provide software update and management services through
SUBSCRIBNET to Netscape's worldwide non-consumer customer base. In consideration
for the services to be performed by the Company, Netscape agreed to pay $8
million, which is being recognized ratably over the one year term of the
arrangement. At November 30, 1998, $2 million of the fee is included in accounts
receivable and is scheduled for collection on or before December 31, 1998.
F-11
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--BALANCE SHEET COMPONENTS:
<TABLE>
<CAPTION>
FEBRUARY 28,
-------------------- NOVEMBER 30,
1997 1998 1998
--------- --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
ACCOUNTS RECEIVABLE, NET:
Accounts receivable......................................... $ 2 $ 3,158 $ 11,146
Allowance for doubtful accounts............................. -- (32) (50)
--------- --------- ------------
$ 2 $ 3,126 $ 11,096
--------- --------- ------------
--------- --------- ------------
PROPERTY AND EQUIPMENT, NET:
Computer equipment.......................................... $ 432 $ 857 $ 846
Internal-use software....................................... 175 207 277
Furniture and office equipment.............................. 97 261 988
Leasehold improvements...................................... -- -- 140
Leasehold construction-in-process........................... -- 65 --
--------- --------- ------------
704 1,390 2,251
Less: Accumulated depreciation and amortization............. (42) (312) (696)
--------- --------- ------------
$ 662 $ 1,078 $ 1,555
--------- --------- ------------
--------- --------- ------------
ACCRUED EXPENSES:
Accrued compensation and benefits........................... $ 89 $ 474 $ 1,563
Other....................................................... 15 307 237
--------- --------- ------------
$ 104 $ 781 $ 1,800
--------- --------- ------------
--------- --------- ------------
</TABLE>
Property and equipment includes $276,000, $276,000 and $644,000 of computer
equipment and internal-use software under capital leases at February 28, 1997
and 1998 and November 30, 1998, respectively. Accumulated amortization of assets
under capital leases totaled $15,000, $74,000 and $160,000 at February 28, 1997
and 1998 and November 30, 1998, respectively.
NOTE 4--INCOME TAXES:
At November 30, 1998, the Company had approximately $11,663,000 of federal
and $11,495,000 of state net operating loss carryforwards available to offset
future taxable income which expire in varying amounts beginning in 2012 and
2005, respectively. Under the Tax Reform Act of 1986, the amounts of and
benefits from net operating loss carryforwards may be impaired or limited in
certain circumstances. Events which cause limitations in the amount of net
operating losses that the Company may utilize in any one year include, but are
not limited to, a cumulative ownership change of more than 50%, as defined, over
a three year period. Due to cumulative ownership changes, at November 30, 1998
the Company may utilize approximately $1,100,000 of federal net operating losses
annually to offset future taxable income.
F-12
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--INCOME TAXES: (CONTINUED)
Net deferred assets are composed of the following (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 28,
-------------------- NOVEMBER 30,
1997 1998 1998
--------- --------- -------------
<S> <C> <C> <C>
Net operating loss carryforwards.............................. $ 373 $ 882 $ 4,628
Research and experimentation credit carryforwards............. 20 -- 217
Cumulative temporary differences.............................. -- 1,040 305
Valuation allowance........................................... (393) (1,922) (5,150)
--------- --------- ------
Net deferred tax asset........................................ $ -- $ -- $ --
--------- --------- ------
--------- --------- ------
</TABLE>
Based upon the Company's limited operating history, losses incurred to date
and the difficulty in accurately forecasting the Company's future results,
management does not believe that the realization of the related deferred tax
asset meets the recognition criteria required by generally accepted accounting
principles and, accordingly, a full valuation allowance has been recorded.
NOTE 5--BORROWINGS:
REVOLVING LOAN AGREEMENT
At February 28, 1998 and November 30, 1998, the Company had $1,754,000 and
$1,171,000 of outstanding borrowings under a bank revolving loan agreement.
Borrowings under the revolving loan bear interest of 1% per annum in excess of
the bank's prime rate and are secured by the Company's tangible personal
property. The agreement provides for borrowings of up to $5,000,000 through
July, 1999. Under the agreement, the Company is required to maintain compliance
with certain negative and financial covenants. At November 30, 1998, the Company
was in compliance with all such covenants.
NOTE 6--COMMITMENTS:
The Company leases its office facilities and certain equipment under
noncancelable operating lease agreements which expire at various dates through
2003. The terms of the facility lease provide for rental payments on a graduated
scale. The Company recognizes rent expense on a straight-line basis over the
lease period, and has accrued for rent expense incurred but not paid. The lease
requires that the Company pay all costs of maintenance, utilities, insurance and
taxes. Rent expense under these leases totaled $53,000, $180,000 and $402,155
during the period from August 14, 1996 (inception) through February 28, 1997,
the year ended February 28, 1998 and the nine months ended November 30, 1998,
respectively.
In October 1996, the Company entered into a lease financing agreement that
provides for the lease of computers and office equipment up to $300,000. In July
1998, the Company entered into a second lease financing arrangement with the
same lessor for an amount up to $350,000. Equipment financed under these
agreements are subject to repayment over a three year period. At November 30,
1998, purchases of computers and office equipment under this agreement totaled
$644,000.
F-13
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--COMMITMENTS: (CONTINUED)
Future minimum lease payments under all noncancelable operating and capital
leases at November 30, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING CAPITAL OPERATING
FEBRUARY 28, LEASES LEASES
- ------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
1999..................................................................... $ 61 $ 191
2000..................................................................... 256 669
2001..................................................................... 184 690
2002..................................................................... 252
2003..................................................................... 104
----- -----------
Total minimum lease payments............................................. 501 $ 1,906
-----------
-----------
Less: amount representing interest....................................... (76)
-----
Present value of minimum lease payments.................................. 425
Less: current portion.................................................... (200)
-----
Long-term lease obligation............................................... $ 225
-----
-----
</TABLE>
NOTE 7--CONVERTIBLE PREFERRED STOCK:
The following table summarizes Convertible Preferred Stock ($0.0001 par
value) at November 30, 1998 (in thousands):
<TABLE>
<CAPTION>
SHARES
------------------------ LIQUIDATION NET
AUTHORIZED OUTSTANDING AMOUNT PROCEEDS
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Series A.................................... 1,524 1,500 $ 1,500 $ 1,500
Series B.................................... 1,698 1,667 2,667 2,642
Series C.................................... 667 667 1,500 1,500
Series D.................................... 2,205 2,189 11,714 11,714
Undesignated................................ 1,906 -- -- --
----------- ----------- ----------- ---------
8,000 6,023 $ 17,381 $ 17,356
----------- ----------- ----------- ---------
----------- ----------- ----------- ---------
</TABLE>
The Company's Articles of Incorporation, as amended, authorize the Company
to issue 8,000,000 shares of $0.0001 par value Preferred Stock in the aggregate.
The rights, privileges and restrictions of holders of Series A, B, C and D
Convertible Preferred Stock ("Series A," "Series B," "Series C" and "Series D,"
respectively) are set forth in the Company's Amended and Restated Certificate of
Incorporation, and are summarized as follows:
VOTING
Each share of Series A, B, C and D has voting rights equal to an equivalent
number of shares of Common Stock into which it is convertible and votes together
as one class with the Common Stock. The holders of Series A, B and D are
entitled, each as a separate class, to elect two directors, one director and one
director, respectively. The holders of Common Stock are entitled, as a separate
class,
F-14
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--CONVERTIBLE PREFERRED STOCK: (CONTINUED)
to elect one director. The holders of Series A, B, C and D together with the
holders of Common Stock are entitled, as a separate class, to elect the
remaining director or directors.
DIVIDENDS
Holders of Series A, B, C and D are entitled to receive noncumulative
dividends at the annual rate of $.14, $.24, $.32 and $.74 per share,
respectively, when and if declared by the Board of Directors, prior to payment
of dividends on Common Stock. The holders of Series A, B, C and D will also be
entitled to participate in dividends declared on Common Stock, when and if
declared by the Board of Directors, based on the number of shares of Common
Stock held on as-if-converted basis. No dividends on Series A, B, C and D or
Common Stock have been declared by the Board from inception through November 30,
1998.
LIQUIDATION
In the event of any liquidation, dissolution or winding up of the Company,
including a merger, acquisition or sale of assets where the beneficial owners of
the Company's Common Stock and Convertible Preferred Stock own less than 50% of
the resulting voting power of the surviving entity, the holders of Series A, B,
C and D are entitled to receive an amount of $.50, $.80, $1.125 and $1.783 per
share, respectively, plus any declared but unpaid dividends prior to and in
preference to any distribution to the holders of Common Stock. The remaining
assets, if any, shall be distributed ratably to the holders of Common Stock and
Convertible Preferred Stock, on an as-if-converted into Common Stock basis.
Should the Company's legally available assets be insufficient to satisfy the
liquidation preferences, the funds will be distributed among the holders of
Convertible Preferred Stock in proportion to the liquidation preferences of such
shares then held by them.
CONVERSION
Each share of Series A, B, C and D is convertible, at the option of the
holder, at any time after the date of issuance into shares of Common Stock based
on a conversion rate as defined in the amended and restated Certificate of
Incorporation, which currently results in a conversion rate of one share of
Common Stock for one share of Preferred Stock. Each share of Series A, B, C and
D shall automatically be converted into shares of Common Stock at the then
effective conversion rate upon the closing of an initial public offering of
Common Stock at a price not less than $7.50 per share with gross proceeds of at
least $15,000,000. In addition, each share of (1) Series A and B, (2) Series C
and (3) Series D shall automatically be converted into shares of Common Stock at
then effective conversion rate on the date of which the (1) majority of Series A
and B, (2) the majority of Series C and (3) the holders of more than sixty
percent of Series D, respectively, each voting as a single class, elect to
convert such shares to Common Stock.
PREFERRED STOCK WARRANTS
In October 1996, the Company issued a warrant to purchase 24,000 shares of
Series A Preferred Stock to a creditor in consideration for equipment lease
commitments up to $300,000. The warrant has an exercise price of $1.00 per share
and expires in October 2006. The Company has determined that the warrant had a
nominal fair value at the date of issuance.
F-15
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--CONVERTIBLE PREFERRED STOCK: (CONTINUED)
In July 1997, in connection with a credit facility, the Company issued the
bank a warrant to purchase up to 31,250 shares of Series B Preferred Stock at an
exercise price of $1.60 per share that expire in July 2007. The Company has
determined that the warrants had a nominal fair value at the date of issuance.
In November 1997, a director exercised a warrant granted in July 1997 in
connection with the Company's Series B financing to purchase 15,625 shares of
Series B Preferred Stock at a purchase price of $1.60. The Company has
determined that the warrants had a nominal fair value at the date of issuance.
In July 1998, the Company issued a warrant to purchase 3,671 shares of
Series D Preferred Stock to a creditor in consideration for equipment lease
commitments up to $350,000. The warrant has an exercise price of $5.35 per share
and expires in July 2008. The Company has determined that the warrant had a
nominal fair value at the date of issuance.
In September 1998, in connection with an operating lease agreement, the
Company issued the lessor a warrant to purchase shares of Series D Preferred
Stock. The number of shares and price per share is based on a defined formula,
initially 5,607 shares with an exercise price of $5.35 per share. The warrant
expires in September 2008 or five years from the effective date of the Company's
initial public offering, whichever is shorter. The Company has determined that
the warrant had a nominal fair value on the initial measurement date.
NOTE 8--COMMON STOCK:
The Company's Articles of Incorporation, as amended, authorize the Company
to issue 40,000,000 shares of $0.0001 par value Common Stock.
As of November 30, 1998, approximately 1,319,000 shares of outstanding
founder's Common Stock were subject to repurchase by the Company at the original
purchase price in the event of voluntary or involuntary termination of
employment of the shareholder. The Company's repurchase right lapses generally
over three years. Under certain events of involuntary termination, an additional
one-third of shares may lapse immediately. In the event of a merger or
substantial sale of assets, all remaining shares would immediately lapse. In the
event the repurchase right has lapsed, and in the event of the termination of
the shareholder, the Company has the right to purchase such shares at the fair
market value of the shares as determined by the Board of Directors.
As of November 30, 1998, approximately 1,100,000 shares of outstanding
Common Stock were subject to repurchase by the Company in the event of voluntary
or involuntary termination of employment of the shareholder on stock that was
unvested under the 1996 Stock Option Plan.
F-16
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--COMMON STOCK: (CONTINUED)
At November 30, 1998, the Company had reserved shares of Common Stock for
future issuance as follows (in thousands):
<TABLE>
<CAPTION>
NOVEMBER 30,
1998
------------
<S> <C>
Conversion of Series A Preferred Stock.......................................... 3,046
Conversion of Series B Preferred Stock.......................................... 3,396
Conversion of Series C Preferred Stock.......................................... 1,334
Conversion of Series D Preferred Stock.......................................... 4,410
Exercise of options under stock option plan..................................... 3,800
Undesignated.................................................................... 24,014
------------
40,000
------------
------------
</TABLE>
NOTE 9--EMPLOYEE BENEFIT PLANS:
401(K) SAVINGS PLAN
The Company has a savings plan (the "Savings Plan") that qualifies as a
defined contribution arrangement under Section 401(a), 401(k) and 501(a) of the
Internal Revenue Code. Under the Savings Plan, participating employees may defer
a percentage (not to exceed 25%) of their eligible pretax earnings up to the
Internal Revenue Service's annual contribution limit. All employees on the
United States payroll of the Company are eligible to participate in the Plan.
The Company will determine its contributions, if any, based on its current
profits and/or retained earnings, however, no contributions have been made since
the inception of the Savings Plan.
STOCK OPTION PLANS
In October 1996, the Company adopted the 1996 Stock Option Plan (the
"Plan"). The Plan provides for the granting of stock options to employees and
consultants of the Company. Options granted under the Plan may be either
incentive stock options or nonqualified stock options. Incentive stock options
("ISO") may be granted only to Company employees (including officers and
directors who are also employees). Nonqualified stock options ("NSO") may be
granted to Company employees and consultants. The Company has reserved 6,200,000
shares of Common Stock for issuance under the Plan.
The Plan provides that the options shall be exercisable over a period not to
exceed ten years from the date of the grant; however, in the case of an ISO
granted to a person owning more than 10% of the combined voting power of all
classes of the stock of the Company, the term of the option will be five years
from the date of the grant. Options granted by the Company to date generally
vest 25% one year after the date of grant and the remaining options thereafter
generally vest in equal monthly installments over the following 36 months.
In accordance with the Plan, the stated exercise price shall not be less
than 85% of the estimated fair value of the shares on the date of grant as
determined by the Board of Directors, provided, however, that (i) the exercise
price of an ISO and NSO shall not be less than 100% and 85% of the estimated
fair value of the shares on the date of grant, respectively, and (ii) the
exercise price of an
F-17
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--EMPLOYEE BENEFIT PLANS: (CONTINUED)
ISO and NSO granted to a 10% shareholder shall not be less than 110% of the
estimated fair value of the shares on the date of grant, respectively.
The following table summarizes stock option activity under the Plan (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------
WEIGHTED
OPTIONS AVERAGE
AVAILABLE NUMBER OF EXERCISE
FOR GRANT OPTIONS PRICE
----------- ----------- -----------
<S> <C> <C> <C>
Shares authorized............................................................... 3,000 -- $ --
Options granted................................................................. (846) 846 0.05
Options exercised............................................................... -- -- --
Options canceled................................................................ -- -- --
----------- -----------
BALANCE AT FEBRUARY 28, 1997.................................................... 2,154 846 --
Shares authorized............................................................... 800 -- --
Options granted at fair value................................................... (629) 629 0.07
Options granted below fair value................................................ (1,281) 1,281 0.13
Options exercised............................................................... -- (126) 0.05
Options canceled................................................................ 50 (50) 0.13
----------- -----------
BALANCE AT FEBRUARY 28, 1998.................................................... 1,094 2,580 0.07
Shares authorized............................................................... -- -- --
Options granted below fair value................................................ (1,150) 1,150 0.68
Options exercised............................................................... -- (1,554) 0.10
Options canceled................................................................ 158 (158) 0.16
----------- -----------
BALANCE AT NOVEMBER 30, 1998.................................................... 102 2,018 0.28
----------- -----------
----------- -----------
</TABLE>
The minimum value of options granted during the period from August 14, 1996
(inception) to February 28, 1997 and the year ended February 28, 1998 and the
nine months ended November 30, 1998, was approximately $0.02, $0.02 and $2.45
per share, respectively.
The following table summarizes the information about stock options
outstanding and exercisable as of February 28, 1998 (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AT FEBRUARY 28, 1998 OPTIONS VESTED
------------------------------------------- AND EXERCISABLE AT
WEIGHTED FEBRUARY 28, 1998
AVERAGE WEIGHTED --------------------------------
REMAINING AVERAGE WEIGHTED
NUMBER CONTRACTUAL EXERCISE NUMBER AVERAGE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE PRICE OUTSTANDING EXERCISE PRICE
- ------------------------------------------ ------------- ----------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$0.05..................................... 1,068 8.86 years $ 0.05 98 $ 0.05
0.13...................................... 1,058 9.56 years 0.13 -- --
0.15...................................... 454 9.84 years 0.15 -- --
----- ---
2,580 98
----- ---
----- ---
</TABLE>
F-18
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--EMPLOYEE BENEFIT PLANS: (CONTINUED)
The following table summarizes the information about stock options
outstanding and exercisable as of November 30, 1998 (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AT NOVEMBER 30, 1998 OPTIONS VESTED
------------------------------------------- AND EXERCISABLE AT
WEIGHTED NOVEMBER 30, 1998
AVERAGE --------------------------------
REMAINING WEIGHTED WEIGHTED
NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
RANGE OF EXERCISABLE PRICES OUTSTANDING LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- ------------------------------------------ ------------- ----------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$0.05..................................... 418 8.11 years $ 0.05 189 $ 0.05
0.13...................................... 352 8.81 years 0.13 129 0.13
0.15...................................... 446 9.09 years 0.15 19 0.15
0.40...................................... 216 9.58 years 0.40 2 0.40
1.00...................................... 514 9.83 years 1.00 -- --
1.50...................................... 72 9.92 years 1.50 -- --
----- ---
2,018 339
----- ---
----- ---
</TABLE>
The Company calculated the minimum fair value of each option grant on the
date of grant using the Black-Scholes option pricing model as prescribed by SFAS
No. 123 using the following assumptions:
<TABLE>
<CAPTION>
AUGUST 14,
1996
(INCEPTION) NINE MONTHS
THROUGH FEB YEAR ENDED ENDED
28, FEBRUARY 28, NOVEMBER 30,
1997 1998 1998
-------------- ------------ ------------
<S> <C> <C> <C>
Risk-free interest rates............................................ 5.8%-6.4% 5.4%-6.7% 5.4%-6.5%
Expected lives (in years)........................................... 4 4 4
Dividend yield...................................................... 0% 0% 0%
Expected volatility................................................. 0% 0% 0%
</TABLE>
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for the stock option plans
(the "Plan") described above. Accordingly, no fair value compensation cost has
been recognized for the Plan. If compensation cost for the Plan had been
determined consistent with FAS No. 123, "Accounting for Stock-Based
Compensation," the Company's net loss and loss per share would not have been
materially affected.
UNEARNED STOCK-BASED COMPENSATION
In connection with certain stock option grants during the year ended
February 28, 1998 and the nine months ended November 30, 1998, the Company
recognized unearned compensation totaling $492,000 and $1,805,000, respectively,
which is being amortized over the four year vesting periods of the related
options. Amortization expense recognized during the nine months ended November
30, 1998 totaled approximately $264,000 and was allocated to expense categories
based on functional line of service.
F-19
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--EMPLOYEE BENEFIT PLANS: (CONTINUED)
STOCK OPTION GRANTS AND AUTHORIZATION
During the period from December 1, 1998 to December 18, 1998, the Company
granted options to purchase 1,730,470 shares of Common Stock to employees at an
exercise price of $2.50. The Company recognized unearned compensation totaling
$865,000 associated with such grants which will be recognized over the four year
vesting period.
In December 1998, the Board of Directors approved an increase in the number
of shares authorized for issuance under the Company's plan to 6,200,000 shares.
NOTE 10--RELATED PARTY TRANSACTIONS:
At November 30, 1998, the Company held a note receivable from an officer of
the Company totaling $300,000. The note is full recourse, is secured by Common
Stock and bears simple interest at 8% per annum. Principal and interest is due
and payable upon the earliest of 30 days after the Common Shares are eligible
for sale under Rule 144 of the Securities Act of 1933 or pursuant to a
Registration Statement on Form S-1, ninety days after the last date of
employment, 60 days after the sale of the Common Stock associated with a defined
change in control event, or two years from the note date, July 1998.
NOTE 11--SUBSEQUENT EVENTS (UNAUDITED):
RECAPITALIZATION
In December 1998, the Company's Board of Directors authorized a two-for-one
split of the outstanding shares of Common Stock to be effective immediately
prior to the effectiveness this offering. This stock split will result in a
corresponding change in the conversion rate for all outstanding shares of
Preferred Stock to a ratio of two shares of Common Stock for each share of
Preferred Stock. In addition, the Board of Directors approved an increase in the
authorized shares of Common and Preferred Stock to 250 million and 10 million,
respectively. All share and per share information included in these financial
statements have been retroactively adjusted to reflect the stock split. The
change in the Preferred Stock conversion rate and the increased share
authorization have been reflected in the pro forma financial information as of
November 30, 1998. See "Note 1--The Company and its Significant Accounting
Policies."
1998 DIRECTOR OPTION PLAN
In December 1998, the Board adopted the Director Plan which will become
effective immediately prior to the effective date of the offering. The Director
Plan reserves a total of 150,000 shares of the Company's Common Stock for
issuance thereunder. Members of the Board who are not employees of the Company,
of the Company, are eligible to participate in the Director Plan. The option
grants under the Directors Plan are automatic and nondiscretionary, and the
exercise price of the options must be 100% of the fair market value of the
Common Stock on the date of grant. Each eligible director who first becomes a
member of the Board will initially be granted an option to purchase 15,000
shares ("First Option") on the date such director first becomes a director.
Immediately following each Annual Meeting of the Company, each eligible director
will automatically be granted an additional option to purchase 7,500 shares
("Subsequent Option") if such director has served continuously as a member of
the Board for at least the preceding six months. The term of such options is ten
years, provided that
F-20
<PAGE>
INTRAWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--SUBSEQUENT EVENTS (UNAUDITED): (CONTINUED)
they will terminate 3 months following the date the director ceases to be a
director or a consultant of the Company (twelve months if the termination is due
to death or disability). First Options granted under the Directors Plan will
vest as to 12.5% of the shares on the six month anniversary of the date of grant
and as to 2.08% of the shares each month thereafter, provided the optionee
continues as a member of the Board or as a consultant to the Company.
EMPLOYEE STOCK PURCHASE PLAN
In December 1998, the Board adopted the 1998 Employee Stock Purchase Plan
(the "Purchase Plan") which will become effective immediately prior to the
effective date of the offering. The Purchase Plan reserves 600,000 shares of
Common Stock for issuance thereunder. On each March 1 beginning in 2000, the
aggregate number of shares reserved for issuance under the Purchase Plan will be
increased automatically to the lessor of 400,000 shares, 1% of the outstanding
shares on such date or a lessor amount determined by the Board of Directors. The
aggregate number of shares reserved for issuance under the Purchase Plan shall
not exceed 600,000 shares. Employees generally will be eligible to participate
in the Purchase Plan if they are customarily employed by the Company for more
than 20 hours per week and more than five months in a calendar year and are not
(and would not become as a result of being granted an option under the Purchase
Plan) 5% stockholders of the Company. Under the Purchase Plan, eligible
employees may select a rate of payroll deduction up to 15% of their W-2 cash
compensation subject to certain maximum purchase limitations. Each offering
period will have a maximum duration of two years and consists of four six-month
Purchase Periods. The first Offering Period is expected to begin on the first
business day on which price quotations for the Company's Common Stock are
available on The Nasdaq National Market. Depending on the Effective Date, the
first Purchase Period may be more or less than six months long. Offering Periods
and Purchase Periods thereafter will begin on April 1 and October 1. The price
at which the Common Stock is purchased under the Purchase Plan is 85% of the
lesser of the fair market value of the Company's Common Stock on the first day
of the applicable offering period or on the last day of that purchase period.
F-21
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Intraware in connection with
the sale of Common Stock being registered. All amounts are estimates except the
SEC registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
SEC registration fee.......................................... $ 19,182
<S> <C>
NASD filing fee............................................... 7,400
Nasdaq National Market listing fee............................ 150,000
Printing and engraving costs.................................. 250,000
Legal fees and expenses....................................... 300,000
Accounting fees and expenses.................................. 175,000
Blue Sky fees and expenses.................................... 10,000
Transfer Agent and Registrar fees............................. 10,000
Miscellaneous expenses........................................ 78,418
-----------
Total......................................................... $ 1,000,000
-----------
-----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.
Article IX of the Registrant's Restated Certificate of Incorporation
provides for the indemnification of directors to the fullest extent permissible
under Delaware law.
Article VI of the Registrant's Bylaws provides for the indemnification of
officers, directors and third parties acting on behalf of the Registrant if such
person acted in good faith and in a manner reasonably believed to be in and not
opposed to the best interest of the Registrant, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his or her conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
The Underwriting Agreement (Exhibit 1.1 hereto) provides for indemnification
by the Underwriters of the registrant and its executive officers and directors,
and by the registrant of the underwriters for certain liabilities, including
liabilities arising under the Securities Act, in connection with matters
specifically provided in writing by the Underwriters for inclusion in the
Registration Statement.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Registrant has issued unregistered
securities to a limited number of persons as described below:
(a) In September 1996, Registrant issued and sold an aggregate of
5,250,000 shares of Common Stock to the founding officers and directors of
the Company for an aggregate purchase price of $26,250.
II-1
<PAGE>
(b) In September 1996, Registrant issued and sold an aggregate of
1,500,000 shares of Series A Preferred Stock (convertible into 3,000,000
shares of Common Stock upon consummation of the two-for-one stock split) to
21 investors for $1.00 per share or an aggregate of $1,500,000. The
foregoing purchases and sales were exempt from registration under the
Securities Act pursuant to Section 4(2) thereof on the basis that the
transaction did not involve a public offering.
(c) In June 1997 and July 1997, Registrant issued and sold an aggregate
of 1,650,999 shares of Series B Preferred Stock, (convertible into 3,301,998
shares of Common Stock upon consummation of the two-for-one stock split), to
a total of 26 investors for $1.60 per share, or an aggregate of $2,641,600.
The foregoing purchases and sales were exempt from registration under the
Securities Act pursuant to Section 4(2) thereof on the basis that the
transaction did not involve a public offering.
(d) In December 1997, Registrant issued and sold an aggregate of 666,667
shares of Series C Preferred Stock, (convertible into 1,333,334 shares of
Common Stock upon consummation of the two-for-one stock split) to Entities
Associated with Kleiner Perkins Caufield & Byers for $2.25 per share, or an
aggregate of $1,500,000.75. The foregoing purchases and sales were exempt
from registration under the Securities Act pursuant to Section 4(2) thereof
on the basis that the transaction did not involve a public offering.
(e) In April 1998 Registrant issued and sold an aggregate of 2,122,149
shares of Series D Preferred Stock (convertible into 4,244,298 shares of
Common Stock upon consummation of the two-for-one stock split) for $5.35 per
share, or an aggregate of $11,300,003. The foregoing purchases and sales
were exempt from registration under the Securities Act pursuant to Section
4(2) thereof on the basis that the transaction did not involve a public
offering.
(f) As of November 30, 1998, an aggregate of 1,679,550 shares of Common
Stock had been issued upon exercise of options under the Registrant's 1996
Stock Option Plan. Except as indicated above, none of the foregoing
transactions involved any underwriters, underwriting discounts or
commissions, or any public offering, and the Registrant believes that each
transaction was exempt from the registration requirements of the Securities
Act by virtue of Section 4(2) thereof, Regulation D promulgated thereunder
or Rule 701 pursuant to compensatory benefit plans and contracts relating to
compensation as provided under such Rule 701. The recipients in such
transactions represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof, and appropriate legends were affixed to the share
certificates and instruments issued in such transactions. All recipients had
adequate access, through their relationships with the Registrant, to
information about the Registrant.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of the Registrant to be in effect after the closing of the
offering made under this Registration Statement.
3.2 Restated Bylaws of the Registrant to be in effect after the closing of the offering made under this
Registration Statement.
4.1* Specimen Common Stock Certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1** Form of Indemnification Agreement between the Registrant and each of its directors and officers.
10.2** 1996 Stock Option Plan (as amended on December 17, 1998) and form of agreements thereunder.
10.3 1998 Employee Stock Purchase Plan and form of agreements thereunder.
10.4 1998 Director Option Plan and form of agreements thereunder.
10.5** Form of Registration and Information Rights Agreement.
10.6 Loan Agreement entered into as of July 29, 1998 between the Registrant and Imperial Bank and related
General Security Agreement and Collateral Assignment as Collateral, Patent Mortgage and Security
Agreement.
10.7** Sleepy Hollow Investment Company Office Lease made August 23, 1996 between Sleepy Hollow Investment
Company and Intraware, Inc.
10.8** First Amendment to the Lease for Intraware, Inc. entered into as of May 5, 1997 by and between the
Registrant and Sleepy Hollow Investment Company I.
10.9** Second Amendment to the Lease for Intraware, Inc. entered into as of March 31, 1998 by and between the
Registrant and Sleepy Hollow Investment Company I.
10.10** Master Lease Agreement dated September 9, 1998 between Comdisco, Inc. and Intraware, Inc.
10.11** Addendum and Equipment Schedules to the Master Lease Agreement dated as of September 9, 1998 between
Intraware, Inc., as Lessee and Comdisco, Inc, as Lessor.
10.12+ Services Agreement between Netscape Communications Corporation and Intraware, Inc. entered into as of
October 1, 1998.
10.13+ Netcenter Services Agreement between Netscape Communications Corporation and Intraware, Inc. entered
into as of September 3, 1998.
10.14+ Amended and Restated Electronic Distribution License Agreement between Netscape Communications
Corporation and Intraware, Inc. entered into as of March 6, 1997.
23.1 Consent of Independent Accountants.
23.2* Consent of Counsel (see Exhibit 5.1).
24.1** Power of Attorney.
27.1** Financial Data Schedules.
</TABLE>
- ------------------------
+ Certain portions of this exhibit have been granted confidential treatment by
the Commission. The omitted portions have been separately filed with the
Commission.
* To be filed by amendment.
** Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1993, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY
OF ORINDA, STATE OF CALIFORNIA, ON THE 7TH DAY OF JANUARY, 1999.
<TABLE>
<S> <C> <C>
INTRAWARE, INC.
By /s/ PETER H. JACKSON
------------------------------------------
PETER H. JACKSON,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED BELOW.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
* Officer and Director
- ------------------------------ (Principal Executive January 7, 1999
(PETER H. JACKSON) Officer)
Executive Vice President
/s/ DONALD M. FREED and Chief Financial
- ------------------------------ Officer (Principal January 7, 1999
(DONALD M. FREED) Financial Officer)
*
- ------------------------------ Director January 7, 1999
(LAURENCE M. BAER)
*
- ------------------------------ Director January 7, 1999
(JOHN V. BALEN)
*
- ------------------------------ Director January 7, 1999
(MARY ANN BYRNES)
*
- ------------------------------ Director January 7, 1999
(CHARLES G. DAVIS, JR.)
*
- ------------------------------ Director January 7, 1999
(MARK B. HOFFMAN)
</TABLE>
<TABLE>
<S> <C> <C>
/s/ DONALD M. FREED
------------------------------------
(DONALD M. FREED)
* By ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER PAGE
- --------- ---------
<C> <S> <C>
1.1* Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of the Registrant to be in effect after the closing of
the offering made under this Registration Statement.
3.2 Restated Bylaws of the Registrant to be in effect after the closing of the offering made under
this Registration Statement.
4.1* Specimen Common Stock Certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1** Form of Indemnification Agreement between the Registrant and each of its directors and
officers.
10.2** 1996 Stock Option Plan (as amended on December 17, 1998) and form of agreements thereunder.
10.3 1998 Employee Stock Purchase Plan and form of agreements thereunder.
10.4 1998 Director Option Plan and form of agreements thereunder.
10.5** Form of Registration and Information Rights Agreement.
10.6 Loan Agreement entered into as of July 29, 1998 between the Registrant and Imperial Bank and
related General Security Agreement and Collateral Assignment as Collateral, Patent Mortgage and
Security Agreement.
10.7** Sleepy Hollow Investment Company Office Lease made August 23, 1996 between Sleepy Hollow
Investment Company and Intraware, Inc.
10.8** First Amendment to the Lease for Intraware, Inc. entered into as of May 5, 1997 by and between
the Registrant and Sleepy Hollow Investment Company I.
10.9** Second Amendment to the Lease for Intraware, Inc. entered into as of March 31, 1998 by and
between the Registrant and Sleepy Hollow Investment Company I.
10.10** Master Lease Agreement dated September 9, 1998 between Comdisco, Inc. and Intraware, Inc.
10.11** Addendum and Equipment Schedules to the Master Lease Agreement dated as of September 9, 1998
between Intraware, Inc., as Lessee and Comdisco, Inc, as Lessor.
10.12+ Services Agreement between Netscape Communications Corporation and Intraware, Inc. entered into
as of October 1, 1998.
10.13+ Netcenter Services Agreement between Netscape Communications Corporation and Intraware, Inc.
entered into as of September 3, 1998.
10.14+ Amended and Restated Electronic Distribution License Agreement between Netscape Communications
Corporation and Intraware, Inc. entered into as of March 6, 1997.
23.1 Consent of Independent Accountants.
23.2* Consent of Counsel (see Exhibit 5.1).
24.1** Power of Attorney.
27.1** Financial Data Schedules.
</TABLE>
- ------------------------
+ Certain portions of this exhibit have been granted confidential treatment by
the Commission. The omitted portions have been separately filed with the
Commission.
* To be filed by amendment.
** Previously filed.
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
INTRAWARE, INC.
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
Peter A. Jackson and Robert M. Tarkoff each hereby certifies:
(1) They are the President and Secretary, respectively, of Intraware,
Inc., a corporation organized and existing under the General Corporation Law of
the State of Delaware (the "General Corporation Law");
(2) The original Certificate of Incorporation of this corporation,
originally filed on May 13, 1996, is hereby amended and restated in its entirety
to read as follows:
FIRST: The name of this corporation is Intraware, Inc. (the
"Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1013 Centre Road, Wilmington, County of New
Castle, Delaware 19805. The name of its registered agent at such
address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH: The Corporation is authorized to issue two classes of stock to be
designated respectively Common Stock and Preferred Stock. The
total number of shares of all classes of stock which the
Corporation has authority to issue is Two Hundred Sixty Million
(260,000,000), consisting of Two Hundred Fifty Million
(250,000,000) shares of Common Stock, $0.0001 par value (the
"Common Stock"), and Ten Million (10,000,000) shares of Preferred
Stock, $0.0001 par value (the "Preferred Stock").
The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized subject
to limitations prescribed by law, to fix by resolution or
resolutions the designations, powers, preferences and rights, and
the qualifications, limitations or restrictions thereof, of each
such series of Preferred Stock, including without limitation
authority to fix by resolution or resolutions, the dividend
rights, dividend rate, conversion rights, voting rights, rights
and terms of redemption (including sinking fund provisions),
redemption price or prices, and liquidation preferences of any
wholly unissued series of Preferred Stock, and the number
<PAGE>
of shares constituting any such series and the designation
thereof, or any of the foregoing.
The Board of Directors is further authorized to increase (but not
above the total number of authorized shares of the class) or
decrease (but not below the number of shares of any such series
then outstanding) the number of shares of any series, the number
of which was fixed by it, subsequent to the issue of shares of
such series then outstanding, subject to the powers, preferences
and rights, and the qualifications, limitations and restrictions
thereof stated in the resolution of the Board of Directors
originally fixing the number of shares of such series. If the
number of shares of any series is so decreased, then the shares
constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the
number of shares of such series.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The election of directors need not be by written ballot unless
the Bylaws of the Corporation shall so provide.
SEVENTH: The number of directors which constitute the whole Board of
Directors of the
Corporation shall be designated in the Bylaws of the Corporation.
EIGHTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is
expressly authorized to adopt, alter, amend or repeal the Bylaws
of the Corporation.
NINTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended,
no director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director.
The Corporation may indemnify to the fullest extent permitted by
law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he, his testator or
intestate is or was a director, officer or employee of the
Corporation or any predecessor of the Corporation or serves or
served at any other enterprise as a director, officer or employee
at the request of the Corporation or any predecessor to the
Corporation.
Neither any amendment nor repeal of this Article, nor the
adoption of any provision of this Amended and Restated
Certificate of Incorporation inconsistent with this Article,
shall eliminate or reduce the effect of this Article in respect
of any matter occurring, or any cause of action, suit or claim
-2-
<PAGE>
that, but for this Article, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
TENTH: At the election of directors of the Corporation, each holder of
stock of any class or series shall be entitled to one vote for
each share held. No stockholder will be permitted to cumulate
votes at any election of directors.
The number of directors which constitute the whole Board of
Directors of the Corporation shall be fixed exclusively by one or
more resolution adopted from time to time by the Board of
Directors. The Board of Directors shall be divided into three
classes designated as Class I, Class II, and Class III,
respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders
following the date hereof, the term of office of the Class I
directors shall expire and Class I directors shall be elected for
a full term of three years. At the second annual meeting of
stockholders following the date hereof, the term of office of the
Class II directors shall expire and Class II directors shall be
elected for a full term of three years. At the third annual
meeting of stockholders following the date hereof, the term of
office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At
each succeeding annual meeting of stockholders, directors shall
be elected for a full term of three years to succeed the
directors of the class whose terms expire at such annual meeting.
Vacancies created by newly created directorships, created in
accordance with the Bylaws of this Corporation, may be filled by
the vote of a majority, although less than a quorum, of the
directors then in office, or by a sole remaining director.
ELEVENTH: Meetings of stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provision contained in
the laws of the State of Delaware) outside of the State of
Delaware at such place or places as may be designated from time
to time by the Board of Directors or in the Bylaws of the
Corporation.
The stockholders of the Corporation may not take any action by
written consent in lieu of a meeting, and must take any actions
at a duly called annual or special meeting of stockholders and
the power of stockholders to consent in writing without a meeting
is specifically denied.
TWELFTH: Advance notice of new business and stockholder nominations for
the election of directors shall be given in the manner and to the
extent provided in the Bylaws of the Corporation.
-3-
<PAGE>
THIRTEENTH: Notwithstanding any other provisions of this Restated Certificate
of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of the capital stock required by
law or this Restated Certificate of Incorporation, the
affirmative vote of the holders of at least two-thirds (2/3) of
the combined voting power of all of the then-outstanding shares
of the Corporation entitled to vote shall be required to alter,
amend or repeal Articles TENTH or ELEVENTH hereof, or this
Article THIRTEENTH, or any provision thereof or hereof, unless
such amendment shall be approved by a majority of the directors
of the Corporation not affiliated or associated with any person
or entity holding (or which has announced an intention to obtain)
twenty percent (20%) or more of the voting power of the
Corporation's outstanding capital stock.
FOURTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated
Certificate of Incorporation, in the manner now or hereafter
prescribed by the laws of the State of Delaware, and all rights
conferred herein are granted subject to this reservation.
(3) This Amended and Restated Certificate of Incorporation has been duly
adopted by the Board of Directors of this Corporation in accordance with
Sections 242 and 245 of the General Corporation Law.
(4) This Amended and Restated Certificate of Incorporation has been duly
approved, in accordance with Section 242 of the General Corporation Law, by vote
of the holders of a majority of the outstanding stock entitled to vote thereon.
IN WITNESS WHEREOF, the undersigned have executed this Amended and Restated
Certificate of Incorporation on this ____ day of February, 1999.
---------------------------------------
Peter A. Jackson
President
- ------------------------------
Robert M. Tarkoff
Secretary
-4-
<PAGE>
BYLAWS
OF
INTRAWARE, INC.
(A DELAWARE CORPORATION)
<PAGE>
BYLAWS OF
INTRAWARE, INC.
