<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CONTINUUS SOFTWARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE
(State or jurisdiction 7371 43-1070080
of incorporation or (Primary Standard Industrial (I.R.S. Employer
organization) Classification Code Number) Identification Number)
</TABLE>
108 PACIFICA
IRVINE, CALIFORNIA 92618
(949) 453-2200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOHN R. WARK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CONTINUUS SOFTWARE CORPORATION
108 PACIFICA
IRVINE, CALIFORNIA 92618
(949) 453-2200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
D. BRADLEY PECK, ESQ. JEFFREY D. SAPER, ESQ.
MICAELA H. MARTIN, ESQ. MICHAEL J. DANAHER, ESQ.
PATRICK R. O'NEIL, ESQ. ANTONE F. JOHNSON, ESQ.
COOLEY GODWARD LLP WILSON SONSINI GOODRICH & ROSATI, P.C.
4365 EXECUTIVE DRIVE, SUITE 1100 650 PAGE MILL ROAD
SAN DIEGO, CA 92121 PALO ALTO, CA 94304
(619) 550-6000 (650) 493-9300
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, 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 of 1933, 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,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS PROPOSED MAXIMUM
OF SECURITIES TO BE AGGREGATE OFFERING AMOUNT OF
REGISTERED PRICE(1)(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.001 par value....................... $40,480,000 $11,254
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes shares that the underwriters have the option to purchase solely to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(o) under the Securities Act of
1933.
------------------------
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED APRIL 23, 1999
[ ] SHARES
CONTINUUS SOFTWARE CORPORATION
COMMON STOCK
$ PER SHARE
CONTINUUS LOGO
- --------------------------------------------------------------------------------
- - Continuus Software Corporation is offering shares and selling
stockholders are offering shares.
- - We anticipate that the initial public offering price will be between
$ and $ per share.
- - This is our initial public offering and no public market currently exists for
our shares.
- - Proposed trading symbol: Nasdaq National Market -- CNSW
---------------------------------------------
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 8.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ---------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds to Continuus Software Corporation.................. $ $
Proceeds to selling stockholders............................ $ $
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
The underwriters have a 30-day option to purchase up to additional shares
of common stock from us to cover over-allotments, if any.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OF ANYONE'S INVESTMENT IN THESE SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
U.S. BANCORP PIPER JAFFRAY CIBC WORLD MARKETS
THE DATE OF THIS PROSPECTUS IS , 1999
THE INFORMATION IN THE PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE SECURITIES AND EXCHANGE COMMISSION DECLARES OUR
REGISTRATION STATEMENT EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 3
(INSIDE FRONT COVER PAGE)
[Description of illustration: a collage of images, including part of a clock
face, currency, a ticker board, a computer monitor, compact disks, a cellular
telephone and fighter planes, appears in the center of the page against a white
background. At the top right corner of the page, the caption appears:
"SOFTWARE IS THE ENGINE OF VALUE IN THE INFORMATION ECONOMY
In every segment of the economy
- -software enables new products and services
- -software facilitates rapid large-scale change and innovation
- -software must, in turn, respond to rapid and constant change."
On the bottom third of the page the caption appears:
"FROM Telecommunications, where software enables the evolution and control of
the worldwide network infrastructure
Financial Services, where software-based systems and services facilitate the
reshaping of the industry on a global basis
Aerospace and Defense, where software enables the communication, command, and
control systems of the information age battlefield
Software and Services, which creates the software packages and custom solutions
that drive every other segment of the economy
E-commerce, where software powers the Internet's redefinition of entire
industries
Effectively managing Internet and enterprise software assets is a critical
success factor in the information economy. Continuus Software provides the
applications and infrastructure to manage the people, projects, and processes
for developing, enhancing, deploying and managing Internet and enterprise
software assets."
The Continuus Software name and logo are also depicted.]
<PAGE> 4
(INTERIOR FOLD-OUT FRONT COVER PAGE)
[Description of illustration: centered in the illustration is a horizontal band
of clouds. Blending out of the center band into a white background of clouds
appears the images of a man running, a magnifying glass, a man juggling balls of
light, and a butterfly. The caption "Continuus Solutions for Continuus
Improvement" appears horizontally across the center of the illustration. There
is a block of text in each corner, each of which is stated below:
REDUCE TIME-TO-MARKET
Organizations using our solutions can more rapidly and predictably deliver
Internet and software development projects. The Continuus Change Management
Suite and Continuus WebSynergy provide a common environment for all participants
in a development project. We facilitate better communication and coordination of
activities within teams and across multiple locations. Our products help to
manage and automate a common set of shared processes which helps to automate or
eliminate time-consuming and repetitive manual activities. Our products also
enable management to better monitor and evaluate project status and take
immediate corrective actions. This leads to improved productivity, reductions in
wasted time, and less risk of project failure.
CONTINUOUSLY IMPROVE QUALITY
Our solutions allow customers to increase the quality of Internet and software
applications. Customers can use our products to create a platform for
continuously improving the processes used to manage, develop, enhance and deploy
Internet and software-based systems. Our products provide non-intrusive process
management capabilities that allow an organization to implement and enforce
organizational or industry best practices. Our process automation capabilities
allow the elimination of many of the typical sources of errors in building,
configuring and deploying large Internet and software systems.
EFFECTIVELY MANAGE E-ASSETS
Continuus provides our customers with a common, shared repository that can serve
as a central catalog for an organization's portfolio of e-assets. Customers can
manage a wide range of software and software-related assets, including technical
software that may be embedded in other products, IT applications that are both
internally developed or purchased from package vendors and Internet applications
including web content. Customers can track where components are used, ensure
that no assets are lost, as well as track and manage the complete history of
changes to components over their lifetime. Our repository and configurable
workflow provides a foundation for increasing a customer's return on their
investment in software assets by enabling component reuse.
QUICKLY ADAPT TO CHANGE
As customer's organizations grow and as they adopt new organizational
strategies, our products can be quickly and easily reconfigured to adapt to
these changes. Our distributed architecture can support a small development team
managing a single development project in a single location and then easily scale
to support hundreds of developers working on dozens of concurrent projects
distributed across many locations. Customers can quickly tailor our product's
process management capability to adopt new processes and policies and best
practices. Our open architecture allows customers to use our products with
almost any of the standards-based development tools they are currently using or
may adopt in the future.
The Continuus Software name and logo are also depicted.]
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 4
Risk Factors................................................ 8
Use of Proceeds............................................. 20
Dividend Policy............................................. 20
Capitalization.............................................. 21
Dilution.................................................... 22
Selected Consolidated Financial Data........................ 24
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 25
Business.................................................... 35
Management.................................................. 46
Certain Transactions........................................ 54
Principal and Selling Stockholders.......................... 56
Description of Capital Stock................................ 58
Shares Eligible For Future Sale............................. 61
Underwriting................................................ 63
Legal Matters............................................... 64
Experts..................................................... 65
Where You Can Find More Information......................... 65
Index to Consolidated Financial Statements.................. F-1
</TABLE>
---------------------------------------------
You should rely only on the information contained in this prospectus. We have
not, and the underwriters have not, authorized any other person to provide you
with different information. This prospectus is not an offer to sell, nor is it
seeking an offer to buy, these securities in any state where the offer or sale
is not permitted. The information in this prospectus is complete and accurate as
of the date on the front cover, but the information may have changed since that
date.
3
<PAGE> 6
- --------------------------------------------------------------------------------
SUMMARY
The items in the following summary are described in more detail later in this
prospectus. This summary provides an overview of selected information and does
not contain all the information you should consider. Therefore, you should also
read the more detailed information set out in this prospectus, the financial
statements and the other information incorporated by reference into this
prospectus.
BUSINESS OF CONTINUUS SOFTWARE CORPORATION
Continuus is a leading provider of software products and services for Internet
and enterprise software asset management, e-asset management, an emerging market
segment that enables organizations to more effectively develop, enhance, deploy
and manage their Internet and enterprise software systems. Our product line is
specifically designed to support the collaborative development, management,
approval and deployment of all types of software, Internet applications and web
content. Our integrated product line, consisting of the Continuus WebSynergy
Suite and the Continuus Change Management Suite, simplifies the development of
the most complex and demanding Internet and software applications. We also offer
Continuus Professional Services which include consulting, training and
maintenance services to facilitate the successful implementation of our
solution. Since 1995, we have licensed our products to over 400 customers
worldwide.
In response to increasingly competitive global markets, businesses are seeking
cost savings and productivity gains through implementing software solutions that
automate business processes. These efforts to automate business processes have
led to an explosive growth in the scale and complexity of software and
software-related assets within organizations. The advent of the Internet has
further added complexity by increasing both the number of and sophistication of
new applications and extending such applications beyond the enterprise. The
Internet has also highlighted and accelerated the trend that software has become
a major driver to both revenue growth and expense reduction as Internet
applications are directly connecting organizations to their employees,
customers, vendors and partners. In addition, companies are adopting more
complex organizational strategies in order to develop, deploy and maintain
applications in accelerated "Internet time." For example, companies are
dispersing and outsourcing their development across locations to take advantage
of the best qualified and most cost-effective resources.
Because of these trends, software has become one of the most strategic assets
for companies, however, many companies are not managing these assets
effectively. A 1998 report by the Standish Group estimated that as few as 26% of
all corporate IT software projects were completed on time and on budget.
Customers using our products can realize significant cost savings through more
effectively managing their Internet and enterprise software assets. Our solution
also enables organizations to improve the quality of their software assets and
to reduce time to deliver Internet and software applications.
Our objective is to become the leader in the emerging market for e-asset
management solutions. The key elements of our strategy are:
- provide comprehensive Internet and enterprise software asset
management solutions;
- focus on Internet and e-commerce application management;
- focus on successful customer implementation;
- leverage our customer base;
- expand sales coverage; and
- expand partnering and strategic relationships.