(a Delaware corporation)
TABLE OF CONTENTS
Page
----
ARTICLE I - CORPORATE OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 REGISTERED OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 OTHER OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - MEETINGS OF STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . 1
2.1 PLACE OF MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 ANNUAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS. . . . . . . . . . . . . . . . . . . 2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS . . . 2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. . . . . . . . . . . . . 2
2.7 QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.8 ADJOURNED MEETING; NOTICE . . . . . . . . . . . . . . . . . . . . . . 3
2.9 VOTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . 3
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING. . . . . . . . . . . . . . 4
2.12 PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.13 ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE . . . . . . . . . . . . . . . . 5
ARTICLE III - DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 POWERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 NUMBER OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS. . . . . . . . . . . . . . . 5
3.4 RESIGNATION AND VACANCIES . . . . . . . . . . . . . . . . . . . . . . 6
3.5 REMOVAL OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE. . . . . . . . . . . . . . . 7
3.7 FIRST MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 REGULAR MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.9 SPECIAL MEETINGS; NOTICE. . . . . . . . . . . . . . . . . . . . . . . 7
-i-
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
3.10 QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.11 WAIVER OF NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.12 ADJOURNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.13 NOTICE OF ADJOURNMENT . . . . . . . . . . . . . . . . . . . . . . . . 8
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . . . . 9
3.15 FEES AND COMPENSATION OF DIRECTORS. . . . . . . . . . . . . . . . . . 9
3.16 APPROVAL OF LOANS TO OFFICERS . . . . . . . . . . . . . . . . . . . . 9
3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF
INCORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV - COMMITTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.1 COMMITTEES OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . .10
4.2 MEETINGS AND ACTION OF COMMITTEES . . . . . . . . . . . . . . . . . .10
4.3 COMMITTEE MINUTES . . . . . . . . . . . . . . . . . . . . . . . . . .11
ARTICLE V - OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
5.1 OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
5.2 ELECTION OF OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . .11
5.3 SUBORDINATE OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . .11
5.4 REMOVAL AND RESIGNATION OF OFFICERS . . . . . . . . . . . . . . . . .12
5.5 VACANCIES IN OFFICES. . . . . . . . . . . . . . . . . . . . . . . . .12
5.6 CHAIRMAN OF THE BOARD . . . . . . . . . . . . . . . . . . . . . . . .12
5.7 PRESIDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
5.8 VICE PRESIDENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.9 SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.10 CHIEF FINANCIAL OFFICER . . . . . . . . . . . . . . . . . . . . . . .13
5.11 ASSISTANT SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . .14
5.12 ADMINISTRATIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . .14
5.13 AUTHORITY AND DUTIES OF OFFICERS. . . . . . . . . . . . . . . . . . .14
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS. . . . . . . . . . . . . . . . . . . . . . . . .14
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . . .14
6.2 INDEMNIFICATION OF OTHERS . . . . . . . . . . . . . . . . . . . . . .15
6.3 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
-ii-
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
ARTICLE VII - RECORDS AND REPORTS. . . . . . . . . . . . . . . . . . . . . . .16
7.1 MAINTENANCE AND INSPECTION OF RECORDS . . . . . . . . . . . . . . . .16
7.2 INSPECTION BY DIRECTORS . . . . . . . . . . . . . . . . . . . . . . .17
7.3 ANNUAL STATEMENT TO STOCKHOLDERS. . . . . . . . . . . . . . . . . . .17
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. . . . . . . . . . . .17
7.5 CERTIFICATION AND INSPECTION OF BYLAWS. . . . . . . . . . . . . . . .17
ARTICLE VIII - GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . .17
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE
AND VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS . . . . . . . . . . . . . .18
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW
EXECUTED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES. . . . . . . . . . .18
8.5 SPECIAL DESIGNATION ON CERTIFICATES . . . . . . . . . . . . . . . . .19
8.6 LOST CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . .19
8.7 TRANSFER AGENTS AND REGISTRARS. . . . . . . . . . . . . . . . . . . .20
8.8 CONSTRUCTION; DEFINITIONS . . . . . . . . . . . . . . . . . . . . . .20
ARTICLE IX - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
-iii-
<PAGE>
BYLAWS
OF
INTRAWARE, INC.
(a Delaware Corporation)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the
certificate of incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside
the State of Delaware designated by the board of directors. In the absence
of any such designation, stockholders' meetings shall be held at the
principal executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the third
Friday in June in each year at 3:00 p.m. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on
the next succeeding full business day. At the meeting, directors shall be
elected, and any other proper business may be transacted.
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2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board or by the president.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings of stockholders shall be sent or otherwise
given in accordance with Section 2.5 of these bylaws not less than ten (10)
nor more than sixty (60) days before the date of the meeting. The notice
shall specify the place, date and hour of the meeting and (i) in the case
of a special meeting, the purpose or purposes for which the meeting is
called (no business other than that specified in the notice may be
transacted) or (ii) in the case of the annual meeting, those matters which
the board of directors, at the time of giving the notice, intends to
present for action by the stockholders (but any proper matter may be
presented at the meeting for such action). The notice of any meeting at
which directors are to be elected shall include the name of any nominee or
nominees who, at the time of the notice, the board intends to present for
election.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
To be properly brought before an annual meeting or special meeting,
nominations for the election of directors or other business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the board of directors, (b) otherwise properly brought
before the meeting by or at the direction of the board of directors or (c)
otherwise properly brought before the meeting by a stockholder.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges
prepaid and shall be addressed to the stockholder at the address of that
stockholder appearing on the books of the corporation or given by the
stockholder to the corporation for the purpose of notice. Notice shall be
deemed to have been given at the time when delivered personally or
deposited in the mail or sent by telegram or other means of written
communication.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or
any transfer agent of the corporation giving the notice, shall be prima
facie evidence of the giving of such notice.
2.7 QUORUM
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for
the transaction of business except as otherwise provided by statute or by
the
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certificate of incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the
chairman of the meeting or (ii) the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting in accordance with Section 2.7 of these bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented
by proxy shall decide any question brought before such meeting, unless the
question is one upon which, by express provision of the laws of the State
of Delaware or of the certificate of incorporation or these bylaws, a
different vote is required, in which case such express provision shall
govern and control the decision of the question.
If a quorum be initially present, the stockholders may continue to
transact business until adjournment, notwithstanding the withdrawal of
enough stockholders to leave less than a quorum, if any action taken is
approved by a majority of the stockholders initially constituting the
quorum.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time and place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting
if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may
transact any business that might have been transacted at the original
meeting. If the adjournment is for more than thirty (30) days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these
bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries,
pledgors and joint owners, and to voting trusts and other voting
agreements).
Except as may be otherwise provided in the certificate of
incorporation or these bylaws, each stockholder shall be entitled to one
vote for each share of capital stock held by such stockholder.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
The stockholders may not take any action by written consent in lieu of
a meeting, and must take any actions at a duly called annual or special
meeting of stockholders and the power of stockholders to consent in writing
is specifically denied.
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2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat, the board of directors may fix, in advance, a
record date, which shall not precede the date upon which the resolution
fixing the record date is adopted by the board of directors and which shall
not be more than sixty (60) days nor less than ten (10) days before the
date of any such meeting, and in such event only stockholders of record on
the date so fixed are entitled to notice and to vote, notwithstanding any
transfer of any shares on the books of the corporation after the record
date.
If the board of directors does not so fix a record date, the record
date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the business
day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the business day next preceding the day
on which the meeting is held.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting unless the board of directors fixes a new record date for the
adjourned meeting, but the board of directors shall fix a new record date
if the meeting is adjourned for more than thirty (30) days from the date
set for the original meeting.
The record date for any other purpose shall be as provided in Section
8.1 of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the
secretary of the corporation, but no such proxy shall be voted or acted
upon after three (3) years from its date, unless the proxy provides for a
longer period. A proxy shall be deemed signed if the stockholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission, telefacsimile or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on
its face that it is irrevocable shall be governed by the provisions of
Section 212(e) of the General Corporation Law of Delaware.
2.13 ORGANIZATION
The president, or in the absence of the president, the chairman of the
board, shall call the meeting of the stockholders to order, and shall act
as chairman of the meeting. In the absence of the president, the chairman
of the board, and all of the vice presidents, the stockholders shall
appoint a chairman for such meeting. The chairman of any meeting of
stockholders shall determine the order of business and the procedures at
the meeting, including such matters as the regulation of the manner of
voting and the conduct of business. The secretary of the corporation shall
act as secretary of all meetings of the stockholders, but in the absence of
the secretary at any meeting of the stockholders, the chairman of the
meeting may appoint any person to act as secretary of the meeting.
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2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and to any limitations in the certificate of incorporation or these bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the
direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The board of directors shall consist of seven (7) members. The number
of directors may be changed by an amendment to this bylaw, duly adopted by
the board of directors or by the stockholders, or by a duly adopted
amendment to the certificate of incorporation.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the
next annual meeting. Each director, including a director elected or
appointed to fill a vacancy, shall hold office until the expiration of the
term for which elected and until a successor has been elected and
qualified.
Election of directors need not be by written ballot.
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3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of
directors, unless the notice specifies a later time for that resignation to
become effective. If the resignation of a director is effective at a
future time, the board of directors may elect a successor to take office
when the resignation becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the
vote of the stockholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a
duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute a majority of the required quorum). Unless
otherwise provided in the certificate of incorporation or these bylaws,
each director so elected shall hold office until the next annual meeting of
the stockholders and until a successor has been elected and qualified.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or
by a sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the
provisions of the certificate of incorporation, vacancies and newly created
directorships of such class or classes or series may be filled by a
majority of the directors elected by such class or classes or series
thereof then in office, or by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of
stockholders in accordance with the provisions of the certificate of
incorporation or these bylaws, or may apply to the Court of Chancery for a
decree summarily ordering an election as provided in Section 211 of the
General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority
of the whole board (as constituted immediately prior to any such increase),
then the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten (10) percent of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors
then in office as
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aforesaid, which election shall be governed by the provisions of
Section 211 of the General Corporation Law of Delaware as far as
applicable.
3.5 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of
directors may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of Delaware that has been designated from time
to time by resolution of the board. In the absence of such a designation,
regular meetings shall be held at the principal executive office of the
corporation. Special meetings of the board may be held at any place within
or outside the State of Delaware that has been designated in the notice of
the meeting or, if not stated in the notice or if there is no notice, at
the principal executive office of the corporation.
Any meeting of the board, regular or special, may be held by
conference telephone or similar communication equipment, so long as all
directors participating in the meeting can hear one another; and all such
participating directors shall be deemed to be present in person at the
meeting.
3.7 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly
elected board of directors, or in the event such meeting is not held at the
time and place so fixed by the stockholders, the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the board of directors, or as shall be
specified in a written waiver signed by all of the directors.
3.8 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
at such time as shall from time to time be determined by the board of
directors. If any regular meeting day shall fall on a legal holiday, then
the meeting shall be held at the same time and place on the next succeeding
full business day.
3.9 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any
vice president, the secretary or any two directors.
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Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telecopy or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If
the notice is mailed, it shall be deposited in the United States mail at
least four (4) days before the time of the holding of the meeting. If the
notice is delivered personally or by telephone, telecopy or telegram, it
shall be delivered personally or by telephone or to the telegraph company
at least forty-eight (48) hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the
director who the person giving the notice has reason to believe will
promptly communicate it to the director. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
3.10 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in
Section 3.12 of these bylaws. Every act or decision done or made by a
majority of the directors present at a duly held meeting at which a quorum
is present shall be regarded as the act of the board of directors, subject
to the provisions of the certificate of incorporation and applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any
action taken is approved by at least a majority of the quorum for that
meeting.
3.11 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice, whether before or after the meeting, or (ii) who attends
the meeting other than for the express purposed of objecting at the
beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened. All such waivers shall be
filed with the corporate records or made part of the minutes of the
meeting. A waiver of notice need not specify the purpose of any regular or
special meeting of the board of directors.
3.12 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting of the board to another time and place.
3.13 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting of the
board need not be given unless the meeting is adjourned for more than
twenty-four (24) hours. If the meeting is adjourned for more than
twenty-four (24) hours, then notice of the time and place of the adjourned
meeting shall be
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given before the adjourned meeting takes place, in the manner specified in
Section 3.9 of these bylaws, to the directors who were not present at the
time of the adjournment.
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such
action by written consent shall have the same force and effect as a
unanimous vote of the board of directors. Such written consent and any
counterparts thereof shall be filed with the minutes of the proceedings of
the board of directors.
3.15 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed
or determined by resolution of the board of directors. This Section 3.15
shall not be construed to preclude any director from serving the
corporation in any other capacity as an officer, agent, employee or
otherwise and receiving compensation for those services.
3.16 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of
its subsidiaries, including any officer or employee who is a director of
the corporation or any of its subsidiaries, whenever, in the judgment of
the directors, such loan, guaranty or assistance may reasonably be expected
to benefit the corporation. The loan, guaranty or other assistance may be
with or without interest and may be unsecured, or secured in such manner as
the board of directors shall approve, including, without limitation, a
pledge of shares of stock of the corporation. Nothing contained in this
section shall be deemed to deny, limit or restrict the powers of guaranty
or warranty of the corporation at common law or under any statute.
3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION
In the event only one director is required by these bylaws or the
certificate of incorporation, then any reference herein to notices,
waivers, consents, meetings or other actions by a majority or quorum of the
directors shall be deemed to refer to such notice, waiver, etc., by such
sole director, who shall have all the rights and duties and shall be
entitled to exercise all of the powers and shall assume all the
responsibilities otherwise herein described as given to the board of
directors.
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ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board.
The board may designate one (1) or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any
meeting of the committee. The appointment of members or alternate members
of a committee requires the vote of a majority of the authorized number of
directors. Any committee, to the extent provided in the resolution of the
board, shall have and may exercise all the powers and authority of the
board, but no such committee shall have the power or authority to (i) amend
the certificate of incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided
in Section 151(a) of the General Corporation Law of Delaware, fix the
designations and any of the preferences or rights of such shares relating
to dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an
agreement of merger or consolidation under Sections 251 or 252 of the
General Corporation Law of Delaware, (iii) recommend to the stockholders
the sale, lease or exchange of all or substantially all of the
corporation's property and assets, (iv) recommend to the stockholders a
dissolution of the corporation or a revocation of a dissolution or
(v) amend the bylaws of the corporation; and, unless the board resolution
establishing the committee, the bylaws or the certificate of incorporation
expressly so provide, no such committee shall have the power or authority
to declare a dividend, to authorize the issuance of stock, or to adopt a
certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the following provisions of Article III of these
bylaws: Section 3.6 (place of meetings; meetings by telephone), Section 3.8
(regular meetings), Section 3.9 (special meetings; notice), Section 3.10
(quorum), Section 3.11 (waiver of notice), Section 3.12 (adjournment),
Section 3.13 (notice of adjournment) and Section 3.14 (board action by
written consent without meeting), with such changes in the context of those
bylaws as are necessary to substitute the committee and its members for the
board of directors and its members; provided, however, that the time of
regular meetings of committees may be determined either by resolution of
the board of directors or by resolution of the committee, that special
meetings of committees may also be called by resolution of the board of
directors, and that notice of special meetings of committees shall also be
given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of
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directors may adopt rules for the government of any committee not
inconsistent with the provisions of these bylaws.
4.3 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
ARTICLE V
OFFICERS
5.1 OFFICERS
The Corporate Officers of the corporation shall be a president, a
secretary and a chief financial officer. The corporation may also have, at
the discretion of the board of directors, a chairman of the board, one or
more vice presidents (however denominated), one or more assistant
secretaries, one or more assistant treasurers, and such other officers as
may be appointed in accordance with the provisions of Section 5.3 of these
bylaws. Any number of offices may be held by the same person.
In addition to the Corporate Officers of the Company described above,
there may also be such Administrative Officers of the corporation as may be
designated and appointed from time to time by the president of the
corporation in accordance with the provisions of Section 5.12 of these
bylaws.
5.2 ELECTION OF OFFICERS
The Corporate Officers of the corporation, except such officers as may
be appointed in accordance with the provisions of Section 5.3 or
Section 5.5 of these bylaws, shall be chosen by the board of directors,
subject to the rights, if any, of an officer under any contract of
employment, and shall hold their respective offices for such terms as the
board of directors may from time to time determine.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other Corporate Officers as the business of the corporation
may require, each of whom shall hold office for such period, have such
power and authority, and perform such duties as are provided in these
bylaws or as the board of directors may from time to time determine.
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The president may from time to time designate and appoint
Administrative Officers of the corporation in accordance with the
provisions of Section 5.12 of these bylaws.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of a Corporate Officer under any
contract of employment, any Corporate Officer may be removed, either with
or without cause, by the board of directors at any regular or special
meeting of the board or, except in case of a Corporate Officer chosen by
the board of directors, by any Corporate Officer upon whom such power of
removal may be conferred by the board of directors.
Any Corporate Officer may resign at any time by giving written notice
to the corporation. Any resignation shall take effect at the date of the
receipt of that notice or at any later time specified in that notice; and,
unless otherwise specified in that notice, the acceptance of the
resignation shall not be necessary to make it effective. Any resignation
is without prejudice to the rights, if any, of the corporation under any
contract to which the Corporate Officer is a party.
Any Administrative Officer designated and appointed by the president
may be removed, either with or without cause, at any time by the president.
Any Administrative Officer may resign at any time by giving written notice
to the president or to the secretary of the corporation.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner
prescribed in these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise such
other powers and perform such other duties as may from time to time be
assigned to him by the board of directors or as may be prescribed by these
bylaws. If there is no president, then the chairman of the board shall
also be the chief executive officer of the corporation and shall have the
powers and duties prescribed in Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an
officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors,
have general supervision, direction and control of the business and the
officers of the corporation. He or she shall preside at all meetings of
the stockholders and, in the absence or nonexistence of a chairman of the
board, at all meetings of the board of directors. He or she shall have the
general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and perform
such other duties as may be prescribed by the board of directors or these
bylaws.
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5.8 VICE PRESIDENTS
In the absence or disability of the president, and if there is no
chairman of the board, the vice presidents, if any, in order of their rank
as fixed by the board of directors or, if not ranked, a vice president
designated by the board of directors, shall perform all the duties of the
president and when so acting shall have all the powers of, and be subject
to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these
bylaws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of the
board of directors, committees of directors and stockholders. The minutes
shall show the time and place of each meeting, whether regular or special
(and, if special, how authorized and the notice given), the names of those
present at directors' meetings or committee meetings, the number of shares
present or represented at stockholders' meetings and the proceedings
thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register or a duplicate share register, showing the
names of all stockholders and their addresses, the number and classes of
shares held by each, the number and date of certificates evidencing such
shares and the number and date of cancellation of every certificate
surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by
law or by these bylaws. He or she shall keep the seal of the corporation,
if one be adopted, in safe custody and shall have such other powers and
perform such other duties as may be prescribed by the board of directors or
by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of
the properties and business transactions of the corporation, including
accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, retained earnings and shares. The books of account shall
at all reasonable times be open to inspection by any director for a purpose
reasonably related to his position as a director.
The chief financial officer shall deposit all money and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the board of directors. He or she
shall disburse the funds of the corporation as may be ordered by the board
of directors, shall render to the president and directors, whenever they
request it, an account of all of his or her
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transactions as chief financial officer and of the financial condition of
the corporation, and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or these bylaws.
5.11 ASSISTANT SECRETARY
The assistant secretary, if any, or, if there is more than one, the
assistant secretaries in the order determined by the board of directors (or
if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her
inability or refusal to act, perform the duties and exercise the powers of
the secretary and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
5.12 ADMINISTRATIVE OFFICERS
In addition to the Corporate Officers of the corporation as provided
in Section 5.1 of these bylaws and such subordinate Corporate Officers as
may be appointed in accordance with Section 5.3 of these bylaws, there may
also be such Administrative Officers of the corporation as may be
designated and appointed from time to time by the president of the
corporation. Administrative Officers shall perform such duties and have
such powers as from time to time may be determined by the president or the
board of directors in order to assist the Corporate Officers in the
furtherance of their duties. In the performance of such duties and the
exercise of such powers, however, such Administrative Officers shall have
limited authority to act on behalf of the corporation as the board of
directors shall establish, including but not limited to limitations on the
dollar amount and on the scope of agreements or commitments that may be
made by such Administrative Officers on behalf of the corporation, which
limitations may not be exceeded by such individuals or altered by the
president without further approval by the board of directors.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing powers, authority and duties, all
officers of the corporation shall respectively have such authority and
powers and perform such duties in the management of the business of the
corporation as may be designated from time to time by the board of
directors.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware as the same now exists
or may hereafter be amended, indemnify any
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person against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred in connection
with any threatened, pending or completed action, suit, or proceeding in
which such person was or is a party or is threatened to be made a party by
reason of the fact that such person is or was a director or officer of the
corporation. For purposes of this Section 6.1, a "director" or "officer"
of the corporation shall mean any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of
the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of
the corporation or of another enterprise at the request of such predecessor
corporation.
The corporation shall be required to indemnify a director or officer
in connection with an action, suit, or proceeding (or part thereof)
initiated by such director or officer only if the initiation of such
action, suit, or proceeding (or part thereof) by the director or officer
was authorized by the board of Directors of the corporation.
The corporation shall pay the expenses (including attorney's fees)
incurred by a director or officer of the corporation entitled to
indemnification hereunder in defending any action, suit or proceeding
referred to in this Section 6.1 in advance of its final disposition;
provided, however, that payment of expenses incurred by a director or
officer of the corporation in advance of the final disposition of such
action, suit or proceeding shall be made only upon receipt of an
undertaking by the director or officer to repay all amounts advanced if it
should ultimately be determined that the director or officer is not
entitled to be indemnified under this Section 6.1 or otherwise.
If a claim for indemnification or payment of expenses under this
Article is not paid in full within sixty days after a written claim
therefor has been received by the corporation the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the corporation shall have the burden of proving that
the claimant was not entitled to the requested indemnification or payment
of expenses under applicable law.
The rights conferred on any person by this Article shall not be
exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the corporation's Certificate of
Incorporation, these bylaws, agreement, vote of the stockholders or
disinterested directors or otherwise.
Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person
in respect of any act or omission occurring prior to the time of such
repeal or modification.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees),
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judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any threatened, pending or completed action,
suit, or proceeding, in which such person was or is a party or is
threatened to be made a party by reason of the fact that such person is or
was an employee or agent of the corporation. The corporation's obligation,
if any, to indemnify any person who was or is serving at its request as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, enterprise or non-profit entity shall be reduced by
any amount such person may collect as indemnification from such other
corporation, partnership, joint venture, trust, enterprise or non-profit
enterprise. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or officer) shall mean any person
(i) who is or was an employee or agent of the corporation, (ii) who is or
was serving at the request of the corporation as an employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
or (iii) who was an employee or agent of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record
of its stockholders listing their names and addresses and the number and
class of shares held by each stockholder, a copy of these bylaws as amended
to date, accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose
the corporation's stock ledger, a list of its stockholders, and its other
books and records and to make copies or extracts therefrom. A proper
purpose shall mean a purpose reasonably related to such person's interest
as a stockholder. In every instance where an attorney or other agent is
the person who seeks the right to inspection, the demand under oath shall
be accompanied by a power of attorney or such other writing that authorizes
the attorney or other agent
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to so act on behalf of the stockholder. The demand under oath shall be
directed to the corporation at its registered office in Delaware or at its
principal place of business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a
purpose reasonably related to his or her position as a director.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of
the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, if any, the president, any vice president,
the chief financial officer, the secretary or any assistant secretary of
this corporation, or any other person authorized by the board of directors
or the president or a vice president, is authorized to vote, represent and
exercise on behalf of this corporation all rights incident to any and all
shares of the stock of any other corporation or corporations standing in
the name of this corporation. The authority herein granted may be
exercised either by such person directly or by any other person authorized
to do so by proxy or power of attorney duly executed by such person having
the authority.
7.5 CERTIFICATION AND INSPECTION OF BYLAWS
The original or a copy of these bylaws, as amended or otherwise
altered to date, certified by the secretary, shall be kept at the
corporation's principal executive office and shall be open to inspection by
the stockholders of the corporation, at all reasonable times during office
hours.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or
the stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which
shall not precede the date upon which the resolution fixing the record date
is adopted and which shall not be more than sixty (60)
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days before any such action. In that case, only stockholders of record at
the close of business on the date so fixed are entitled to receive the
dividend, distribution or allotment of rights, or to exercise such rights,
as the case may be, notwithstanding any transfer of any shares on the books
of the corporation after the record date so fixed, except as otherwise
provided by law.
If the board of directors does not so fix a record date, then the
record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the board of directors adopts the
applicable resolution.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts,
other orders for payment of money, notes or other evidences of indebtedness
that are issued in the name of or payable to the corporation, and only the
persons so authorized shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize and empower any officer or officers, or agent or agents, to
enter into any contract or execute any instrument in the name of and on
behalf of the corporation; such power and authority may be general or
confined to specific instances. Unless so authorized or ratified by the
board of directors or within the agency power of an officer, no officer,
agent or employee shall have any power or authority to bind the corporation
by any contract or engagement or to pledge its credit or to render it
liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series
of its stock shall be uncertificated shares. Any such resolution shall not
apply to shares represented by a certificate until such certificate is
surrendered to the corporation. Notwithstanding the adoption of such a
resolution by the board of directors, every holder of stock represented by
certificates and, upon request, every holder of uncertificated shares,
shall be entitled to have a certificate signed by, or in the name of the
corporation by, the chairman or vice-chairman of the board of directors, or
the president or vice-president, and by the treasurer or an assistant
treasurer, or the secretary or an assistant secretary of such corporation
representing the number of shares registered in certificate form. Any or
all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be
issued by the corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
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Certificates for shares shall be of such form and device as the board
of directors may designate and shall state the name of the record holder of
the shares represented thereby; its number; date of issuance; the number of
shares for which it is issued; a summary statement or reference to the
powers, designations, preferences or other special rights of such stock and
the qualifications, limitations or restrictions of such preferences and/or
rights, if any; a statement or summary of liens, if any; a conspicuous
notice of restrictions upon transfer or registration of transfer, if any; a
statement as to any applicable voting trust agreement; if the shares be
assessable, or, if assessments are collectible by personal action, a plain
statement of such facts.
Upon surrender to the secretary or transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence
of succession, assignment or authority to transfer, it shall be the duty of
the corporation to issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to
be paid therefor. Upon the face or back of each stock certificate issued
to represent any such partly paid shares, or upon the books and records of
the corporation in the case of uncertificated partly paid shares, the total
amount of the consideration to be paid therefor and the amount paid thereon
shall be stated. Upon the declaration of any dividend on fully paid
shares, the corporation shall declare a dividend upon partly paid shares of
the same class, but only upon the basis of the percentage of the
consideration actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations,
the preferences and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the certificate that the
corporation shall issue to represent such class or series of stock;
provided, however, that, except as otherwise provided in Section 202 of the
General Corporation Law of Delaware, in lieu of the foregoing requirements
there may be set forth on the face or back of the certificate that the
corporation shall issue to represent such class or series of stock a
statement that the corporation will furnish without charge to each
stockholder who so requests the powers, the designations, the preferences
and the relative, participating, optional or other special rights of each
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the
latter is surrendered to the corporation and cancelled at the same time.
The board of directors may, in case any share certificate or certificate
for any other security is lost, stolen or destroyed, authorize the issuance
of replacement certificates on such terms and conditions as the board may
require; the board may require indemnification of the corporation
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secured by a bond or other adequate security sufficient to protect the
corporation against any claim that may be made against it, including any
expense or liability, on account of the alleged loss, theft or destruction
of the certificate or the issuance of the replacement certificate.
8.7 TRANSFER AGENTS AND REGISTRARS
The board of directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, each of which shall be an
incorporated bank or trust company -- either domestic or foreign, who shall
be appointed at such times and places as the requirements of the
corporation may necessitate and the board of directors may designate.
8.8 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules
of construction and definitions in the General Corporation Law of Delaware
shall govern the construction of these bylaws. Without limiting the
generality of this provision, as used in these bylaws, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both an entity and a natural person.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted,
amended or repealed by the stockholders entitled to vote; provided,
however, that the corporation may, in its certificate of incorporation,
confer the power to adopt, amend or repeal bylaws upon the directors. The
fact that such power has been so conferred upon the directors shall not
divest the stockholders of the power, nor limit their power to adopt, amend
or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in
the book of bylaws with the original bylaws, in the appropriate place. If
any bylaw is repealed, the fact of repeal with the date of the meeting at
which the repeal was enacted or the filing of the operative written
consent(s) shall be stated in said book.
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EXHIBIT 10.3
INTRAWARE, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1998 Employee Stock Purchase
Plan of Intraware, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the common stock of the Company.
(d) "COMPANY" shall mean Intraware, Inc. and any Designated
Subsidiary of the Company.
(e) "COMPENSATION" shall mean all base straight time gross earnings
and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "DESIGNATED SUBSIDIARY" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "EMPLOYEE" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "ENROLLMENT DATE" shall mean the first Trading Day of each
Offering Period.
(i) "EXERCISE DATE" shall mean the last Trading Day of each Purchase
Period.
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(j) "FAIR MARKET VALUE" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day on the date of such determination, as reported in
THE WALL STREET JOURNAL or such other source as the Board deems reliable;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in THE WALL STREET JOURNAL or such
other source as the Board deems reliable;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(4) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "OFFERING PERIODS" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after April 15 and
October 15 of each year and terminating on the last Trading Day in the periods
ending twenty-four months later; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
October 15, 2000. The duration and timing of Offering Periods may be changed
pursuant to Section 4 of this Plan.
(l) "PLAN" shall mean this 1998 Employee Stock Purchase Plan.
(m) "PURCHASE PERIOD" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
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(n) "PURCHASE PRICE" shall mean 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "RESERVES" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(p) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "TRADING DAY" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. ELIGIBILITY.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after April 15 and October 15 each year, or on such other date
as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
October 15, 2000. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
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5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent (15%) of
the Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any,
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which arise upon the exercise of the option or the disposition of the Common
Stock. At any time, the Company may, but shall not be obligated to, withhold
from the participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by the Employee.
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than 5,000
shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of the Company's Common Stock an Employee may purchase during
each Purchase Period of such Offering Period. Exercise of the option shall
occur as provided in Section 8 hereof, unless the participant has withdrawn
pursuant to Section 10 hereof. The option shall expire on the last day of the
Offering Period.
8. EXERCISE OF OPTION.
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on
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such Exercise Date, and continue all Offering Periods then in effect, or (y)
provide that the Company shall make a pro rata allocation of the shares
available for purchase on such Enrollment Date or Exercise Date, as applicable,
in as uniform a manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all participants exercising options to
purchase Common Stock on such Exercise Date, and terminate any or all Offering
Periods then in effect pursuant to Section 20 hereof. The Company may make pro
rata allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
9. DELIVERY. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. WITHDRAWAL.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. TERMINATION OF EMPLOYMENT.
Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
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12. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. STOCK.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 600,000 shares, plus an annual increase to be added on the first day of
the Company's fiscal year beginning in 2000 equal to the lesser of (i) 400,000
shares, (ii) 1% of the outstanding shares on such date or (iii) a lesser amount
determined by the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. ADMINISTRATION. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more
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<PAGE>
dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.
16. TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. USE OF FUNDS. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. REPORTS. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION,
MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the Reserves, the maximum number of shares
each participant may purchase each Purchase Period (pursuant to Section 7),
as well as the price per share and the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised shall
be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company after the closing of
the Company's first firmly underwritten public offering of its Common Stock;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to an option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in
progress shall be shortened by setting a new Exercise Date (the "New Exercise
Date"), and shall terminate immediately prior to the consummation of such
proposed dissolution or liquidation, unless provided otherwise by the Board.
The New Exercise Date shall be before the date of the Company's proposed
dissolution or
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liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that
the participant's option shall be exercised automatically on the New Exercise
Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
(c) MERGER OR ASSET SALE. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its shareholders. Except as
provided in Section 19 and this Section 20 hereof, no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Section 423 of the Code
(or any successor rule or provision or any other applicable law, regulation or
stock exchange rule), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's
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<PAGE>
Compensation, and establish such other limitations or procedures as the Board
(or its committee) determines in its sole discretion advisable which are
consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(1) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(2) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(3) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
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<PAGE>
24. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
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EXHIBIT A
INTRAWARE, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ______________________ hereby elects to participate in the Intraware, Inc.
1998 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and
subscribes to purchase shares of the Company's Common Stock in accordance
with this Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to 15%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note
that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only):__________
______________________________________.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the
<PAGE>
excess of the fair market value of the shares at the time such shares were
purchased by me over the price which I paid for the shares. I HEREBY AGREE
TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS AFTER THE DATE OF ANY
DISPOSITION OF MY SHARES AND I WILL MAKE ADEQUATE PROVISION FOR FEDERAL,
STATE OR OTHER TAX WITHHOLDING OBLIGATIONS, IF ANY, WHICH ARISE UPON THE
DISPOSITION OF THE COMMON STOCK. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to meet
any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to
the extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market
value of the shares on the first day of the Offering Period. The remainder
of the gain, if any, recognized on such disposition will be taxed as
capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)
------------------------------------------------
(First) (Middle) (Last)
- ------------------------------- ---------------------------------------------
Relationship
---------------------------------------------
(Address)
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Employee's Social
Security Number:
------------------------------------
Employee's Address:
------------------------------------
------------------------------------
------------------------------------
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
------------------------- ----------------------------------------
Signature of Employee
----------------------------------------
Spouse's Signature (If beneficiary other
than spouse)
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EXHIBIT B
INTRAWARE, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Intraware, Inc.
1998 Employee Stock Purchase Plan which began on ____________, 19____ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
--------------------------------
--------------------------------
--------------------------------
Signature:
--------------------------------
Date:
----------------------------
<PAGE>
Exhibit 10.4
INTRAWARE, INC.
1998 DIRECTOR OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1998 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" means the common stock of the Company.
(d) "COMPANY" means Intraware, Inc., a Delaware corporation.
(e) "DIRECTOR" means a member of the Board.
(f) "DISABILITY" means total and permanent disability as defined in
section 22(e)(3) of the Code.
(g) "EMPLOYEE" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(i) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination as reported in
THE WALL STREET JOURNAL or such other source as the Administrator deems
reliable;
<PAGE>
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock for the last market trading day prior to the time of
determination, as reported in THE WALL STREET JOURNAL or such other source as
the Board deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(j) "INSIDE DIRECTOR" means a Director who is an Employee.
(k) "OPTION" means a stock option granted pursuant to the Plan.
(l) "OPTIONED STOCK" means the Common Stock subject to an Option.
(m) "OPTIONEE" means a Director who holds an Option.
(n) "OUTSIDE DIRECTOR" means a Director who is not an Employee.
(o) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(p) "PLAN" means this 1998 Director Option Plan.
(q) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(r) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 150,000 Shares (the "Pool"). The Shares may be authorized,
but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. ADMINISTRATION AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) PROCEDURE FOR GRANTS. All grants of Options to Outside Directors
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
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<PAGE>
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options.
(ii) Each Outside Director shall be automatically granted an
Option to purchase 15,000 Shares (the "First Option") on the date on which such
person first becomes an Outside Director, whether through election by the
shareholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically granted an
Option to purchase 7,500 Shares (a "Subsequent Option") on the date of the
annual meeting of the stockholders of each year provided he or she is then an
Outside Director and if as of such date, he or she shall have served on the
Board for at least the preceding six (6) months.
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any exercise of an Option granted before the Company has obtained
shareholder approval of the Plan in accordance with Section 16 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall be as
follows:
(A) the term of the First Option shall be ten (10)
years.
(B) the First Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the First Option.
(D) subject to Section 10 hereof, the First Option
shall become exercisable as to 12.5% of the Shares subject to the First Option
on the six-month anniversary of its date of grant, and as to 1/48 of the Shares
subject to the First Option each month thereafter, provided that the Optionee
continues to serve as a Director on such dates.
(vi) The terms of a Subsequent Option granted hereunder shall
be as follows:
(A) the term of the Subsequent Option shall be ten
(10) years.
(B) the Subsequent Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
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<PAGE>
(C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the Subsequent Option.
(D) subject to Section 10 hereof, the Subsequent
Option shall become exercisable as to 25% of the Shares subject to the
Subsequent Option on the six-month anniversary of its date of grant, and as to
1/24 of the Shares subject to the Subsequent Option each month thereafter,
provided that the Optionee continues to serve as a Director on such dates.
(vii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options to the Outside
Directors on a pro rata basis. No further grants shall be made until such time,
if any, as additional Shares become available for grant under the Plan through
action of the Board or the shareholders to increase the number of Shares which
may be issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
5. ELIGIBILITY. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. FORM OF CONSIDERATION. The consideration to be paid for the Shares to
be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.
8. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
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<PAGE>
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option, but only within three (3) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE. In the event Optionee's status as a
Director terminates as a result of Disability, the Optionee may exercise his or
her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to
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exercise such Option does not exercise such Option (to the extent otherwise so
entitled) within the time specified herein, the Option shall terminate.
9. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding
Option, and the number of Shares issuable pursuant to the automatic grant
provisions of Section 4 hereof shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification
of the Common Stock, or any other increase or decrease in the number of
issued Shares effected without receipt of consideration by the Company after
the closing of the Company's first firmly underwritten public offering of its
Common Stock; provided, however, that conversion of any convertible
securities of the Company shall not be deemed to have been "effected without
receipt of consideration." Except as expressly provided herein, no issuance
by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of Shares subject
to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company
with or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation"). If an Option is assumed or substituted for, the
Option or equivalent option shall continue to be exercisable as provided in
Section 4 hereof for so long as the Optionee serves as a Director or a director
of the Successor Corporation. Following such assumption or substitution, if the
Optionee's status as a Director or director of the Successor Corporation, as
applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or option shall become fully exercisable, including as to
Shares for which it would not otherwise be exercisable. Thereafter, the Option
or option shall remain exercisable in accordance with Sections 8(b) through (d)
above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that
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<PAGE>
the Option shall be fully exercisable for a period of thirty (30) days from the
date of such notice, and upon the expiration of such period the Option shall
terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
11. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such
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<PAGE>
Shares, if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
14. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.
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<PAGE>
INTRAWARE, INC.
DIRECTOR OPTION AGREEMENT
Intraware, Inc., (the "Company"), has granted to ____________________ (the
"Optionee"), an option to purchase a total of [_________ (___)] shares of the
Company's Common Stock (the "Optioned Stock"), at the price determined as
provided herein, and in all respects subject to the terms, definitions and
provisions of the Company's 1998 Director Option Plan (the "Plan") adopted by
the Company which is incorporated herein by reference. The terms defined in the
Plan shall have the same defined meanings herein.
17. NATURE OF THE OPTION. This Option is a nonstatutory option and is not
intended to qualify for any special tax benefits to the Optionee.
18. EXERCISE PRICE. The exercise price is $_______ for each share of
Common Stock.
19. EXERCISE OF OPTION. This Option shall be exercisable during its term
in accordance with the provisions of Section 8 of the Plan as follows:
(a) RIGHT TO EXERCISE.
(i) This Option shall become exercisable in installments
cumulatively with respect to _______ percent (____%) of the Optioned Stock one
year after the date of grant, and as to an additional _____ percent (____%) of
the Optioned Stock on each anniversary of the date of grant, so that one hundred
percent (100%) of the Optioned Stock shall be exercisable [________] years after
the date of grant; provided, however, that in no event shall any Option be
exercisable prior to the date the stockholders of the Company approve the Plan.
(ii) This Option may not be exercised for a fraction of a
share.
(iii) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.
(b) METHOD OF EXERCISE. This Option shall be exercisable by written
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the
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Optionee and shall be delivered in person or by certified mail to the Secretary
of the Company. The written notice shall be accompanied by payment of the
exercise price.
20. METHOD OF PAYMENT. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check; or
(c) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Company and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price.
21. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
22. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The
terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
23. TERM OF OPTION. This Option may not be exercised more than ten (10)
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option.
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<PAGE>
24. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.
DATE OF GRANT:
---------------
INTRAWARE, INC.,
a Delaware corporation
By:
-------------------------------
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated:
-----------------
------------------------------
Optionee
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<PAGE>
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
INTRAWARE, INC.
25 Orinda Way
Orinda, CA 94563
Attention: Corporate Secretary
1. EXERCISE OF OPTION. The undersigned ("Optionee") hereby elects to
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of Intraware, Inc. (the "Company") under and pursuant to the Company's
1998 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").
2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee has
received, read and understood the Agreement.
3. FEDERAL RESTRICTIONS ON TRANSFER. Optionee understands that the
Shares must be held indefinitely unless they are registered under the Securities
Act of 1933, as amended (the "1933 Act"), or unless an exemption from such
registration is available, and that the certificate(s) representing the Shares
may bear a legend to that effect. Optionee understands that the Company is
under no obligation to register the Shares and that an exemption may not be
available or may not permit Optionee to transfer Shares in the amounts or at the
times proposed by Optionee.
4. TAX CONSEQUENCES. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
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<PAGE>
6. ENTIRE AGREEMENT. The Agreement is incorporated herein by reference.
This Exercise Notice and the Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the subject matter hereof. This
Exercise Notice and the Agreement are governed by California law except for that
body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: INTRAWARE, INC.
By:
--------------------------------
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Its:
--------------------------------
- -----
Address:
Dated: Dated:
------------------------ --------------------------
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<PAGE>
Exhibit 10.6
LOAN AGREEMENT
THIS LOAN AGREEMENT is entered into as of July 29, 1998 (this "LOAN
AGREEMENT") between INTRAWARE, INC., a Delaware corporation (herein called
"BORROWER"), and IMPERIAL BANK (herein called "BANK").