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4
<PAGE> 7
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We market and sell our products primarily through our direct sales force in
North America and Europe. We also market our products through distributors in
Australia, Denmark, Finland, India, Israel, Italy, the Netherlands, Norway,
Spain and Sweden. We currently have customers worldwide in a variety of
industries, including financial services, telecommunications, technology,
manufacturing and others. Our customers include AT&T, Dresdner Bank, BMW, Bell
Atlantic, Boeing, British Telecom, Morgan Stanley Dean Witter, Motorola,
Prudential, Siemens, Texas Instruments and USinternetworking.
Our principal executive offices are located at 108 Pacifica, Irvine, California
92618 and our telephone number is (949) 453-2200. We were incorporated on
January 12, 1984 as a California corporation. We will reincorporate in Delaware
prior to the consummation of this offering. Our fiscal year ends December 31. We
maintain a worldwide web site at www.continuus.com. The reference to our
worldwide web address does not constitute incorporation by reference of the
information contained at this site. Continuus Change Management Suite, Continuus
WebSynergy and the Continuus Software Corporation logo are trademarks of
Continuus. All other brand names or trademarks appearing in this prospectus are
the property of their respective holders.
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5
<PAGE> 8
- --------------------------------------------------------------------------------
THE OFFERING
<TABLE>
<S> <C>
Common stock offered:
By Continuus Software Corporation..................... shares
By selling stockholders............................... ________ shares
Total......................................... shares
Common stock outstanding after the offering............. shares
Offering price.......................................... $ per share
Use of proceeds......................................... Working capital and general corporate
purposes.
Proposed Nasdaq National Market symbol.................. CNSW
</TABLE>
The number of shares to be outstanding after the offering includes the issuance
of (1) 4,306,454 shares of common stock in connection with the conversion of all
outstanding shares of preferred stock upon the closing of this offering and (2)
278,125 shares of common stock reserved for issuance upon exercise of warrants
to purchase common stock at $5.57 per share. It excludes (1) 2,452,830 shares of
common stock reserved for issuance under our current stock option plan, of which
1,257,671 shares were subject to outstanding options as of March 31, 1999 at a
weighted average exercise price of $3.27 per share, (2) 1,179,033 shares of
common stock reserved for issuance and subject to outstanding options as of
March 31, 1999 under our initial stock option plan at a weighted average
exercise price of $1.58 per share, (3) 1,033,737 shares of common stock reserved
for issuance upon exercise of outstanding warrants as of March 31, 1999 at a
weighted average exercise price of $1.25 per share and (4) 1,078,167 shares of
common stock reserved for issuance upon the conversion of a $6 million senior
secured convertible debenture with a conversion price of $5.57 per share.
Except as otherwise noted, all information in this prospectus (i) assumes no
exercise of the underwriters' over-allotment option, (ii) reflects a 1-for-2.65
reverse stock split, which will be effective prior to the closing of this
offering and (iii) reflects the conversion of all outstanding shares of
preferred stock into common stock upon completion of the offering and the
exercise and conversion into common stock of warrants to purchase 278,125 shares
of preferred stock which will terminate if not exercised upon completion of the
offering.
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6
<PAGE> 9
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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The pro forma information below gives effect, as of March 31, 1999, to the
receipt of $1,547,766 from holders of warrants to purchase 278,125 shares of
common stock upon exercise of such warrants concurrently with the closing of
this offering.
The pro forma as adjusted information below gives effect as of March 31, 1999,
to our receipt of the estimated net proceeds of $_________ from the sale of
______________ shares of common stock offered by us at an assumed initial public
offering price of $____ per share and the receipt of the estimated proceeds
therefrom.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- ----------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- ------- ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
Software licenses.............. $ 3,887 $ 8,664 $ 9,611 $13,829 $14,429 $ 3,745 $4,172
Services....................... 2,478 4,436 6,488 9,434 13,007 3,065 4,067
------- ------- ------- ------- ------- ------- ------
Total revenues.............. 6,365 13,100 16,099 23,263 27,436 6,810 8,239
------- ------- ------- ------- ------- ------- ------
Cost of revenues:
Software licenses.............. 582 535 775 650 654 167 156
Services....................... 2,264 2,583 4,207 6,007 7,446 1,681 1,945
------- ------- ------- ------- ------- ------- ------
Total cost of revenues...... 2,846 3,118 4,982 6,657 8,100 1,848 2,101
------- ------- ------- ------- ------- ------- ------
Gross profit..................... 3,519 9,982 11,117 16,606 19,336 4,962 6,138
------- ------- ------- ------- ------- ------- ------
Operating expenses:
Sales and marketing............ 5,347 9,296 11,776 12,079 15,469 3,577 4,098
Research and development....... 1,964 2,434 3,473 3,574 4,493 1,065 1,233
General and administrative..... 1,204 1,565 1,720 1,896 2,483 749 704
------- ------- ------- ------- ------- ------- ------
Total operating expenses.... 8,515 13,295 16,969 17,549 22,445 5,391 6,035
------- ------- ------- ------- ------- ------- ------
Income (loss) from operations.... (4,996) (3,313) (5,852) (943) (3,109) (429) 103
Other expense, net............. 33 94 198 637 750 207 296
------- ------- ------- ------- ------- ------- ------
Loss before income tax
provision...................... (5,029) (3,407) (6,050) (1,580) (3,859) (636) (193)
Income tax provision............. 1 4 3 3 7 13 5
------- ------- ------- ------- ------- ------- ------
Net loss......................... $(5,030) $(3,411) $(6,053) $(1,583) $(3,866) $ (649) $ (198)
======= ======= ======= ======= ======= ======= ======
Pro forma basic and diluted net
loss per share(1).............. $ (0.62) $(0.03)
======= ======
Pro forma basic and diluted
weighted average shares(1)..... 6,202 6,222
======= ======
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1999
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 2,357 $ 3,905 $
Working capital........................................... 826 2,374
Total assets.............................................. 13,323 14,871
Long-term liabilities..................................... 6,376 6,376
Total stockholders' equity (deficit)...................... (3,285) (1,737)
</TABLE>
- ---------------------------------------------
(1) See Note 1 of Notes to Consolidated Financial Statements for method used to
determine pro forma basic and diluted net loss per share.
- --------------------------------------------------------------------------------
7
<PAGE> 10
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Our business, financial condition or results of
operations could be harmed by any of the following risks. The trading price of
our common stock could decline due to any of the following risks, and you might
lose all or part of your investment.
OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY, WHICH MAY CAUSE THE PRICE OF OUR
STOCK TO FALL
We believe that quarter-to-quarter or annual 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 will likely fall.
Our operating results have varied in the past, and we expect that they will
continue to vary significantly from period-to-period due to a number of factors,
including:
- the size and timing of individual orders;
- seasonality of our revenues;
- employee hiring and retention, particularly with respect to
sales personnel;
- lengthy sales and implementation cycles;
- changes in the mix of higher margin and lower margin products
and services;
- timing and market acceptance of the introduction of new
products;
- competition and pricing in the software industry;
- consulting personnel utilization rates; and
- the mix of international and domestic revenues.
Our quarterly revenues and operating results depend on the volume and timing of
customer contracts we receive during a given quarter and the percentage of each
contract we can recognize as revenue during each quarter. It is very difficult
to predict these factors in any given quarter.
Moreover, we have often recognized a substantial portion of our revenues in the
last month of a quarter, with a concentration of such revenues in the last weeks
or days of the third month. Accordingly, we cannot predict our financial results
for any quarter until very late in the quarter. A delay in an anticipated sale
near the end of a quarter can seriously harm our operating results for that
quarter.
Our expense levels are relatively fixed in the short term and are based, in
part, on our expectations of our future revenues. As a result, any delay in
generating or recognizing revenues could cause significant variations in our
operating results from quarter to quarter and could result in increased
operating losses.
SEASONAL TRENDS IN SALES OF OUR SOFTWARE PRODUCTS MAY AFFECT OUR QUARTERLY
OPERATING RESULTS
We have experienced and expect to continue to experience seasonality in sales of
our software products. These seasonal trends materially affect our
quarter-to-quarter operating results. We may experience weaker demand for our
products and services in our third quarter each year, particularly in
international markets, as a result of reduced sales activities during the summer
months. As a result of customer buying patterns, we may also realize lower
revenues in the first quarter of each year than in the preceding fourth quarter.
8
<PAGE> 11
WE HAVE A HISTORY OF LOSSES, WE EXPECT FUTURE LOSSES AND WE MAY NEVER BECOME
PROFITABLE
We have not achieved profitability, we expect to incur net losses in the
foreseeable future and we may never become profitable in the future. We incurred
net losses of $3.9 million in 1998 and $0.2 million for the three months ended
March 31, 1999. As of March 31, 1999, we had an accumulated deficit of $23.6
million. 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.
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 such profitability on a quarterly or
annual basis. For more detailed information regarding our operating results and
financial condition, please see "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
CUSTOMER FOCUS AND SPENDING ON YEAR 2000 REMEDIATION MAY REDUCE OUR FUTURE
REVENUES
Many computers, software applications and other equipment are not capable of
distinguishing 21st century dates from 20th century dates. As a result,
beginning on January 1, 2000, some computers, software and other equipment could
fail to operate or fail to produce correct results if "00" is interpreted to
mean 1900 rather than 2000. These problems are commonly referred to as the "year
2000 problem."
Our business may be harmed by customer focus on year 2000 computer problems.
Many customers may spend their limited financial and personnel resources
remediating these year 2000 problems, thereby delaying or foregoing entirely
investment in more general IT products such as Continuus Change Management Suite
and Continuus WebSynergy. This trend could reduce our revenues in 1999 and 2000.