1. COMMITMENT.
A. REVOLVING COMMITMENT. Subject to all the terms and conditions of
this Loan Agreement and prior to the termination of its commitment as
hereinafter provided, Bank hereby agrees to make loans (each a "REVOLVING LOAN")
to Borrower, from time to time and in such amounts as Borrower shall request
pursuant to this SECTION 1.A., up to an aggregate principal amount outstanding
under the Revolving Loan Account (as hereinafter defined) not to exceed the
lesser of: (a) eighty percent (80.0%) of Eligible Accounts (as the same may be
adjusted from time to time as provided for under SECTION 9.B. hereof the
"BORROWING BASE") or (b) $5,000,000.00 (the "REVOLVING COMMITMENT"). If at any
time or for any reason, the outstanding principal amount of the Revolving Loan
Account is greater than the least of: (x) the Borrowing Base or (y) the
Revolving Commitment, Borrower shall immediately pay to Bank, in cash, the
amount of such excess. Any commitment of Bank, pursuant to the terms of this
Loan Agreement, to make Revolving Loans shall expire on the Revolving Loan
Maturity Date (as hereinafter defined), subject to Bank's right to renew said
commitment in its sole and absolute discretion at Borrower's request. Any such
renewal of said commitment shall not be binding upon Bank unless it is in
writing and signed by an officer of Bank. Provided that no Event of Default (as
hereinafter defined) has occurred and is continuing, all or any portion of the
Revolving Loans advanced by Bank which are repaid by Borrower shall be available
for reborrowing in accordance with the terms hereof. Borrower promises to pay
to Bank the entire outstanding unpaid principal balance (and all accrued unpaid
interest thereon) of the Revolving Loan Account on July 29, 1999 ("REVOLVING
LOAN MATURITY DATE").
(1) REVOLVING LOANS. The amount of each Revolving Loan made by
Bank to Borrower hereunder shall be debited to the loan ledger account of
Borrower maintained by Bank for the Revolving Commitment (herein called the
"REVOLVING LOAN ACCOUNT") and Bank shall credit the Revolving Loan Account with
all loan repayments in respect thereof made by Borrower. When Borrower desires
to obtain a Revolving Loan, Borrower shall notify Bank (which notice shall be
signed by an officer of Borrower and shall be irrevocable) in accordance with
SECTION 2 hereof, to be received no later than 3:00 p.m. Pacific time one (1)
Banking Day (as hereinafter defined) before the day on which the Revolving Loan
is to be made. Revolving Loans may only be used for working capital purposes.
(2) INTEREST PAYMENTS ON REVOLVING LOANS. Borrower further
promises to pay to Bank from the date of the advance of the initial Revolving
Loan through the Revolving Loan Maturity Date, on or before the tenth (10th) day
of each month, interest on the average daily unpaid balance of the Revolving
Loan Account during the immediately preceding month at a rate of interest EQUAL
TO one percent (1.0%) per annum in excess of the rate of interest which Bank has
announced as its prime lending rate (the "PRIME RATE"), which shall vary
concurrently with any change in the Prime Rate. Interest shall be computed at
the above rate on the basis of the actual number of days during which the
principal balance of the Revolving Loan Account is outstanding divided by 360,
which shall for interest computation purposes be considered one (1) year.
2. LOAN REQUESTS. Requests for Revolving Loans hereunder shall be in
writing duly executed by Borrower in a form satisfactory to Bank and shall
contain a certification setting forth the matters referred to in SECTION 1,
which shall disclose that Borrower is entitled to the amount of Revolving Loan
being requested. Bank is hereby authorized to charge Borrower's deposit account
with Bank for all principal and interest due and owing Bank under this Loan
Agreement and other fees agreed to by Borrower.
1.
<PAGE>
3. DELIVERY OF PAYMENTS. Payment to Bank of all amounts due hereunder
shall be made at its Santa Clara Valley Regional office, or at such other place
as may be designated in writing by Bank from time to time. If any payment date
fall on a day that is not a day that Bank is open for the transaction of
business ("BANKING DAY"), the payment due date shall be extended to the next
Banking Day.
4. LATE CHARGE. If any interest payment, principal payment or principal
balance payment required hereunder is not received by Bank on or before ten (10)
days from the date in which such payment becomes due, Borrower shall pay to
Bank, a late charge EQUAL TO the lesser of (a) five percent (5.0%) of the amount
of such unpaid payment, in addition to said unpaid payment or (b) the maximum
amount permitted to be charged by applicable law, until remitted to Bank;
PROVIDED; HOWEVER, nothing contained in this SECTION 4, shall be construed as
any obligation on the part of Bank to accept payment of any past due payment or
less than the total unpaid principal balance of the Loan Account following the
Revolving Loan Maturity Date. All payments shall be applied first to any late
charges due hereunder, next to accrued interest then payable and the remainder,
if any, to reduce any unpaid principal due under the Loan Account.
5. DEFAULT INTEREST. From and after the Revolving Loan Maturity Date or
such earlier date as all sums owing under the Loan Account becomes due and
payable by acceleration or otherwise, or upon the occurrence and during the
continuance of an Event of Default, at the option of Bank all sums owing under
the Loan Account shall bear interest until paid in full at a rate equal to the
lesser of (a) five percent (5.0%) per annum in excess of the then applicable
interest rate provided for in SECTION 1.A.(2) hereof or (b) the maximum amount
permitted to be charged by applicable law, until all obligations hereunder are
repaid in full or the Event of Default is waived or cured to the satisfaction of
Bank, as applicable.
6. DEFINITIONS. As used in this Loan Agreement and unless otherwise
defined herein, all initially capitalized terms shall have the meanings set
forth on EXHIBIT A attached hereto and incorporated herein by this reference.
7. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Bank: (a) That Borrower is a corporation, duly organized and existing in the
State of its incorporation and the execution, delivery and performance of each
of the Loan Documents are within Borrower's corporate powers, have been duly
authorized and are not in conflict with law or the terms of any charter, by-law
or other incorporation papers, or of any material indenture, agreement or
undertaking to which Borrower is a party or by which Borrower is bound or
affected; (b) Borrower is, and at the time the Collateral becomes subject to
Bank's security interest will be, the true and lawful owner of and has, and at
the time the Collateral becomes subject to Bank's security interest will have,
good and clear title to the Collateral, subject only to Bank's rights therein
and to Permitted Liens; (c) Each Account is, and at the time the Account comes
into existence will be, a true and correct statement of a BONA FIDE indebtedness
incurred by the debtor named therein in the amount of the Account for either
merchandise sold or delivered (or being held subject to Borrower's delivery
instructions) to, or services rendered, performed and accepted by, the account
debtor; (d) That there are and will be no defenses, counterclaims, or setoffs
which may be asserted against the Accounts from time to time represented by
Borrower to be Eligible Accounts, except as permitted in the definition thereof;
(e) Any and all financial information, including information relating to the
Collateral, submitted by Borrower to Bank, whether previously or in the future,
is and will be true and correct; (f) There is no litigation or other proceeding
pending or threatened against or affecting Borrower, and Borrower is not in
default with respect to any order, writ, injunction, decree or demand of any
court or other governmental or regulatory authority; (g) (i) The consolidated
balance sheets of Borrower dated as of February 28, 1998, and the related
consolidated profit and loss statements for the fiscal year then ended, copies
of which have heretofore been delivered to Bank by Borrower, and all other
statements and data submitted in writing by Borrower to Bank in connection with
Borrower's request for credit are true and correct, and said balance sheet and
profit and loss statement accurately present the financial condition of Borrower
as of the date thereof and the results of the operations of Borrower for the
period covered thereby, and have been prepared in accordance with GAAP,
(ii) since such date, there have been no material adverse changes in the
financial condition of Borrower, and
2.
<PAGE>
(iii) Borrower has no knowledge of any liabilities, contingent or otherwise,
which are not reflected in said balance sheet, and Borrower has not entered into
any special commitments or substantial contracts which are not reflected in said
balance sheet, other than in the ordinary and normal course of its business,
which may have a Material Adverse Effect upon its financial condition,
operations or business as now conducted; (h) Borrower has no liability for any
material delinquent local, state or federal taxes, and, if Borrower has
contracted with any government agency, it has no liability for renegotiation of
profits; and (i) Borrower, as of the date hereof, possesses all necessary
trademarks, trade names, copyrights, patents, patent rights, and licenses to
conduct its business as now operated, without any known conflict with valid
trademarks, trade names, copyrights, patents, patent rights and license rights
of others (or could obtain such trademarks, trade names, copyrights, patents,
patent rights and licenses without a material adverse effect on its business);
and (j) Borrower and its Subsidiaries (as hereinafter defined) have reviewed the
areas within their operations and business which could be adversely affected by,
and have developed or are developing a program to address on a timely basis, the
Year 2000 Problem and have made related appropriate inquiry of material
suppliers and vendors, and based on such review and program, the Year 2000
Problem will not have a Material Adverse Effect upon its financial condition,
operations or business as now conducted.
8. NEGATIVE COVENANTS. Borrower agrees that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or the
commitment of Bank hereunder is in effect, neither Borrower, nor any of its
subsidiaries ("SUBSIDIARIES") will, without the prior written consent of Bank:
A. Make any substantial change in the character of its business as
now conducted which would have a material adverse effect on its business or its
ability to perform hereunder;
B. Create, incur, assume or permit to exist any Indebtedness other
than loans from Bank except obligations now existing as shown in the financial
statements referenced in SECTION 7.(g)(i), excluding those being refinanced by
Bank, Subordinated Debt and Permitted Indebtedness; or sell or transfer, either
with or without recourse, any accounts or notes receivable or any monies due or
to become due;
C. Create, incur, assume or permit to exist any mortgage, pledge,
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
Permitted Liens and liens in favor of Bank, or execute any financing statements
covering any asset in favor of any person other than Bank;
D. Sell or dispose of any of the Collateral other than to Bank
(other than the disposing of such Collateral in the ordinary and normal course
of its business as now conducted or other assets which are obsolete or otherwise
considered surplus);
E. Make any loans or advances to any Person or other entity other
than in the ordinary and normal course of its business as now conducted
(provided that such loans or advances are not made to any Person or entity which
is controlled by or under common control with Borrower in an amount in excess of
$300,000) or make any investment in the securities of any Person or other entity
other than the United States Government;
F. (1) Purchase or otherwise acquire all or substantially all of the
assets or business of any Person or other entity; or (2) liquidate, dissolve,
merge or consolidate, or commence any proceedings therefore; and
G. Declare or pay any dividend or make any other distribution on any
of its capital stock now outstanding or hereafter issued or purchase, redeem or
retire any of such stock other than in dividends or distributions payable in
Borrower's or any such Subsidiary's capital stock other than (i) repurchases of
equity securities owned by any employee, consultant, officer or director upon
termination of their relationship with the
3.
<PAGE>
Borrower, (ii) repurchase of equity securities with the proceeds of the sale of
other equity securities or Subordinated Debt; (iii) dividends by any Subsidiary
to Borrower; and (iv) dividends, repurchases or other distributions, which after
giving effect to such dividend, repurchase or other distribution, would not have
a material adverse effect on Borrower or its ability to perform hereunder or
leave Borrower with cash and cash equivalents less than the aggregate commitment
of the Bank under this Loan Agreement.
9. AFFIRMATIVE COVENANTS. Borrower affirmatively covenants that so long
as any loans, obligations or liabilities remain outstanding or unpaid to Bank or
the commitment of Bank hereunder is in effect, it will:
A. Furnish Bank from time to time such information as Bank may
reasonably request and inform Bank immediately upon the occurrence of a material
adverse change therein.
B. Notwithstanding any provision of this Agreement to the contrary,
Borrower shall not be required to disclose, permit the inspection, examination,
copying or making extracts of, or discuss, any document, information or other
matter that is prohibited by an intellectual property development agreement
("Intellectual Property Development Agreement") with a third party binding on
the Borrower, provided the agreement was not entered into by the Borrower for
the primary purpose of concealing information from the Bank, and further
provided the agreement was executed prior to the date hereof and Borrower uses
its best efforts to obtain the third party's consent to disclose such
information to Bank. Notwithstanding anything to the contrary, Intellectual
Property Development Agreements shall not include any license agreements in
which the Borrower is the licensee or the licensor.
C. Permit representatives of Bank to conduct an audit of Borrower's
books and records relating to the Collateral and make extracts therefrom, with
results satisfactory to Bank, PROVIDED that Bank shall use its best efforts to
not interfere with the conduct of Borrower's business, and to the extent
possible to arrange for verification of the Accounts directly with the account
debtors obligated thereon or otherwise, all under reasonable procedures
acceptable to Bank and at Borrower's sole expense (not to exceed $2,500 per
audit); PROVIDED FURTHER that, prior to an Event of Default, Borrower shall not
be responsible for the expense of more than one (1) such audit, in any fiscal
year. Borrower hereby acknowledges and agrees that upon completion of any such
audit, Bank shall have the right to adjust the Borrowing Base percentage, in its
sole and reasonable discretion, based on its review of the results of such
Collateral audit;
D. Promptly notify Bank of any attachment or other legal process
levied against any of the Collateral and any information received by Borrower
relative to the Collateral, including the Accounts, the account debtors or other
Persons obligated in connection therewith, which may in any way affect the value
of the Collateral or the rights and remedies of Bank in respect thereto;
E. Reimburse Bank upon demand for any and all documented legal
costs, including reasonable attorneys' fees, and other expenses incurred in
collecting any sums payable by Borrower under the Loan Account or any other
obligation secured hereby, enforcing any term or provision of this Loan
Agreement or otherwise or in the checking, handling and collection of the
Collateral and the preparation and enforcement of any agreement relating
thereto;
F. Notify Bank of each location and of each office of Borrower at
which records of Borrower relating to the Accounts are kept;
G. Provide, maintain and deliver to Bank policies insuring the
Collateral against loss or damage as set forth in the General Security
Agreement;
4.
<PAGE>
H. In the event the unpaid balance of the Loan Account shall exceed
the maximum amount of outstanding loans to which Borrower is entitled under
SECTION 1 hereof, as applicable, Borrower shall within three (3) business days
pay to Bank for credit to the Loan Account the amount of such excess;
I. Maintain and preserve all rights, franchises and other authority
adequate and necessary for the conduct of its business and maintain and preserve
its existence in the state of its incorporation and any other state(s) in which
Borrower conducts its business, except with respect to such other state(s),
where the failure to do so would not have a Material Adverse Effect;
J. Maintain public liability, property damage and workers
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses. Borrower shall provide evidence of property
insurance in amounts and types acceptable to Bank, and certificates naming Bank
as a loss payee;
K. Pay and discharge, before the same becomes delinquent and
penalties accrue thereon, all taxes, assessments and governmental charges upon
or against it or any of its properties, and any of its other liabilities at any
time existing, except to the extent and so long as: (1) the same are being
contested in good faith and by appropriate proceedings in such manner as not to
cause any Material Adverse Effect or the loss of any right of redemption from
any sale thereunder; and (2) it shall have set aside on its books reserves
(segregated to the extent required by GAAP);
L. Maintain a standard and modern system of accounting in accordance
with GAAP on a basis consistently maintained; permit Bank's representatives to
have access to, and to examine its properties, books and records at all
reasonable times; provided that Bank shall use its best efforts to not interfere
with the conduct of Borrower's business;
M. Maintain its properties, equipment and facilities in good order
and repair;
N. Maintain its primary banking and operating accounts with Bank or
Imperial Securities Corporation; and
O. Prior to allowing any of Borrower's raw materials, work in
process, finished goods inventory and property, plant and equipment to be
transported to or be held at any contract manufacturer, warehouse or other
location (other than with BONA FIDE distributors and retail accounts), Borrower
shall provide notice to Bank and Borrower shall have complied with such filing
and notice requirements as shall, in Bank's opinion, assure Borrower's and
Bank's priority in such property over creditors of such contract manufacturer,
warehouseman or operator of such other location, including, without limitation,
making filings under California Commercial Code Section 2326, providing notice
under California Commercial Code Section 9114 and making filings and
publications as required under California Civil Code Section 3440.1 and Section
3440.5 All such filings, notices and publications shall be in form and
substance satisfactory to Bank.
P. Borrower shall perform all acts reasonably necessary to ensure
that Borrower, its Subsidiaries and any business in which Borrower holds a
substantial interest becomes Year 2000 Compliant in a timely manner. Such acts
shall include, without limitation, performing a comprehensive review and
assessment of all of Borrower's systems and adopting a detailed plan, with an
itemized budget, for the remediation, monitoring and testing of such systems.
If requested by Bank, Borrower shall immediately deliver a statement to Bank
summarizing the Year 2000 exposure, program or progress of Borrower and its
Subsidiaries or other evidence of Borrower's compliance with the terms of this
Section, certified by an officer of Borrower.
5.
<PAGE>
10. FINANCIAL COVENANTS AND INFORMATION. All financial covenants and
financial information referenced herein shall be interpreted and prepared in
accordance with GAAP as used in the United States of America applied on a basis
consistent with previous years. Compliance with the financial covenants shall
be calculated and monitored on a monthly basis, except as shall be expressly
stated to the contrary. Borrower affirmatively covenants that so long as any
loans, obligations or liabilities remain outstanding or unpaid to Bank or any
commitment is outstanding hereunder, it will, on a consolidated basis:
A. At all times, maintain a Minimum Tangible Net Worth of not less
than $5,000,000. As used herein, "TANGIBLE NET WORTH" shall mean all assets,
EXCLUDING any value for goodwill, trademarks, patents, copyrights, organization
expense and other similar intangible items, LESS all liabilities, PLUS
Subordinated Debt;
B. At all times maintain a Minimum Adjusted Quick Ratio of not less
than 1.25:1.00. As used herein "ADJUSTED QUICK RATIO" means ALL unrestricted
cash and cash equivalents PLUS Accounts DIVIDED BY current liabilities LESS
deferred maintenance contract revenue;
C. Measured on a quarterly basis on the last day of each fiscal
quarter, have Maximum Quarterly Losses not in excess of (1) $2,500,000 through
the fiscal quarter ending February 28, 1999 and (2) $1,500,000 for each fiscal
quarter thereafter;
D. As soon as it is available, but not later than thirty (30) days
after and as of the end of each month, deliver to Bank an internally-prepared
financial statement consisting of a balance sheet and profit and loss statement,
prepared in accordance with GAAP, and a Compliance Certificate in the form of
EXHIBIT B attached hereto and incorporated herein by this reference, certified
by an officer of Borrower;
E. As soon as it is available, but not later than ninety (90) days
after the end of Borrower's fiscal year, deliver to Bank unqualified copies of
Borrower's consolidated financial statements together with changes in financial
position audited by an independent certified public accountant selected by
Borrower but reasonably acceptable to Bank;
F. So long as any Revolving Loans remain outstanding and unpaid
under the Revolving Loan Account, as soon as it is available, but not later than
twenty (20) days after and as of the end of each month, deliver to Bank, in such
form and detail as Bank may reasonably require, statements showing aging of the
Accounts and Borrower's accounts payable, together with a Borrowing Base
Certificate in the form of EXHIBIT C attached hereto and incorporated herein by
this reference, certified by an officer of Borrower. Notwithstanding the
foregoing, if Borrower has not provided to Bank the statements described
immediately above for the most recent month then ended, as a condition to any
request for a Revolving Loan, Borrower shall have delivered to Bank said
statements as well as a Borrowing Base Certificate covering the most recent
month then ended at least twenty (20) days prior to the date of Borrower's
request for an advance for said Revolving Loan;
G. Upon the reasonable request of Bank, deliver to Bank current
budgets, sales projections, operating plans and other financial exhibits and
information in form and substance reasonably satisfactory to Bank; and
H. Upon any officer becoming aware, deliver immediately to Bank
written notice of any pending or threatened litigation reasonably likely to
result in, damages against Borrower in an amount in excess of $50,000.00.
11. LOAN FEE. Borrower has paid, and Bank hereby acknowledges receipt of,
in respect of the Revolving Commitment, a loan fee in the amount of Twelve
Thousand Five Hundred Dollars ($12,500.00).
6.
<PAGE>
12. DEFAULT AND REMEDIES. The occurrence of any one or more of the
following shall constitute an "EVENT OF DEFAULT": (a) Default be made in the
payment of any obligation by Borrower under any Loan Document and such failure
shall continue for three (3) days; (b) Except for any failure to pay as
described in clause (a) above, breach be made in any warranty, statement,
promise, term or condition, contained herein or in any other Loan Document and
the same shall not have been cured to the satisfaction of Bank within fifteen
(15) days after Borrower shall have become aware thereof, whether by written
notice from Bank, or otherwise, (except that no cure period shall exist for
breaches in respect of Borrower's obligations under SECTION 8, SUBSECTIONS 9.B.,
9.F., 9.G., 9.I. and 9.O., SUBSECTIONS 10.A., 10.B., 10.C., 10.D., 10.E. and
10.F. of this Loan Agreement, and SECTIONS 1 and 2 of the General Security
Agreement); (c) Any statement, warranty or representation made by Borrower at
any time proves false; (d) Borrower defaults in the repayment of any principal
of or the payment of any interest on any indebtedness exceeding in the aggregate
principal amount $50,000.00 or breaches or violates any term or provision of any
promissory note, loan agreement, mortgage, indenture or other evidence of such
indebtedness pursuant to which amounts outstanding in the aggregate exceed
$50,000.00 and such failure continues beyond any applicable grace period if the
effect of such breach is to permit the acceleration of such indebtedness,
provided the note holder or obligee has not waived the default, and such failure
shall not have been cured to Bank's satisfaction within fifteen (15) calendar
days after Borrower shall become aware thereof, whether by written notice from
Bank or otherwise, or there has in fact been an acceleration of such
indebtedness; (e) Borrower becomes insolvent or makes an assignment for the
benefit of creditors; (f) Any proceeding be commenced by Borrower under any
bankruptcy, reorganization, arrangement, readjustment of debt or moratorium law
or statute or, any such a proceeding is commenced against Borrower and is not
dismissed or stayed within ten (10) days (PROVIDED THAT no Loans will be made
prior to the dismissal of such proceeding); (g) Any money judgment, writ of
attachment, garnishment, execution or other legal process be entered against
Borrower or issued against any material property of Borrower which is not fully
covered by insurance (subject to reasonable deductibles) and remains unvacated,
unbonded, unstayed or unpaid or undischarged for more than fifteen (15) days
(whether or not consecutive) or in any event later than five (5) days prior to
the date of any proposed sale thereunder, or if any assessment for taxes against
Borrower other than against any of its real property, is made by the Federal or
State government or any department thereof; or (h) Any change in Borrower's
financial condition, prospects or operations which has a Material Adverse
Effect. Upon the occurrence and during the continuance of an Event of Default,
Bank may, at its option and without demand first made and without notice to
Borrower, do any one or more of the following: (i) Terminate its obligation to
make loans to Borrower as provided in SECTION 1 hereof; (ii) Declare all sums
secured hereby immediately due and payable; (iii) Immediately take possession of
the Collateral wherever it may be found, using all legally permissible means to
do so, or require Borrower to assemble the Collateral and make it available to
Bank at a place designated by Bank which is reasonably convenient to Borrower
and Bank, and Borrower waives all claims for damages due to or arising from or
connected with any such taking; (iv) Proceed in the foreclosure of Bank's
security interest and sale of the Collateral in any manner permitted by law, or
provided for herein; (v) Sell, lease or otherwise dispose of the Collateral at
public or private sale, with or without having the Collateral at the place of
sale, and upon terms and in such manner as Bank may determine, and Bank may
purchase same at any such sale; (vi) Retain the Collateral in full satisfaction
of the obligations secured thereby to the extent permitted under the Uniform
Commercial Code; or (vii) Exercise any remedies of a secured party under the
Uniform Commercial Code. Prior to any such disposition, Bank may, at its
option, cause any of the Collateral to be repaired or reconditioned in such
manner and to such extent as Bank may deem advisable, and any sums expended
therefor by Bank shall be repaid by Borrower and secured hereby. Bank shall
have the right to enforce one or more remedies hereunder successively or
concurrently, and any such action shall not estop or prevent Bank from pursuing
any further remedy that it may have hereunder or by law. If a sufficient sum is
not realized from any such disposition of the Collateral to pay all obligations
secured by this Loan Agreement, Borrower hereby promises and agrees to pay Bank
any deficiency.
13. RECORDS RETENTION. Borrower authorizes Bank to destroy all invoices,
delivery receipts, reports and other types of documents and records submitted to
Bank in connection with the transactions contemplated herein at any time
subsequent to four (4) months from the time such items are delivered to Bank.
7.
<PAGE>
14. ATTORNEYS' FEES. Borrower agrees to reimburse Bank for its reasonable
attorneys' fees and expenses incurred in connection with the negotiation,
preparation, execution and delivery of the Loan Documents.
15. GOVERNING LAW; JUDICIAL REFERENCE.
A. GOVERNING LAW. This Agreement shall be deemed to have been made
in the State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of law.
B. JUDICIAL REFERENCE.
(1) Other than (a) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (b) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Loan Agreement or the other Loan Documents, which controversy,
dispute or claim is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to this Loan
Agreement gives written notice to all other parties that a controversy, dispute
or claim exists), will be settled by a reference proceeding in California in
accordance with the provisions of Section 638 ET SEQ. of the California Code of
Civil Procedure, or their successor section ("CCP"), which shall constitute the
exclusive remedy for the settlement of any controversy, dispute or claim
concerning this Loan Agreement, including whether such controversy, dispute or
claim is subject to the reference proceeding and except as set forth above, the
parties waive their rights to initiate any legal proceedings against each other
in any court or jurisdiction other than the Superior Court in the County where
the real property, if any, is located or Santa Clara County, if none (the
"COURT"). The referee shall be a retired Judge of the Court selected by mutual
agreement of the parties, and if they cannot so agree within forty-five (45)
days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his/her representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP Section 170.6. The referee shall (x) be requested to set the
matter for hearing within sixty (60) days after the date of selection of the
referee and (y) try any and all issues of law or fact and report a statement of
decision upon them, if possible, within ninety (90) days of the Claim Date. Any
decision rendered by the referee will be final, binding and conclusive and
judgement shall be entered pursuant to CCP Section 644 in any court in the State
of California having jurisdiction. Any party may apply for a reference
proceeding at any time after thirty (30) days following notice to any other
party of the nature of the controversy, dispute or claim, by filing a petition
for a hearing and/or trial. All discovery permitted by this Loan Agreement
shall be completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the event of
a party's refusal to provide requested discovery for any reason whatsoever,
including, without limitation, legal objections raised to such discovery or
unavailability of a witness due to absence or illness. No party shall be
entitled to "priority" in conducting discovery. Depositions may be taken by
either party upon seven (7) days written notice, and request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided
herein, the Superior Court is empowered to issue temporary and/or provisional
remedies, as appropriate.
(2) Except as expressly set forth in this Loan Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with respect to the
course of the reference proceeding. All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court
reporter except that when any party so requests, a court reporter will be used
at any hearing
8.
<PAGE>
conducted before the referee. The party making such a request shall have the
obligation to arrange for and pay for the court reporter. The costs of the
court reporter at the trial shall be borne equally by the parties.
(3) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the
close of the reference proceeding that shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(4) In the event that the enabling legislation which provides
for appointment of a referee is repealed (and no successor statute is enacted),
any dispute between the parties that would otherwise be determined by the
reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the Court,
in accordance with the California Arbitration Act, Section 1280 through Section
1294.2 of the CCP as amended from time to time. The limitations with respect to
discovery as set forth hereinabove shall apply to any such arbitration
proceeding.
16. MISCELLANEOUS PROVISIONS.
A. Nothing herein shall in any way limit the effect of the
conditions set forth in any other security or other agreement executed by
Borrower, but each and every condition hereof shall be in addition thereto.
B. No failure or delay on the part of Bank, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof.
C. All rights and remedies existing under this Loan Agreement or any
other Loan Document are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
D. All headings and captions in this Loan Agreement and any related
documents are for convenience only and shall not have any substantive effect.
9.
<PAGE>
E. This Loan Agreement may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. Each
such agreement shall become effective upon the execution of a counterpart hereof
or thereof by each of the parties hereto and telephonic notification that such
executed counterparts has been received by Borrower and Bank.
BANK: BORROWER:
IMPERIAL BANK INTRAWARE, INC.,
a Delaware corporation
By: /s/ Sunita Patel By: /s/ Donald M. Freed
-------------------------------- --------------------------------
Sunita R. Patel Donald Freed
Assistant Vice President Executive Vice President and
Chief Financial Officer
LIST OF EXHIBITS AND SCHEDULES
EXHIBIT A: Definitions
SCHEDULE 1 TO EXHIBIT A: List of Specific Permitted Indebtedness
SCHEDULE 2 TO EXHIBIT A: List of Specific Permitted Liens
EXHIBIT B: Compliance Certificate
EXHIBIT C: Borrowing Base Certificate
10.
<PAGE>
EXHIBIT A
DEFINITIONS
"ACCOUNTS" means any right to payment for goods sold or leased, or to be
sold or to be leased, or for services rendered or to be rendered no matter how
evidenced, including accounts receivable, contract rights, chattel paper,
instruments, purchase orders, notes, drafts, acceptances, general intangibles
and other forms of obligations and receivables.
"CAPITAL LEASE" means, as to any Person, any lease of any Property by such
Person as lessee that is, or should be in accordance with Financing Accounting
Standards Board Statement No. 13, classified and accounted for as a "CAPITAL
LEASE" on the balance sheet of such Person prepared in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed in a note to such balance sheet.
"COLLATERAL" means any and all personal property of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest hereunder (including, without
limitation, the Accounts), or pursuant to the terms of the General Security
Agreement, the IP Security Agreement or otherwise.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, letter of credit or other obligation of another, including,
without limitation, any such obligation directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business), co-made or discounted or sold with recourse by that Person, or in
respect of which that Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation for which that Person is in
effect liable through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, capital stock purchases, capital contributions or
otherwise), or to maintain the solvency of the obligor of such obligation, or to
make payment for any products, materials or supplies or for any transportation,
services or lease regardless of the non-delivery or non-furnishing thereof, in
any such case if the purpose or intent of such agreement is to provide assurance
that such obligation will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof. The amount of
any Contingent Obligation of any Person shall be deemed to be an amount equal to
the maximum amount of such Person's liability with respect to the stated or
determinable amount of the primary obligation for which such Contingent
Obligation is incurred or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder).
"ELIGIBLE ACCOUNTS" means such of Borrower's Accounts as Bank in its
reasonable discretion shall determine are eligible from time to time; PROVIDED,
HOWEVER, that in no event shall Eligible Accounts include the following unless
otherwise agreed to in writing by Bank:
(1) all Accounts under which payment is not received within 90 days
from the applicable invoice date;
Exhibit A
Page 1 of 5
<PAGE>
(2) all Accounts against which the account debtor or any other Person
obligated to make payment thereon asserts any defense, offset, counterclaim
or other right to avoid or reduce the liability represented by the
Accounts;
(3) any Accounts if the account debtor or any other Person liable in
connection therewith is insolvent, subject to bankruptcy or receivership
proceedings or has made an assignment for the benefit of creditors or whose
credit standing is unacceptable to Bank and Bank has so notified Borrower;
(4) Accounts with respect to which the account debtor is an officer,
director, shareholder, employee or Subsidiary;
(5) Accounts due from an account debtor if more than fifty percent
(50%) of the aggregate amount of Accounts of such account debtor have at
that time remained unpaid for more than ninety (90) days from the
applicable invoice date;
(6) Accounts with respect to international transactions unless either
(a) such Accounts are insured or covered by a letter of credit in a manner
and form acceptable to the Bank or (b) Bank shall have otherwise permitted
in writing in its sole and absolute direction;
(7) salesperson's accounts for promotional purposes;
(8) the amount by which the aggregate of all Accounts of an account
debtor exceeds twenty-five percent (25.0%) of the total accounts receivable
balance;
(9) Accounts where the account debtor is a seller to borrower, to the
extent that a potential offset exists; and
(10) Accounts where the account debtor is a federal governmental
entity, federal agency or instrumentality thereof.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 12.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by the significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GENERAL SECURITY AGREEMENT" means that certain General Security Agreement
dated of even date herewith, made by Borrower in favor of Bank.
"INDEBTEDNESS" means, as to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money, including, without limitation,
all of such indebtedness outstanding under this Loan Agreement and any of the
other Loan Documents, (b) all Capital Lease Obligations of such Person, (c) to
the extent of the outstanding indebtedness thereunder, any obligation of such
Person representing an extension of credit to such Person, whether or not for
borrowed money, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than (i) trade or other accounts payable in
the ordinary course of business in accordance with customary industry terms and
(ii) deferred franchise fees), (e) all Contingent Obligations, (f) any
obligation of such Person of the nature described in clauses (a), (b), (c), (d)
or (e) above, that is secured by a Lien
Exhibit A
Page 2 of 5
<PAGE>
on assets of such Person and which is non-recourse to the credit of such Person,
but only to the extent of the fair market value of the assets so subject to the
Lien, (g) obligations of such Person arising under acceptance facilities or
under facilities for the discount of accounts receivable of such Person, (h) any
obligation of such Person to reimburse the issuer of any letter of credit issued
for the account of such Person upon which a draw has been made, and (i) any
lease having the effect of indebtedness, whether or not the same shall be
treated as such on the balance sheet of Borrower under GAAP.
"IP SECURITY AGREEMENT" means that certain Collateral Assignment as
Collateral, Patent Mortgage and Security Agreement dated of even date herewith,
made by Borrower in favor of Bank.
"LIEN" means any mortgage, pledge, security interest, lien or other charge
or encumbrance, including the lien or retained security title of a conditional
vendor, upon or with respect to any property or assets.
"LOAN ACCOUNT" means the Revolving Loan Account.
"LOAN DOCUMENTS" means this Loan Agreement, the General Security Agreement,
the IP Security Agreement and that certain Agreement to Provide Insurance (Real
or Personal Property) dated of even date herewith, each as executed by Borrower
in favor of Bank, together with all other documents entered into or delivered
pursuant to any of the foregoing, in each case as originally executed or as the
same may from time to time be modified, amended, supplemented or restated.
"MATERIAL ADVERSE EFFECT" means any set of circumstances or events which
(a) has or could reasonably be expected to have any material adverse effect upon
the validity or enforceability of any material provision of any Loan Document,
(b) is or could reasonably be expected to be material and adverse to the
condition (financial or otherwise) or business operations of Borrower,
(c) materially impairs or could reasonably be expected to materially impair the
ability of Borrower, to perform its material Obligations, (d) materially impairs
or could reasonably be expected to materially impair the value or priority of
Bank's security interest in any Collateral or (e) materially impairs or could
reasonably be expected to materially impair the ability of Bank to enforce any
of its legal remedies pursuant to the Loan Documents.
"PERMITTED INDEBTEDNESS" means the following:
(1) indebtedness of Borrower or Indebtedness and Contingent
Obligations of its Subsidiaries in favor of Bank arising under this Loan
Agreement and the other Loan Documents;
(2) the existing Indebtedness and Contingent Obligations disclosed
on SCHEDULE 1 attached hereto and incorporated herein by this reference;
PROVIDED that the principal amount thereof is not increased and the terms
thereof are not modified to impose more burdensome terms upon Borrower or
any of its Subsidiaries;
(3) the Subordinated Debt;
(4) extensions, renewals or refinancings of Indebtedness permitted
under this Loan Agreement, other than clause (3) immediately above;
(5) accrued dividends on the preferred stock of Borrower;
(6) interest rate and currency hedging agreements;
Exhibit A
Page 3 of 5
<PAGE>
(7) guaranties of any Subsidiary's suppliers in connection with the
purchase of supplies in the ordinary course of business;
(8) guaranties of lease obligations incurred in the ordinary course
of business and to the extent otherwise permitted hereunder;
(9) Contingent Obligations constituting Permitted Liens; and
(10) the indebtedness referred to in clause (3)(a) of the definition
of Permitted Liens.
"PERMITTED LIENS" means the following:
(1) liens and security interests existing as of this date and
disclosed in SCHEDULE 2 attached hereto and incorporated herein by this
reference;
(2) liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith
by appropriate proceedings;
(3) liens and security interests (a) upon or in any equipment
acquired or held by Borrower to secure the purchase price of such equipment
or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment and in an amount not greater than the
purchase price thereof or (b) existing on such equipment at the time of its
acquisition, PROVIDED that the lien and security interest is confined
solely to the property so acquired and improvements thereon, and the
proceeds of such equipment;
(4) liens consisting of leases or subleases and licenses and
sublicenses granted to others in the ordinary course of Borrower's business
not interfering in any material respect with the business of Borrower and
any interest or title of a lessor or licensor under any lease or license,
as applicable;
(5) liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons or entities
imposed without action of such parties, PROVIDED that the payment thereof
is not yet required;
(6) liens incurred or deposits made in the ordinary course of
Borrower's business in connection with worker's compensation, unemployment
insurance, social security and other like laws;
(7) liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(8) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances affecting real property not interfering in any material
respect with the ordinary conduct of Borrower's business;
(9) liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(10) liens that are not prior to Bank's security interest which
constitute rights of set-off of a customary nature;
Exhibit A
Page 4 of 5
<PAGE>
(11) any interest or title of a lessor in equipment subject to any
Capitalized Lease otherwise permitted hereunder; and
(12) any liens arising from the filing of any financing statements
relating to true leases otherwise permitted hereunder.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, firm, joint stock
company, estate, entity or governmental agency.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
"SUBORDINATED DEBT" means indebtedness of Borrower, the repayment of
principal of which is fully subordinated in time and right of payment to the
Loans, and has been approved in Bank's sole and absolute discretion and in
writing.
"YEAR 2000 COMPLIANT" means, in regard to Borrower or any Person, that all
software, hardware, firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition of Borrower or such
Person, will properly perform date sensitive functions before, during and after
the year 2000.
"YEAR 2000 PROBLEM" means the risk that any computer applications used by
Borrower and its Subsidiaries may be unable to recognize and properly perform
date-sensitive functions involving certain dates prior to and any date on or
after December 31, 1999.
Exhibit A
Page 5 of 5
<PAGE>
SCHEDULE 1 TO EXHIBIT A
SPECIFIC PERMITTED INDEBTEDNESS
Schedule 1 to Exhibit A
Page 1 of 1
<PAGE>
SCHEDULE 2 TO EXHIBIT A
SPECIFIC PERMITTED LIENS
Schedule 2 to Exhibit A
Page 1 of 1
<PAGE>
EXHIBIT B
COMPLIANCE CERTIFICATE
The consolidated financial statements dated as of __________________________ of
INTRAWARE, INC., a Delaware corporation ("BORROWER") attached hereto and
submitted to IMPERIAL BANK ("BANK") pursuant to that certain Loan Agreement
dated as of July 29, 1998, entered into between Borrower and Bank (the "LOAN
AGREEMENT"), are in compliance with all financial covenants (unless otherwise
noted below) as specified in SECTION 10 therein, as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COVENANT: ACTUAL:
<S> <C> <C>
A. MINIMUM TANGIBLE NET WORTH OF:
$5,000,000
- --------------------------------------------------------------------------------
B. MINIMUM QUICK RATIO:
1.25:.00
- --------------------------------------------------------------------------------
C. MAXIMUM QUARTERLY LOSSES NOT IN EXCESS OF:
$2,500,000 (through the FQ ending 2/28/99)
$1,500,000 (each FQ thereafter)
- --------------------------------------------------------------------------------
</TABLE>
Exceptions: (if none, so state):
- --------------------------------------------------------------------------------
The undersigned authorized officer of Borrower hereby certifies that Borrower is
in complete compliance with the terms and conditions of the Loan Agreement for
the period ending _____________________, ____, and as of the date of this
Compliance Certificate the representations and warranties stated therein are
true, accurate and complete as of the date hereof (except as to those
representations and warranties which specifically reference a particular date
and except as noted above).
The undersigned further certifies that s/he knows of no pending conditions which
may cause an Event of Default (as defined in the Loan Agreement) to exist in the
next thirty (30) days. The required support documents for this certification
are attached and prepared in accordance with GAAP consistently applied.