OUR OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON THE CONTINUUS CHANGE
MANAGEMENT SUITE
In 1997, sales of the Continuus Change Management Suite or its components
accounted for 100% of our total software license revenues. In 1998, the sales
accounted for approximately 94% of our total software license revenues and for
the three months ended March 31, 1999, they accounted for approximately 99% of
our total software license revenues. We expect that these products and services
will continue to account for a substantial portion of our total revenues for the
foreseeable future. The following events may reduce revenues derived from the
Continuus Change Management Suite:
- competition from other products;
- significant flaws in our software products or incompatibility
with third-party hardware or software products;
- negative publicity or evaluation; or
- obsolescence of the hardware platforms or software environments
in which our systems run.
A decline in the demand for Continuus Change Management Suite and the revenue
associated with licenses of the Continuus Change Management Suite would harm our
business.
OUR SUCCESS PARTIALLY DEPENDS ON OUR NEW INTERNET PRODUCT AND NEW PRODUCT
DEVELOPMENT
A substantial portion of our revenues in the future may be derived from
Continuus WebSynergy Suite and related services. A decline in the price of, or
demand for, Continuus WebSynergy, or our failure
9
<PAGE> 12
to achieve broad market acceptance of Continuus WebSynergy, would harm our
business. In addition, we are currently developing new product features and in
the future we may expand our operations by promoting new or complementary
products and services. In particular, we have developed and intend to expand the
current functionality to provide a more comprehensive e-asset management
solution. Any development of these new technologies and product suites will
require significant research and development resources and will involve many
challenges. If we are unable to provide a comprehensive e-asset management
solution, our business could be harmed. If we incur delays in the introduction
of new product features, or if these features do not provide the benefits
expected or do not achieve widespread market acceptance, our business may be
harmed.
WE MAY NOT BE ABLE TO RECRUIT AND RETAIN THE PERSONNEL WE NEED TO SUCCEED
Our future success depends upon the continued service of our executive officers
and other key employees, including certain sales and marketing, technical and
consulting personnel. If we lost the services of one or more of our executives
or key employees, including if one or more of our executives or key employees
decided to join a competitor or otherwise compete directly or indirectly with
us, this could harm our business. We do not maintain "key person" life insurance
policies covering any of our employees.
We sell our products primarily through our direct sales force and we support our
customers with our internal technical support staff. To achieve significant
revenue growth in the future, we must recruit, train and retain additional sales
and technical support personnel. Factors that may affect our ability to reach
this goal include:
- time delays between the date we hire personnel and the date they
become fully productive or productive at all;
- our ability to effectively manage an expansion of our sales and
technical support personnel and retain such personnel; and
- competition for qualified personnel from larger, more
established companies who have greater financial resources than
we do.
In the past, we have had difficulty recruiting and retaining qualified
personnel, and we cannot guarantee that we will not experience such difficulties
in the future. In 1996 and 1998, we suffered decreased sales and revenue due to
turnover in our sales force. Newly hired sales personnel generally do not become
fully productive until they have worked for at least two quarters. Because of
the time required to recruit new sales personnel and for them to become fully
productive, we cannot quickly and easily expand our sales force in response to
unanticipated events. As a result, failure to retain key personnel may harm our
business in the future.
THE SALES CYCLE FOR OUR PRODUCTS IS LONG AND MAY HARM OUR OPERATING RESULTS
Our customers typically take a long time to evaluate our products. The period of
time between initial customer contact and an actual sales order may span six
months or more. During the evaluation period, customers may decide not to
purchase or may scale down their orders of our products for various reasons,
some of which are beyond our control, including:
- changes in our customers' budgets and purchasing priorities;
- actions by competitors, including introduction of new products
and price reductions; and
- diversion of resources and management's attention to other
information technology issues, such as year 2000 issues.
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<PAGE> 13
In addition, we often must provide a significant level of education to our
prospective customers regarding the use and benefit of our products, which may
cause additional delays during the evaluation process. Because of the foregoing
factors, it is difficult for us to forecast the timing and recognition of
revenues from sales of our products and services.
IF WE DO NOT CONTINUE TO RECEIVE REPEAT BUSINESS FROM EXISTING CUSTOMERS, OUR
BUSINESS WILL SUFFER
In 1998, we generated approximately 58% of our software license revenues from
repeat business from existing customers. Our ability to generate repeat business
from current customers depends on many factors. Most of our current customers
initially purchase a limited number of licenses as they implement and adopt our
products. Even if the customer successfully uses our products, customers may not
purchase additional licenses to expand the use of our products. Purchases of
expanded licenses by these customers will depend on their success in deploying
our products, their satisfaction with our products and support services and
their perception of competitive alternatives. A customer's decision whether to
widely deploy our products and purchase additional licenses may also be affected
by factors that are outside of our control or which are not related to our
products or services. In addition, as we deploy new versions of our products or
introduce new product suites, our current customers may not require the
functionality of our new products and may not ultimately license these products.
If we fail to generate repeat and expanded business from our customers, our
business could be harmed.
WE FACE INTENSE COMPETITION
The markets for integrated Internet and enterprise software asset management
solutions are intensely competitive, subject to rapid change and sensitive to
new product introductions or enhancements and marketing efforts by industry
participants. We expect to experience significant and increasing levels of
competition in the future. The principal competitive factors affecting the
markets for our product and professional services include:
- corporate and product reputation;
- innovation with frequent product enhancement;
- breadth of integrated product line;
- product architecture;
- product functionality and features;
- product quality;
- product performance;
- the availability of support and technical consulting services;
and
- price.
Although we believe that our products compete favorably with respect to these
factors, we may not be able to maintain our competitive position against current
or potential competitors, especially those with greater resources.
Many of our existing competitors, as well as a number of potential competitors,
have larger technical staffs, more established and larger marketing and sales
organizations, and significantly greater financial resources than we do.
Moreover, we have limited proprietary barriers to entry that could keep our
competitors from developing similar products or selling competing products in
our markets.
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<PAGE> 14
Future competition may result in price reductions, reduced margins or loss of
licenses which in turn would harm our business, operating results and financial
condition. See "Business -- Competition."
OUR SUCCESS PARTIALLY DEPENDS ON THE EMERGING MARKET FOR E-ASSET MANAGEMENT
SOLUTIONS
Our success depends on the size and growth of the market for our products. The
following factors characterize the market for our products:
- rapid technological change;
- frequent new product announcements and introductions; and
- evolving industry standards and changing customer requirements.
We are expanding beyond traditional change management software to provide our
customers with comprehensive e-asset management solutions. Potential customers
may not fully appreciate the differences between our comprehensive e-asset
management solutions and traditional change management software. The e-asset
management market generally may not develop and continue or grow as we
anticipate. Any failure of this market to develop or grow would harm our
business.
CHANGES IN INTERNET TECHNOLOGY AND STANDARDS MAY IMPEDE MARKET ACCEPTANCE OF OUR
INTERNET PRODUCT
Rapidly changing Internet technology and standards may impede market acceptance
of Continuus WebSynergy. The success of Continuus WebSynergy will require us to
develop and introduce new technologies and product suites and to offer
functionality that we do not currently provide. Continuus WebSynergy has been
designed and the full e-asset management solution will be designed based upon
prevailing Internet technology. If Internet technologies emerge that are
incompatible with Continuus WebSynergy or other new Internet products we
develop, our products may become obsolete and existing and potential new
customers may seek alternatives to them. We may not be able to quickly adapt our
products to new Internet technology.
THERE ARE MANY RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS
We derived approximately 52% of our total revenues in 1998 from sales outside
North America, principally in Europe. During the three months ended March 31,
1999, we derived approximately 48% from sales outside North America. We believe
that our growth and profitability will depend in part on additional expansion of
sales in foreign markets. Accordingly, we have sales or support staff located in
the United Kingdom, Ireland, France and Germany. Our international operations
require and will continue to require significant management attention and
financial resources and could adversely affect our operating margins. To
increase international sales, we must establish additional foreign operations,
hire additional personnel and recruit additional international resellers. If we
fail to expand international sales in a timely and cost-effective manner, it
would harm our business, operating results and financial condition.
Additional risks inherent in our international business activities include:
- longer payment cycles;
- difficulties in staffing and managing foreign operations;
- increased sales and marketing and research and development
expenses;
- costs and risks of relying upon distributors;
- various and changing regulatory requirements;
- export restrictions and availability of export licenses;
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<PAGE> 15
- tariffs and other trade barriers;
- political and economic instability; and
- potentially adverse tax laws.
Any of these factors could harm our business. Foreign laws also govern a certain
number of our customer purchase agreements, which may differ significantly from
U.S. laws. Therefore, we may be limited in our ability to enforce our rights
under such agreements and to collect payments should any customer refuse to pay
such amounts. In addition, we are subject to the Foreign Corrupt Practices Act
which may place us at a competitive disadvantage to foreign companies that are
not subject to the FCPA.
FLUCTUATIONS IN THE VALUE OF FOREIGN CURRENCIES COULD RESULT IN CURRENCY
TRANSACTION LOSSES
Our international customers pay us in their local currencies. Consequently, any
gains and losses on the conversion to U.S. dollars of accounts receivable and
accounts payable arising from international operations may contribute to
fluctuations in our operating results. Although we may utilize some hedging in
the future, we currently do not utilize foreign currency hedging instruments.
Historically such foreign currency gains and losses have not been material to
our financial performance. We cannot guarantee that fluctuations in currency
rates will not harm our business, operating results and financial condition in
the future.
FAILURE TO MANAGE OUR GROWING OPERATIONS WOULD HARM OUR BUSINESS
We plan to increase business opportunities through an expansion of our
distribution network in the United States and internationally. However, we
cannot guarantee that the efforts and funds directed towards expanding our
distribution network will succeed. Any future growth will also depend on, among
other things, our ability to gain market acceptance for our products in new
geographic areas and to monitor and control the additional costs and expenses
associated with expansion. We cannot guarantee that we can successfully manage
these aspects of our business.