Date: INTRAWARE INC.,
------------------------- a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Exhibit B
Page 1 of 1
<PAGE>
EXHIBIT C
BORROWING BASE CERTIFICATE
(To be provided and attached by Bank)
Exhibit C
<PAGE>
GENERAL SECURITY AGREEMENT
THIS GENERAL SECURITY AGREEMENT is executed on July 29, 1998 (this
"SECURITY AGREEMENT"), by INTRAWARE, INC., a Delaware corporation (hereinafter
called "GRANTOR"). In consideration of financial accommodations given, to be
given or continued, Grantor hereby grants to IMPERIAL BANK (hereinafter called
"BANK") a security interest in (a) all property (i) delivered to Bank by
Grantor, (ii) which shall be in Bank's possession or control in any matter or
for any purpose, (iii) described below or (iv) now owned or hereafter acquired
by Grantor of the type or class described below and/or in any exhibit or
supplementary schedule hereto, or in any financing statement filed by Bank and
executed by or on behalf of Grantor; and (b) the proceeds, increase and products
of such property, all accessions thereto, and all property which Grantor may
receive on account of such collateral (collectively referred to as "COLLATERAL")
to secure payment and performance of all of Grantor's present or future debts or
obligations to Bank, whether absolute or contingent (hereafter referred to as
"DEBT"). See EXHIBIT A attached hereto and incorporated herein by this
reference for a description of the Collateral (it being understood that,
notwithstanding the foregoing, the Collateral shall not include (a) any
equipment leased or financed from third parties to the extent the contracts
evidencing such lease or financing prohibit the granting by Grantor of any
security interest therein (together with accessions, attachments, improvements,
replacements and proceeds thereof), and (b) any rights of Grantor under any
license or contract if, and to the extent, the granting of a security interest
therein in favor of Bank would violate the terms of such license or contract
only to the extent and for so long as such prohibition is in effect.) The
Collateral which is not in Bank's possession will be located at the locations
set forth on EXHIBIT B attached hereto and incorporated herein by this
reference. Unless otherwise defined herein, initially capitalized terms used
herein shall have the meanings given them (A) in the California Uniform
Commercial Code, (B) as defined in that certain Loan Agreement dated as of the
date hereof entered into by and among Grantor and Bank (as the same may be
modified, amended, supplemented, restated or superceded from time to time, the
"LOAN AGREEMENT") or (C) as defined in EXHIBIT A attached hereto.
Grantor hereby represents, warrants and agrees:
1. Grantor will immediately pay (a) Bank's costs of collecting the Debt,
of protecting, insuring or realizing on Collateral, and any expenditure of Bank
pursuant hereto, including attorneys' fees and expenses, with interest at the
rate of twenty-four percent (24%) per year, or the rate applicable to the Debt,
whichever is less, from the date of expenditure, and (b) any deficiency after
realization of Collateral.
2. Grantor will use the proceeds of any loan that becomes Debt hereunder
for the purpose indicated on the application therefor, and, will promptly
contract to purchase and pay the purchase price of any property which becomes
Collateral hereunder from the proceeds of any loan made for that purpose in the
event Bank and Grantor agree to a separate equipment line of credit.
3. As to all Collateral in Grantor's possession or the possession of its
contract manufacturers (unless specifically otherwise agreed to by Bank in
writing), Grantor will:
(a) Have or has possession of the Collateral at the location
disclosed to Bank and will not remove the Collateral from said location, except
in the ordinary course of Borrower's business, provided Grantor shall give Bank
prompt written notice thereof and take any actions reasonably requested by Bank
to perfect its security interest.
(b) Keep the Collateral separate and identifiable.
1.
<PAGE>
(c) Maintain the Collateral in good and saleable condition, repair it
if necessary, ordinary wear and tear excepted, use it lawfully and only as
permitted by insurance policies, and permit Bank to inspect the Collateral at
any reasonable time in accordance with the terms of the Loan Agreement.
(d) Not sell, contract to sell, lease, encumber or transfer the
Collateral (other than the disposition of such inventory Collateral in the
ordinary course of Borrower's business and other assets which are obsolete or
otherwise considered surplus) until the Debt has been paid or performed in full,
even though Bank has a security interest in the proceeds of such Collateral.
4. As to Collateral which is inventory and accounts, Grantor:
(a) May, until notice from Bank after the occurrence and during the
continuance of an Event of Default, sell, lease or otherwise dispose of
inventory Collateral in the ordinary course of business only, and collect the
cash proceeds thereof.
(b) Will, upon notice from Bank after the occurrence and during the
continuance of an Event of Default, deposit all cash proceeds as received in a
demand deposit account with Bank, containing only such proceeds and deliver
statements identifying units of inventory disposed of, accounts which gave rise
to proceeds, and all acquisitions and returns of inventory as required by Bank.
(c) Will receive in trust after the occurrence and during the
continuance of an Event of Default, schedule on forms satisfactory to Bank and,
upon notice from Bank, deliver to Bank all non-cash proceeds other than
inventory received in trade.
(d) So long as there does not exist an Event of Default, may obtain
release of Bank's interest in individual units of inventory upon request
therefore, payment to Bank of the release price of such units shown on any
Collateral schedule supplementary hereto, and compliance herewith as to proceeds
thereof.
5. As to Collateral which are Accounts, Chattel Paper, General
Intangibles and Proceeds described in SECTION 4(c) above, Grantor warrants,
represents and agrees:
(a) All such Collateral is genuine, enforceable in accordance with
its terms and conditions precedent (except as disclosed to and accepted by Bank
in writing), and is supported by consecutively numbered invoices to, or rights
against, the debtors thereon. Grantor will supply Bank with duplicate invoices
or other evidence of Grantor's rights on Bank's request.
(b) All persons appearing to be obligated on such Collateral have
authority and capacity to contract.
(c) To the best of Grantor's knowledge (without independent
investigation), all Chattel Paper is in compliance with applicable law as to
form, content and manner of preparation and execution and has been properly
registered, recorded, and/or filed to protect Grantor's interest thereunder.
(d) If an account debtor shall also be indebted to Grantor on another
obligation, any payment made by such account debtor not specifically designated
by an account debtor to be applied on any particular obligation shall be
considered to be a payment on the account in which Bank has a security interest.
Should any remittance include a payment not on an account, it shall be delivered
to Bank and, if no Event of Default has occurred, Bank shall pay Grantor the
amount of such payment.
2.
<PAGE>
(e) Grantor agrees that following the occurrence and during the
continuance of an Event of Default, Grantor shall not compromise, settle or
adjust any Account or renew or extend the time of payment thereof without Bank's
prior written consent.
(f) Until Bank exercises its rights to collect the Accounts pursuant
to SECTION 11 hereof, Grantor will collect with diligence all Grantor's
Accounts. Any collection of Accounts by Grantor, whether in the form of cash,
checks, notes, or other instruments for the payment of money (properly endorsed
or assigned where required to enable Bank to collect same), shall be in trust
for Bank, provided that Grantor shall not be required to remit the same to Bank
unless Bank believes, in its sole discretion, such remittance is necessary to
protect Bank's security interest or an Event of Default has occurred. If an
Event of Default has occurred and is continuing, Grantor shall keep all such
collections separate and apart from all other funds and property so as to be
capable of identification as the property of Bank and deliver said collections
daily to Bank in the identical form received. The proceeds of such collections
when received by Bank may be applied by Bank directly to the payment of the
applicable Loan Account or to any other obligation secured hereby. Any credit
given by Bank upon receipt of said proceeds shall be conditional credit subject
to collection. Returned items at Bank's option may be charged to Grantor's
deposit account with Bank. All collections of the Accounts shall be set forth
on an itemized schedule, showing the name of the account debtor, the amount of
each payment and such other information as Bank may request.
(g) Until Bank exercises its rights to collect the Accounts pursuant
to SECTION 11 hereof, Grantor may continue its present policies with respect to
returned merchandise and adjustments. However, Grantor shall immediately notify
Bank of all cases involving repossessions, and material loss or damage of or to
merchandise represented by the Accounts.
6. Grantor owns all of the Collateral absolutely and no other person has
or claims any interest in any of the Collateral, except for Permitted Liens and
as disclosed to and accepted by Bank in writing. Grantor will defend any
proceeding which may affect Bank's security interest in any of the Collateral,
and will indemnify and hold Bank free and harmless from all costs and expenses
of Bank's defense.
7. Grantor will pay when due all existing or future charges, liens or
encumbrances on and all taxes and assessments (except for taxes not yet due and
payable or which are contested in good faith and for which Grantor has set aside
adequate reserves) now or hereafter imposed on or affecting the Collateral and,
if the Collateral is in Grantor's possession, the realty on which the Collateral
is located.
8. Grantor will insure the Collateral with Bank as loss payee in form and
amounts with companies, and against risks and liability satisfactory to Bank (to
the extent customarily maintained by businesses similar to Borrower's), and
hereby assigns such policies to Bank, agrees to deliver them to Bank at Banks
request, and authorizes Bank to make any claim thereunder, to cancel the
insurance upon Grantor's default, and to receive payment of and endorse any
instrument in payment of any loss or return premium. If Grantor should fail to
deliver the required insurance policy or policies to Bank, Bank may, at
Grantor's cost and expense, without any duty to do so, get and pay for insurance
naming as the insured, at Bank's option, either both Grantor and Bank, or only
Bank, and the cost thereof shall be secured by this Security Agreement, and
shall be repayable as provided in SECTION 1 above.
9. Grantor will give Bank any information it reasonably requires in
accordance with the terms of the Loan Documents. All information at any time
supplied to Bank by Grantor (including, but not limited to, the value and
condition of Collateral, financial statements, financing statements, and
statements made in documentary Collateral) shall be true and correct in all
material respects, and Grantor will notify Bank of any adverse change in such
information. Grantor will promptly notify Bank of any change of Grantor's
residence, chief executive office or mailing address.
3.
<PAGE>
10. At any time and from time to time, upon the written request of Bank,
and at the sole expense of Grantor, Grantor shall promptly and duly execute and
deliver any and all such further instruments and documents and take such further
action as Bank may reasonably deem desirable to obtain the full benefits of this
Security Agreement and of the rights and powers herein granted, including,
without limitation, (a) using its best efforts to secure all consents and
approvals necessary or appropriate for the grant of a security interest to Bank
in any Contract or License held by Grantor or in which Grantor has any rights
not heretofore assigned, (b) filing any financing or continuation statements
under the UCC with respect to the security interests granted hereby, (c) filing
or cooperating with Bank in filing any forms or other documents required to be
filed with the United States Patent and Trademark Office, United States
Copyright Office, or any filings in any foreign jurisdiction or under any
international treaty, required to secure or protect Bank's interest in the
Collateral, (d) in the event Bank, in its reasonable discretion, is concerned
about its security interest, transferring Collateral to Bank's possession (if a
security interest in such Collateral can be perfected by possession),
(e) placing the interest of Bank as lienholder on the certificate of title (or
other evidence of ownership) of any vehicle owned by Grantor or in or with
respect to which Grantor holds a beneficial interest and (f) using reasonable
efforts to obtain waivers of liens from landlords and mortgagees. Grantor also
hereby authorizes Bank to file any such financing or continuation statement
without the signature of Grantor. If any amount payable under or in connection
with any of the Collateral is or shall become evidenced by any Instrument, such
Instrument, other than checks and notes received in the ordinary course of
business, shall be duly endorsed in a manner satisfactory to Bank and delivered
to Bank promptly upon Grantor's receipt thereof.
11. Upon the occurrence and during the continuation of an Event of
Default, Bank may, without prior notice to Grantor, collect the Collateral and
may give notice of assignment of Accounts to any and all account debtors and
Grantor does hereby make, constitute and appoint Bank its irrevocable, true and
lawful attorney-in-fact with power to do any act which Grantor is obligated
hereby to do, to exercise such rights as Grantor may exercise, to use such
equipment as Grantor might use, to enter Grantor's premises to give notice of
Bank's security interest, and to collect Collateral and proceeds and to execute
and file in Grantor's name any financing statements and amendments thereto
required to perfect Bank's security interest hereunder, all to protect and
preserve the Collateral and Bank's rights hereunder. Without limiting the
generality of the foregoing, upon and during the continuance of an Event of
Default, Bank may:
(a) Endorse the name of Grantor, collect and receive delivery or
payment of Instruments and Documents constituting Collateral.
(b) Demand, sue for, give acquittances for, make extension agreements
with respect to or affecting Collateral, exchange it for other Collateral,
release persons liable thereon or take security for the payment thereof, and
compromise, prosecute or defend any action, claim, proceeding or other disputes
in connection therewith.
(c) Use or operate Collateral for the purpose of preserving
Collateral or its value and for preserving or liquidating Collateral.
12. Discharge of Grantor except for full payment, or any extension,
forbearance, change of rate of interest, or acceptance, release or substitution
of Collateral or any impairment or suspension of Bank's rights against Grantor,
or any transfer of Grantor's interest to another shall not affect the liability
of Grantor hereunder. Until the Debt shall have been paid or performed in full,
Bank's rights shall continue even if the Debt is deemed unenforceable. Grantor
hereby waives: (a) any right to require Bank to proceed against Grantor before
any other, or to pursue any other remedy; (b) presentment, protest and notice of
protest, demand and notice of nonpayment, demand or performance, notice of sale,
and advertisement of sale; (c) any right to the benefit of or to direct the
application of any Collateral until the Debt shall have been paid or performed
in full; and (d) any right of subrogation to Bank until the Debt shall have been
paid or performed in full.
4.
<PAGE>
13. Upon and during the continuance of an Event of Default, at Bank's
option, without demand or notice, all or any part of the Debt shall immediately
become due and payable. Bank shall have all rights given by law, and may sell,
in one or more sales, Collateral in any county where Bank has an office. Bank
may purchase at such sale. Sales for cash or on credit to a wholesaler,
retailer or user of the Collateral, or at public or private auction, are all to
be considered commercially reasonable. Bank may require Grantor to assemble the
Collateral and make it available to Bank at the entrance to the location where
the Collateral is stored, or at a place designated by Bank.
14. Bank's acceptance of partial or delinquent payments or the failure of
Bank to exercise any right or remedy shall not waive any obligation of Grantor
or right of Bank to modify this Security Agreement, or waive any other similar
default.
15. Upon the transfer of all or any part of the Debt, Bank may transfer
all or any part of the Collateral. Bank may deliver all or any part of the
Collateral to any Grantor at any time. Any such transfer or delivery shall
discharge Bank from all liability and responsibility with respect to such
Collateral transferred or delivered. This Security Agreement benefits Bank's
successors and assigns and binds Grantor's heirs, legatees, personal
representatives, successors and assigns. Time is of the essence. This Security
Agreement, the other Loan Documents and the exhibit(s) attached hereto contain
the entire security agreement between Bank and Grantor. Grantor will execute
any additional agreements, assignments or documents reasonably required by Bank
to carry this Security Agreement into effect.
16. If one or more Grantors sign this Security Agreement, their liability
hereunder shall be joint and several. Any Grantor who is married hereby agrees
that recourse may be had against his or her separate property for the Debt.
17. This Security Agreement shall be governed by and construed in
accordance with the laws of the State of California, to the jurisdiction of
whose courts Grantor hereby agrees to submit. Grantor agrees that service of
process may be accomplished by any means authorized by California law. All
words used herein in the singular shall be considered to have been used in the
plural where the context and construction so require.
18. Grantor hereby acknowledges receiving a copy of this Security
Agreement and waives all rights to receive from Bank a copy of any financing
statement or financing change statement filed, or any verification statement
received, at any time in respect of this Security Agreement.
GRANTOR
INTRAWARE, INC.,
a Delaware corporation
By: /s/ Donald Freed
-----------------------------------
Donald Freed
Executive Vice President and
Chief Financial Officer
5.
<PAGE>
EXHIBIT A
DESCRIPTION OF COLLATERAL
A. COLLATERAL. This Exhibit A covers all right, title and interest of
Grantor in, to and under all of the following, wherever located and whether now
owned or hereafter owned or acquired (collectively, the "Collateral"):
(a) All Accounts of Grantor;
(b) All Chattel Paper of Grantor;
(c) All Contracts of Grantor;
(d) All Deposit Accounts of Grantor;
(e) All Documents of Grantor;
(f) All Equipment of Grantor;
(g) All Fixtures of Grantor;
(h) All General Intangibles of Grantor;
(i) All Instruments of Grantor;
(j) All Inventory of Grantor;
(k) All Investment Property of Grantor;
(l) All Licenses of Grantor;
(m) All property of Grantor held by Bank or any other party for whom
Bank is acting as agent hereunder, including, without limitation, all property
of every description now or hereafter in the possession or custody of or in
transit to Bank or such other party for any purpose, including, without
limitation, safekeeping, collection or pledge, for the account of Grantor, or as
to which Grantor may have any right or power;
(n) All other goods and personal property of Grantor whether tangible
or intangible and whether now or hereafter owned or existing, leased, consigned
by or to, or acquired by, Grantor and wherever located; and
(o) To the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and rents,
profits and products of each of the foregoing (it being understood that,
notwithstanding the foregoing, the Collateral shall not include (a) any
equipment leased from or financed by third parties to the extent the contracts
evidencing such lease or financing prohibit the granting by Grantor of any
security interest therein (together with accessions,
Exhibit A
Page 1 of 5
<PAGE>
attachments, improvements, replacements and proceeds thereof), and (b) any
rights of Grantor under any license or contract if, and to the extent, the
granting of a security interest therein in favor of Bank would violate the terms
of such license or contract only to the extent and for so long as such
prohibition is in effect.)
B. DEFINED TERMS. Unless otherwise defined herein, the following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined):
"ACCOUNTS" means any "account," as such term is defined in Section 9106 of
the UCC, now owned or hereafter acquired by Grantor and, in any event, shall
include, without limitation, all accounts receivable, book debts and other forms
of obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments) now owned or hereafter received or acquired by or
belonging or owing to Grantor (including, without limitation, under any trade
name, style or division thereof) whether arising out of goods sold or services
rendered by Grantor or from any other transaction, whether or not the same
involves the sale of goods or services by Grantor (including, without
limitation, any such obligation which may be characterized as an account or
contract right under the UCC) and all of Grantor's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all of Grantor's rights to any goods represented by any of the
foregoing (including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
or repossessed goods), and all monies due or to become due to Grantor under all
purchase orders and contracts for the sale of goods or the performance of
services or both by Grantor (whether or not yet earned by performance on the
part of Grantor or in connection with any other transaction), now in existence
or hereafter occurring, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts, and all collateral security and
guarantees of any kind given by any person or entity with respect to any of the
foregoing.
"CHATTEL PAPER" means any "chattel paper," as such term is defined in
Section 9105(1)(b) of the UCC, now owned or hereafter acquired by Grantor.
"CONTRACTS" means all contracts, undertakings, franchise agreements or other
agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Grantor may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
"COPYRIGHT LICENSE" means all of the following now owned or hereafter
acquired by Grantor: any agreement granting any right in or to any Copyright or
Copyright registration (whether Grantor is the licensee or the licensor
thereunder) including, without limitation, licenses pursuant to which Grantor
has obtained the exclusive right to use a copyright owned by a third party.
"COPYRIGHTS" means all of the following in which Grantor now holds or
hereafter acquires any interest: (i) all copyrights, whether registered or
unregistered, held pursuant to the laws of the United States, any state thereof
or of any other country; (ii) registrations, applications and recordings in the
United States Copyright Office or in any similar office or agency of the United
States, any state thereof or any other country or political subdivision thereof;
(iii) any continuations, renewals or extensions thereof; (iv) any registrations
to be issued in any pending applications; (v) prior versions of works covered by
copyright and all works based upon, derived from, or incorporating such works;
(vi) income, royalties, damages, claims, and payments now and hereafter due and
payable with respect to copyrights including, without limitation, damages and
payments for past, present, or
Exhibit A
Page 2 of 5
<PAGE>
future infringement; (vii) rights to sue for past, present and future
infringements of copyright; and (viii) any other rights corresponding to any of
the foregoing rights throughout the world.
"DEPOSIT ACCOUNT" means any "deposit account" as such term is defined in
Section 9105(e) of the UCC, and should include, without limitation, any demand,
time, savings passbook or like account, now or hereafter maintained by or for
the benefit of Grantor, or in which Grantor now holds or hereafter acquires any
interest, with a bank, savings and loan association, credit union or like
organization (including Bank) and all funds and amounts therein, whether or not
restricted or designated for a particular purpose.
"DOCUMENTS" means any "documents," as such term is defined in Section
9105(1)(f) of the UCC, now owned or hereafter acquired by Grantor.
"EQUIPMENT" means any "equipment," as such term is defined in Section
9109(2) of the UCC, now or hereafter owned or acquired by Grantor and, in any
event, shall include, without limitation, all machinery, equipment, furnishings,
vehicles, computers and other electronic data-processing and any other office
equipment of any nature whatsoever, any and all additions, substitutions and
replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
"FIXTURES" means "fixtures," as such term is defined in Section 9313(1)(a)
of the UCC, now or hereafter owned or acquired by Grantor and, in any event,
shall include, without limitation, regardless of where located, all of the
fixtures, systems, machinery, apparatus, equipment and fittings of every kind
and nature whatsoever and all appurtenances and additions thereto and
substitutions or replacements thereof, now or hereafter attached or affixed to
or constituting a part of, or located in or upon, real property wherever
located, including, without limitation, all heating, electrical, mechanical,
lighting, lifting, plumbing, ventilating, air-conditioning and air cooling,
refrigerating, food preparation, incinerating and power, loading and unloading,
signs, escalators, elevators, boilers, communications, switchboards, sprinkler
and other fire prevention and extinguishing fixtures, systems, machinery,
apparatus and equipment, and all engines, motors, dynamos, machinery, pipes,
pumps, tanks, conduits and ducts constituting a part of any of the foregoing,
together with all right, title and interest of Grantor in and to all extensions,
improvements, betterments, renewals, substitutes, and replacements of, and all
additions and appurtenances to any of the foregoing property, and all
conversions of the security constituted thereby, immediately upon any
acquisition or release thereof or any such conversion, as the case may be.
"GENERAL INTANGIBLES" means any "general intangibles," as such term is
defined in Section 9106 of the UCC, now owned or hereafter acquired by Grantor
and, in any event, shall include, without limitation, all right, title and
interest which Grantor may now or hereafter have in or under any Contract, all
Intellectual Property, interests in partnerships, joint ventures and other
business associations, Licenses, permits, goodwill (including, without
limitation, the goodwill associated with any Trademark, Trademark registration
or Trademark licensed under any Trademark License), claims in or under insurance
policies, including unearned premiums, uncertificated securities, deposit
accounts, rights to receive tax refunds and other payments and rights of
indemnification.
"INSTRUMENTS" means any "instrument," as such term is defined in Section
9105(1)(i) of the UCC now owned or hereafter acquired by Grantor, including,
without limitation, all notes, certificated securities, and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.
Exhibit A
Page 3 of 5
<PAGE>
"INTELLECTUAL PROPERTY" means all Copyrights, Patents, Trademarks, trade
secrets, customer lists, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
recipes, experience, processes, models, drawings, materials and records.
"INVENTORY" means any "inventory," as such term is defined in Section
9109(4) of the UCC, wherever located, now or hereafter owned or acquired by,
Grantor and, in any event, shall include, without limitation, all inventory,
merchandise, goods and other personal property which are held by or on behalf of
Grantor for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in Grantor's business, or
the processing, packaging, promotion, delivery or shipping of the same, and all
furnished goods whether or not such inventory is listed on any schedules,
assignments or reports furnished to Bank from time to time and whether or not
the same is in transit or in the constructive, actual or exclusive occupancy or
possession of Grantor or is held by Grantor or by others for Grantor's account,
including, without limitation, all goods covered by purchase orders and
contracts with suppliers and all goods billed and held by suppliers and all
inventory which may be located on premises of Grantor or of any carriers,
forwarding agents, truckers, warehousemen, vendors, selling agents or other
persons.
"INVESTMENT PROPERTY" means any "investment property," as such term is
defined in Section 9115(1)(f) of the UCC, now owned or hereafter acquired by
Grantor, including, without limitation, a security, whether certificated or
uncertificated, a security entitlement, a securities account, a commodity
contract or a commodity account.
"LICENSE" means any Copyright License, Patent License, Trademark License or
other license of rights or interests now held or hereafter acquired by Grantor.
"LOAN ACCOUNT" shall have the meaning ascribed to it in the Loan Agreement.
"LOAN DOCUMENTS" shall have the meaning ascribed to it in the Loan
Agreement.
"PATENT LICENSE" means any of the following now owned or hereafter acquired
by Grantor: any written agreement granting any right with respect to any
invention on which a Patent is in existence.
"PATENTS" means all of the following in which Grantor now holds or
hereafter acquires any interest: (a) letters patent of the United States or any
other county, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country or any political subdivision
thereof; (b) all reissues, continuations, continuations-in-part or extensions
thereof; (c) all petty patents, divisionals, and patents of addition; and (d)
all patents to issue in any such applications.
"PROCEEDS" means "proceeds," as such term is defined in Section 9-306(1) of
the UCC and, in any event, shall include, without limitation, (a) any and all
Accounts, Chattel Paper, Instruments, cash or other proceeds payable to Grantor
from time to time in respect of the Collateral, (b) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to Grantor from time to time
with respect to any of the Collateral, (c) any and all payments (in any form
whatsoever) made or due and payable to Grantor from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral above by any governmental body, authority, bureau
or agency (or any person acting under color of governmental authority), (d) any
claim of Grantor against third parties (i) for past, present or future
infringement
Exhibit A
Page 4 of 5
<PAGE>
of any Patent or Patent License, (ii) for past, present or future infringement
of any Copyright or Copyright License, (iii) for past, present or future
infringement or dilution of any Trademark or Trademark License or for injury to
the goodwill associated with any Trademark, Trademark registration or Trademark
licensed under any Trademark License, (e) all certificates, dividends, cash,
Instruments and other property received or distributed in respect of or in
exchange for any Investment Property and (f) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral or any
Contract.
"TRADEMARK LICENSE" means any written agreement granting any right in and
to any Trademark or Trademark registration (whether Grantor is the licensee or
the licensor thereunder).
"TRADEMARKS" means any of the following now owned or hereafter acquired by
Grantor: (a) any and all trademarks, trade names, corporate names, company
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature, now existing
or hereafter adopted or acquired, all registrations and recordings thereof, and
any applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state thereof or any other country or any political subdivision thereof (the
"Marks"), (b) any reissues, extensions or renewals thereof, (c) the goodwill of
the business symbolized by or associated with Marks, (d) income, royalties,
damages and payments now and hereafter due and/or payable with respect to Marks,
including, without limitation, damages, claims and recoveries for past, present
or future infringement, misappropriation, or dilution, and (e) rights to sue for
past, present and future infringements of Marks.
"UCC" means the Uniform Commercial Code as the same may, from time to time,
be in effect in the State of California; PROVIDED, HOWEVER, in the event that,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Bank's security interest in any collateral is governed
by the Uniform Commercial Code as in effect in a jurisdiction other than the
State of California, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection of priority and for purposes of definitions
related to such provisions.
Exhibit A
Page 5 of 5
<PAGE>
EXHIBIT B
LOCATION OF COLLATERAL NOT IN BANK'S POSSESSION
1. 25 Orinda Way, Orinda, California 94563.
2. PLEASE ADD OTHER ADDRESS LOCATIONS, IF ANY. IF NONE, PLEASE INDICATE
"NONE" BELOW:
Exhibit B
<PAGE>
COLLATERAL ASSIGNMENT AS COLLATERAL, PATENT
MORTGAGE AND SECURITY AGREEMENT
THIS COLLATERAL ASSIGNMENT AS COLLATERAL, PATENT MORTGAGE AND SECURITY
AGREEMENT is made as of July 29, 1998 ("SECURITY AGREEMENT"), by and between
INTRAWARE, INC., a Delaware corporation ("DEBTOR"), and IMPERIAL BANK ("BANK").
RECITALS
A. Bank has agreed to lend to Debtor certain funds (the "LOAN"), and
Debtor desires to borrow such funds from Bank pursuant to the terms of a Loan
Agreement dated of even date herewith (as the same may be modified, amended,
supplemented, restated or superceded from time to time, the "LOAN AGREEMENT").
Terms not defined herein shall the meanings ascribed to them in the General
Security Agreement.
B. In order to induce Bank to make the Loan, Debtor has agreed to assign
as collateral certain intangible property to Bank for purposes of securing the
obligations of Debtor to Bank.
NOW, THEREFORE, the parties hereto agree as follows:
1. COLLATERAL ASSIGNMENT, PATENT MORTGAGE AND GRANT OF SECURITY INTEREST.
As collateral security for the prompt and complete payment and performance of
all of Debtor's present or future indebtedness, obligations and liabilities to
Bank, including, without limitation, such indebtedness, obligations and
liabilities under the Loan Agreement and the other documents executed in
connection therewith (as the same may be modified, amended, supplemented,
restated or superceded from time to time, collectively, the "LOAN DOCUMENTS"),
Debtor hereby assigns as collateral, transfers, conveys and grants a security
interest and mortgage to Bank, as security, in and to Debtor's entire right,
title and interest in, to and under the following, now or hereafter existing,
created, acquired or held by Debtor (all of which shall collectively be called
the "COLLATERAL"):
(a) Any and all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret, including, without limitation, those set forth on
EXHIBIT A attached hereto and incorporated herein by this reference
(collectively, the "COPYRIGHTS").
(b) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products;
(c) Any and all design rights which may be available to Debtor;
(d) All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same, including, without limitation,
those set forth on EXHIBIT B attached hereto and incorporated herein by this
reference (collectively, the "PATENTS");
(e) Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of
1.
<PAGE>
Debtor connected with and symbolized by such trademarks, including, without
limitation, those set forth on EXHIBIT C attached hereto and incorporated herein
by this reference (collectively, the "TRADEMARKS");
(f) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(g) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(h) All amendments, renewals and extensions of any of the Copyrights,
Patents or Trademarks; and
(i) All proceeds and products of the foregoing, including, without
limitation, all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
THE INTEREST IN THE COLLATERAL BEING ASSIGNED HEREUNDER SHALL NOT BE
CONSTRUED AS A CURRENT ASSIGNMENT, BUT AS A CONTINGENT ASSIGNMENT TO SECURE ALL
OF DEBTOR'S PRESENT OR FUTURE INDEBTEDNESS, OBLIGATIONS AND LIABILITIES TO BANK,
INCLUDING, WITHOUT LIMITATION, SUCH INDEBTEDNESS, OBLIGATIONS AND LIABILITIES
UNDER THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS.
2. AUTHORIZATION AND REQUEST. Debtor authorizes and requests that the
Register of Copyrights and the Commissioner of Patents and Trademarks record
this Security Agreement.
3. COVENANTS AND WARRANTIES. Debtor represents, warrants, covenants and
agrees as follows:
(a) Debtor is now the sole owner of the Collateral, except for
non-exclusive licenses granted by Debtor to its customers in the ordinary and
normal course of business as now conducted;
(b) Performance of this Security Agreement does not conflict with or
result in a breach of any agreement to which Debtor is a party or by which
Debtor is bound, except to the extent that certain intellectual property
agreements prohibit the assignment of the rights thereunder to a third party
without the licensor's or other party's consent and this Security Agreement
constitutes as assignment;
(c) During the term of this Security Agreement, Debtor will not sell,
transfer, assign or otherwise encumber any interest in the Collateral, except
for (i) non-exclusive licenses granted by Debtor in the ordinary and normal
course of its business as now conducted or as set forth in this Security
Agreement and (ii) subject to Debtor's execution of appropriate documents, in
form acceptable to Bank, to perfect or continue the perfection of Bank's
interest in the Collateral, transfers to affiliates of Debtor;
(d) To its knowledge, each of the Patents is valid and enforceable,
and no part of the Collateral has been judged invalid or unenforceable, in whole
or in part, and no claim has been made that any part of the Collateral violates
the rights of any third party;
(e) Debtor shall promptly advise Bank of any material changes in the
composition of the Collateral, including but not limited to any subsequent
ownership right of Debtor in or to any Copyright, Patent or Trademark not
specified in this Security Agreement;
2.
<PAGE>
(f) Debtor shall (i) protect, defend and maintain the validity and
enforceability of the Copyrights, Patents and Trademarks, (ii) use its best
efforts to detect infringements of the Copyrights, Patents and Trademarks and
promptly advise Bank in writing of material infringements detected and (iii) not
allow any Copyrights, Patents or Trademarks to be abandoned, forfeited or
dedicated to the public without the written consent of Bank, which shall not be
unreasonably withheld, unless Debtor determines that reasonable business
practices suggest that abandonment is appropriate;
(g) Debtor shall promptly register the most recent version of
Debtor's material Copyrights, if not so already registered, as Bank may
reasonably request from time to time based on its review of the Quarterly Report
(as hereinafter defined) and shall, from time to time, execute and file such
other instruments, and take such further actions as Bank may reasonably request
from time to time to perfect or continue the perfection of Bank's interest in
the Collateral;
(h) This Security Agreement creates, and in the case of after
acquired Collateral, this Security Agreement will create at the time Debtor
first has rights in such after acquired Collateral, in favor of Bank a valid and
perfected first priority security interest in the Collateral in the United
States securing the payment and performance of all present or future
indebtedness, obligations and liabilities of Debtor to Bank, including, without
limitation, such indebtedness, obligations and liabilities under the Loan
Agreement and the other Loan Documents, upon making the filings referred to in
SECTION 3(i) below, subject only to Permitted Liens (as defined in the Loan
Agreement);
(i) To its knowledge, except for, and upon, the filings with, as
applicable, (1) the United States Patent and Trademark office with respect to
the Patents and Trademarks, (2) the Register of Copyrights with respect to the
Copyrights and (3) the UCC Division of the California Secretary of State,
necessary to perfect the security interests and assignment as collateral created
hereunder, and except as has been already made or obtained, no authorization,
approval or other action by, and no notice to or filing with, any United States
governmental authority or United States regulatory body is required either (a)
for the grant by Debtor of the security interest granted hereby or for the
execution, delivery or performance of this Security Agreement by Debtor in the
United States or (b) for the perfection in the United States or the exercise by
Bank of its rights and remedies hereunder;
(j) All information heretofore, herein or hereafter supplied to Bank
by or on behalf of Debtor with respect to the Collateral is accurate and
complete in all material respects;
(k) Debtor shall not enter into any agreement that would materially
impair or conflict with Debtor's obligations hereunder without Bank's prior
written consent, which consent shall not be unreasonably withheld. Debtor shall
not permit the inclusion in any material contract to which it becomes a party of
any provisions that could or might in any way prevent the creation of a security
interest in Debtor's rights and interests in any property included within the
definition of the Collateral acquired under such contracts, except that certain
contracts may contain anti-assignment provisions that could in effect prohibit
the creation of a security interest in such contracts; and
(l) Upon any executive officer of Debtor obtaining actual knowledge
thereof, Debtor will promptly notify Bank in writing of any event that
materially adversely affects the value of any Collateral, the ability of Debtor
to dispose of any Collateral or the rights and remedies of Bank in relation
thereto, including the levy of any legal process against any of the Collateral.
4. BANK'S RIGHTS. Bank shall have the right, but not the obligation, to
take, at Debtor's sole expense, any actions that Debtor is required under this
Security Agreement to take but which Debtor fails to take, after fifteen (15)
days' notice to Debtor. Debtor shall reimburse and indemnify Bank for all
3.
<PAGE>
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this SECTION 4.
5. INSPECTION RIGHTS. Debtor hereby grants to Bank and its employees,
representatives and agents the right to visit, during reasonable hours upon
prior reasonable written notice to Debtor, any of Debtor's plants and facilities
that manufacture, install or store products (or that have done so during the
prior six-month period) that are sold utilizing any of the Collateral, and to
inspect the products and quality control records relating thereto upon
reasonable written notice to Debtor and as often as may be reasonably requested.
6. FURTHER ASSURANCES; ATTORNEY IN FACT.
(a) On a quarterly basis, Debtor agrees to deliver to Bank a report,
in form acceptable to Bank and certified by an officer of Debtor, which lists
all Copyrights, Patents and Trademarks that are material to the operation of
Debtor's business on an on-going basis, and in which Bank does not already have
a perfected security interest (the "QUARTERLY REPORT"); PROVIDED, HOWEVER,
Debtor may provide a general description of the Copyrights by type. Based upon
review of the Quarterly Report, Bank shall, in its reasonable discretion,
identify which Copyrights, Patents and Trademarks it deems material to the
operation of Debtor's business on an on-going basis or the value of the
Collateral.
(b) On a continuing basis, Debtor will make, execute, acknowledge and
deliver, and file and record in the proper filing and recording places in the
United States, all such instruments, including appropriate financing and
continuation statements and collateral agreements and filings with the United
States Patent and Trademark Office and the Register of Copyrights, and take all
such action as may reasonably be necessary or advisable, or as reasonably
requested by Bank, to perfect Bank's security interest in all Copyrights,
Patents and Trademarks, which Bank reasonably identifies pursuant to SECTION
6(a) above as material to the operation of Debtor's business on an on-going
basis or the value of the Collateral, and otherwise to carry out the intent and
purposes of this Security Agreement, or for assuring and confirming to Bank the
grant or perfection of a security interest in all Collateral.
(c) Debtor hereby irrevocably appoints Bank as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor, from time to time in Bank's discretion, to take any action
and to execute any instrument which Bank may reasonably deem necessary or
advisable to accomplish the purposes of this Security Agreement, including (i)
to modify, in its reasonable discretion, this Security Agreement without first
obtaining Debtor's approval of or signature to such modification by amending
Exhibit A, Exhibit B or Exhibit C hereof, as appropriate, to include reference
to any material right, title or interest in any Copyrights, Patents or
Trademarks acquired by Debtor after the execution hereof or to delete any
reference to any right, title or interest in any Copyrights, Patents or
Trademarks in which Debtor no longer has or claims any right, title or interest,
(ii) to file, in its reasonable discretion, one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of Debtor where permitted by law and (iii)
after the occurrence and during the continuance of an Event of Default, to
transfer the Collateral into the name of Bank or a third party to the extent
permitted under the California Uniform Commercial Code.
4.
<PAGE>
7. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "EVENT OF DEFAULT" under this Security Agreement:
(a) An Event of Default (as defined in the Loan Agreement) occurs
under the Loan Agreement or any of the other Loan Documents (as defined in the
Loan Agreement); or
(b) Debtor breaches any warranty or agreement in any material respect
made by Debtor in this Security Agreement and, as to any breach that is capable
of cure, Debtor fails to cure such breach within fifteen (15) days of the
occurrence of such breach if notice thereof has been given to Debtor.
8. REMEDIES. Upon the occurrence and during the continuance of an Event
of Default, Bank shall have the right to exercise all the remedies of a secured
party under the California Uniform Commercial Code, including, without
limitation, the right to require Debtor to assemble the Collateral and any
tangible property in which Bank has a security interest and to make it available
to Bank at a place designated by Bank. Bank shall have a nonexclusive, royalty
free license to use the Copyrights, Patents and Trademarks to the extent
reasonably necessary to permit Bank to exercise its rights and remedies upon the
occurrence and during the continuance of an Event of Default. Debtor will pay
any expenses (including reasonable attorneys' fees) incurred by Bank in
connection with the exercise of any of Bank's rights hereunder, including,
without limitation, any expense incurred in disposing of the Collateral. All of
Bank's rights and remedies with respect to the Collateral shall be cumulative.
9. INDEMNITY. Debtor agrees to defend, indemnify and hold harmless Bank
and its officers, employees, and agents against: (a) all obligations, demands,
claims, and liabilities claimed or asserted by any other party in connection
with the transactions contemplated by this Security Agreement and (b) all losses
or expenses in any way suffered, incurred, or paid by Bank as a result of or in
any way arising out of, following or consequential to transactions between Bank
and Debtor, whether under this Security Agreement or otherwise (including,
without limitation, reasonable attorneys' fees and reasonable expenses), except
for losses arising from or out of Bank's gross negligence or willful misconduct.
10. REASSIGNMENT. At such time as Debtor shall completely satisfy all of
the obligations secured hereunder, Bank shall execute and deliver to Debtor all
deeds, assignments as collateral and other instruments as may be necessary or
proper to revest in Debtor full title to the property assigned as collateral
hereunder, subject to any disposition thereof which may have been made by Bank
pursuant hereto.
11. NO FAILURE OR DELAY. No failure or delay on the part of Bank, in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof.
12. ATTORNEYS' FEES. If any action relating to this Security Agreement is
brought by either party hereto against the other party, the prevailing party
shall be entitled to recover reasonable attorneys' fees, costs and
disbursements.
13. AMENDMENTS. This Security Agreement may be amended only by a written
instrument signed by both parties hereto.
14. COUNTERPARTS. This Security Agreement may be executed in any number
of counterparts, each of which when so delivered shall be deemed an original,
but all such counterparts shall constitute but one and the same instrument.
Each such Security Agreement shall become effective upon
5.
<PAGE>
the execution of a counterpart hereof or thereof by each of the parties hereto
and telephonic notification that such executed counterparts has been received by
Debtor and Bank.
15. JUDICIAL REFERENCE. The terms and provisions of SECTION 15 of the
Loan Agreement are incorporated herein by this reference and made a part hereof.
16. GOVERNING LAW; JURISDICTION; JURY WAIVER. This Security Agreement
shall be governed by, and construed in accordance with, the internal laws of the
State of California, without regard to principles of conflicts of law. Debtor
and Bank consent to the exclusive jurisdiction of any state or federal court
located in Santa Clara County, California. DEBTOR AND BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS SECURITY AGREEMENT AND ANY OTHER LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
17. CONFLICT. In the event of a conflict between any term and/or
provision contained in this Security Agreement with any term and/or provision
contained in the General Security Agreement (as defined in the Loan Agreement),
the term and/or provision of this Security Agreement shall govern.
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement on the day and year first above written.