Any business opportunities will increase demands on our systems and controls. To
deal with these concerns, we will need to implement a variety of new and
upgraded operational and financial systems, procedures and controls and to hire
additional administrative personnel. We cannot be sure that we can complete the
implementation of these systems, procedures and controls or hire such personnel
in a timely manner. Our failure to implement our new operational and financial
control systems to accommodate new growth would harm our business.
OUR NEW EXECUTIVE TEAM MAY NOT BE ABLE TO WORK TOGETHER TO MEET OUR BUSINESS
OBJECTIVES, WHICH WOULD HARM OUR BUSINESS
Several of our executive officers have been employed by us for a relatively
short period of time. Our Vice President, Research and Development, joined in
August 1998, our Chief Financial Officer joined in December 1998 and our Vice
President, Americas Operations, joined in March 1999. In addition, our former
Vice President, Research and Development, became Vice President, Marketing in
August 1998. The failure of the new management team to work together effectively
would harm our business.
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<PAGE> 16
WE MUST KEEP PACE WITH TECHNOLOGICAL CHANGE TO REMAIN COMPETITIVE
The introduction of products utilizing new technologies and the emergence of new
industry standards could render our existing products and products currently
under development obsolete and unmarketable. The following factors characterize
the markets for our products:
- rapid technological advances;
- evolving industry standards;
- changes in end-user requirements; and
- frequent new product introductions and enhancements.
As a result, our future success depends upon our ability to enhance our current
products and successfully develop, introduce and sell new products that
incorporate new technology and respond to evolving end-user requirements. We
plan to introduce new products and enhanced versions of current products in
1999, including release 4.6 of the Continuus Change Management Suite, release
1.0 of Continuus WebPT, and release 2.0 of Continuus WebSynergy. We generally
allow for both internal and beta-site testing of product performance in our
product release schedules. Because of the complexity of our products, however,
we may postpone the release of new products should test results indicate the
need for redesign, retesting or enhancements in response to beta customer
feedback. Any failure to anticipate or adequately respond to technological
developments or end-user requirements, or any significant delays developing or
introducing new products, could damage our competitive position in the
marketplace and reduce revenues. We cannot guarantee that we will succeed in
developing and marketing new products or enhancements on a timely basis or that
we will not experience significant delays in the future. In addition, we plan on
increasing the size of our product development staff in 1999. We may not be able
to successfully hire and train adequate product development personnel to meet
our needs.
WE MAY BE SUBJECT TO SIGNIFICANT LIABILITY CLAIMS FROM OUR CUSTOMERS
Because our software products are complex, they often contain errors or "bugs"
that can be detected at any point in a product's life cycle. Such defects are
most frequently found during the period immediately following the introduction
of new products or enhancements to existing products. Despite extensive product
testing prior to introduction, our products have in the past contained software
errors that were discovered after commercial introduction. Errors or performance
problems may also be discovered in the future. Any future software defects
discovered after we ship our products could result in loss of revenues or delays
in market acceptance, which would harm our business, operating results or
financial condition. Because we rely on our own products in connection with
developing our software, any such errors could make it more difficult for us to
develop software in the future.
We typically design our customer license agreements to contain provisions which
limit our exposure to potential product liability claims. However, we cannot
guarantee that such limitations of liability would be enforceable or would
otherwise protect us from liability for damages to a customer resulting from a
defect in one of our products, or associated with the professional services we
render. Although we maintain insurance which covers certain damages arising from
the implementation and use of our products, we are not certain that such
insurance would cover or be sufficient to cover any such claims against us.
Moreover, we incur risks of professional and other liability stemming from our
training and consulting services. Any product liability or other claims against
us, if successful and of sufficient magnitude, could harm our business,
operating results and financial position.
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<PAGE> 17
OUR FAILURE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS MAY HARM OUR BUSINESS
Our success and competitive advantage is heavily dependent upon our proprietary
and licensed technology. Therefore, if we do not adequately protect our
proprietary and licensed technology, our business will suffer. We primarily rely
on a combination of copyright and trademark laws, trade secrets, nondisclosure
agreements and technical measures to protect our proprietary rights. We do not
have any patents. We typically enter confidentiality or license agreements with
our employees, distributors, customers and potential customers. We also limit
access to and distribution of our software, documentation and other proprietary
information. We can not guarantee that our confidentiality procedures can
adequately deter misappropriation or independent third-party development of our
technology or prevent an unauthorized third party from obtaining or using
information that we regard as proprietary. In addition, the laws of some foreign
countries do not protect or enforce proprietary rights to the same extent as do
the laws of the United States. Policing the unauthorized use of our products is
difficult and, while we can not determine the extent to which third parties are
pirating our software products, we expect software piracy to be a persistent
problem in the future.