BANK DEBTOR
IMPERIAL BANK INTRAWARE, INC.,
a Delaware corporation
By: /s/ Sunita R. Patel By: /s/ Donald Freed
---------------------------- --------------------------------
Sunita R. Patel Donald Freed
Assistant Vice President Executive Vice President and
Chief Financial Officer
ADDRESS OF BANK ADDRESS OF DEBTOR
226 Airport Parkway 25 Orinda Way
San Jose, California 95110 Orinda, California 94563
Attention: Donald Freed
WITH A COPY TO:
2460 Sand Hill Road, Suite 102
Menlo Park, California 94025
Attention: Sunita Patel
6.
<PAGE>
EXHIBIT A
COPYRIGHTS
1. REGISTERED: List titles below or indicate "None"
see attached
2. UNREGISTERED: List titles below or indicate "None"
see attached
3. APPLICATIONS IN PROCESS: List titles, applicable dates, application
numbers, etc. below or indicate "None"
see attached
Exhibit A
Page 1 of 1
<PAGE>
EXHIBIT B
U.S. PATENTS AND PATENT APPLICATIONS
(List titles below or indicate "None")
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PATENT PENDING TITLE ISSUE FILING
NO. APPLICATION NO. DATE DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
see attached
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Exhibit B
Page 1 of 1
<PAGE>
EXHIBIT C
U.S. TRADEMARKS AND TRADEMARK APPLICATIONS
(List marks below or indicate "None")
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REGISTRATION PENDING MARK REGISTRATION FILING
NO. APPLICATION DATE DATE
NO.
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
see attached
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
UNREGISTERED TRADEMARKS: List marks below or indicate "None."
Exhibit C
Page 1 of 1
<PAGE>
6. The corporation owns the following domestic and foreign registered and
applied for trademarks, tradenames and service marks:
<TABLE>
<CAPTION>
Trademarks, Tradenames, or Service Marks Registration or Application No.
---------------------------------------- -------------------------------
<S> <C>
Intraware Trademark Application in the
European Community pending
VirtualExpress Trademark Application
in US S/N's: 75/429,571
</TABLE>
7. The corporation owns the following domestic and foreign copyrights and
copyright registrations:
<TABLE>
<CAPTION>
Description of Copyright Registration or Application No.
------------------------ -------------------------------
<S> <C>
Compariscope Content TX 4-716-466
effective 5/8/98
</TABLE>
8. The corporation anticipates that it may apply to register the following
domestic or foreign patents within the next year:
Brief Description of Patent
---------------------------
None
9. The corporation anticipates that it may apply to register the following
domestic or foreign trademarks, tradenames or service marks within the next
year:
Trademarks, Tradenames or Service Marks
---------------------------------------
Trademarks - Radarscope U.S.
SubscribNet - Foreign (European Community)
Compariscope - Foreign (European Community)
10. The corporation anticipates that it may apply to register the following
domestic or foreign copyrights and copyright registrations within the next
year:
Description of Copyright
------------------------
Quarterly Copyrights of Compariscope
11. The corporation's federal employer I.D. number is: 68-0389976
-----------------------
2.
<PAGE>
6. continued
Compariscope Trademark Application in US S/N's: 75/429, 528
SubscribNews Trademark Application in US S/N's: 75/429, 171
ExtraDocs Trademark Application in US S/N's: 75/429, 148
IntraLease Trademark Application in US 75/359,462
intraware.shop Trademark Application in US pending
SubscribNet 75/247,313
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
[*] Denotes information for which confidential treatment has been requested
pursuant to a confidential treatment request filed with the Securities and
Exchange Commission. Confidential portions omitted have been filed separately
with the Commission.
Exhibit 10.12
Netscape Agreement # 004891
SERVICES AGREEMENT
This SERVICES AGREEMENT is made and entered into as of the 1st day of October
1998 (the "Effective Date") between Netscape Communications Corporation
("Netscape"), a Delaware corporation with offices at 501 E. Middlefield Road,
Mountain View, California 94043, and Intraware Inc., a Delaware corporation
("Intraware"), with offices at 25 Orinda Way, Orinda California 94563.
WHEREAS, Netscape is in the business of developing and offering for sale
certain software products and related support services;
WHEREAS, Intraware is in the business of developing and offering for sale
worldwide proactive software update and management services to end users
through its SubscribNet-Registered Trademark- service; and
WHEREAS, Netscape desires to obtain, and Intraware desires to provide,
worldwide subscriptions of Intraware's SubscribNet-Registered Trademark- to
Non-consumer Customers of Netscape (as defined below);
NOW THEREFORE, in consideration of the foregoing recitals, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, terms used and not otherwise defined herein
shall have the following meanings:
" Agreement" or "this Agreement " shall mean this Services Agreement and
the following attachments:
Attachment A "Statement of Work"
Attachment B Third Party Products
Attachment C Netcenter General Terms
Attachment D Escrow Agreement
" Channel Distributor " shall mean any Netscape authorized distributor or
reseller of Netscape Products, or any Netscape authorized distributor or
reseller of Third Party Products on behalf of Netscape, other than Intraware,
who has purchased a license from Netscape to sell such Netscape and Third Party
Products.
" Confidential Information " shall mean this Agreement and all information about
Intraware Products and Netscape Products, as well as Intraware and Netscape
services, customers, strategy, research, development, methods of manufacture,
trade secrets, business plans, finances, personnel data, and other material or
information considered confidential by either party. Confidential Information
also includes any third party confidential information disclosed to either party
under this Agreement.
" End Users " shall mean all Non-consumer Parties who have a Netscape
maintenance subscription for their license to use Netscape Products which they
acquired from Netscape or a Channel Distributor, as well as all Non-consumer
Parties who obtain a maintenance subscription to Third Party Products for which
they currently own a license through Netscape or a Channel Distributor.
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"EVENT OF DEFAULT " shall have the meaning contained in Section 9.1.
"INTRAWARE CUSTOMER " shall mean any party who receives any product or service
directly or indirectly from Intraware or its non-Netscape partners or who
becomes an Intraware Customer under Section 2.7.
"INTRAWARE PRODUCTS " shall mean any Intraware software that Intraware will use
in connection with the Services, including, without limitation, its
SubscribNet-Registered Trademark- products, and any major and minor updates or
functional supersets to any such products.
"NETSCAPE CUSTOMER DATA " shall have the meaning set forth in Section 2.7.
"NETSCAPE PRODUCTS " shall mean all current, commercially available Netscape
software products listed on its then-current price list in the Territory. If at
any time during the Term, Netscape sells, assigns or otherwise transfers its
right to distribute directly or through Channel Distributors any such products
listed Netscape's applicable North America price list, such Netscape products
shall cease to be "Netscape Products" under this Agreement.
"NETSCAPE UPDATES " shall mean major and minor updates, if any, or any
functional supersets, to the Netscape Products or to Third Party Products.
"Major Updates" involve additions of substantial functionality while "Minor
Updates" do not. Major Updates are designated by a change in the number to the
left of the decimal point of the number appearing after the product name while
Minor Updates are designated by a change in such number to the right of the
decimal point. Minor Updates shall also include bug patches and bug fixes as
mutually agreed upon. Netscape is the sole determiner of the availability and
designation of an update as a Major or Minor Update. Major Updates exclude
software releases which are reasonably designated by Netscape as new products.
Where used herein, "Netscape Updates" shall mean Major Updates and Minor Updates
interchangeably.
"NETSCAPE'S WEB SITE " shall mean the collection of Local Language HTML
documents targeted at end users in the Territory and currently accessible by the
public via the Internet at the URL http://home.netscape.com and/or at such other
URL or locations as Netscape may designate. Netscape's Web Site does not include
any future technologies or future uses of existing technologies which might
embody a collection of documents (other than HTML documents) on the Internet.
"NON-CONSUMER CUSTOMER / NON-CONSUMER PARTY " shall mean any party or customer
who licenses 10 or more copies and/or seats of a Netscape client product, or a
purchaser of any other Netscape Product.
"SERVICES " shall mean the services to be provided by Intraware in accordance
with Article 2, Article 4 and the Statement of Work identified on Attachment A.
"SUBSCRIBNET -Registered Trademark- " shall mean Intraware's software
subscription update service for Non-consumer Customers.
"SUBSCRIBNET -Registered Trademark- UPDATES " shall mean enhancements to
SubscribNet-Registered Trademark-.
"SUBSCRIPTION " shall mean an offering by Netscape of SubscribNet-Registered
Trademark- that entitles End Users, upon entering into a maintenance agreement
with Netscape, to receive Netscape Updates for the number of users for which
each such End User has received a license to a Netscape or Third Party Product.
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"TERRITORY " shall mean worldwide.
"THIRD PARTY PRODUCTS " shall mean all third party vendor products currently
distributed by Netscape, or by a hannel Distributor from Netscape's worldwide
price list as of the Effective Date and/or September 30, 1998, which products
are listed on Attachment C. If at any time during the Term, Netscape sells,
assigns, ceases selling or otherwise transfers its right to distribute directly
or through Channel Distributors products from any third party vendor
listed on Attachment B, such vendor's products shall cease to be "Third Party
Products" under this Agreement.
ARTICLE 2
SERVICES
2.1 GENERAL . Intraware shall perform the Services in accordance with the
terms and conditions set forth herein and in the Statement of Work only for
such Netscape Products and, subject to Sections 2.8 and 2.9, Third Party
Products as are set forth on Attachment B to this Agreement. [*]
2.2 EXCLUSIVITY . During the Term, as between other third parties, Intraware
shall have an exclusive right to provide subscription services to Netscape's
non-consumer Customers. However, Netscape reserves the right to provide for
itself services similar to the Service.
2.3 TERMS OF DISTRIBUTION . Netscape and Intraware shall offer the
Subscription to End Users through Netscape's maintenance agreement, and as
soon as practicable after the Effective Date such agreement will clearly
state on behalf of each party and for the benefit of Channel Distributors
that maintenance includes the SubscribNet-Registered Trademark- service. End
Users will be able to access the Services through the co-branded Netscape
SubscribNet site through Netscape's Insight, and/or Netscape's Netcenter at a
URL to be mutually agreed, however, the URL will include the SubscribNet name
and the Netscape.com domain, such as: http://SubscribNet.Netscape.com". The
Service may also be accessed through other URLs on Netscape's Web Site, URLs
contained in email notifications and/or through such other sites within
Netscape's Web Site as Netscape may specify from time to time. For reporting
purposes, all traffic on the co-branded site shall be considered to be
Netscape traffic, however, Intraware may use aggregated traffic data for the
purposes and in the manner set forth in Attachment C.
2.4 SUBSCRIBNET -Registered Trademark- UPDATES . [*] Such
SubscribNet-Registered Trademark- Updates will be distributed in the same manner
as the Services are distributed under this Agreement.
2.5 PERSONNEL . Each party shall provide adequate resources to assure its
performance under this Agreement. Towards this goal, the parties will designate
the resources set forth in this Section 2.5 and in the statement of work.
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(A) Netscape Personnel . Netscape will designate an Operations Program
Manager for the implementation of this Agreement and to insure the success of
the Services. Netscape will further designate a marketing representative to
approve content and other marketing related issues.
(B) Intraware Personnel . Intraware will assign a dedicated Operations
Program Manager for the implementation of this Agreement and to insure the
success of the Services. Intraware will further assign a dedicated marketing
representative to approve content and other marketing related issues.
2.6 Monthly Reviews . During the initial Term, Netscape and Intraware shall
meet to conduct monthly reviews at Intraware's and Netscape's primary business
addresses in alternating order to discuss and adjust metrics and performance as
provided in the Statement of Work and to coordinate management information
systems or other operational processes arising out of this Agreement. Each party
will bear its own travel or other costs associated with attending any such
meetings. In any renewal Term, the parties shall mutually agree upon the
frequency and scope of periodic reviews.
2.7 END USER DATA :
(A) Except as expressly provided in this subparagraph (A), all customer
data, including channel transaction data, added to the
Netscape/SubscribNet-Registered Trademark- Service or existing from Netscape
on the date hereof will be considered Netscape data ("Netscape Customer
Data") and shall be solely owned by Netscape, [*] If a Netscape customer is
also, independently, an Intraware Customer , and requests that it's account
be handled through Intraware, then, [*] such customer data shall be owned
jointly by Intraware and Netscape. All such data shall constitute
"Confidential Information" and shall be subject to the end user and privacy
guidelines set forth in Attachment C-1.
(B) Intraware will implement procedures reasonably acceptable to Netscape,
and use reasonable commercial efforts, to distinguish channel transaction data
files between Netscape Customers and Intraware Customers.
(C) [*]
2.8 THIRD PARTIES . Notwithstanding anything in this Agreement to the contrary,
Intraware may perform Services hereunder for Third Party Products only if
and to the extent Netscape is authorized to enable electronic download of
Third Party Products. The parties will mutually agree whether and the terms
upon which additional third party vendor products shall be added to the
definition of "Third Party Products" under this Agreement.
2.9 CHANNEL DISTRIBUTORS . Notwithstanding anything in this Agreement to the
contrary, Netscape's arrangements with its Channel Distributors may not permit
Intraware to electronically distribute Netscape Products, in which case such
arrangement shall be excluded from the Services. In addition, Netscape shall be
obligated to provide Intraware with information or access to Third Party data or
information hereunder only to the extent authorized by each Channel Distributor.
2.10 END USERS . Should a Non-consumer Party obtain a license to a Third
Party Product through Netscape or a Channel Distributor after the Effective
Date, and should such Non-consumer Party wish to acquire a maintenance
subscription from Netscape or a Channel Distributor to receive the
SubscribNet-Registered Trademark- services, upon approval by Intraware and
receipt by Intraware of [*] (or such other percentage and terms as the parties
may agree) of the "net Subscription sales price" from Netscape for each such
Non-consumer
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Party, such additional Non-consumer Party will become an End User. "Net
Subscription sales price" means the price indicated in an invoice for any sale
of a Netscape Product, i.e., the gross sales price less
applicable discounts, but excluding rebates, if any.
2.11 REPORTING/ACCESS . Netscape will have full access to the systems data
records, and such records will be reasonably compatible with Netscape systems as
specified in the Statement of Work. Intraware will provide Netscape with an
online and flexible direct interface to this data through a reporting tool as
set forth in the Statement of Work. In addition, there will be certain Netcenter
traffic reporting requirements set forth in Attachment
ARTICLE 3
TERM AND TERMINATION
3.1 TERM . Unless sooner terminated in accordance with this Article or
Article 9 (Default), the term of this Agreement (the "Term") shall commence
on the Effective Date and shall continue for a period of one year thereafter.
This Agreement may be renewed for two additional one year periods upon mutual
agreement of the parties; however:
(A) If the parties fail to mutually agree upon renewal after the initial
Term, then Intraware shall be obligated to continue to perform the Services
for a period of six months after the Effective Date and Netscape will pay
Intraware on a pro-rated basis the payments payable hereunder, excluding the
initial payment set forth in Section 5.2 (i.e., [*] pro-rated over the Term,
payable monthly for six months); and
(B) If the parties agree on a renewal Term, the price for the Services
shall not exceed 10 percent of Netscape's Subscription revenue over the
preceding Term.
3.2 TERMINATION .
(A) For Convenience. This Agreement may be terminated by Netscape for
convenience upon ninety (90) calendar days prior written notice to Intraware,
and in such event, Netscape shall pay Intraware for the Services based upon the
pro rata portion of fees earned by Intraware through the effective date of
termination.
(B) With Cause. If this Agreement is terminated by Netscape for cause by
reason of an Event of Default, as set forth in Article 9, Intraware will pay
to Netscape on a pro-rated basis the payments payable hereunder, excluding
the initial payment set forth in Section 5.2, (i.e., [*], pro-rated over the
Term, payable monthly for 90 days). Any termination, however, shall not
relieve either party from any obligations hereunder that survive termination
under Section 16.3 hereof.
3.3 TECHNOLOGY ESCROW . Intraware agrees that the entire source code for
SubscribNet and other Intraware Products, together with all related listings
and documentation, as it now exists or hereafter becomes available including,
but not limited to, the then current version(s) of such products being used
by Intraware in the performance of the Services ("Escrow Materials") will be
deposited, maintained and updated at Netscape's expense in escrow pursuant to
the form of Escrow Agreement to be mutually agreed between the parties and
attached hereto as Attachment D. Intraware shall deposit the Escrow Materials
within sixty (60) days of the Effective Date or, in the case of updates to
the Service, within 60 days after commercial release of such updates.
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ARTICLE 4
NETCENTER RESPONSIBILITIES
4.1 Co-Branding . A co-branded name using the format "Netscape [generic name]
by SubscribNet-Registered Trademark-" will be mutually agreed between the
parties for use on the co-branded Netscape/SubcribNet-Registered Trademark- site
and throughout all communications and materials, including but not limited to
marketing materials and price lists, relating to the Services. All use of the
SubscribNet-Registered Trademark- brand by Netscape will be subject to trademark
guidelines provided by Intraware, and all use of the "Netscape" trademark will
be subject to trademark guidelines provided by Netscape. Intraware shall not
independently use the Netscape name without Netscape's prior written consent
unless such use occurs in connection with Intraware's advertising sales and
promotional efforts on behalf of the Service. The co-branding will be subject to
Netscape's then-current design guidelines as set forth in Attachment C. Each
party's trademarked portion of the co-brand shall remain generally consistent in
terms of relative size in comparison with the marks contained in the mock-up
provided as part of Attachment C.
4.2 Technical Support . Intraware will provide technical support to Netscape to
ensure that content is correctly received and displayed by Netscape. Intraware
shall provide technical support services for the Service to Netscape on a timely
basis, appoint a technical contact to whom Netscape may address all technical
questions relating to the Service, and use reasonable commercial efforts to
promptly remedy any material malfunctioning of the Service. Intraware shall be
solely responsible for the purchase, implementation, maintenance and support of
all software and hardware required to fulfill its obligations under the
Agreement.
4.3 Service Implementation . Intraware shall provide consistent Services on the
co-branded site on Netscape's Web Site. All content supplied by Intraware for
the Service will meet Netscape's specifications with regard to page size,
loading speed and speed of access to database driven content as Netscape may,
from time to time, set forth in Attachment C; provided that such obligations
shall not be materially more restrictive than the current features, unless the
parties otherwise mutually agree. Intraware shall be responsible for the
production, technology deployment, content programming, and creation of graphic
user interfaces of the Service; all in accordance with Netscape's then-current
guidelines. The Service shall use substantially the same technology and
advantages that Intraware uses in its own proprietary SubscribNet service(s), if
any, unless otherwise mutually agreed by the parties. The Service shall not be
disadvantaged or suffer from inferior production, programming or performance
relative to Intraware's similar services, or any similar service that Intraware
might make available to, or operate on behalf of, third parties. The Service
shall perform substantially in accordance with the performance standards of its
own proprietary services, including, but not limited to, load time, timeliness
of content, and quality of programming. Intraware's obligation to produce the
Service, including production services, technology deployment and content
programming that meets or exceeds standards established by Intraware on
Intraware's Web Site or services (or any web site or services Intraware manages
for any third party) and general industry standards is a material obligation of
Intraware under this Agreement.
4.4 LICENSE GRANT . During the Term, Intraware grants to Netscape the
non-exclusive, worldwide and royalty-free right to store, display, perform,
and otherwise use the data, information, content or other intellectual
property provided by Intraware for use within the Service or Netcenter.
4.5 NETCENTER GENERAL TERMS . The parties agree and accept the Netcenter
General Terms provided herewith as Attachment C.
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ARTICLE 5
PAYMENT TERMS
5.1 PRICE . In consideration for the Services performed hereunder and
subject to the terms and conditions hereof, Netscape shall pay Intraware
[*] for the Services.
5.2 PAYMENT TERMS . Netscape will pay Intraware an initial payment in the
amount of [*] on or before September 30, 1998. Ninety days after the
Effective Date of this Agreement, Netscape will pay Intraware [*]. One
Hundred and Eighty Days after the Effective Date of this Agreement, Netscape
will pay Intraware [*]. Two Hundred and Seventy days after the Effective Date
of this Agreement, Netscape will pay Intraware [*]. All payments made by
Netscape hereunder will be made by wire transfer to the bank specified by
Intraware. A finance charge of one and one-half percent (1.5%) per month, or
the lawful limit if less, shall be assessed on all amounts that are past due,
and Intraware shall be responsible for collection costs if applicable.
Interest shall be calculated from the invoice due date to the date payment is
received.
ARTICLE 6
REPRESENTATIONS AND WARRANTY
6.1 INTRAWARE'S REPRESENTATIONS AND WARRANTY Intraware represents and/or
warrants to Netscape, as appropriate, as follows:
(A) NO RESTRICTIONS. Intraware represents that it is not under any
obligation or restriction which would in any way interfere with or be
inconsistent with its performance obligations under this Agreement.
(B) SERVICES . Intraware warrants that the Services, whether performed by
Intraware or subcontractors, shall be performed in a professional and
workmanlike manner, with all due skill and care, and will meet or exceed the
specifications set forth in the Statement of Work and any documentation provided
by Intraware.
(C) INTRAWARE PRODUCTs . Intraware warrants that (i) the media on which
the Intraware Products are delivered will be free of defects in material and
workmanship, (ii) the Intraware Product(s) will function in accordance with the
specifications for the Intraware Product(s) in applicable documentation, and
(iii) any documentation provided with the Intraware Product(s) shall be accurate
in all material respects. In the case of a breach of the warranties in this
subsection (C), Intraware shall repair or replace nonconforming, unsuitable or
inaccurate Intraware Product(s) or documentation within a reasonable period of
time (not to exceed ten (10) days) of receipt of written notice of such
condition.
(D) YEAR 2000 . Intraware warrants that the current version of the
Intraware Products, including the SubscribNet software, contain
functionality, including the time-and-date-related code, needed for the
December 31, 1999 to January 1, 2000 date change; provided the underlying
operating system of the host machine, and any non-Intraware-owned software
provided with or in the host machine or Product(s), also contain
functionality, including the time-and-date-related code, needed for the
December 31, 1999 to January 1, 2000 date change. The sole and exclusive
remedy for any breach of this warranty is repair or replacement of the
affected Product(s), excluding any non-Intraware-owned software or underlying
operating system. This warranty is null and void if Netscape alters, modifies
or misuses any portion of the Product(s).
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In the case of a breach of the warranty described in this subsection (D),
Intraware shall use reasonable efforts to modify the Intraware Products such
that the Intraware Product(s) is Year 2000 Compliant. [*]
(E) THE WARRANTIES CONTAINED IN THIS ARTICLE 6 AND ATTACHMENT C ARE THE
ONLY WARRANTIES GIVEN TO NETSCAPE IN CONNECTION WITH THIS AGREEMENT AND THE
SERVICES PERFORMED HEREUNDER. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE ARE DISCLAIMED.
6.2 NETSCAPE'S REPRESENTATIONS AND WARRANTY Netscape represents and/or warrants
to Intraware, as appropriate, as follows:
(A) USE OF USER INTERFACE. At no time during the term of the
Agreement, or at any time thereafter, will Netscape copy, modify or
otherwise utilize the SubscribNet-Registered Trademark- user interface.
(B) NO RESTRICTIONS. Netscape represents that, except as provided in
Sections 2.8 and 2.9, it is not under any obligation or restriction that
would in any way interfere with or be inconsistent with its performance
obligations under this Agreement.
ARTICLE 7
CONFIDENTIAL INFORMATION
7.1 Each party agrees not to use directly or indirectly or reproduce the
Confidential Information of the other for any purpose except for carrying out
the terms of this Agreement and agrees not to disclose the Confidential
Information of the other to any third parties except in accordance with this
Agreement.
7.2 Each party agrees to use its best efforts to protect such Confidential
Information from disclosure to third parties. Disclosures of the Confidential
Information shall be restricted to the parties' employees who are directly
participating in the efforts covered by this Agreement, have a need to know such
Confidential Information and are bound by the provisions of this Article 7.
7.3 The limitations on reproduction, disclosure, and use of the
Confidential Information shall lapse upon the occurrence of one of the
following:
(1) If such Confidential Information is publicly available or later
becomes publicly available other than through a breach of this Agreement;
or
(2) If the disclosing party generally furnishes its Confidential
Information to a third party without similar confidentiality restrictions
on the third party's rights; or
(3) If disclosure of such Confidential Information is compelled by
court order or judicial or administrative process; or
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(4) If such Confidential Information is independently developed by
the receiving party subsequent to such disclosure without use of
Confidential Information disclosed hereunder; or
(5) If such Confidential Information is lawfully obtained by the
receiving party from a third party without obligations of confidentiality.
ARTICLE 8
INDEMNIFICATION
8.1 Each party (the "indemnitor") will indemnify and hold harmless the
other party (the "indemnitee") from and against (a) losses, damages, judgments,
settlements, attorney's fees, costs, and expenses which the indemnitee may
sustain, incur, or be required to pay, arising out of or in connection with
claims for personal injury or damage to real or tangible property resulting from
negligent action or inaction of the indemnitor or a person employed by the
indemnitor in the performance of this Agreement; (b) a breach of any of the
representations and warranties made by either party hereunder; or (c) in the
case of Intraware, any third party claim arising from the Service; and (d) any
material, content, or any content to which a party can link, supplied by either
party in connection with this Agreement.
8.2 Intellectual Property Indemnity:
8.2.1. Intraware Indemnity. Intraware shall defend or settle, at its
option, any action brought against Netscape to the extent it is based on a claim
that use, reproduction or distribution by Netscape of the Intraware portion of
the Intraware Products furnished hereunder within the scope of a license granted
hereunder directly infringes any valid U.S. copyright, U.S. patent or U.S. trade
secret. Intraware shall also defend any action brought against Netscape to the
extent that it is based on a claim that the Intraware trademark(s) Netscape is
licensed to use hereunder directly infringes any valid United States trademark.
Intraware will pay resulting costs, damages and legal fees finally awarded
against Netscape in such action which are attributable to such claim provided
that Netscape: (a) promptly (within twenty (20) days) notifies Intraware in
writing of any such claim and Intraware has sole control of the defense and all
related settlement negotiations; and (b) cooperates with Intraware, at
Intraware's expense, in defending or settling such claim.
Should an Intraware Product become, or be likely to become in
Intraware's opinion, the subject of infringement of such U.S. patent,
copyright, trademark or trade secret, Intraware may procure for Netscape: (i)
the right to continue using the same; or (ii) replace or modify it to make it
non-infringing. In the event that Intraware shall reasonably determine that
neither (i) nor (ii) above is commercially practicable, Intraware may
terminate the license for the infringing Intraware Product and refund
Netscape for the fees that Netscape has paid hereunder (excluding the initial
payment) up to [*]. Intraware shall have no obligation or liability for, and
Netscape shall defend, indemnify and hold Intraware harmless from and against
any claim based upon: (a) use of other than the then current, unaltered
version of the Intraware Product, unless the infringing portion is also in
the then current, unaltered release; (b) use, operation or combination of
Intraware Products with non-Intraware programs, data, equipment or
documentation if such infringement would have been avoided but for such use,
operation or combination; (c) Netscape's or its agent's activities after
Intraware has notified Netscape that Intraware believes such activities may
result in such infringement; (d) compliance with Netscape's designs,
specifications or instructions; (e) any modifications or marking of the
Intraware Products not specifically authorized in writing by Intraware; (f)
Netscape's use of any trademarks other than those set forth hereunder; or (g)
third party software. The foregoing states the entire liability of Intraware
and the exclusive remedy of
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Netscape with respect to infringement of any intellectual property rights,
whether under theory of warranty, indemnity or otherwise.
8.2.2. Netscape Indemnity. Netscape shall defend or settle, at its
option, any action brought against Intraware to the extent it is based on a
claim that use, reproduction or distribution by Intraware of the Netscape
portion of the Netscape Products furnished hereunder within the scope of a
license granted hereunder directly infringes any valid U.S. copyright, U.S.
patent or U.S. trade secret. Netscape shall also defend any action brought
against Intraware to the extent that it is based on a claim that the Netscape
trademark(s) Intraware is licensed to use hereunder directly infringes any
valid United States trademark. Netscape will pay resulting costs, damages and
legal fees finally awarded against Intraware in such action which are
attributable to such claim provided that Intraware: (a) promptly (within
twenty (20) days) notifies Netscape in writing of any such claim and Netscape
has sole control of the defense and all related settlement negotiations; and
(b) cooperates with Netscape, at Netscape's expense, in defending or settling
such claim.
Should a Netscape Product become, or be likely to become in Netscape's
opinion, the subject of infringement of such U.S. patent, copyright,
trademark or trade secret, Netscape may procure for Intraware: (i) the right
to continue using the same; or (ii) replace or modify it to make it
non-infringing. In the event that Netscape shall reasonably determine that
neither (i) nor (ii) above is commercially practicable, Netscape may
terminate the license for the infringing Netscape Product and pay Intraware
an amount representing the fees that Netscape has paid hereunder (excluding
the initial payment) up to [*]. Netscape shall have no obligation or
liability for, and Intraware shall defend, indemnify and hold Netscape
harmless from and against any claim based upon: (a) use of other than the
then current, unaltered version of the Netscape Product, unless the
infringing portion is also in the then current, unaltered release; (b) use,
operation or combination of Netscape Products with non-Netscape programs,
data, equipment or documentation if such infringement would have been avoided
but for such use, operation or combination; (c) Intraware's or its agent's
activities after Netscape has notified Intraware that Netscape believes such
activities may result in such infringement; (d) compliance with Intraware's
designs, specifications or instructions; (e) any modifications or marking of
the Netscape Products not specifically authorized in writing by Netscape; (f)
Intraware's use of any trademarks other than those set forth hereunder; or
(g) third party software. The foregoing states the entire liability of
Netscape and the exclusive remedy of Intraware with respect to infringement
of any intellectual property rights, whether under theory of warranty,
indemnity or otherwise.
8.2.3 Neither party will have any liability to the other for any claim
of infringement in this Section 8.2 based on (i) the other party's continued
use or distribution, as the case may be, of a superseded product after the
indemnifying party has given reasonable notice and a reasonable opportunity
to update its use, or an altered release, except for such alteration(s) or
modification(s) which have been made by the indemnifying party or under the
indemnifying party's direction, if such infringement would have been avoided
by the use of a current, unaltered release of such product, or (ii) the
combination, operation, or use of any Services furnished under this Agreement
with programs or data not created by the indemnifying party if such
infringement would have been avoided by the use of the Services without such
programs or data.
ARTICLE 9
DEFAULT
9.1 EVENT OF DEFAULT . An "Event of Default" shall occur under any of the
following conditions:
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(A) Either party fails to perform any material obligation to be
performed by it hereunder within thirty (30) days after written notice from
the other party that time for such performance has passed or, if no such time
is prescribed, within thirty (30) days after written notice from the other
party.
(B) Either party becomes insolvent or unable to pay its debts as they
become due, makes an assignment for the benefit of creditors or files a
petition in any insolvency proceeding or in any bankruptcy, reorganization,
scheme of arrangement or reconstruction, or similar proceeding.
(C) A receiver, manager or liquidator is appointed for any of a
party's assets or a petition is filed in any insolvency, bankruptcy,
reorganization, scheme of arrangement, reconstruction or similar proceeding,
and such receiver, manager or liquidator is not discharged, or such petition
is not withdrawn, within ninety (90) days after such appointment or filing.
9.2 Remedy . If either party causes to occur an Event of Default as specified
in Section 9.1, then the non-defaulting party, at its option, shall have the
right to terminate this Agreement by written notice as provided in Section 3
and pursue any other remedy hereunder or otherwise available to it at law or
in equity. 9.3 Compensation . Intraware hereby expressly agrees and
acknowledges that, except as provided in Section 3 and in this Section 9.3,
termination of this Agreement by either party shall not entitle it to any
termination compensation or to any payment in respect of any goodwill
established by Intraware during the Term or render Netscape liable for
damages on account of any loss of prospective profits or on account of any
expenditure, investment or obligation incurred or made by Intraware, or
otherwise.
ARTICLE 10
LIMITATION OF LIABILITY
EXCEPT FOR A BREACH OF SECTIONS 7 (CONFIDENTIALITY), 8 (INDEMNIFICATION) AND 11
(OWNERSHIP):
(A) EACH PARTY'S LIABILITY FOR DIRECT DAMAGES UNDER THIS AGREEMENT WILL IN NO
EVENT EXCEED [*]; AND
(B) NEITHER INTRAWARE NOR NETSCAPE WILL BE LIABLE FOR INDIRECT, INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO, LOST DATA OR
LOST PROFITS, HOWEVER ARISING, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES OR FOR ANY SIMILAR CLAIM AGAINST LICENSEE BY ANY OTHER PARTY.
ARTICLE 11
OWNERSHIP
11.1 NETSCAPE OWNERSHIP . Intraware shall acquire no rights in and to
the Netscape Products or the Netscape Customer Data, and all ownership rights in
and to the Netscape Products, Netscape Customer Data and any marketing or
customer data generated hereunder shall remain with Netscape or its licensors,
as appropriate. Intraware agrees that it shall not (i) sell, transfer or assign
any of same or any rights or interest therein, or (ii) create or suffer to exist
any liens with respect to the Netscape Products or its programs or publications,
except in accordance with this Agreement or the specific instructions of
Netscape or its licensor hereunder or statutory or common law liens resulting
from Netscape's failure to pay Intraware invoices. Intraware acknowledges that
Netscape (or its licensor) is the owner of all intellectual and proprietary
rights in the Netscape Products or its programs and publications, including
source and object code, trademarks, copyrights and patents relating to the
Netscape Products or its programs and publications, and that neither this
Agreement nor performance of the Services hereunder
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shall directly or indirectly create in or for Intraware any right, title or
interest therein, other than in accordance with the statutory or common law
liens referenced above.
11.2 Intraware Ownership . Except as expressly stated herein, Netscape
shall acquire no rights in and to the Intraware Products or the Intraware
Customer data, and all ownership rights in and to such Intraware Product shall
remain with Intraware or its licensors, as appropriate. Netscape agrees that it
shall not (i) sell, transfer or assign any of same or any rights or interest
therein, or (ii) create or suffer to exist any liens with respect to the
Intraware Products or its programs or publications, except in accordance with
this Agreement or the specific instructions of Intraware or its licensor
hereunder or statutory or common law liens resulting from Intraware's failure to
pay Intraware invoices. Intraware acknowledges that Intraware (or its licensor)
is the owner of all intellectual and proprietary rights in such Intraware
Product, including source and object code, trademarks, copyrights and patents
relating to the Intraware Products or its programs and publications, and that
neither this Agreement nor performance of the Services hereunder shall directly
or indirectly create in or for Intraware any right, title or interest therein,
other than in accordance with the statutory or common law liens referenced
above.
ARTICLE 12
DISPUTES
Should any dispute or differences arise from this Agreement or any performance
thereunder, the parties shall first attempt to arrive at an amicable settlement,
as follows. A party shall identify the existence of a dispute by notifying the
other party in writing. Upon such notice, the matter shall be referred to a
senior executive officer of each party whose responsibilities are not in the
profit center that is the subject of the dispute, for oral presentations (with
minimal written support such as briefing charts or summary sheets). No outside
counsel may appear during this informal process.
If at the completion of such presentation such officers cannot resolve this
dispute, then either party may refer the dispute to non-binding mediation
conducted by JAMS/EndDispute in Santa Clara County, California (the "Venue").
The parties will share the costs of mediation. If the dispute is not resolved
after 45 days of mediation, the parties will refer the dispute to binding
arbitration by JAMS/EndDispute in the Venue. The results of any arbitration will
be final and non-appeallable, except that either party may petition any court of
competent jurisdiction in the Venue to review any decision relating to
intellectual property matters (including the scope of license rights), vacating
or modifying erroneous conclusions of law or findings of fact not supported by
substantial evidence. The arbitrator may fashion any legal or equitable remedy
except punitive or exemplary damages, which both parties waive. The arbitrator
will render a written decision, which may be entered in and enforced by any
court of competent jurisdiction, but which will have no preclusive effect in
other matters involving third parties. The losing party will pay the costs of
the arbitration and the reasonable legal fees and expenses of the prevailing
party, as determined by the arbitrator. The parties will jointly pay arbitration
costs pending a final allocation by the arbitrator. At any point in the dispute
resolution process, either party may seek injunctive relief preserving the
status quo pending the outcome of that process. Except as noted, the parties
waive any right to judicial process. The U.S. Arbitration Act and
JAMS/EndDispute rules will govern the arbitration process. Absent
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fraudulent concealment, neither party may raise a claim more than 3 years after
it arises or any shorter period provided by applicable statutes of limitations.
California law, without regard to its conflict-of-law provisions, will govern
this Agreement. either party shall have any remedy to it available at law or in
equity (but not in contradiction of the provisions including limitation of
liability) hereunder. An attempt at settlement shall be deemed to have failed
when one of the parties advises the other party in writing to this effect, in
which event either party shall have any remedy to it available at law or in
equity. Settlement discussions and materials will be confidential and
inadmissible in any subsequent proceeding without both parties' consent.
ARTICLE 13
TAXES
All prices are in U.S. Dollars and are exclusive of any applicable taxes.
Intraware shall be responsible for filing all appropriate federal, state and
local tax forms related to payment for its Services under this Agreement.
Intraware shall be responsible for sales or use taxes which are due solely by
reason of Intraware's performance of Services hereunder other than taxes
assessed on Intraware's income. Each party shall cooperate with the other in
minimizing any applicable tax. In addition, each party shall reasonably
cooperate with the other in the event of a government audit.
ARTICLE 14
EXPORT
Intraware shall comply fully with all then current applicable laws, rules and
regulations relating to the export of technical data, including, but not limited
to any regulations of the United States Office of Export Administration and
other applicable governmental agencies and Intraware acknowledges that by virtue
of certain security technology embedded in the Netscape Products, that export of
such software may not be legal
ARTICLE 15
MARKETING AND PROMOTION
15.1 MARKETING COLLATERAL . Reasonable amounts of marketing collateral
(i.e., pamphlets, brochures, and the like) associated with the
SubscribNet-Registered Trademark- service will be made available to Netscape.
15.2 OUTBOUND MARKETING . All outbound marketing content including all
electronic communication with End Users who are not Intraware Customers will be
approved by Netscape. The parties will mutually agree upon the guidelines for
marketing materials, as set forth in the Statement of Work.
15.3 NETSCAPE MARKETING EFFORTS. Netscape will use reasonable
commercial efforts to communicate and disseminate the details of the SubscribNet
program to its sales force, customer service representatives, technical support
representatives, Channel Distributors, third party partners and end user
customers upon implementation, launch and on an ongoing basis.
15.4 JOINT PRESS RELEASE. Netscape and Intraware will jointly issue
a press release describing Netscape's usage of Intraware's
SubscribNet-Registered Trademark- service. Such release will be issued within
7 days of execution of this Agreement or as soon thereafter as possible.
Netscape will support the release with timely and reasonably scheduled press
and analyst calls.
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15.5 Response Times . Netscape shall respond to Intraware requests for
approval of marketing materials within 24 hours during a business day or as soon
as practicable thereafter, or otherwise in accordance with the Statement of
Work, to ensure timely delivery of such materials to End Users, taking into
consideration the importance of timeliness to the SubscribNet brand.
ARTICLE 16
MISCELLANEOUS
16.1 Order of Priority . In the event of a conflict between this
Agreement, the Statement of Work and any outstanding agreements between Netscape
and Intraware, the order of priority of this Agreement shall be as follows: (a)
this Agreement, (b) the Statement of Work and (c) other exhibits hereto.
16.2 Force Majeure . Neither party shall be liable for delays in its
performance of this Agreement occasioned by strikes, fires, accidents, or by
other causes beyond its control. In the event of a stoppage or delay suffered by
Intraware resulting from any such cause, Intraware shall perform such parts of
the work as Intraware is capable of performing and shall resume full performance
of the Services as soon as is reasonably practicable.
16.3 Survival . The provisions of Sections 2.7 (A) and (C), 3.2
(Termination), 9.2 and 9.3 (Default), and Articles 10 (Limitation Of Liability),
11 (Ownership), 13 (Taxes), and 16 (Miscellaneous) shall survive termination of
this Agreement. The provisions of Articles 6 (Representations and Warranty) and
8 (Indemnification) shall survive termination for a period of four years
thereafter. The provisions of Article 7 (Confidentiality) shall survive
termination of this Agreement for a period of five years thereafter.
16.4 Assignment . Neither party to this Agreement shall assign any
rights hereunder without the prior written consent of the other party, which
consent shall not be unreasonably withheld. In the event of a merger or
consolidation involving either party in which that party is not the surviving
corporation the Agreement will transfer or be assigned to the resulting
corporation or entity without approval provided that such acquiror agree in
writing to be bound by the terms of this Agreement. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors,
executors, administrators, legal representatives and assigns.
16.5 Severance . In the event that any provision of this Agreement
shall be held by a court of law or other governmental agency to be void,
voidable, or unenforceable, the remaining portions hereof shall remain in full
force and effect.
16.6 Relationship . Intraware is an independent contractor and nothing
contained herein shall be construed to create any other relationship
between the parties. Nothing in this Agreement shall be construed to
constitute either party as the agent of the other party for any purpose
whatsoever, and neither party shall bind or attempt to bind the other party
to any contract or the performance of any other obligation, or represent to
any third party that it has the right to enter into any binding obligation
on the other party's behalf.
16.7 Governing Law . All questions concerning the validity and
operation of this Agreement and performance of the obligations imposed upon the
parties hereunder shall be governed by the substantive laws of the State of
California. Jurisdiction and venue shall be in Santa Clara County or the
Northern District of California.
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16.8 Headings . The headings and titles to the Articles and Sections
of this Agreement are inserted for convenience only and shall not be deemed a
part hereof or affect the construction or interpretation of any provision
hereof.
16.9 Remedies . Unless otherwise expressly provided herein, the rights
and remedies hereunder are in addition to, and not in limitation of, other
rights and remedies available to the parties, and exercise of one right or
remedy shall not be deemed a waiver of any other right or remedy.
16.10 No Amendment or Waiver . No amendment, modification, deletion,
addition or other change in this Agreement or any provision hereof, or wavier of
any right or remedy herein provided, shall be effective for any purpose unless
specifically set forth in a writing signed by the party to be bound thereby. No
waiver of any right or remedy in respect of any occurrence or event on one
occasion shall be deemed a waiver of such right or remedy in respect of such
occurrence or event on any other occasion.
16.11 Entire Agreement . This Agreement supersedes all other
agreements, oral or written, heretofore made with respect to the subject matter
hereof and the transactions contemplated hereby and, with the Attachments
hereto, contains the entire agreement of the parties.
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16.12 Notices . Notices and communications required or permitted to be
given under this Agreement shall be written in English and shall addressed as
set forth below.
If to Netscape:
Netscape Communications Corporation
501 E. Middlefield Road
Mountain View, CA 94043
Attention: Tony Weber
Title: Finance Manager/Customer Satisfaction
Telephone: 650/937-3095
Fax: 650.937-5441
If to Intraware:
Intraware, Inc.
25 Orinda Way, Orinda CA 94563
Attention: Cindy Mascheroni
Title: Vice President Business Development
Telephone: 925/254-4506
Fax: 925/253-4599
Notice shall be sent by registered mail, postage prepaid, return receipt
requested, by reputable overnight courier, paid by the sender, or by facsimile.
The date of receipt shall be deemed to be the date on which such notice was
actually received. Each party shall promptly give the other party written notice
of any change of address.
16.13 Complying with the Law . Intraware and Netscape agree to comply
fully with all federal, state and local laws.
16.14 Attorneys' Fees . The prevailing party in any dispute shall have
all court costs, expenses, reasonable attorneys' fees, and any other relief a
court orders paid by the other party.
16.15. Insurance . Intraware, at its sole cost and expense, shall secure
and maintain adequate insurance coverage as is necessary, as a reasonable
prudent businessperson, for Intraware to bear all of its obligations under this
Agreement. On Netscape's request, Intraware shall provide Netscape with
satisfactory evidence of such insurance. Before any cancellation or material
change in any coverage, Intraware shall provide Netscape with 30 days' advance
written notice.
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16.16 Counterparts . This Agreement may be executed in counterparts or by
facsimile, each of which shall be an original, and all of which together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, authorized representatives of the parties hereto have
executed this Agreement as of the Effective Date.
NETSCAPE COMMUNICATIONS CORPORATION
By: /s/ Dana Stalder
----------------------------------------------
Print name: Dana Stalder
-------------------------------------
Print title: Director of Finance & Operation
Enterprise Sales
-------------------------------------
INTRAWARE INC.
By: /s/ Donald M. Freed
----------------------------------------------
Print name: Donald M. Freed
-------------------------------------
Print title: EVP / CFO
-------------------------------------
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ATTACHMENT A
STATEMENT OF WORK
See Attached Pages
18
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ATTACHMENT B
THIRD PARTY PRODUCTS
Products on the Netscape price list as of September 3, 1998 made by the
vendors listed below.** (Inclusion on this list does not imply permission
from any Third Party to perform some or all of the Services; that will need
to be determined on a case by case basis between the parties.)
Oracle
Legato
Marimba
CS&T
Bull**
Grapevine
Novell
Diffusion
Actuate
Enwisen
** Bull products will be listed as soon as practicable.
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ATTACHMENT C
NETCENTER GENERAL TERMS
UPTIME
The Service will function substantially in accordance with the terms set forth
in this Agreement. In any given twenty-four hour period during the Service
Period, the Service shall have an uptime of at least 98% with industry standard
downtime for maintenance, provided that such downtime not occur at peak traffic
times. Intraware shall repair any malfunctions of the Service within a
reasonable period of time not to exceed (i) 2 days for material malfunctions of
the Service after written notice by any party of such condition, and (ii) 4 days
for any non-material malfunction of the Service after written notice by any
party of such condition or as otherwise agreed to by the parties.
MAILTO LINK
Notwithstanding the provisions below, Netscape may in its discretion require
that the mailto link send certain help requests to Netscape, as the parties
shall agree in the Statement of Work. For purposes of this Agreement, "Service
Pages" shall refer to the co-branded pages on Netcenter being designated
hereunder for the Service.
NETCENTER GENERAL TERMS
SEE ATTACHMENT
SEE ALSO ADDITIONAL ATTACHMENT TO BE MUTUALLY AGREED AND ATTACHED
AS EXHIBIT C-2, COVERING NETCENTER DESIGN AND SPECIFICATIONS AND
REPORTING REQUIREMENTS
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ATTACHMENT C-1
USER REGISTRATION AND PRIVACY
I. DEFINITIONS
"Netcenter Registration" means the portion of the registration that is
maintained, hosted, and controlled by Netscape and applies to multiple services
across Netcenter. Netcenter Registration includes the assignment of a user name,
password, and the collection of core Netcenter user profile data including but
not limited to: First name, Last name, Address, City, State, Country, Zip Code,
Email Address, Age and Gender. Netscape Registration means any registration
that is maintained, hosted, and controlled by Netscape and applies to Netscape's
Web Site. Netscape Registration includes the assignment of a user name,
password, and the collection of core user profile data including but not limited
to: First name, Last name, Address, City, State, Country, Zip Code, Email
Address, Age and Gender.
II. REGISTRATION PROCESS
To the extent that Intraware desires to offer a registration process, Intraware
will be responsible for the implementation of the Service Registration and the
integration of the Service with Netcenter Registration. The functionality,
design, and, integration of the Service Registration process and Netcenter
Registration will be subject to Netscape's approval, terms and conditions as
defined this Agreement. Such specifications, terms and conditions may be revised
by Netscape from time to time upon 30 days prior notice to Intraware. Intraware
will implement changes within a 30 day period unless the parties mutually agreed
otherwise. The point of entry to the registration area from the Service shall be
hosted and controlled by Netscape unless otherwise determined by Netscape.
III. REGISTRATION FEATURES
The Service Registration area shall be co-branded and have a look and feel which
is consistent with the implementation of the registration process in other
sections of Netcenter. Intraware shall not launch the Service Registration until
Netscape has notified Intraware in writing that Netscape has accepted
Intraware's implementation. Intraware shall manage site access using Netcenter
site access models, as such site access models shall be determined by Netscape
from time to time upon notice to Intraware. Netscape shall transfer to Intraware
all data necessary to provide site access to registered Netcenter users.
Intraware will make commercially reasonable efforts to implement such changes
within a 30 day period.
III. DATA COLLECTED BY INTRAWARE DURING SERVICE REGISTRATION PROCESS
Netscape will determine the data to be collected in the Service Registration
process considering Intraware's recommendations and technical restrictions.
Netscape reserves the right to change such data requirements from time to time.
Intraware will make BEST efforts [STILL AN ISSUE] to implement these changes
within 5 working days unless mutually agreed to otherwise. If Netscape
implements a Netcenter loyalty program, Intraware shall also offer end user
loyalty selections as part of the Service Registration process at Netscape's
request. Intraware shall deliver to Netscape data collected pursuant to such
loyalty programs in a format and timeframe as mutually agreed to by the parties.
V. DATA TRANSFER
Intraware shall use commercially reasonable efforts to transfer all end user
data collected during the Service Registration process and data collected by
any other means, to Netscape in real time data transfer, unless otherwise
agreed to by the parties. Netscape reserves the right to request any
information collected during the Service Registration to be supplied in a
Netscape specified format and timeframe. If Intraware collects information
about users
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accessing the Service in addition to information supplied by the users during
the registration process, such information shall be made available to
Netscape in a format and timeframe as the parties shall mutually agree.
VI. NETCENTER CONSIDERATIONS
All third party programs participating in the Service within Netcenter shall
register users with Netcenter when the user completes an order, if such user
is not already registered with Netcenter. If a user is a registered Netcenter
member, Intraware shall pre-populate relevant customer data fields in the
customer order form based on information in the Netcenter database or
seamlessly pass this information to the third party provider.
VII. USE OF PERSONAL DATA
Ownership and use of customer data shall be as set forth in the Agreement.
Intraware: (i) shall have the right to aggregate such data and information
and use such aggregated data only for marketing and reporting pertaining to
the SubscribNet service and specifically not for sales solicitation of
customers), except as required for legal, audit or tax purposes; (ii) shall
not disclose to any third party such end user data and information without
Netscape's prior written approval; and (iii) may use information collected
about the users during registration or from any other means ("End User
Information") only for the purpose of marketing Netcenter programs to the
users. The parties shall treat all data pertaining to the Service, including
without limitation Netscape Customer Data and Intraware Customer Data, as
Confidential Information. Intraware may not disclose any non-Intraware
customer data to any third party such end user data and information without
Netscape's prior written approval. It is a material obligation of this
Agreement that Intraware shall adhere to Netscape's then-current privacy
policy, set forth at http://home.netscape.com/legal_notices/privacy.html or
at such other URL as Netscape may designate from time to time. The parties
will cooperate to create guidelines for Intraware's disclosure of aggregate
statistical information concerning Service's demographics and use to
advertisers. Intraware shall not resell or disclose such End User Information
to any third party; provided however, that Intraware may sell or disclose
such End User Information to third parties upon prior notice to and consent
from such end users and written approval from Netscape. If Netscape
determines that Intraware or third party in contract with Intraware is not
complying with the terms of use of personal data published on Netscape's Web
Site at http://home.netscape.com/netcenter/index.html, or such other URL as
Netscape may determine from time to time, Netscape may terminate this
Agreement upon written notice to Intraware if Intraware is not in compliance
within 5 days of written notice from Netscape. After a given end user has
requested to be "unsubscribed" from the Service, Intraware will terminate all
Services unless otherwise specified by the user and discontinue any use of
the End User Information associated with the given user. After the
termination or expiration of the Service Period, Intraware will transfer all
non-Intraware customer data, including Netscape Customer Data, to Netscape
and destroy all copies of that data.
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ATTACHMENT C-2
- -NETCENTER DESIGN AND IMPLEMENTATION SPECIFICATIONS
- -NETCENTER REPORTING REQUIREMENTS
23
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ATTACHMENT D
MUTUAL CONFIDENTIAL DISCLOSURE AGREEMENT
PREVIOUSLY EXECUTED DOCUMENT MUST BE ATTACHED
24
<PAGE>
ATTACHMENT D
ESCROW AGREEMENT
SEE ATTACHED PAGES
25
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
[*] Denotes information for which confidential treatment has been requested
pursuant to a confidential treatment request filed with the Securities and
Exchange Commission. Confidential portions omitted have been filed separately
with the Commission.
Exhibit 10.13
[NETSCAPE LOGO]
U.S. ENGLISH LANGUAGE
NETCENTER SERVICES AGREEMENT
COVER SHEET
This Netcenter Services Agreement, of which this page is a cover sheet
("COVER SHEET"), is entered into between Netscape Communications Corporation,
a Delaware corporation ("NETSCAPE"), and Intraware, Inc., a Delaware
corporation ("PARTICIPANT"), effective as of the date of Netscape's signature
below ("EFFECTIVE DATE").
BRIEF DESCRIPTION OF SERVICE: A channel called the IT Center within
Netcenter's Computing and Internet channel which will include a range of
interactive services offered by sponsors and content providers. TERRITORY:
North America LAUNCH DATE: The earlier to occur of the date on which the
Service is functional and accessible to end users, or October 14, 1998. LOCAL
LANGUAGE: U.S. English SERVICE PERIOD (EXCEPT FOR THE ADVERTISING PACKAGE
DESCRIBED IN EXHIBIT A): 12 months beginning on the Launch Date ADVERTISING
SERVICE PERIOD: beginning on the Effective Date
ADDRESSES FOR NOTICE:
Intraware, Inc. Netscape Communications Corporation
25 Orinda Way 501 East Middlefield Road, MV-002
Orinda, CA 94563 Mountain View, CA 94043
USA USA
Fax: (925) 253-4599 Fax: (650) 528-4123
Attn: Cindy Maascheroni Attn: General Counsel
INTRAWARE, INC. NETSCAPE COMMUNICATIONS
CORPORATION
By: /s/ Cindy Mascheroni By: /s/ Mike Homer
Name: Cindy Mascheroni Name: Michael J. Homer
Title: VP Business Development Title: EVP & GM of Netcenter
Date: September 3, 1998 Effective Date: 9/3/1998
Intraware, Inc.
Netcenter Services Agreement 090398ttk
CONFIDENTIAL 1 Rev. 082598
<PAGE>
U.S. ENGLISH LANGUAGE
NETCENTER SERVICES AGREEMENT
NETCENTER SPECIAL TERMS
IN CONSIDERATION OF THE MUTUAL COVENANTS CONTAINED HEREIN, THE PARTIES AGREE
AS FOLLOWS:
1 DEFINITIONS
"AGREEMENT" means this Netcenter Services Agreement, including the Netcenter
Special Terms and General Terms and the following Exhibits:
Exhibit A: The Service/The Advertising Package
Exhibit B: Payment
Exhibit C: User Registration and Privacy
Exhibit D: Mutual Confidential Disclosure Agreement
Exhibit E: Participant's Trademark Guidelines
"CHANNEL" means the link on Netcenter, which provides content (at the top
level), links, community components (i.e., mail, chat, discussion groups, etc.),
e-commerce opportunities or links, and other tools, resources, and applications
pertaining to the Computing and Internet topic.
"CHANNEL INDEX PAGE" means that certain page on Netcenter programmed by Netscape
to serve as a gateway to the Channel or the Service Index Page.
"INDEX PAGES" mean the Channel Index Page and the Service Index Page.
"NETCENTER" means that area of Netscape's Web Site that offers online consumer
and business services and shopping opportunities to end users.
"NET REVENUE" means gross revenue less reasonable expenses, including, without
limitation, sales commissions, agency fees, or other reasonable costs directly
associated in the process of promoting and creating the Service. In no event
will the aggregate of such reasonable expenses exceed 25 percent of gross
revenues.
"NETSCAPE'S WEB SITE" means the collection of Local Language HTML documents
targeted at end users in the Territory and currently accessible by the public
via the Internet at the URL http://home.netscape.com and/or at such other URL or
locations as Netscape may designate. Netscape's Web Site does not include any
future technologies or future uses of existing technologies which might embody a
collection of documents (other than HTML documents) on the Internet.
"PARTICIPANT'S WEB SITE" means Participant's primary Local Language Web site,
which is currently accessible by the public via the Internet at the URL
http://www.intraware.com.
"SERVICE" will have the meaning set forth in Section 2.1 of the Netcenter
Special Terms.
Intraware, Inc.
Netcenter Services Agreement 090398ttk
CONFIDENTIAL 2 Rev. 082598
<PAGE>
"SERVICE INDEX PAGE" means that certain page, linked to or accessible from
Netcenter, that serves as the first available point of entry for an end user
accessing the Service from Netcenter or the Channel.
"SERVICE PAGES" mean all pages of the Service.
2 THE SERVICE
2.1 Description of Service. Participant will provide Netscape with Local
Language content and other services (the "SERVICE") for inclusion in the
Channel and targeting to end users in the Territory. Participant will be the
only content-provider within the Service unless otherwise agreed upon by the
parties. The Service does not include the Channel Index Page. All access to
the Service Pages and Index Pages shall be deemed to be via Netscape's Web
Site and therefore considered to be Netscape traffic. The specifications for
the Service are set forth on Exhibit A.
2.2 Index Pages. Participant will maintain the Service Index Page on
Participant's servers; provided, however, Netscape shall have the option to
maintain the Service Index Page on Netscape's servers at any time. If
Netscape decides to exercise its option to maintain the Service Index Page,
the parties shall cooperate to ensure that the Service will have the same
content and services available to end users at all times. The Channel Index
Pages will be maintained on Netscape's servers. Each Index Page will include
areas for co-branding, advertising, content or sponsorships. Participant will
provide to Netscape the content for use on the Service Index Page.
Additional sections and services may be added to or deleted from Exhibit A
from time to time upon mutual agreement of the parties.
2.3 Service Pages. Participant and Netscape shall mutually agree on the
initial design and look and feel of the Service Pages in accordance with
Exhibit A. Netscape shall provide specifications and production schedule (if
any) for the navigation, templates and architecture of the Service Pages in
accordance with Exhibit A. Netscape may (i) amend Section I(a) of Exhibit A
as mutually agreed upon with Participant; and (ii) amend Section 1(b) of
Exhibit A from time to time upon reasonable notice to Participant. Unless
otherwise agreed, the Service Pages shall not include any link outside of the
Channel. The Service Pages shall:
2.3.1 Be produced and managed by Participant, including but not
limited to hiring and managing creative, technical, customer support, and
general staff as needed;
2.3.2 Be hosted and maintained solely on Participant's servers;
2.3.3 Have a "Netscape.com" domain name or such other domain name as
Netscape may determine
2.3.3 Include a field providing search functionality; and
2.3.5 Be directly linked, within one click, to Netscape's Web Site.
2.4 Co-Branding. The Service Pages will be co-branded by Netscape and
Participant. The co-branding will be subject to Netscape's then-current design
guidelines and will include Participant's company name and logo; provided,
however, the co-branded web pages shall include Participant's company logo so
that it will be
Intraware, Inc.
Netcenter Services Agreement 090398ttk
CONFIDENTIAL 3 Rev. 082598
<PAGE>
(i) immediately visible to an end user accessing the co-branded web page,
without any Netcenter Services Agreement scrolling or navigation by such end
user; and (ii) not less prominent than Netscape's company logo. Service
Implementation. Participant shall provide consistent and continuously updated
content for the Service Pages. For the Service Pages, Netscape and
Participant shall agree upon (i) a schedule for regular updates; (ii) a
quality assurance procedure; and (ii) a bug tracking process. All content
supplied by content providers to Netscape, including content provided by
Participant for the Service, will meet Netscape's specifications with regard
to page size, loading speed and speed of access to database driven content as
set forth in Exhibit A. Participant shall be responsible for the production,
technology deployment, content programming, and creation of graphic user
interfaces of the Service; all in accordance with Netscape's then-current
guidelines. The Service shall use substantially the same technology and
advantages that Participant uses in its own proprietary service(s) unless
otherwise mutually agreed by the parties. The Service shall not be
disadvantaged or suffer from inferior production, programming or performance
relative to Participant's similar services, or any similar service that
Participant might make available to, or operate on behalf of, third parties.
The Service shall perform substantially in accordance with the performance
standards of its own proprietary services, including, but not limited to,
load time, timeliness of content, and quality of programming. Participant's
obligation to produce the Service, including production services, technology
deployment and content programming that meets or exceeds standards
established by Participant on Participant's Web Site or services (or any web
site or services Participant manages for any third party) and general
industry standards is a material obligation of Participant under this
Agreement.
2.6 Service Name. The Service name will be as set forth in Exhibit A or as
otherwise mutually agreed upon by Netscape and Participant. Participant shall
not independently use the Service name without Netscape's prior written
consent unless such use occurs in connection with Participant's advertising
sales and promotional efforts on behalf of the Service provided, however,
Participant shall have the right to use Participant's own brand name. If the
Service name includes a co-branding component that is not generic or
descriptive, Participant may not use the Service name with Netscape's name
expunged; provided, however, Participant shall have the right to use
Participant's own brand name.
2.7 License Grant. During the Term and to the extent necessary for
Netscape to fulfill its obligations under this Agreement, Participant grants
to Netscape to use within the Service or Netcenter the non-exclusive,
worldwide and royalty-free right to store, display, perform, transmit,
re-transmit and otherwise use the data, information, content or other
intellectual property provided by Participant. Netscape's use of
Participant's trademark hereunder shall be subject to (i) Participant's
trademark guidelines as set forth in Exhibit E; and (ii) approval by
Participant, such approval not to be unreasonably withheld.
2.8 Technical Support.
2.8.1 During the Term, Participant will provide technical support to
Netscape to ensure that content is correctly received and displayed by
Netscape. Participant shall
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provide technical support services for the Service to Netscape on a timely
basis, appoint a technical contact to whom Netscape may address all technical
questions relating to the Service, and to promptly remedy any material
malfunctioning of the Service. Participant shall be solely responsible for
the purchase, implementation, maintenance and support of all software and
hardware required to fulfill its obligations under the Agreement.
2.8.2 During the Term, Netscape shall promptly provide technical
support services to Participant for the interaction between the Service Index
Pages and Netscape's Web Site on a timely basis and appoint a technical
contact to whom Participant may address all technical questions relating to
the technical interface between such areas.
2.9 Customer Support Programs. Participant shall provide the
following customer support features in the Service: (i) seventy-two (72) hour
response to customer inquiries; (ii) twenty-four (24) hour notification of
order confirmation and estimated delivery time; and (iii) a secure
transaction environment (supporting at least SSL 3.0, or the then current
industry standard). Participant shall use commercially reasonable efforts to
provide programs including gift search, universal check-out, reminder
programs, and other programs and features as Netscape may determine.
2.10 Quarterly Reviews. Netscape and Participant agree to establish
quarterly reviews of the Service to evaluate the success of the Service and
agree to modifications and improvements to the Service.
2.11 Equal Treatment. Netscape shall ensure that within the
Service, Participant's products and services are accorded a position of
prominence, overall as well as on an element by element basis, at least as
great as the positioning given any competitive resellers.
3 PAYMENT
For the benefits provided to Participant under this Agreement, Participant
shall pay Netscape in the amount and subject to the terms set forth in
Exhibit B.
4 MARKETING AND PROMOTION OF THE SERVICE
The responsibilities for marketing and promotion are as follows:
4.1 Advertising and Sponsorship Responsibilities. Netscape will
sell all advertising and sponsorships for the Index Pages. Netscape and
Participant shall share Net Revenues from selling advertising or sponsorships
for the Index Pages in accordance with Exhibit B.
4.2 Service Promotion. Netscape shall develop and run targeted
advertisements for the Service and look for opportunities for cross-promotion of
the Service within Netcenter. Netscape's Service promotions shall consist of
banner ads, text links, marquee ads, spotlight and button sponsorships. Netscape
shall determine where to place these ads in the Channel or other areas of
Netcenter. Netscape shall deliver a minimum cumulative total of [*]
impressions or page views relating to the promotion of the Service.
5. ADVERTISING PACKAGE
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5.1 Placement of Advertising. Netscape shall provide to
Participant the advertising placement package described in Section II of
Exhibit A.
5.2 Delivery of Impressions/Page Views. For the advertising package
described in Section II of Exhibit A, Participant will allow Netscape to
serve [*] impressions by October 31, 1998, then Netscape will deliver
an additional [*] impressions of advertising based on the
specifications described in Section II of Exhibit A during the Term.
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NETCENTER GENERAL TERMS
1. PROPRIETARY RIGHTS
Copyrighted elements or trademarks contained in, or used in conjunction with,
the Service shall be the property of the copyright or trademark owner. Ownership
of all end user data and information related to the Service shall be as set
forth in Exhibit C.
2. NETCENTER PROGRAM REQUIREMENTS
2.1 User Registration. In order to offer a compelling end user
experience in the Service, Netscape and Participant shall cooperate to
streamline the registration process so that each end user needs to register
only once for the services within Netcenter. The Service's user registration
processes will be integrated with Netscape's "Universal Registration" system
and be consistent with Netscape's then-current privacy policy, each as set
forth on Exhibit C.
2.2 Community Services/Consistent Environment. Where applicable,
Participant will integrate Netscape's then-current Netcenter core community
services into the Service. Netscape will, from time to time, notify
Participant of changes in the core community services.
3. NETSCAPE PRODUCTS AND TECHNOLOGY
3.1 Optimize for Netscape Technology. In order to optimize the efficiency of
the Service:
3.1.1 Within all aspects of the Service, Participant will use best efforts to
ensure compatibility with the client software used by Netcenter members,
especially the latest version of Netscape Communicator client software;
3.1.2 Participant will consider the use of at least [*] of
Netscape [*] software product to maintain Participant's Web
Sites;
3.1.3 Participant will display the "Netscape Now" button prominently on the
home page of Participant's Web Site, on the Service Pages, and on any
page on Participant's Web Site which contains a virtual button or other
text or graphic for any third party Internet client or server software,
software provider or online service; and
3.1.4 [*]
3.2 Course of Dealing. In consideration of (i) the use of the
netscape.com domain name for the Service, and (ii) the treatment of the
Service as a fundamental part of the Netcenter service, until such time as
Microsoft Corporation fully publicly documents and makes available its
operating systems' programming interfaces sufficiently to enable Netscape to
make use of all of the facilities and resources of those operating systems on
a basis equal to that Microsoft Corporation, Participant agrees to the
following:
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3.2.1 No Disadvantage. Participant shall not make any content
available solely to users of client software or services other than
Netscape's, or disfavor or disadvantage users of Netscape client software or
services in any way relative to users of other Internet client software or
services; and
3.2.2 [*]
3.3 No Disabling. Participant shall not provide or implement any
means or functionality that would (i) alter, modify or enable end users to alter
or modify, any Netscape client software, standard user interface or
configuration (collectively, the "Software"), (ii) disable any functionality of
the Software or any other Internet browser software, or (iii) modify the
functioning of pages served from Netscape's Web Site.
3.4 Mailto Link. Participant shall make commercially reasonable
efforts to include on the Service Pages a "mailto" link that users of
Participant's proprietary service can use to direct questions or help
requests to Participant. Participant will use reasonable efforts to reply
promptly, but in any event within 1 week, to any such question or help request
4 HARMFUL CONTENT
Participant is solely responsible for any liability arising out of or
relating to (i) the Service and/or (ii) any material to which users can link
through the Service. Except for content provided within Participant's
Radarscope, Ask James, Compariscope, Intranet library and SubscribNews
services or such other editorial content and analysis tools services as the
parties shall mutually agree from time to time, if Netscape is aware that the
Service contains any material that Netscape deems likely to cause Netscape
material harm, then Netscape will inform Participant and may (i) not include
the Service on Netscape's Web Site, and/or (ii) terminate this Agreement if
Participant has not revised, to Netscape's satisfaction, the Service or
otherwise altered the Service within 1 business day after receipt of written
notice from Netscape. Netscape reserves the right not to include in the
Netscape's Web Site all or any part of the Service that does not
substantially conform to the terms set forth herein.
5 WARRANTIES
5.1 Participant Warranty. Participant warrants that: (i) it holds
the necessary rights to provide, and permit the use of, the Service, any
content provided by Participant for the Service and any material to which
users can link directly therefrom, and that the license granted to Netscape
hereunder is sufficient to enable Netscape to use the Service; (ii) the
Service does not infringe on any third parties' proprietary or personal
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rights, or otherwise violate applicable laws, rules or regulations or rights
of any third parties (iii) other than as specifically set forth in this
Agreement, Netscape shall not be obligated to pay any fees or royalties for
including the Service in Netcenter; and (iv) the Service and any material to
which users can directly link through the Service will not violate any
criminal laws, rights of any third parties, or any applicable local, state,
national or international laws. Participant further warrants that the Service
will function substantially in accordance with the terms set forth in this
Agreement. In any given twenty-four hour period during the Service Period,
the Service shall have an uptime of at least 98% with industry standard
downtime for maintenance, provided that such downtime not occur at peak
traffic times. Participant shall repair (i) any material malfunctions of the
Service within a reasonable period of time (not to exceed 2 days) after
notice by any party of such condition; and (ii) any non-material malfunctions
of the Service within 4 days after notice by any party of such condition or
as otherwise agreedto by the parties.
5.2 Netscape Warranty. Netscape warrants that (i) it has the right to
perform the services set forth in this Agreement, and (ii) Participant shall
not be obligated to pay any fees or royalties for participating in Netcenter
other than as specifically set forth in this Agreement. Netscape further
warrants that Netcenter will function substantially in accordance with the
terms set forth in this Agreement. In any given twenty-four hour period
during the Service Period, Netcenter shall have an uptime of at least 98%
with industry standard downtime for maintenance, provided that such downtime
not occur at peak traffic times. Netscape shall repair any malfunctions of
Netcenter within a reasonable period of time (not to exceed 2 days) after
notice by any party of such condition.
5.3 Disclaimer. THE WARRANTIES PROVIDED BY THE PARTIES HEREIN ARE THE ONLY
WARRANTIES PROVIDED BY THE PARTIES WITH RESPECT TO THE SUBJECT MATTER OF THIS
AGREEMENT. SUCH WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES BY THE
PARTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE
SUBJECT MATTER OF THIS AGREEMENT.
6 INDEMNITY
6.1 Participant Indemnity. Participant shall indemnify, hold harmless and
defend Netscape from and against any and all claims, liabilities,
losses, damages, expenses and costs (including attorneys' fees and
costs) arising out of or relating to: (a) a breach of Participant's
representations or warranties under Section 5.1 of the Netcenter General
Terms; (b) the Service, any content provided by Participant for the
Service and any material to which users can directly link through the
Service; (c) other information supplied or managed by Participant for
the Service; or (d) the negligence or intentional wrongdoing of
Participant, except to the extent that Netscape is responsible under
Section 6.2 of the Netcenter General Terms. Participant will pay
resulting costs, damages and legal fees finally awarded in such action
in a court or in a settlement which are attributable to such claim
provided that: (i) Netscape promptly notifies Participant in writing of
any such claim; (ii) Participant has sole control of the defense and all
related settlement negotiations; and (iii) Netscape cooperates with
Participant, at Participant's expense, in defending or settling such
claim.
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6.2 Netscape Indemnity. Netscape shall indemnify, hold harmless and defend
Participant from and against any and all claims, liabilities, losses,
damages, expenses and costs (including attorneys' fees and costs)
arising out of or relating to: (a) a breach of Netscape's
representations or warranties under Section 5.2 of the Netcenter General
Terms; (b) any content provided by Netscape to Participant for use in
the Service in accordance with this Agreement; or (c) the negligence or
intentional wrongdoing of Netscape, except to the extent that
Participant is responsible under Section 6.1 of the Netcenter General
Terms. Netscape will pay resulting costs, damages and legal fees finally
awarded in such action in a court or in a settlement that are
attributable to such claim provided that: (i) Participant promptly
notifies Netscape in writing of any such claim; (ii) Netscape has sole
control of the defense and all related settlement negotiations; and
(iii) Participant cooperates with Netscape, at Netscape's expense, in
defending or settling such claim.
7 LIMITATION OF LIABILITY
EXCEPT FOR A BREACH BY EITHER PARTY IN CONNECTION WITH EACH PARTY'S
INDEMNIFICATION OBLIGATIONS SET FORTH IN SECTION 6 OF THESE NETCENTER GENERAL
TERMS (INDEMNITY)OR A BREACH BY EITHER PARTY OF ITS CONFIDENTIALITY
OBLIGATIONS AS DESCRIBED IN SECTION 12.2 OF THE NETCENTER GENERAL TERMS, IN
NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR LOST PROFITS OR ANY
FORM OF INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY
CHARACTER FROM ANY CAUSES OF ACTION OF ANY KIND WITH RESPECT TO THIS
AGREEMENT WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE),
OR OTHERWISE, AND WHETHER OR NOT THE OTHER PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE. THE LIABILITY OF EITHER PARTY FOR DAMAGES OR
ALLEGED DAMAGES HEREUNDER (EXCEPT FOR DAMAGES OR ALLEGED DAMAGES ARISING
UNDER SECTION 6 OR SECTION 12.2 OF THE NETCENTER GENERAL TERMS) WHETHER IN
CONTRACT OR TORT OR ANY OTHER LEGAL THEORY IS LIMITED TO AND SHALL NOT EXCEED
[*].
8 TERM AND TERMINATION
8.1 Term. Unless sooner terminated in accordance with the provisions
hereof, this Agreement shall commence on the Effective Date and end on the
last day of the Service Period (the "TERM"). Ninety days prior to the
expiration of the initial Term, or any renewal Term, if applicable, the
parties agree to enter into negotiations to determine whether, and the terms
upon which, to renew this Agreement for a renewal period of one year. If, at
the end of such negotiations, no agreement is reached as to the terms of the
renewal period, the parties may mutually agree to extend the Term by 90 days.
8.2 Termination for Cause. Either party shall have the right to terminate
this Agreement upon a material default by the other party of any of its
material obligations under this Agreement, unless within 30 calendar days
after written notice of such breach the breaching party remedies such default.
8.3 Rights Upon Termination or Expiration. Ownership of all end user data and
information related to the Service shall be as set forth in Exhibit C.
[*]
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[*]. In order to continue to offer a successor to the Service within
Netcenter without interruption, Participant shall promptly deliver
Service-related information (excluding (i) Radarscope-related and
Compariscope-related source code, content, data schema, configuration,
information filters and rules; and (ii) third party confidential information
which Participant is under a contractual obligation not to disclose) to
Netscape or its designee in a form and manner to be reasonably designated by
Netscape. Netscape shall not be liable to Participant in the event of
termination, expiration or failure to agree upon an extension of the term of
this Agreement for compensation, reimbursement or damages on account of the
loss of prospective profits, or anticipated sales, or on account of
expenditures, investments, leases or commitments in connection with the
business or goodwill of Participant. In the event of Participant terminates
this Agreement due to a material breach by Netscape prior to the end of the
Term, Netscape shall refund Participant the participation fees paid
byParticipant under Section 1(a) of Exhibit B less the sum of (i) a prorated
amount of such fees based on the number of impressions or page views
delivered by Netscape pursuant to Section II of Exhibit A; and (ii) a
prorated amount of such fees based on the number of months Netscape has
provided services during the Term.
8.4 Extension of Term. Notwithstanding anything to the contrary herein, if
the cumulative number of impressions or page views promoting the Service
delivered by Netscape under Section 4.2 of the Netcenter Special Terms is
less than [*] at the end of the Term, the parties agree to extend the
Term to the earlier of (i) the time it takes to reach the [*]
impressions or page view mark; or (ii) 6 months.
9 INSURANCE
Participant, at its sole cost and expense, shall secure and maintain adequate
insurance coverage as is necessary, as a reasonable prudent businessperson,
for Participant to bear all of its obligations under this Agreement. Such
coverage shall include Worker's Compensation Insurance (or self insurance, if
applicable law permits), Employers Liability Insurance, Comprehensive
Automobile Liability Insurance, Umbrella Liability Insurance, Professional
Liability Insurance, and Commercial General Liability Insurance, and include
a waiver of subrogation in Netscape's favor. Maintenance of the foregoing
insurance shall in no way be interpreted as relieving Participant of any
responsibility or obligation whatsoever and Participant may acquire, at its
own expense, such additional insurance as Participant deems necessary.
Participant assumes full and complete liability for all injuries to, or death
of, any person, or for any damages to property arising from the acts or
omissions of Participant. Participant shall add Netscape as an additional
insured under such coverage and provide copies thereof and waivers of
subrogation to Netscape within 30 days of the Effective Date. Before any
cancellation or material change in any coverage, Participant shall provide
Netscape with 30 days' advance written notice. Participant's insurance shall
be primary to any other insurance Netscape may have. All insurance shall be
written by companies with a current A.M. Best rating of A-, VI or better.
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10 DISPUTE RESOLUTION
Any dispute hereunder will be negotiated between the parties commencing upon
written notice from one party to the other. Settlement discussions and
materials will be confidential and inadmissible in any subsequent proceeding
without both parties' consent. If the dispute is not resolved by negotiation
within 45 days following such notice, the parties will refer the dispute to
non-binding mediation conducted by JAMS/EndDispute in Santa Clara County,
California (the "Venue"). The parties will share the costs of mediation. If
the dispute is not resolved after 45 days of mediation, the parties will
refer the dispute to binding arbitration by JAMS/EndDispute in the Venue. The
results of any arbitration will be final and non-appeallable, except that
either party may petition any court of competent jurisdiction in the Venue to
review any decision relating to intellectual property matters (including the
scope of license rights), vacating or modifying erroneous conclusions of law
or findings of fact not supported by substantial evidence. The arbitrator may
fashion any legal or equitable remedy exceptpunitive or exemplary damages,
which both parties waive. The arbitrator will render a written decision,
which may be entered in and enforced by any court of competent jurisdiction,
but which will have no preclusive effect in other matters involving third
parties. The losing party will pay the costs of the arbitration and the
reasonable legal fees and expenses of the prevailing party, as determined by
the arbitrator. The parties will jointly pay arbitration costs pending a
final allocation by the arbitrator. At any point in the dispute resolution
process, either party may seek injunctive relief preserving the status quo
pending the outcome of that process. Except as noted, the parties waive any
right to judicial process. The U.S. Arbitration Act and JAMS/EndDispute rules
will govern the arbitration process. Absent fraudulent concealment, neither
party may raise a claim more than 3 years after it arises or any shorter
period provided by applicable statutes of limitations. California law,
without regard to its conflict-of-law provisions, will govern this Agreement.
11 REPORTS AND AUDIT
11.1 Participant Reports to Netscape. In addition to the reporting
requirement set forth in Exhibit B, Participant shall provide reports to
Netscape as follows:
(a) Weekly Log Reports. On a weekly basis, Participant shall provide
Netscape with the daily user access logs for the Service in common log
format, including information on the total number of hits and page
impressions for Service Page and such other tracking information as the
parties shall mutually agree. The information contained in the report shall
be Netscape's and Participant's Confidential Information, provided, however
that (i) Netscape shall have the right to use the information contained in
such reports in Netscape's private and public reporting of access to the
Service and Netscape's Web Site; and (ii) Participant shall have the right to
use aggregated information about end users for marketing and financial
reporting purposes. All end user related data shall be collected in
accordance with Exhibit C.
(b) Monthly Reports. Within 15 days of the end of each month during
the term, Participant shall provide Netscape with (a) subscription
registration reports, (b) reports of results from advertising and sponsorship
sales and inventory and (c) reports of Gross revenue and Net Revenue in
accordance with Exhibit B.
(c) Search Field. A field providing search functionality will be included on
pages within the Service as the parties shall mutually determine. The search
executed from
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the search field will initially only cover content within the Service itself.
If an end user is given the option of expanding the scope of the search to
encompass the World Wide Web, the search engines driving such query shall be
one or more of Netscape's Local Language Net Search Program search engines,
as Netscape shall determine. Netscape reserves the right to review the
financial effect of the search field in the Service as such search
functionality may impact Netscape's own Net Search Program and require that
the Internet-wide search functionality in the Service be minimized or
deleted. Within 15 days of the end of each month during the Term, Participant
shall provide Netscape with monthly reports detailing the following
information for each day during the month covered in the report: (i) the
number of times the Service's internal search field as well as each of
Netscape's Local Language Search Program search engines were selected and
"clicked" on by end users; and (ii) any information about users and user
client software Participant may collect whether such information is
user-given or technology-provided. Netscape shall determine the format and
the date of submission for this monthly report. The information contained in
each report shall be Netscape's and Participant's Confidential Information;
however, Netscape reserves the right to provide the information contained in
the report to the Net Search Program companies in a format mutually agreed
upon by the parties.
(d) Audit Rights. Either party shall have the right, upon no less than 30
days prior written notice, to cause an independent Certified Public
Accountant to inspect and audit, during the other party's normal business
hours, all relevant records upon which such reports are based, including,
without limitation, the access logs. The costs of such audit shall be paid by
the auditing party, provided, however, that if such inspection shall reveal
an underpayment in excess of 5 percent of monies due, the party being audited
shall pay for the audit. These audit rights as described herein shall
continue for 2 years after the expiration or termination of this Agreement.
No such audit may occur more than once a year during the Term.
11.2 Netscape Reports to Participant. Netscape shall provide Participant
with the reports described in Exhibit B, and if Netscape elects to exercise
the option to maintain the Services Index Pages on the Netscape servers
pursuant to Section 2.2 of the Netcenter Special Terms, then Netscape shall
provide Participants the reports as set forth in subsection (a) below:
(a) Netscape shall provide Participant with reports on the traffic to
the Service, including information describing the number of redirects of
traffic to the Service from Netscape's Web Site and such other tracking
information as the parties shall mutually agree. On a monthly basis, Netscape
shall provide Participant with a report to verify the traffic to the Service
Index Page.
12 GENERAL
12.1 Notices. All notices required or permitted hereunder shall be given in
writing addressed to the respective parties as first set forth above on the
Cover Sheet and shall either be (i) personally delivered or (ii) transmitted
by internationally-recognized private express courier, and shall be deemed to
have been given on the date of receipt if delivered personally, or the day on
which such notice is delivered to the recipient as evidenced by the delivery
records of such courier, but in no case later than 5 days after
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deposit with such courier. Either party may change its address for purposes
hereof by written notice to the other in accordance with the provisions of
this subsection.
12.2 Confidentiality. All disclosures of proprietary and/or confidential
information in connection with this Agreement and the contents of this
Agreement shall be governed by the terms of the Mutual Confidential
Disclosure Agreement either entered into previously by the parties or entered
into concurrently with this Agreement, a copy of which is attached hereto as
Exhibit D. The information contained in the Usage Reports provided by each
party hereunder shall be deemed the Confidential Information of the
disclosing party. Notwithstanding the foregoing, Netscape may, in its sole
discretion, make publicly available client software market share information
contained in the Usage Reports submitted by Participant as such information
may be aggregated with data provided by other content providers.
12.3 Excuse. Either party shall be excused from any delay or failure in
performance hereunder, except the payment of monies by Participant to
Netscape, caused by reason of any occurrence or contingency beyond its
reasonable control, including but not limited to, acts of nature. The
obligations and rights of the party so excused shall be extended on a
day-to-day basis for the period of time equal to that of the underlying cause
of the delay.
12.4 Assignment. Participant may not assign this Agreement or any part
hereof without the prior written consent of Netscape, such consent not to be
unreasonably withheld. Any attempt by Participant to assign (by operation of
law or otherwise) this Agreement or any part thereof without such consent
shall be null and void.
12.5 Publicity. Neither party shall make any statement to the press or
issue any press release about the subject matter of this Agreement without
the prior written consent of the other party, which consent shall not be
unreasonably withheld.
12.6 Waiver. The waiver, express or implied, by either party of any breach
of this Agreement by the other party will not waive any subsequent breach by
such party of the same or a different kind.
12.7 Amendment. This Agreement may be amended only by a writing signed by
duly authorized representatives of Netscape and Participant.
12.8 Entire Agreement. This Agreement constitutes the entire agreement
between the parties concerning the subject matter hereof and supersedes all
prior and contemporaneous agreements and communications, whether oral or
written, between the parties relating to the subject matter hereof, and all
past courses of dealing or industry custom. The terms and conditions hereof
shall prevail exclusively over any written instrument submitted by
Participant, including any report, invoice or purchase order, and Participant
hereby disclaims any terms therein, except for terms required under Section
11.1 of the General Terms.
12.9 Independent Contractors. The parties acknowledge and agree that they
are dealing with each other hereunder as independent contractors. Nothing
contained in this Agreement shall be interpreted as constituting either party
the joint venturer, employee or partner of the other party or as conferring
upon either party the power of authority to bind the other party in any
transaction with third parties.
12.10 Survival. The following provisions of shall survive the expiration or
termination of this Agreement for any reason: Section 3 of the Netcenter
Special Terms ("Payment") and the following provisions of the Netcenter
General Terms: Section 1 ("Proprietary
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Rights"), Section 4 ("Harmful Content"), Section 5 ("Warranties"), Section 6
("Indemnity"), Section 7 ("Limitation of Liability"), Section 8.3 ("Rights
Upon Termination or Expiration"), Section 10 ("Dispute Resolution"), Section
11.1(d) ("Audit Rights") and Section 12 ("General), Section VII of Exhibit C
("Use of Personal Data"). In addition, provisions of this Agreement which, by
their nature, are intended to remain in effect beyond the termination or
expiration of this Agreement, shall survive the termination or expiration of
this Agreement.
12.11 Severability. In the event any provision of this Agreement is held by
a court or other tribunal of competent jurisdiction to be unenforceable, such
provision shall be reformed only to the extent necessary to make it
enforceable, and the other provisions of this Agreement will remain in full
force and effect.
12.12 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. For purposes hereof, a
facsimile copy of this Agreement, including the signature pages hereto, shall
be deemed to be an original.
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EXHIBIT A
I. THE SERVICE
A. The Service will be positioned as the "IT Knowledge Center". The
Service will be a channel within Netcenter's Computing and Internet Channel.
Netscape and Participant will develop a co-branded portion of the Service to
make use of the following services from Participant:
- Radarscope
- Ask James
- Compariscope
- Intranet Library
- SubscribNews
B. The URL for Co-branding specifications is
http://proto.mcom.com:888/nc20/html/
II. THE ADVERTISING PACKAGE
PLACEMENT OF ADVERTISEMENT
Netscape shall provide the following advertising package to Participant:
IMPRESSIONS
Banner Advertising Commitment to Sponsorship over [*] months
- Home Page [*]
- Business [*]
- Small Business [*]
- Computing & Internet [*]
- Netscape Channel [*]
- Dev Edge [*]
- Professional Conn [*]
Premier Sponsorship Commitment over [*] months
- Business [*]
- Small Business [*]
- Computing & Internet [*]
- Netscape Channel [*]
- Professional Conn [*]
Text Link Sponsorship Commitment over [*] months
- Business [*]
- Small Business [*]
- Computing & Internet [*]
- Netscape Channel [*]
- Dev Edge [*]
- Professional Conn [*]
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Spotlight Sponsorship Commitment over [*] months
- Business [*]
- Small Business [*]
- Computing & Internet [*]
- Netscape Channel [*]
- Dev Edge [*]
- Professional Conn [*]
Button Sponsorship Commitment over [*] months
- Business [*]
- Small Business [*]
- Computing & Internet [*]
- Netscape Channel [*]
- Dev Edge [*]
- Professional Conn [*]
SPECIFICATIONS ON EACH SPONSORSHIP POSITIONS
Banner Advertising (except for banner ads on the Netcenter home page)
- 468 x 60 (except for banner ads on the Netcenter Home
Page, which will be 230 x 33, 2k with no animation
- 10 k
- 4 sec animation
Banner Advertising on the Netcenter Home Page
- 230 x 33
- 2 k
- no animation
Premier Position
- 140 x 90
- 4 k
- sec animation
- 100 characters
What's New / What's Cool Premier
- 295 x 37
- 4 k
- 4 sec.
- 100 characters
Small Business Source Premier
- 51 x 145
- 4 k
- 4 sec animation
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Text Position
- 29 characters
Button Positions
- 88 x 31
- 1 k
- no animation
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EXHIBIT B
PAYMENT
1. Payments. All payments hereunder shall be made in US Dollars.
(a) Payment to Netscape. Participant will pay Netscape a participation
fee on or before September 30, 1998 as follows: (i) [*] for the
services set forth in Section I of Exhibit A; and (ii) [*] for the
advertising package set forth in Section II of Exhibit A. In addition,
pursuant to the schedule set forth in Section 2 below, Participant shall pay
Netscape [*] of Net Revenues derived from the Service, including, without
limitation, revenues from Compariscope.
(b) Payment to Participant. Netscape will pay Participant [*] of Net
Revenues from advertisements placed in accordance with Section 4.1 of the
Netcenter Special Terms.
2. Reporting; Timing of Payment. Within 30 days after the end of each
Netscape fiscal quarter during the Term of this Agreement, each party shall
deliver to the other party a report describing in detail the calculation of
gross revenue and Net Revenue for such fiscal quarter, and shall pay to the
other party that portion of such Net Revenue earned by it during the
preceding Netscape fiscal quarter, pursuant to Section 1 above.
3. Post-Term Payments of Bad Debt. After termination or expiration of
this Agreement, Participant shall pay to Netscape all amounts received by
Participant previously charged by Participant as "bad debt" ("Bad Debt
Payments") and deducted from gross revenue under Section 1 above to the
extent such deducted amounts have not already been paid to Netscape. Such
payment shall be made to Netscape by Participant within 30 days of the
receipt of such Bad Debt Payments by Participant. This Section shall survive
expiration or termination of this Agreement for 18 months.
4. Taxes and Interest. Any portion of any payment due which has not been
paid during the applicable time set forth herein shall bear interest at the
lesser of (i) 1% per month or (ii) the maximum rate allowed by law. All
payments due hereunder are exclusive of any applicable taxes. The collecting
party shall be responsible for all applicable national, state and local
taxes, value added or sales taxes, exchange, interest, banking, collection
and other charges and levies and assessments pertaining to payments other
than U.S. taxes based on Netscape's net income. If the collecting party is
required by law to make any deduction or to withhold from any sum payable to
the other party hereunder, the collecting party shall effect such deduction
or withholding, remit such amounts to the appropriate taxing authorities and
promptly furnish the other party with tax receipts evidencing the payments of
such amounts. For every dollar for revenue sharing under this Agreement,
"collecting party" means the first of Netscape or Participant to collect such
dollar. This Exhibit shall survive termination or expiration of this
Agreement.
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EXHIBIT C
USER REGISTRATION AND PRIVACY
I. DEFINITION
"Netcenter Registration" means the portion of the registration that is
maintained, hosted, and controlled by Netscape and applies to multiple
services across Netcenter. Netcenter Registration includes the assignment of
a user name, password, and the collection of core Netcenter user profile data
including but not limited to: First name, Last name, Address, City, State,
Country, Zip Code, Email Address, Age and Gender. Netscape Registration
means any registration that is maintained, hosted, and controlled by Netscape
and applies to Netscape's Web Site. Netscape Registration includes the
assignment of a user name, password, and the collection of core user profile
data including but not limited to: First name, Last name, Address, City,
State, Country, Zip Code, E-mail Address, Age and Gender.
II. REGISTRATION PROCESS
To the extent that Participant desires to offer a registration process,
Participant will be responsible for the implementation of the Service
Registration and the integration of the Service with Netcenter Registration.
The functionality, design, and, integration of the Service Registration
process and Netcenter Registration will be subject to Netscape's approval,
terms and conditions as defined this Agreement. Such specifications, terms
and conditions may be revised by Netscape from time to time upon 30 days
prior notice to Participant. Participant will implement changes within a 30
day period unless the parties mutually agreed otherwise. The point of entry
to the registration area from the Service shall be hosted and controlled by
Netscape unless otherwise determined by Netscape.
III. REGISTRATION FEATURES
The Service Registration area shall be co-branded and have a look and feel
which is consistent with the implementation of the registration process in
other sections of Netcenter. Participant shall not launch the Service
Registration until Netscape has notified Participant in writing that Netscape
has accepted Participant's implementation. Participant shall manage site
access using Netcenter site access models, as such site access models shall
be determined by Netscape from time to time upon notice to Participant.
Netscape shall transfer to Participant all data necessary to provide site
access to registered Netcenter users. Participant will make commercially
reasonable efforts to implement such changes within a 30 day period.
IV. DATA COLLECTED BY PARTICIPANT DURING SERVICE REGISTRATION PROCESS
Netscape will determine the data to be collected in the Service Registration
process. Netscape will approve Participant's recommendations and technical
restrictions in such Service Registration process, such approval not to be
unreasonably withheld. Netscape reserves the right to change such data
requirements from time to time. Participant will make best efforts to
implement these changes within 5 working days unless mutually
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agreed to otherwise. If Netscape implements a Netcenter loyalty program,
Participant shall also offer end user loyalty selections as part of the
Service Registration process at Netscape's request. Participant shall deliver
to Netscape data collected pursuant to such loyalty programs in a format and
timeframe as mutually agreed to by the parties.
V. DATA TRANSFER
Participant shall use commercially reasonable efforts to transfer all end
user data collected during the Service Registration process and data
collected by any other means relating to the Service, to Netscape in real
time data transfer, excluding individual credit and purchase information
(such as credit card number, purchase order numbers, corporate accounting
codes) and data as otherwise agreed to by the parties. Netscape reserves the
right to request any information collected during the Service Registration to
be supplied in a Netscape specified format and timeframe. If Participant
collects information about users accessing the Service in addition to
information supplied by the users during the registration process, such
information shall be made available to Netscape in a format and timeframe as
the parties shall mutually agree.
VI. NETCENTER CONSIDERATIONS
All third party programs participating in the Service within Netcenter shall
register users with Netcenter when the user completes an order, if such user
is not already registered with Netcenter. If a user is a registered Netcenter
member, Participant shall pre-populate relevant customer data fields in the
customer order form based on information in the Netcenter database or
seamlessly pass this information to the third party provider.
VII. USE OF PERSONAL DATA
Netscape and Participant shall jointly own all end user data and information
obtained in connection with registering for the Service. Neither party shall
disclose to any third party such end user data and information; provided,
however, either party may use and disclose end user data and information for
purposes relating to its respective web sites. It is a material obligation of
this Agreement that Participant shall adhere to Netscape's then-current privacy
policy, set forth at http://home.netscape.com/legal_notices/privacy.html or
at such other URL as Netscape may designate from time to time. The parties
will cooperate to create guidelines for Participant's disclosure of aggregate
statistical information concerning Service's demographics and use to
advertisers. Except as otherwise provided in this Agreement, neither party
shall resell or disclose information collected about the users during
registration or from any other means ("End User Information") to any third
party; provided however, that either party may sell or disclose such End User
Information to third parties upon prior notice to and consent from such end
users. If Participant or third party in contract with Participant is not
complying with the terms of use of personal data published on Netscape's Web
Site at http://home.netscape.com/netcenter/index.html, or such other URL as
Netscape may determine from time to time, Netscape may terminate this
Agreement upon written notice to Participant if Participant is not in
compliance within 5 days of written notice from Netscape. After a given end
user has requested to be "unsubscribed" from the Service, Participant will
terminate all Services unless otherwise specified by the user and discontinue
any use of the End User Information associated with the given user.
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EXHIBIT D
MUTUAL CONFIDENTIAL DISCLOSURE AGREEMENT
WHEREAS, Netscape Communications Corporation ("Netscape") has developed unique
and proprietary computer programs; and WHEREAS, ______________________________.
("Company") and Netscape are entering into a business relationship.
NOW, THEREFORE:
Each party (the "Receiving Party") understands that the other party (the
"Disclosing Party") has disclosed or may disclose information (including,
without limitation, computer programs, code, algorithms, names and expertise
of employees and consultants, know-how, formulas, processes, ideas,
inventions (whether patentable or not), schematics and other technical,
business, financial and product development plans, forecasts, strategies and
information), which to the extent previously, presently, or subsequently
disclosed to the Receiving Party is hereinafter referred to as "Proprietary
Information" of the Disclosing Party whether disclosed orally, in writing, or
otherwise. All Proprietary Information disclosed in tangible form by the
Disclosing Party shall be marked "confidential" or "proprietary", and all
Proprietary Information disclosed orally or otherwise in intangible form by
the Disclosing Party shall be designated as confidential or proprietary at
the time of disclosure and shall be reduced to writing and delivered to the
Receiving Party within thirty (30) days following the date of disclosure.
In consideration of the parties' discussions and any access the Receiving
Party may have to Proprietary Information of the Disclosing Party, the
Receiving Party hereby agrees as follows:
1. The Receiving Party agrees (i) to hold the Disclosing Party's
Proprietary Information in confidence and to take all reasonably necessary
precautions to protect such Proprietary Information (including, without
limitation, all precautions the Receiving Party employs with respect to its
own confidential materials), (ii) not to divulge any such Proprietary
Information or any information derived therefrom to any third person, (iii)
not to make any use whatsoever at any time of such Proprietary Information
except as provided in the Net Search and Net Directory Program (Distinguished
Provider) Agreement ("Distinguished Agreement") between Netscape and Company
dated as of _______________ to which this Agreement is attached as an
Exhibit, (iv) not to remove or export any such Proprietary Information from
the country of the Receiving Party, and (v) not to copy or reverse engineer,
reverse compile or attempt to derive the composition or underlying
information of any such Proprietary Information. The Receiving Party shall
limit the use of and access to the Disclosing Party's Proprietary Information
to those of the Receiving Party's employees who need to know such Proprietary
Information for the purpose of such internal evaluation and shall cause such
employees to comply with the obligations set forth herein. The Receiving
Party shall treat the Proprietary Information with at least the same degree
of care and protection as it would use with respect to its own proprietary
information. The foregoing obligations shall survive for a period of three
(3) years from the date of disclosure of the Proprietary Information. Without
granting any right or license, the Disclosing Party agrees that the foregoing
shall not apply with respect to information that (i) is in the public domain
and is available at the time of disclosure or which thereafter enters the
public domain and is available, through no improper action or inaction by the
Receiving Party or any affiliate, agent or employee, or (ii) was in the
Receiving Party's possession or known by it prior to receipt from the
Disclosing Party, or (iii) was rightfully disclosed to the Receiving Party by
another person without restriction, or (iv) is independently developed by the
Receiving Party without access to such Proprietary Information, or (v) is
required to be disclosed pursuant to any statutory or regulatory authority,
provided the Disclosing Party is given prompt notice of such requirement and
the scope of such disclosure is limited to the extent possible, or is
required to be disclosed by a court order, provided the Disclosing Party is
given prompt notice of such order and provided the opportunity to contest it.
2. Immediately upon a request by the Disclosing Party at any
time, the Receiving Party will turn over to the Disclosing Party all
Proprietary Information of the Disclosing Party and all documents or media
containing any such Proprietary Information
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<PAGE>
and any and all copies or extracts thereof. The Receiving Party understands
that nothing herein requires the disclosure of any Proprietary Information of
the Disclosing Party, which shall be disclosed, if at all, as required under
the Distinguished Agreement or at the option of the Disclosing Party.
3. Except to the extent required by law, as set forth in this
Agreement or as otherwise mutually agreed to by the parties, neither party
shall disclose the existence or subject matter of the negotiations or
business relationship contemplated by this Agreement, or the content and
terms of the Distinguished Agreement.
4. The Receiving Party acknowledges and agrees that due to the
unique nature of the Disclosing Party's Proprietary Information, there can be
no adequate remedy at law for any breach of its obligations hereunder, that
any such breach may allow the Receiving Party or third parties to unfairly
compete with the Disclosing Party resulting in irreparable harm to the
Disclosing Party, and therefore, that upon any such breach or any threat
thereof, the Disclosing Party shall be entitled to seek appropriate equitable
relief in addition to whatever remedies it might have at law. The Receiving
Party will notify the Disclosing Party in writing immediately upon the
occurrence of any such unauthorized release or other breach. In the event
that any of the provisions of this Agreement shall be held by a court or
other tribunal of competent jurisdiction to be unenforceable, the remaining
portions hereof shall remain in full force and effect.
5. Neither party acquires any intellectual property rights under
this Agreement or any disclosure hereunder, except the limited right to use
such Proprietary Information in accordance with this Agreement. No warranties
of any kind are given with respect to the Proprietary Information disclosed
under this Agreement or any use thereof, except as may be otherwise agreed to
in writing.
6. This Agreement together with the Distinguished Agreement
supersede all prior discussions and writings with respect to the subject
matter hereof and thereof, and constitute the entire agreement between the
parties with respect to the subject matter hereof and thereof. No waiver or
modification of this Agreement will be binding upon either party unless made
in writing and signed by a duly authorized representative of such party and
no failure or delay in enforcing any right will be deemed a waiver.
COMPANY: NETSCAPE:
NETSCAPE COMMUNICATIONS
CORPORATION
By: /s/ Cindy Mascheroni By: /s/ Mike Homer
Print Name: Cindy Mascheroni Print Name: Michael J. Homer
Title: VP Business Development Title: EVP of Netcenter
Date: September 3, 1998 Date: 9/3/1998
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CONFIDENTIAL TREATMENT REQUESTED
[*] Denotes information for which confidential treatment has been requested
pursuant to a confidential treatment request filed with the Securities and
Exchange Commission. Confidential portions omitted have been filed separately
with the Commission.
Exhibit 10.14
[NETSCAPE LOGO]
AMENDED AND RESTATED
ELECTRONIC DISTRIBUTION LICENSE AGREEMENT
No. 003987
This Amended and Restated Electronic Distribution License Agreement (this
"Agreement") is entered into by and between Intraware, Inc., a Delaware
corporation ("Intraware"), with principal offices at 25 Orinda Way, Orinda,
CA 94563 and Netscape Communications Corporation, a Delaware corporation
("Netscape"), effective as of the date of execution by Netscape (the
"Effective Date").
WHEREAS, Netscape and Intraware entered into an Electronic Distribution
License Agreement effective March 6, 1997 (as amended to date, the
"Agreement"), the initial term of which expired May 5, 1998, but was extended
by mutual tacit agreement of the parties.
WHEREAS, Netscape and Intraware desire to amend, restate and supersede the
Agreement and to update certain business terms therein as of the Effective
Date.
WHEREAS, Intraware markets and distributes computer software products.
WHEREAS, Netscape has proprietary or re-marketing rights to certain computer
software products.
WHEREAS, Netscape wishes to grant to Intraware and Intraware desires to
obtain certain license rights to such computer software products more
particularly described below in accordance with the terms and conditions of
this Agreement.
NOW THEREFORE, in consideration of the mutual covenants contained herein, the
parties agree to the following terms and conditions, which set forth the
rights, duties, and obligations of the parties.
1. Definitions. For purposes of this Agreement, the following terms shall
have the following meanings:
1.1 "Derivative Work(s)" means a revision, modification, translation,
abridgment, condensation or expansion of a Netscape Product or
Documentation or any form in which a Netscape Product or Documentation
may be recast, transformed, or adapted, which, if prepared without the
consent of Netscape, would be a copyright infringement.
1.2 "Documentation" means those software user manuals, reference manuals and
installation guides, or portions thereof, which are distributed in
conjunction with the Netscape Products set forth in Exhibit A.
1.3 "End User" means any third party licensed by Intraware to use, but not
to further distribute, the Netscape Products except that if such third
party is a corporation or other entity, then, for fee accrual purposes
only under Section 4.1 "End User" means each individual within such
corporation or entity licensed by Intraware pursuant to this Agreement
to use, but not to further distribute, the Netscape Product.
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1.4. "Exhibit(s)" means the Exhibits to this Agreement which are attached
hereto and incorporated herein:
1.4.1 Exhibit A (Description of Netscape Products and Services) which
sets forth a description of each Netscape Product licensed hereunder and
Services.
1.4.2 Exhibit B (Pricing, Payment Schedules and Deliverables) which sets
forth pricing for Intraware, payment schedules, and specific items to be
delivered to Intraware.
1.4.3 Exhibit C (Netscape's End User License Agreements) which sets
forth Netscape's terms and conditions of licensing applicable to an end
user customer as of the Effective Date.
1.4.4 Exhibit D (Technical Support) which sets forth Netscape's and
Intraware's support obligations.
1.4.5 Exhibit E (Intraware Product(s)) which sets forth a description of
Intraware Products which will be bundled with the Netscape Products.
1.4.6 Exhibit F (Point of Sale Reports) which sets forth the form
pursuant to which Intraware shall provide monthly reports.
1.4.7 Exhibit G (Professional Services Agreement), which sets forth the
terms pursuant to which the Services are offered hereunder.
1.5 "Intraware Product(s)" means Intraware's computer software products
developed and marketed by Intraware, as described in Exhibit E, with
which the Netscape Products are bundled for distribution.
1.6 "Major and Minor Updates" mean updates, if any, to the Netscape
Products. Major Updates involve additions of substantial functionality
while Minor Updates do not. Major Updates are designated by a change in
the number to the left of the decimal point of the number appearing
after the product name while Minor Updates are designated by a change in
such number to the right of the decimal point. Netscape is the sole
determiner of the availability and designation of an update as a Major
or Minor Update. Major Updates exclude software releases which are
reasonably designated by Netscape as new products. Where used herein
"Updates" shall mean Major Updates and Minor Updates interchangeably.
1.7 "Netscape Product(s)" means the executable version (but not the source
code version) of Netscape's proprietary software products listed or
described in Exhibit A and any Updates thereto as may be provided to
Intraware pursuant to this Agreement.
1.8 "Order(s)" shall have the meaning set forth in Section 15. 1 hereof.
1.9 "Prepaid License Fee" shall have the meaning set forth in Section 4.1.1
hereof.
1.10 "Program Errors" means one or more reproducible deviations in the
Netscape Products from the applicable specifications shown in the
Documentation.
1.11 "Services" shall have the meaning set forth in Section 15.1 hereof.
1.12 "Territory" means the geographic area set forth in Exhibit B.
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2. GRANT OF LICENSES AND RIGHTS
2.1. Licenses
2.1.1 Reproduction, Internal Use and Distribution License. Subject to
the terms and conditions of this Agreement, Netscape hereby grants
and Intraware hereby accepts, a nonexclusive and nontransferable
right and license in the Territory to (a) reproduce, without change,
the Netscape Products (in executable form only); (b) use the Netscape
Products for Intraware internal business purposes in accordance with
the license grant provisions of the end user license agreement that
accompanies the Netscape Products; and (c) distribute by sublicense
tangible copies and/or secure electronic copies of the Netscape
Product to End Users; and (d) authorize End Users who have ordered a
"10 pack" or "50 pack" of the Netscape Client Product and purchased a
right to copy license, the right to reproduce, without change, the
number of copies of the Netscape Client Product (but not the
Documentation), set forth in Intraware's invoice therefor. Netscape's
license to distribute NAS products is subject to NAS guidelines and
the additional terms and conditions set forth in the Special Terms
and Conditions provided with this Agreement.
2.1.2 Distribution Restrictions. Intraware shall only electronically
distribute the Netscape Products: (a) from one FTP (file transfer
protocol) HTTP and /or SHTTP site operated by Intraware and located in
the Territory, or such other protocol as the parties shall mutually
agree in writing; (b) in exportable versions, or in non-exportable
versions provided Intraware complies with applicable export and import
laws and otherwise complies with the conditions of Section 2.2 and
Exhibit A hereto ; and (c) after the End User has indicated its
acceptance of the Netscape end user license agreement or the End User
License Agreement (defined in Section 3.3) for such Netscape Product;
and (e) to the End User on a trial use basis provided the Netscape
Products are provided with the appropriate trial user End User License
Agreement provided by Netscape or consistent with such Netscape
agreement. Prior to any electronic distribution, Intraware shall: (x)
manufacture a secure, electronic version of the Netscape Product in a
digital wrapper or "envelope"; (y) implement appropriate mechanisms to
ensure that: (i) Intraware can accurately secure and account for the
number of electronic downloads; and (ii) electronic distribution occurs
only as expressly set forth herein and that such FTP, HTTP and /or,
SHTTP and/or other agreed upon site shall not permit any other person or
entity to download or otherwise electronically access any Netscape
Product except as expressly set forth herein; and (z) institute systems
to accrue payment hereunder for each copy of the Netscape Product prior
to, or contemporaneous with such distribution. Intraware represents and
warrants that said secure wrapper or "envelope" cannot be unlocked and
the Netscape Product installed until the End User has registered with,
and obtained an authorized password or key from Intraware. Intraware
shall not indirectly sell, indirectly sublicense or otherwise indirectly
distribute the Netscape Products. Intraware is expressly prohibited from
any marketing and/or distribution of Netscape Products outside of the
Territory or on a standalone basis. Except as expressly permitted in
this Section 2.1.2 or Section 2.1.6 below, Intraware shall have no right
to otherwise distribute the Netscape Products or any portion thereof.
2.1.3. Source Code Restrictions. Intraware agrees that, except and
only to the extent that Netscape makes source code for certain Client
Products publicly available on certain public license terms, not to copy
(except as expressly permitted by Section 2.1.1), modify, translate,
decompile, reverse engineer, disassemble, or otherwise determine or
attempt to determine source code from the Netscape Products or to create
any Derivative Works based upon the Netscape Products or Documentation,
and agrees not to permit or authorize anyone else to do so.
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2.1.4 Third Party License. If all or any part of the Netscape Products
or Updates delivered to Intraware has been licensed to Netscape by a
third party software supplier then, notwithstanding anything to the
contrary contained in this Agreement, Intraware is granted a sublicense
to the third party software subject to the same terms and conditions as
those contained in the agreement between Netscape and such third party
software supplier. In addition, Netscape reserves the right to
substitute any third party software in the Netscape Products so long as
the new third party software does not materially affect the
functionality of the Netscape Products. Netscape represents that the
current release of the Netscape Products contains no third party
software which would require Intraware to agree to any terms and
conditions in addition to those set forth in this Agreement.
2.1.5 Promotion of Products and Services. Intraware agrees to treat all
Netscape Products and Services at least as favorably as it treats any
other products distributed by Intraware that are competitive with any
Netscape Product or Service. Specifically, Intraware agrees that it will
not market or promote any Netscape Product and Service or any other
product in a manner that states or implies that the Netscape Product
or Service is inferior or secondary to the other product. For example,
Intraware will not market or promote any other product as "preferred,"
"premier," "primary" or the like as compared to any Netscape Product
or Service. Notwithstanding the foregoing, Netscape has no objection
to Intraware recommending other software products under its
"Compariscope" program.
2.1.6 Patches. In the event Netscape releases a patch to the Netscape
Product for general commercial distribution by permitting customers to
download such patch from Netscape's World-Wide Web home page on the
Internet, then Intraware shall have the right to distribute such patch
(but not the entire Netscape Product) electronically to its End Users.
2.1.7 [*]
2.1.8 Limited Territory License: Intraware may, on a case by case
basis as approved in advance in writing by Netscape, and as part of
its electronic distribution service to U.S. end users, permit
downloading to non-U.S. subsidiaries or to other non-U.S. business
sites in the European and Intercontinental territories, each as set
forth in Addendum 2.1.8 to Exhibit B. Intraware shall report to
Netscape any Netscape Products that are distributed outside the United
States using Internet-based reporting.
2.2 Export
Intraware shall comply fully with all then current applicable laws,
rules and regulations relating to the export of technical data,
including, but not limited to any regulations of the United States
Office of Export Administration and other applicable governmental
agencies and Intraware acknowledges that by virtue of certain security
technology embedded in the Netscape Products, that export of such
software may not be legal. Intraware shall conspicuously mark all
packaging containing the Netscape Products identified by Netscape as not
for export with a "Not For Export" notice. Netscape agrees to cooperate
in providing information requested by Intraware as necessary to obtain
any required licenses and approvals. None of the Netscape Products
or
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<PAGE>
underlying information or technology may be installed or otherwise
exported or reexported (i) into (or to a national or resident of) Cuba,
Iraq, Libya, Sudan, North Korea, Iran, Syria or any other country to
which the U.S. has embargoed goods; or (ii) to anyone on the U.S.
Treasury Department's list of Specially Designated Nationals or the U.S.
Commerce Department's Table of Denial Orders.
3. MARKETING, DISTRIBUTION AND TRAINING
3.1 Non-Exclusivity
3.1 Non-Exclusivity. Intraware understands that Netscape may enter
into arrangements similar to this Agreement with third parties.
3.2 Public Announcements, Promotional Materials and Cooperative Marketing
Funds
3.2.1 Public Announcements and Promotional Materials. Netscape and
Intraware shall cooperate with each other so that each party may issue
a press release concerning this Agreement, provided that each party must
approve such press release prior to its release. Netscape shall have
the right to use Intraware's name as a customer reference and the names
of the Netscape Services or Netscape Products licensed by Intraware to
third parties. Netscape shall cooperate with Intraware in its
development of the initial marketing and sales materials used to promote
the Netscape Services and distribution of the Netscape Products and
Services. Intraware agrees that all marketing and sales materials for
the Intraware Products under the license granted in Section 2.1.1 will
primarily promote the Intraware Products and not the fact that the
Netscape Product or Service is included.
3.2.2 Cooperative Marketing Funds. Cooperative marketing funds ("COOP")
shall accrue at the rate of [*] of license fees paid to Netscape. After
any applicable Prepaid License Fees have been fully depleted, COOP shall
accrue as Netscape receives license fees and point of sale reports from
Intraware. Intraware is limited to using the COOP for the sales,
promotion, advertising or marketing of Netscape Products or Services,
and only after Netscape has approved of such activities. All COOP
accruals will be credited to Intraware's COOP account which will be paid
to Intraware on an invoice basis. Any unused credit to Intraware's COOP
account upon expiration of the Initial Term or any earlier termination
of this Agreement shall be forfeited to Netscape.
3.3 Terms Relating to Distribution
3.3.1 General Restrictions on Distribution. Intraware agrees to comply
with all applicable laws, rules and regulations to preclude the
acquisition of unlimited rights to technical data, software and
documentation provided with the Netscape Product or Services to a
governmental agency, and ensure the inclusion of the appropriate "U.S.
Government End Users" notice required by the U.S. Government agencies or
other applicable agencies.
3.3.2 End User License Agreements. Intraware shall not sublicense or
otherwise distribute the Netscape Products or Documentation to End Users
except pursuant to a written sublicense agreement ("End User License
Agreement") that contains terms and conditions not inconsistent with and
no less restrictive than the applicable terms and conditions set forth
in Netscape's then-current standard end user license agreement for such
Netscape Products and Documentation. Copies of Netscape's End User
License Agreements as of the Effective Date are attached as Exhibit C.
Netscape's End User warranty is set forth in Netscape's then-current
standard end user license agreement. If Intraware does not use
Netscape's then current End
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User License Agreements, Intraware shall include a provision that
Netscape is an intended third party beneficiary of such license entitled
to audit and enforce such license.
3.3.3 Third Party Requirements. In the event that Netscape is required
by a third party software supplier to cease and to cause its licensees
to cease reproduction and distribution of a particular revision of the
Netscape Products, Intraware agrees to comply herewith provided Netscape
provides Intraware with thirty (30) days prior written notice and
further provided Netscape replaces such affected Netscape Product with a
functionally equivalent Netscape Product as soon as commercially
practicable.
3.3 Enforcement of Sublicense Agreements
Intraware shall use commercially reasonable efforts to enforce each End
User License Agreement, with at least the same degree of diligence used
in enforcing similar agreements governing others. Intraware shall use
commercially reasonable efforts to protect Netscape's copyright, and
Intraware shall notify Netscape of any breach of a material obligation
under an End User License Agreement affecting Netscape Products or
Documentation, and will cooperate with Netscape in any legal action to
prevent or stop unauthorized use, reproduction or distribution of
Netscape Products or Documentation.
3.5 Training
Netscape agrees to invite Intraware to attend training classes and other
product informational sessions on the Netscape Products that Netscape
makes generally available at no charge to its OEMs, system integrators
and resellers.
4. FEES AND PAYMENT
4.1 Prepaid License Fees
4.1.1 The parties agree during any Term that Intraware will pay to
Netscape the non-refundable prepaid fees ("Prepaid License Fee"), as
they may specify from time to time be amended by mutual agreement of the
parties. Upon exhaustion of the Prepaid License Fees, Intraware shall
pay to Netscape the license fee specified in Exhibit B for each license
granted by Intraware to End Users in connection with the distribution of
all or any portion of a Netscape Product or Update. Such Prepaid License
Fees shall be credited against the license fees accruing under this
Agreement during the applicable term in which the prepayment is made.
Licenses will accrue in the applicable corresponding quantity upon: (a)
the initial date of Intraware's internal use of a Netscape Product
(other than the number of "no charge" copies listed in Exhibit B); and
(b) distribution by Intraware of a copy of a Netscape Product to an End
User; and (c) authorization by Intraware for an End User to reproduce
the Netscape Client Product pursuant to a "10 pack" Use or "50 pack".
Intraware shall pay Netscape such license fees accrued during each
month, together with any maintenance fees, within thirty (30) days
following the end of such month and each such payment shall be
accompanied by a monthly report as described in Section 4.3 below.
[*]
4.1.2 Maintenance and Support Fees. Intraware shall pay to Netscape the
applicable fees, if any, set forth in Exhibit B, Section F, for the
level of maintenance and support services offered or chosen by
Intraware.
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4.2 Payment and Taxes
4.2.1 Payments. Within 10 days after receipt by Netscape of Intraware's
monthly sales report, Netscape will invoice Intraware for amounts
payable hereunder on a monthly basis as provided below. All invoiced
amounts shall be calculated in accordance with the prices set forth on
Attachment B, as then in effect, and all invoices shall reference the
number of Netscape's then applicable blanket purchase order. All
payments shall be made in United States dollars, at Netscape's option:
(a) at Netscape's address as indicated in this Agreement or at such
other address as Netscape may from time to time indicate by proper
notice hereunder; or (b) by wire transfer to a bank and account number
designated by Netscape. All invoices are due and payable within thirty
(30) days of Netscape's date of invoice. Interest shall be payable at
the rate of one percent (1%) per month or at the maximum rate permitted
by law, whichever is less, on all overdue and unpaid invoices until paid
in full.
4.2.2 Taxes. All prices are in U.S. Dollars and are exclusive of any
applicable taxes. Intraware shall pay all sales, use, value added or
other taxes of any nature, other than taxes on Netscape's net income,
including penalties and interest, and all government permit or license
fees assessed upon or with respect to any products sold or licensed to
Intraware and any services rendered to Intraware (except to the extent
Intraware provides Netscape with a valid tax exemption certificate). In
the event the Territory is amended to include countries outside the
United States and Canada, Intraware shall pay, indemnify and hold
Netscape harmless from all import duties, customs fees, levies or
imposts, and all sales, use, value added or other taxes of any
nature, other than taxes on Netscape's net income, including
penalties and interest, and all government permit or license fees
assessed upon or with respect to any products sold or licensed to
Intraware and any services rendered to Intraware (except to the
extent Intraware provides Netscape with a valid tax exemption
certificate). If any applicable law requires Intraware to withhold
amounts from any payments to Netscape hereunder, (i) Intraware shall
effect such withholding, remit such amounts to the appropriate taxing
authorities and promptly furnish Netscape with tax receipts
evidencing the payments of such amounts, and (ii) the sum payable by
Intraware upon which the deduction or withholding is based shall be
increased to the extent necessary to ensure that, after such
deduction or withholding, Netscape receives and retains, free from
liability for such deduction or withholding, a net amount equal to
the amount Netscape would have received and retained in the absence
of such required deduction or withholding.
4.3 Monthly Reports
Intraware shall maintain full, true and accurate records of End Users,
including the name and address of each End User, the specific product
and platforms distributed to each End User, and any further information
as Netscape may from time to time reasonably request. Intraware shall
report to Netscape within ten (10) business days after the end of each
month, on the form set forth in Exhibit F, the product, platform and
number of licenses granted for each of the Netscape Products distributed
during such prior month. Such monthly report shall also include the name
and "bill" to and "ship to" address of each End User, which will
indicate the state, province, country or postal code.
4.4 Audit of Records
Intraware shall keep and maintain, and shall obligate End Users that are
authorized to reproduce the Netscape Client Product to keep and
maintain, full, true, and accurate records
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containing all data reasonably required for verification of amounts to
be paid, and the quantity of Netscape Products distributed. Intraware
shall also keep and maintain a central End User license agreement
database where all End User activity relating to a particular instance
of license rights is recorded and managed centrally. Netscape shall have
the right, during normal business hours upon at least five (5) business
days prior notice, to audit and analyze the relevant records of
Intraware and such End Users to verify compliance with the provisions of
this Agreement. Audits shall occur no more frequently than twice in any
twelve (12) month period unless the results of the last two (2) audits
reveal that Intraware has underpaid Netscape by more than five percent
(5%) of the amount actually due in any month, in which event audits may
be conducted on a monthly or quarterly basis until the results of two
(2) consecutive audits disclose that Intraware has paid Netscape the
correct amounts. The audit shall be conducted at Netscape's expense
unless there is inadequate record keeping or the results of such audit
establish that inaccuracies in the monthly reports have resulted in
underpayment to Netscape of more than five percent (5%) of the amount
actually due in any month, in which case Intraware shall (i) bear the
expenses of the audit and (ii) promptly pay to Netscape the amount of
any underpayment determined by any such audit.
4.5 Intercontinental Payment and Reports.
For each Netscape Product sold in the Intercontinental Territory under
Section 2.1.8, payments made and reports generated under Sections 4.1.1,
4.1.2, 4.2 and 4.3 of this Article 4, or otherwise under this Agreement,
shall be executed pursuant to separate invoices, billing numbers and
reports, and otherwise as appropriate to be separate and distinct from
payments made or reports generated for Netscape Products sold within
North America.
5. DELIVERABLES
Netscape shall provide Intraware with the deliverables indicated in
Exhibit B ("Deliverables"). All deliveries under this Agreement shall
be F.O.B. Netscape.
6. TRADEMARKS AND TRADE NAMES/LICENSE TO USE
Whenever Intraware makes reference to the Netscape Products or
Services or the functionality of the Netscape Products provided within
the Intraware Product, Intraware shall during the Initial Term and any
Subsequent Term use, and is hereby granted a non-transferable,
non-exclusive and restricted license (with no right to sublicense),
"Netscape Navigator Included," "Netscape Communicator Included,"
"Powered by [name of Netscape product]" and those Netscape trademarks,
trade names or service names relating to the applicable Netscape
Products or Services in any advertising, marketing, technical or other
materials related to such Netscape Products or Services which are
distributed by Intraware in connection with this Agreement. Such use
shall be in accordance with Netscape's then current trademark
guidelines to be provided and updated by Netscape from time to time.
Intraware need not use Netscape's trademarks and trade names in any
country in which their connotation is offensive, and will consult with
Netscape as to the foreign translation of Netscape's trademarks and
trade names so that Netscape can help ensure uniformity with their use
by Netscape or third parties. Intraware shall clearly indicate
Netscape's ownership of Netscape's trademarks or trade names. All such
usage shall inure to Netscape's benefit. Intraware agrees not to
register any Netscape trademarks or trade names without Netscape's
express prior written consent. Upon Netscape's request from time to
time Intraware agrees to provide Netscape with copies of goods bearing
Netscape's trademarks and trade names so that Netscape can verify that
the quality of Intraware's use of such trademarks is comparable to
that of Netscape's use thereof. Intraware shall suspend use of
Netscape trademarks and trade names if such quality is reasonably
deemed
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inferior by Netscape until Intraware has taken such steps as Netscape
may reasonably require to solve the quality deficiencies.
7. PROPRIETARY RIGHTS
7.1 Proprietary Rights
Title to and ownership of all copies of the Netscape Products and
Documentation whether in machine-readable or printed form, and
including, without limitation, Derivative Works, compilations, or
collective works thereof and all related technical know-how and all
rights therein (including without limitation rights in patents,
copyrights, and trade secrets applicable thereto), are and shall remain
the exclusive property of Netscape or its suppliers. Intraware shall not
take any action to jeopardize, limit or interfere in any manner with
Netscape's ownership of and rights with respect to the Netscape Products
and Documentation. Intraware shall have only those rights in or to the
Netscape Products and Documentation granted to it pursuant to this
Agreement.
7.2 Proprietary Notices
7.2.1 No Alteration of Notices. Intraware and its employees and agents
shall not remove or alter any trademark, trade name, copyright, license
agreement or other proprietary notices, legends, symbols, or labels
appearing on or in copies of the Netscape Products and Documentation
delivered to Intraware by Netscape and shall use the same notices,
legends, symbols, or labels in and on copies of Netscape Products and
Documentation made pursuant to Section 2.1 as are contained in and on
such Netscape Products and Documentation.
7.2.2 Notice. Each portion of the Netscape Products and Documentation
reproduced by Intraware shall include the intellectual property notice
or notices appearing in or on the corresponding portion of such
materials as delivered by Netscape hereunder.
8. CONFIDENTIAL INFORMATION AND DISCLOSURE
8.1 Confidential Information
Each party agrees to maintain all Confidential Information in
confidence to the same extent that it protects its own similar
Confidential Information and to use such Confidential Information only
as permitted under this Agreement. For purposes of this Agreement
"Confidential Information" shall mean information including, without
limitation, computer programs, code, algorithms, names and expertise
of employees and consultants, know-how, formulas, processes, ideas,
inventions (whether patentable or not), schematics and other
technical, business, financial and product development plans,
forecasts, strategies and information marked "Confidential" or if
disclosed verbally identified as confidential and reduced to writing
within thirty (30) days of such disclosure. Each party agrees to take
all reasonable precautions to prevent any unauthorized disclosure or
use of Confidential Information including, without limitations
disclosing Confidential Information only to its employees (a) with a
need to know to further permitted uses of such information and (b) who
are parties to appropriate agreements sufficient to comply with
Section 8, and (c) who are informed of the nondisclosure/ non-use
obligations imposed by Section 8 and both parties shall take
appropriate steps to implement and enforce such non-disclosure/non-use
obligations. The foregoing restrictions on disclosure and use shall
survive for three (3) years following termination of this Agreement
but shall not apply with respect to any Confidential Information which
(i) was or becomes publicly known through no fault of the receiving
party; (ii) was rightfully known or becomes rightfully known to the
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receiving party without confidential or proprietary restriction from a
source other than the disclosing party; (iii) is independently developed
by the receiving party without the participation of individuals who have
had access to the Confidential Information; (iv) is approved by the
disclosing party for disclosure without restriction in a written
document which is signed by a duly authorized officer of such disclosing
party; or (v) the receiving party is legally compelled to disclose;
provided, however, that prior to any such compelled disclosure, the
receiving party will (x) assert the privileged and confidential nature
of the Confidential Information against the third party seeking
disclosure and (y) cooperate fully with the disclosing party in
protecting against any such disclosure and/or obtaining a protective
order narrowing the scope of such disclosure and/or use of the
Confidential Information. In the event that such protection against
disclosure is not obtained, the receiving party will be entitled to
disclose the Confidential Information, but only as and to the extent
necessary to legally comply with such compelled disclosure.
8.2 Confidentiality of Agreement
Unless required by law, and except to assert its rights hereunder or for
disclosures to its own employees on a "need to know" basis, Intraware
agrees not to disclose the terms of this Agreement or matters relating
thereto (including, without limitation, the information contained in the
monthly reports provided in accordance with Section 4.3), without the
prior written consent of Netscape, which consent shall not be
unreasonably withheld.
9. WARRANTIES
9.1. Limited Warranty
(a) General. Subject to the limitations set forth in this Agreement,
Netscape warrants only to Intraware that the Netscape Products when
properly installed and used will substantially conform to the
functional specifications set forth in the Documentation in effect
when the Netscape Products are delivered to Intraware. Netscape's
warranty and obligation shall extend for a period of ninety (90) days
("Warranty Period") from the date Netscape first delivers the
Netscape Products to Intraware. All warranty claims not made in
writing or not received by Netscape within the time period specified
above Warranty Period shall be deemed waived. Netscape's warranty
and obligation is solely for the benefit of Intraware, who has no
authority to extend this warranty to any other person or entity.
NETSCAPE MAKES NO WARRANTY THAT ALL ERRORS OR FAILURES WILL BE
CORRECTED.
(b) Year 2000. Year 2000. Netscape warrants that the current version
of the Netscape Products contain functionality, including the
time-and-date-related code, needed for the December 31, 1999 to
January 1, 2000 date change; provided the underlying operating system
of the host machine, and any non-Netscape-owned software provided with
or in the host machine or Product(s), also contain functionality,
including the time-and-date-related code, needed for the December 31,
1999 to January 1, 2000 date change. The sole and exclusive remedy for
any breach of this warranty is repair or replacement of the affected
Product(s), excluding any non-Netscape- owned software or underlying
operating system. This warranty is null and void if Intraware alters,
modifies or misuses any portion of the Product(s).
(c) Virus. To the best of Netscape's knowledge, on the date of shipment,
the Software shipped to Licensee will be free from any self-destruction
mechanism, illicit code or any copy protection scheme (the "Virus")
which interferes with Licensee's abilities to exercise its rights and
privileges under this Agreement or other computer operations of
Licensee, but only if the Virus
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can be discerned by use of virus protection software that is generally
available for use on a particular platform as of such date.
9.2 EXCLUSIVE WARRANTIES
THE EXPRESS WARRANTY SET FORTH IN SECTION 9.1 CONSTITUTES THE ONLY
WARRANTY WITH RESPECT TO THE NETSCAPE PRODUCTS AND DOCUMENTATION.
NETSCAPE MAKES NO OTHER REPRESENTATION OR WARRANTY OR CONDITION OF
ANY KIND WHETHER EXPRESS OR IMPLIED (EITHER IN FACT OR BY OPERATION OF
LAW) WITH RESPECT TO THE NETSCAPE PRODUCTS AND DOCUMENTATION.
NETSCAPE EXPRESSLY DISCLAIMS ALL WARRANTIES OR CONDITIONS OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. NETSCAPE DOES NOT
WARRANT THAT THE NETSCAPE PRODUCTS OR DOCUMENTATION ARE ERROR-FREE
OR THAT OPERATION OF THE NETSCAPE PRODUCTS WILL BE SECURE OR
UNINTERRUPTED AND HEREBY DISCLAIMS ANY AND ALL LIABILITY ON ACCOUNT
THEREOF. THERE IS ALSO NO IMPLIED WARRANTY OF NON-INFRINGEMENT; THE
SOLE REMEDY FOR INFRINGEMENT IS PROVIDED IN SECTION 10. This subsection
shall be enforceable to the extent allowed by applicable law.
9.3 Defects Not Covered by Warranties
Netscape shall have no obligations under the warranty provisions set
forth in Section 9.1 if any nonconformance is caused by: (a)
Intraware's incorporation, attachment or otherwise engagement of any
attachment, feature, program, or device to the Netscape Products, or
any part thereof; or (b) accident; transportation; neglect or misuse;
alteration, modification, or enhancement of the Netscape Products by
Intraware; failure to provide a suitable installation environment;
use of supplies or materials not meeting specifications; use of the
Netscape Products for other than the specific purpose for which the
Netscape Products are designed; use of the Netscape Products on any
systems other than the specified hardware platform for such Netscape
Products; or Intraware's use of defective media (other than defective
media provided by Netscape to Intraware) or defective duplication of
the Netscape Products or Intraware's failure to incorporate any Minor
Update previously released by Netscape which corrects such
conformance.
9.4 Exclusive Remedy
If Intraware finds what it believes to be errors or a failure of the
Netscape Products to meet then functional specifications set forth in
the Documentation in effect when the Netscape Products are delivered to
Intraware, and provides Netscape with a written report during the
Warranty Period, Netscape will use reasonable efforts to correct
promptly, at no charge to Intraware, any such errors or failures. This
is Intraware's sole and exclusive remedy for any express or implied
warranties hereunder.
10. INDEMNIFICATION
10.1 Netscape shall defend or settle, at its option, any action brought
against Intraware to the extent it is based on a claim that use,
reproduction or distribution by Intraware of the Netscape portion
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of the Netscape Products furnished hereunder within the scope of a
license granted hereunder directly infringes any valid United States
copyright, U.S. patent, U.S. copyright trade secret in the United States
or U.S. trade secret. Netscape shall also defend any action brought
against Intraware to the extent that it is based on a claim that the
Netscape trademark(s) Intraware is licensed to use hereunder directly
infringes any valid United States trademark. Netscape will pay resulting
costs, damages and legal fees finally awarded against Intraware in such
action which are attributable to such claim provided that Intraware: (a)
promptly (within twenty (20) days) notifies Netscape in writing of any
such claim and Netscape has sole control of the defense and all related
settlement negotiations; and (b) cooperates with Netscape, at Netscape's
expense, in defending or settling such claim.
10.2 Should a Netscape Product become, or be likely to become in Netscape's
opinion, the subject of infringement of such U.S. patent, copyright,
trademark or trade secret, Netscape may procure for Intraware: (i) the
right to continue using the same; or (ii) replace or modify it to make
it non-infringing. In the event that Netscape shall reasonably determine
that neither (i) nor (ii) above is commercially practicable, Netscape
may terminate the license for the infringing Netscape Product and refund
the portion of license fee paid by Intraware to Netscape for such
Netscape Product for which Intraware has not derived a benefit. Netscape
shall have no obligation or liability for, and Intraware shall defend,
indemnify and hold Netscape harmless from and against any claim based
upon: (a) use of other than the then current, unaltered version of the
Netscape Product, unless the infringing portion is also in the then
current, unaltered release; (b) use, operation or combination of
Netscape Products with non-Netscape programs, data, equipment or
documentation if such infringement would have been avoided but for such
use, operation or combination; (c) Intraware's or its agent's activities
after Netscape has notified Intraware that Netscape believes such
activities may result in such infringement; (d) compliance with
Intraware's designs, specifications or instructions; (e) any
modifications or marking of the Netscape Products not specifically
authorized in writing by Netscape; (f) Intraware's use of any trademarks
other than those set forth in Exhibit F, Section 6; or (g) third party
software. The foregoing states the entire liability of Netscape and the
exclusive remedy of Intraware with respect to infringement of any
intellectual property rights, whether under theory of warranty,
indemnity or otherwise.
10.3 General Indemnification by Intraware. Intraware agrees to defend,
indemnify, and hold harmless Netscape and its suppliers from and against
any claims, liabilities, losses, damages expenses and costs (including
attorneys' fees and costs) directly relating to or arising out of
Intraware's use, distribution or reproduction of the Netscape Products
including, without limitation, any claims, liabilities, losses, damages,
expenses and costs arising out of a breach relating to the failure of
Intraware's data encryption methods deployed for distribution of the
Netscape Products, defective reproduction of or the use of defective
media in the reproduction of Netscape Products, breach of warranty or
support obligations by Intraware, unauthorized or illegal export of the
Netscape Products, or infringement or misappropriation of intellectual
property rights by the Intraware Products, except to the extent that
Netscape is responsible for a claim under Section 10.1.
11. LIMITATION OF LIABILITY
11.1 TO THE EXTENT ALLOWED BY APPLICABLE LAW, AND EXCEPT FOR A BREACH OF
SECTION 2.1.3 OR SECTION 8, IN NO EVENT SHALL EITHER PARTY OR ITS
SUPPLIERS BE
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LIABLE FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF USE OR DATA,
INTERRUPTION OF BUSINESS, OR FOR INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF ANY KIND, EVEN IF A PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF
ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
11.2 IN NO EVENT WILL NETSCAPE OR ITS SUPPLIERS BE LIABLE FOR, EXCEPT FOR
SECTIONS 10.1 AND 10.2, ANY CLAIM AGAINST INTRAWARE BY ANY THIRD PARTY
OR FOR (A) ANY REPRESENTATION OR WARRANTY MADE TO ANY THIRD PARTY BY
INTRAWARE, ANY AGENT OF INTRAWARE; (B) FAILURE OF THE NETSCAPE PRODUCTS
TO PERFORM AS SPECIFIED HEREIN EXCEPT AS, AND TO THE EXTENT, OTHERWISE
EXPRESSLY PROVIDED HEREIN; (C) FAILURE OF THE NETSCAPE PRODUCTS TO
PROVIDE SECURITY; OR (D) ANY USE OF THE NETSCAPE PRODUCTS OR THE
DOCUMENTATION OR THE RESULTS OR INFORMATION OBTAINED OR DECISIONS
MADE BY END USERS OF THE NETSCAPE PRODUCTS OR THE DOCUMENTATION. THE
REMEDIES PROVIDED HEREIN ARE INTRAWARE'S SOLE AND EXCLUSIVE REMEDIES.
11.3 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, AND
EXCEPT FOR A BREACH OF SECTION 2.1.3 OR SECTION 8, EACH PARTY'S ENTIRE
LIABILITY TO THE OTHER PARTY FOR DAMAGES CONCERNING PERFORMANCE OR
NONPERFORMANCE BY NETSCAPE OR IN ANY WAY RELATED TO THE SUBJECT
MATTER OF THIS AGREEMENT, AND REGARDLESS OF WHETHER THE CLAIM FOR
SUCH DAMAGES IS BASED IN CONTRACT OR IN TORT, SHALL NOT EXCEED [*]
11.4 If for any reason, by operation of law or otherwise, any limitations of
liability set forth in Section+11 are unenforceable, the parties
agree that: (a) except for a breach of Section 2.1.3 or Section 8, a
party's Netscape's entire liability for any loss or damage to real
property or to tangible personal property arising out of or in
connection with this Agreement shall not exceed the amount received
by Netscape from Intraware during the previous twelve (12) months
Netscape Products or Services giving rise to such claim; and (b) a
party's Netscape's liability shall be unlimited with respect to any
loss or damage arising from bodily injury, including death, when such
loss or damage is caused by the negligent acts or omissions or
intentional wrongdoing of such party's employees or agents arising
out of the performance of this Agreement, provided that the party
that is liable receives Intraware gives Netscape prompt written
notice of any such claim of loss or damage, the cooperation of the
damaged party and is allowed to control, and fully cooperates with
Netscape in the defense and all related settlement negotiation.
12. TERM OF AGREEMENT
Unless sooner terminated under the provisions of Section 13, or
otherwise rightfully terminated, this Agreement shall remain in effect
for a period of two (2) years from the Effective Date ("Term").
Thereafter, this Agreement may be renewed by mutual agreement in writing
for an additional one (1) year period.
13. DEFAULT AND TERMINATION
13.1 Termination for Default
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If either party defaults in any of its obligations under this Agreement,
the non-defaulting party, at its option shall have the right to
terminate this Agreement by written notice unless, within thirty (30)
calendar days after written notice of such default, the defaulting party
remedies the default, or, in the case of a default which cannot with due
diligence be cured within a period of thirty (30) calendar days, the
defaulting party institutes within the thirty (30) calendar days steps
necessary to remedy the default and thereafter diligently prosecutes the
same to completion. In the event Intraware breaches Sections 2.1.3
and/or Section 8 of this Agreement, Netscape may immediately terminate
this Agreement.
Either party shall have the right to terminate this Agreement if the
other party ceases to do business in the normal course, becomes or is
declared insolvent or bankrupt, is the subject of any proceeding
relating to its liquidation or insolvency which is not dismissed within
ninety (90)calendar days, or makes an assignment for the benefit of its
creditors.
13.2 Effect on Rights
13.2.1 Termination of this Agreement by either party shall not act
as a waiver of any breach of this Agreement and shall not act as a
release of either party from any liability for breach of such party's
obligations under this Agreement.
13.2.2 Except as specified in Sections 13.4 and 13.5 below, upon
termination or expiration of this Agreement, all licenses for Netscape
Products and Documentation granted under this Agreement shall terminate.
13.2.3 Except where otherwise specified, the rights and remedies
granted to a party under this Agreement are cumulative and in addition
to, and not in lieu of, any other rights or remedies which the party may
possess at law or in equity, including without limitation rights or
remedies under applicable patent, copyright, trade secrets, or
proprietary rights laws, rules or regulations.
13.3 Effect of Termination
Within thirty (30) calendar days after termination of this Agreement,
Intraware shall either deliver to Netscape or destroy all copies of
the Netscape Products and Documentation (except as provided in
Section 13.5) and any other materials provided by Netscape to
Intraware hereunder in its possession or under its control, and shall
furnish to Netscape an affidavit signed by an officer of Intraware
certifying that, to the best of its knowledge, such delivery or
destruction has been fully effected. Notwithstanding the foregoing,
and provided Intraware fulfills its obligations specified in this
Agreement with respect to such items, Intraware may continue to use
and retain copies of the Netscape Products and Documentation to the
extent, but only to the extent, necessary to support and maintain
Netscape Products rightfully distributed to End Users by Intraware
prior to termination of this Agreement.
13.4 Continuing Obligations
13.4.1 Payment of Accrued Fees. Within thirty (30) calendar days of
termination of this Agreement, Intraware shall pay to Netscape all sums
then due and owing. Any other such sums shall subsequently be promptly
paid as they become due and owing.
13.4.2 Continuance of Sublicenses. Notwithstanding the termination
of this Agreement, all End User sublicenses which have been properly
granted by Intraware pursuant to this Agreement prior to its termination
shall survive.
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13.4.3 Other Continuing Obligations. The respective rights and
obligations of Netscape and Intraware under the provisions of Sections
2.1.3, 2.2, 3.4, 4.4, 7, 8, 9.1, 9.2, 9.3, 9.4, 10, 11, 13.2, 13.3, 13.4
and 15 shall survive any termination of this Agreement.
14. PROVISIONS GENERAL
14.1 Notices
Any notice, request, demand, or other communication required or
permitted hereunder shall be in writing and shall be deemed to be
properly given upon the earlier of (a) actual receipt by the addressee
or (b) five (5) business days after deposit in the mail, postage
prepaid, when mailed by registered or certified airmail, return receipt
requested, or two (2) business days after being sent via private
industry courier to the respective parties at the addresses set forth
herein or to such other person or address as the parties may from time
to time designate in a writing delivered pursuant to this Section 14.1.
Notices to Netscape and Intraware shall be attention to: Legal
Department.
14.2 Waiver and Amendment
The waiver by either party of a breach of or a default under any
provision of this Agreement, shall not be construed as a waiver of any
subsequent breach of the same or any other provision of this Agreement,
nor shall any delay or omission on the part of either party to exercise
or avail itself of any right or remedy that it has or may have hereunder
operate as a waiver of any right or remedy. No amendment or modification
of any provision of this Agreement shall be effective unless in writing
and signed by a duly authorized signatory of Netscape and Intraware.
14.3 Assignment
Neither party may assign this Agreement and the licenses granted
hereunder are to a specific legal entity or legal person, not including
corporate subsidiaries or affiliates of Intraware, nor are the
obligations imposed hereunder delegable without the prior written
consent of the other party, which consent shall not be unreasonably
withheld. Any attempt to sublicense (except as expressly permitted
herein) assign or transfer any of the rights, duties or obligations
under this Agreement in derogation hereof shall be null and void.
Notwithstanding the foregoing, either party may assign this Agreement in
the event of a business reorganization or spin out that affects the sale
of the business unit to which this Agreement pertains, or the merger or
sale of all or substantially all of the stock or assets of such party.
14.4 Governing Law
This Agreement is entered into in the State of California, U.S.A., and
this Agreement shall be governed by and construed in accordance with the
laws of the State of California, U.S.A., without reference to its
conflicts of law provisions. Any dispute regarding this Agreement shall
be subject to the exclusive jurisdiction of the California state courts
in and for Santa Clara County, California (or, if there is exclusive
federal jurisdiction, the United States District Court for the Northern
District of California), and the parties agree to submit to the personal
and exclusive jurisdiction and venue of these courts. This Agreement
will not be governed by the United Nations Convention of Contracts for
the International Sale of Goods, the application of which is hereby
expressly excluded.
14.5 Relationship of the Parties
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Netscape 15 CONFIDENTIAL
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No agency, partnership, joint venture, or employment is created as a
result of this Agreement and neither Intraware nor its agents have any
authority of any kind to bind Netscape in any respect whatsoever.
14.6 Captions and Section Headings
The captions and section and paragraph headings used in this Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement.
14.7 Severability
If the application of any provision or provisions of this Agreement to
any particular facts of circumstances shall be held to be invalid or
unenforceable by any court of competent jurisdiction, then (a) the
validity and enforceability of such provision or provisions as applied
to any other particular facts or circumstances and the validity of other
provisions of this Agreement shall not in any way be affected or
impaired thereby and (b) such provision or provisions shall be reformed
without further action by the parties hereto to and only to the extent
necessary to make such provision or provisions valid and enforceable
when applied to such particular facts and circumstances.
14.8 Force Majeure
Either party shall be excused from any delay or failure in performance
hereunder, except the payment of monies by Intraware to Netscape, caused
by reason of any occurrence or contingency beyond its reasonable
control, including but not limited to, acts of God, earthquake, labor
disputes and strikes, riots, war, novelty of product manufacture or
other unanticipated product development problems, and governmental
requirements. The obligations and rights of the party so excused shall
be extended on a day-to-day basis for the period of time equal to that
of the underlying cause of the delay.
14.9 Entire Agreement
This Agreement, including the Exhibits hereto, constitutes the entire
agreement between the parties concerning the subject matter hereof and
supersedes all proposals or prior agreements whether oral or written,
and all communications between the parties relating to the subject
matter of this Agreement and all past courses of dealing or industry
custom. The terms and conditions of this Agreement shall prevail,
notwithstanding any variance with any purchase order or other written
instrument submitted by Intraware, whether formally rejected by
Netscape.
15. NETSCAPE PROFESSIONAL SERVICES
15.1 Authorization to Solicit Orders for Services.
Subject to the terms and conditions herein, Netscape hereby authorizes
Intraware to solicit offers on behalf of Netscape for Netscape to supply
to third party clients with its professional consulting services (the
"Services") under the terms of a professional services agreement
substantially in the form set forth in Exhibit G. Each party hereto will
appoint a principal point of contact within its organization for the
solicitation of offers and placement of resulting purchase orders
("Order(s)") for the Services. In addition, Intraware shall provide
Netscape with the name of key contact persons of potential clients for
the Services, together with as much information about the potential
opportunity as may be reasonably necessary to enable Netscape
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Netscape 16 CONFIDENTIAL
<PAGE>
to pursue the Order. Intraware may electronically submit Orders on such
terms as the parties shall mutually agree.
15.2 Limitations.
In soliciting Orders, Intraware shall have no authority to act for or to
bind Netscape in any way; to sign the name of Netscape in any way, or to
represent that Netscape is in any way responsible for the acts or
omissions of Intraware.
15.3 Compensation.
In consideration for soliciting Orders, Netscape shall pay Intraware a
commission, in the amount and subject to the terms and conditions set
forth in Exhibit B hereto.
15.4 Orders.
Netscape may in its sole discretion elect to pursue or not pursue any
potential Order. Netscape shall have no obligation to accept or reject
any Order for Services for any reason. Intraware shall not purport to
accept Orders in its own name or to bind Netscape to accept any such
Orders. An Order shall be deemed accepted by Netscape when a client has
executed an Order for the Services, which Order (a) accepts the terms
and conditions of the professional services agreement and (b) attaches a
completed statement of work that (i) specifies the Services to be
provided by Netscape and (ii) identifies a start date for the Services.
15.5 Pricing.
Netscape reserves the sole right to establish the prices of the
Services, or to grant to any client at any time any discount it deems
advisable, or to alter discounts.
15.6 Netscape Reports.
Each quarter, Netscape shall provide to Intraware a report that sets
forth, for the three-month period covered thereby, the number of Orders
(a) accepted by Netscape, (b) rejected by Netscape, or (c) that are in
progress. The report shall accompany the payment, if any, due by
Netscape to Intraware as provided in Exhibit B.
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Netscape 17 CONFIDENTIAL
<PAGE>
16. COUNTERPARTS.
16. Counterparts. This Agreement may be executed in counterparts or by
facsimile, each of which shall be an original, and all of which together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
duly authorized representatives of the parties effective as of the Effective
Date.
NETSCAPE COMMUNICATIONS CORPORATION INTRAWARE, INC.
By: /s/ Noreen G. Bergin By: /s/ Cindy Masheroni
Name: Noreen G. Bergin Name: Cindy Masheroni
Title: Senior Vice President, Title: VP Business Development
Finance & Corporate
Controller
Date: 10/20/98 Date: 10/12/98
Address: 501 East Middlefield Road
Mountain View, CA 94043
EXHIBITS:
Exhibit A - Netscape Product and Service Descriptions
Exhibit B - Pricing, Payment Schedules and Deliverables
Exhibit C - End User License Agreements
Exhibit D - Technical Support
Exhibit E - Intraware Products
Exhibit F -Point of Sale Reports
Exhibit G -Professional Services Agreement
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Netscape 18 CONFIDENTIAL
<PAGE>
EXHIBIT A
NETSCAPE PRODUCT AND SERVICES DESCRIPTIONS
As used herein, "Netscape Client Products", "Netscape Server Products" and
"Netscape Application Products" refer to those Netscape Products, and Updates
thereto, in the applicable product group listed on the Netscape's then
current applicable price list. A. Products
The following Netscape Products sold within North America (i.e., the
United States and Canada) are described below.
English language 40 bit and 128 bit versions of Netscape Server
Products, Netscape Client Products and Netscape Application Products
(including related tools) in production and generally available (e.g.
non-beta) as of Netscape's then current North America End User Price
List that are available from Netscape's web site for downloading or
otherwise as mutually agreed between the parties.*
The parties have entered into a trial evaluation period to consider
whether CommercXpert products will be included in the Agreement.
Appropriate representatives of the parties will attempt to resolve the
issue as soon as practicable.
* Provided approvals submitted by the United States Department of
Commerce, Bureau of Export Administration dated June 5, 1997, and
Intraware's inquiry thereto dated May 9, 1997, apply to such Netscape
Product otherwise non-exportable 128 bit versions of Netscape Products.
B. Services.
Netscape Professional Services shall be provided under the Professional
Services Agreement is substantially in the form attached hereto as
Exhibit G. Netscape reserves the right to change, discontinue, or add
Services without any obligation to Intraware, and Exhibits A and G shall
be deemed amended from time to time thereby.
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Netscape 19 CONFIDENTIAL
<PAGE>
EXHIBIT B
PRICING, PAYMENT SCHEDULES AND DELIVERABLES
1. Pricing for Netscape Products and Services. The license fee for each
copy of a Netscape Product shall be as set forth below. The parties will
review this shrinkwrap pricing within [*] of the Effective Date:
A. Shrinkwrap Pricing
End User "Shrinkwrap" Client Products: [*] discount off of the then
current North America End User Price List (quantity 1); (Intraware shall
have the right to use up to 100 copies of the Client Products for its
internal use at no charge other than for any third party royalties
payable by Netscape.)
**Client Product Software Subscription and Support: [*] discount off of
the then current North America End User
Price List (quantity 1);
Shrinkwrap Server Products (Non-NAS): [*] discount off of the then
current North America End User Price List (quantity 1); (Intraware shall
have the right to use up to [*] copies of the Enterprise Server and
up to [*] copies of all other Server Products for its internal use
at no charge.)
**Server Product Software Subscription and Support: [*] discount off of
the then current North America End User
Price List (quantity 1).
Prices for the Services (defined in Section 15 of the Agreement) shall
be offered at 100 percent of Netscape's then current project pricing
policies. Such prices may, from time to time, be amended by Netscape in
its sole discretion.
B. Charters Pricing. Volume Discount pricing under Netscape's Charters
Program or other then current volume program: [*] discount off of the
then current North America applicable End User Price List.
C. ISP Pricing. [*] discount off of the then current North America
applicable End User Price List.
D. Third Party Software Products. (Marimba and Diffusion), if and only to
the extent authorized by the applicable company) [*] discount off of the
then current North America applicable End User Price List.
E. SuiteTools. Included as part of Server products, see discount above.
F. Other Netscape Products. Netscape Applications Server Products: [*]
discount off of the then current North America End User Price List.
Intraware may use up to [*] CPUs of its NAS products for [*].
G. [*]
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Netscape 20 CONFIDENTIAL
<PAGE>
[*]
H. General
1. Prepayment. Terms of prepayment, if any, will be added by mutual
agreement and inserted as part of this Section 2 to this Exhibit B.
2. Subscription. First year software subscription may only be purchased
at the time when the initial applicable license is purchased; however, a
renewal may be purchased if an initial subscription sale has been made.
3 Deliverable One (1) master reproduction copy of each of the Netscape
Products (media) and one (1) copy of the applicable Documentation, in
any format generally available from Netscape.
4. Territory. United States and Canada, except as set forth in Addendum
A to this Exhibit B.
5. Point of Sales Reports.
Contact Name: Katy Turner
Director, Intraware.shop
Telephone: 925-253-4503
Fax: 925-253-4599
Email: [email protected]
<TABLE>
<S> <C>
6. Addresses:
Bill To Address for Invoice Ship To Address for Deliverables
(not P.O. address)
Intraware Intraware
25 Orinda Way 25 Orinda Way
Orinda, CA 94563 Orinda, CA 94563
Attention: Anita Trone Attention: Andy Akiyoshi
VP, Finance Operations Specialist
Telephone: 925-253-4560 Telephone: 925-253-4558
Email: [email protected] Email: [email protected]
</TABLE>
7. For each Order for Services accepted by Netscape, shall pay Intraware
on a quarterly basis a commission representing [*] of the total
Orders for professional services accepted by Netscape in that quarter,
less any credits due to Netscape for cancellations by clients that occur
within the first three months of receipt of such services. Netscape may
offset any amount it owes Intraware under this Section 8 with any amounts
it owes Intraware hereunder. Such payment shall be accompanied by a
quarterly report set forth in Section 15.6 hereof.
8. This agreement is conditional on the following understandings:
a. Intraware will make every reasonable, commercial effort to provide
Netscape with possible consulting opportunities involving Netscape
products on an equal footing with other consulting companies.
b. Netscape has the right to not pursue an opportunity identified by
Intraware
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Netscape 21 CONFIDENTIAL
<PAGE>
c. Netscape will appoint one point of contact and Intraware will
appoint one point of contact to reconcile project opportunities on a
monthly and quarterly basis.
d. This agreement does not include client engagements entered into
between Netscape and the client subsequent to the initial
opportunity, including, without limitation, subsequent engagements
to the initial opportunity identified by the modifications to the
original statement of work to add additional work.
Sales Tax Resale Exemption Certificate No.:_____________________
(ORIGINAL CERTIFICATE MUST BE FURNISHED TO NETSCAPE)
Netscape Sales Rep: John Occupinti
Telephone Number: 650.937.2762
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Netscape 22 CONFIDENTIAL
<PAGE>
Addendum 2.1.8 to Exhibit B
European Territory
Europe France
FRA FRANCE
FXX FRANCE, METROPOLIT
MCOMONACO
Europe Germany
AUT AUSTRIA
DEU GERMANY
Europe Multi-Country
ESH WESTERN SAHARA
ZWE ZIMBABWE
EGY EGYPT
WLF WALLIS AND FUTUNA
TUV TUVALU
RUS RUSSIAN FEDERATION
KIR KIRIBATI
AGO ANGOLA
CMR CAMEROON
BWABOTSWANA
UZB UZBEKISTAN
ARE UNITED ARAB EMIRAT
IntlUNK International Unknown
ZMB ZAMBIA
ZAR ZAIRE
YEM YEMEN
GIN GUINEA
ITA ITALY
STP SAO TOME AND PRINC
SDN SUDAN
SPM ST. PIERRE AND MIQ
SGS SOUTH GEORGIA AND
UKR UKRAINE
TCA TURKS AND CAICOS I
TKM TURKMENISTAN
TUN TUNISIA
TON TONGA
TKL TOKELAU
TZA TANZANIA, UNITED R
TJK TAJIKISTAN
SYR SYRIAN ARAB REPUBL
SWZ SWAZILAND
SUR SURINAME
VGB VIRGIN ISLANDS (BR
KNA SAINT KITTS AND NE
ROMROMANIA
REU REUNION
PRI PUERTO RICO
PCN PITCAIRN
PLW PALAU
OMN OMAN
NIU NIUE
LBN LEBANON
MOZMOZAMBIQUE
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Netscape 23 CONFIDENTIAL
<PAGE>
MARMOROCCO
MSR MONTSERRAT
MUS MAURITIUS
MRT MAURITANIA
MHLMARSHALL ISLANDS
MLT MALTA
LUX LUXEMBOURG
HUNHUNGARY
GRC GREECE
GIB GIBRALTAR
CYP CYPRUS
BEL BELGIUM
KGZ KYRGYZSTAN
Europe Multi County Cont. KWT KUWAIT
BEN BENIN
BRB BARBADOS
BHR BAHRAIN
BHS BAHAMAS
ABWARUBA
ARMARMENIA
ATG ANTIGUA AND BARBUD
ATA ANTARCTICA
GRD GRENADA
GEO GEORGIA
GUF FRENCH GUIANA
EST ESTONIA
DOM DOMINICAN REPUBLIC
CUB CUBA
CCK COCOS (KEELING) IS
CYM CAYMAN ISLANDS
IOT BRITISH INDIAN OCE
BTN BHUTAN
BLR BELARUS
AZE AZERBAIJAN
AIA ANGUILLA
AFG AFGHANISTAN
YUG YUGOSLAVIA
ESP SPAIN
PRT PORTUGAL
ISR ISRAEL
CZE CZECH REPUBLIC
ANDANDORRA
LAO LAO PEOPLES DEMOCR
KEN KENYA
IRQ IRAQ
LBY LIBYAN ARAB JAMAHI
LVA LATVIA
MDA MOLDOVA, REPUBLIC
MTQ MARTINIQUE
MKDMACEDONIA, THE FOR
MMR MYANMAR
NRU NAURU
RWARWANDA
QAT QATAR
MNPNORTHERN MARIANA I
NER NIGER
SLE SIERRA LEONE
VCT SAINT VINCENT AND
SHN ST. HELENA
UGA UGANDA
TTO TRINIDAD AND TOBAG
TGO TOGO
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Netscape 24 CONFIDENTIAL
<PAGE>
SJM SVALBARD AND JAN M
GUY GUYANA
GNB GUINEA-BISSAU
GLP GUADELOUPE
GRL GREENLAND
GHAGHANA
GMB GAMBIA
GAB GABON
ATF FRENCH SOUTHERN TE
FRO FAROE ISLANDS
FLK FALKLAND ISLANDS (
ETH ETHIOPIA
ERI ERITREA
GNQEQUATORIAL GUINEA
DMA DOMINICA
DJI DJIBOUTI
HRV CROATIA (local nam
CIV COTE DIVOIRE
COG CONGO
Europe Multi County Cont. COMCOMOROS
CXR CHRISTMAS ISLAND
TCD CHAD
CAF CENTRAL AFRICAN RE
CPV CAPE VERDE
BDI BURUNDI
BFA BURKINA FASO
BGR BULGARIA
BVT BOUVET ISLAND
BIH BOSNIA AND HERZEGO
BMU BERMUDA
ASM AMERICAN SAMOA
DZA ALGERIA
ALB ALBANIA
VAT VATICAN CITY STATE
TUR TURKEY
CHE SWITZERLAND
POL POLAND
NLD NETHERLANDS
KAZ KAZAKHSTAN
JOR JORDAN
JAM JAMAICA
IRN IRAN (ISLAMIC REPU
HMD HEARD AND MC DONAL
HTI HAITI
LBR LIBERIA
LSO LESOTHO
MLI MALI
MWI MALAWI
MDGMADAGASCAR
LTU LITHUANIA
LIE LIECHTENSTEIN
ANT NETHERLANDS ANTILL
NAM NAMIBIA
LCA SAINT LUCIA
NGANIGERIA
SLB SOLOMON ISLANDS
SVN SLOVENIA
SVK SLOVAKIA (Slovak R
SYC SEYCHELLES
SEN SENEGAL
SAU SAUDI ARABIA
MYT MAYOTTE
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Netscape 25 CONFIDENTIAL
<PAGE>
SOM SOMALIA
SMR SAN MARINO
Europe Nordic
DNK DENMARK
FIN FINLAND
NOR NORWAY
SWE SWEDEN
ISL ICELAND
Europe United Kingdom
IRL IRELAND
ZAF SOUTH AFRICA
GBR UNITED KINGDOM
Intercon Australia
PNG PAPUA NEW GUINEA
NZL NEW ZEALAND
AUS AUSTRALIA
NCL NEW CALEDONIA
COK COOK ISLANDS
VUT VANUATU
NFK NORFOLK ISLAND
Intercontinental Territory
A. Japan
B. North Asia region:
PRC (incl. Hong Kong)
Taiwan
Macau
C. SE Asia region:
Singapore
India
Thailand
Philippines
Pakistan
Vietnam
Indonesia
Australia
New Zealand
Malaysia
Burma
Cambodia
D. Latin America region:
Brazil
Venezuela
Mexico
Bermuda
Chile
Colombia
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<PAGE>
Argentina
Equador
Peru
Uraguay
Paraguay
The European and Intercontinental Territories may be amended from time to
time as the parties shall mutually agree.
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Netscape 27 CONFIDENTIAL
<PAGE>
EXHIBIT C
END USER LICENSE AGREEMENTS
End User Licenses Provided to Intraware Include:
Client Products License
Server Products License
NAS Products License
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Netscape 28 CONFIDENTIAL
<PAGE>
EXHIBIT D
TECHNICAL SUPPORT
These terms will be updated from time to time to be consistent with
Netscape's then current Distributor Tech. Support Model and may vary by
product.
1. Back-end Support. Netscape will provide to Intraware, at no charge,
back-end, escalation technical support by telephone and e-mail to assist
Intraware in providing End Users with support in the installation and set up
of the Netscape Products. Netscape's technical support obligations are
limited solely to the foregoing and do not include support for Program Errors
or the provision on Updates.
2. Front-line Support. Intraware, and not Netscape, will provide
front-line, or first and second level, technical support to its End Users in
the installation and set up of the Netscape Products. Such support includes
call receipt, call screening, installation assistance, problem identification
and diagnosis. Intraware agrees that any documentation distributed by
Intraware will clearly and conspicuously state that an End Users should call
Intraware for technical support in the installation and set up of the
Netscape Products. Netscape will have no obligation to furnish any
assistance, information or documentation with respect to the Netscape
Product, to any End User unless such End User has contracted with Netscape
for support. If Netscape customer support representatives are being contacted
by a significant number of Intraware's End Users in the installation and set
up of the Netscape Products then, upon Netscape's request, Intraware and
Netscape will cooperate to minimize such contract. In the event that Netscape
is able to identify any End User obtaining front-line support from Netscape
as a customer of Intraware, Netscape shall refer such End User back to
Intraware and/or offer such End User the option to purchase support directly
from Netscape.
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Netscape 29 CONFIDENTIAL
<PAGE>
EXHIBIT E
INTRAWARE PRODUCTS
Virtual Express Delivery
SubscribNet
ScriptWrapper installation interface software
ExtraDoc software
Compariscope
Radarscope
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Netscape 30 CONFIDENTIAL
<PAGE>
EXHIBIT F
POINT OF SALE REPORTS
Transaction_Date
PO#
Bill_To_Name
Sell_To_Name
Sell_To_Address1
Sell_To_Address2
Sell_To_City
Sell_To_State
Sell_To_Postal_Code
Sell_To_Country
VLA# (License#)
Acct_Part_Num
Netscape_SKU
Part_Description
Part_OpSys (if not included in Part_Description)
Qty_sold
Price (COGs)
Extended_Price
Direct_Purchase_Flag (or separate files for direct/indirect purchases) POS
data is due no later than the 10th calendar day of the month, in excel, ASCII
text, or other downloadable format.
Intraware Contact: Anita Trone, VP Finance
Tel: 925-253-4560 Fax: 925-253-4599 e-mail: [email protected]
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Netscape 31 CONFIDENTIAL
<PAGE>
EXHIBIT G
PROFESSIONAL SERVICES AGREEMENT
Netscape's then current professional services agreement, the current version
of which has been provided to Intraware
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Netscape 32 CONFIDENTIAL
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated December 14, 1998,
relating to the financial statements of Intraware, Inc., which appears in such
Prospectus. We also consent to the references to us under the heading "Experts"
in such Prospectus.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
San Jose, California
January 6, 1999