OUR PRODUCTS DEPEND ON THE PROPRIETARY AND LICENSED TECHNOLOGY OF OTHERS
We rely upon a database management system developed by Informix Software, Inc.,
embedded in the Change Management Suite pursuant to a license that expires on
December 31, 1999. We may not be able to renew this agreement or develop
alternative technology. We can not be sure that Informix's product lines will
continue to be available to us on commercially reasonable terms. If Informix is
acquired or abandons or fails to enhance the database, we may need to seek other
suppliers. This could harm our business, operating results and financial
condition.
OUR PROPRIETARY TECHNOLOGY MAY BE SUBJECTED TO INFRINGEMENT CLAIMS OR MAY BE
INFRINGED UPON
There is a trend in the software industry to use patents to protect software.
Although we believe that our products and technology do not infringe anyone
else's proprietary rights, third parties may assert infringement claims in the
future that may or may not be resolved in our favor. We expect
proprietary-rights-related lawsuits to continue in our industry segment as the
number of products and competitors grow and the functionality of products in
different industry segments overlap. Because we are dependent upon a limited
number of products, any such claims, with or without merit, could be:
- time-consuming;
- result in costly litigation;
- cause product shipment delays; or
- require us to enter into royalty or licensing agreements.
Such royalty or licensing agreements, if required, may not be available on
acceptable terms or at all. This would materially adversely affect our business,
operating results and financial condition as would any unresolved infringement
claims against us. In addition, we may initiate future litigation to protect our
proprietary rights or to determine the validity and scope of others' proprietary
rights. This litigation could result in substantial costs and a diversion of
resources and could harm our business, operating results and financial
condition.
FUTURE ACQUISITIONS MAY HARM OUR BUSINESS
Our strategic plans may include expanding our product offerings, distribution
channels, and market share through acquisitions. While we have no current
agreements or negotiations underway with respect to any such acquisitions, we
may acquire businesses, products or technologies in the future.
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<PAGE> 18
Our management has limited acquisition experience and will need to develop the
relevant skills if we are to be successful in any such endeavor. In the event of
such future acquisitions, we could:
- issue equity securities which could dilute your stock ownership;
- incur substantial debt and other liabilities; or
- assume contingent liabilities.
These actions could harm our results of operations and our stock price.
Acquisitions also entail numerous risks. For example:
- it is often difficult to assimilate the operations and personnel
of an acquired business;
- it is difficult to effectively manage geographically remote
units;
- our management must devote its attention to assimilating the
acquired business which diverts their attention from our other
business concerns;
- we might lose the key employees of an acquired business;
- we might enter markets in which we have limited or no direct
experience;
- our customers may be dissatisfied with an acquired business;
- a newly-acquired business may not perform as well as we
expected; and
- we may assume unknown liabilities.
We may not be able to overcome these risks if we acquire a business in the
future, which could harm our business, financial condition and results of
operations.
POTENTIAL YEAR 2000 PROBLEMS WITH OUR SOFTWARE OR OUR INTERNAL OPERATING SYSTEMS
COULD HARM OUR BUSINESS
If any of our licensees experience year 2000 problems as a result of their use
of our software products, those licensees could assert claims for damages which,
if successful, could harm our business, future operating results and financial
condition. In the ordinary course of our business, we test and evaluate our
software products. We believe that current versions of our software products are
generally year 2000 compliant, meaning that the use or occurrence of dates on or
after January 1, 2000 will not materially affect the performance of our software
products or the ability of our products to correctly create, store, process and
output information of data involving dates. However, we may learn that certain
of our software products do not contain all of the software routines and codes
necessary for the accurate calculation, display, storage and manipulation of
data involving dates. In addition, in certain cases, we have warranted that the
use or occurrence of dates on or after January 1, 2000 will not adversely affect
the performance of our products with respect to four digit date dependent data
or the ability to create, store, process and output information related to such
data.
For a more detailed description of our year 2000 preparedness assessment, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000 Compliance."
IF CUSTOMERS NEED TO INSTALL THE YEAR 2000 COMPLIANT VERSION OF CONTINUUS CHANGE
MANAGEMENT SUITE BEFORE THE END OF 1999, OUR CONSULTING SERVICES MAY BE
SIGNIFICANTLY AFFECTED
In June 1998, we issued a new version of the Continuus Change Management Suite
that is year 2000 compliant. However, only approximately 25% of our customers
have implemented the year 2000 compliant version to date. The needs of the
majority of our customers to implement the year 2000 compliant version by the
end of 1999 may divert or overwhelm the attention of our consulting
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<PAGE> 19
personnel. Consequently, we may not be able to provide adequate levels of
service to our current customers or to new customers, resulting in strained
customer relations.
OUR STOCK PRICE MAY BE VOLATILE AND YOU MAY NOT BE ABLE TO RESELL SHARES AT OR
ABOVE THE OFFERING PRICE
Our common stock has never been sold in a public market. An active trading
market for our common stock may not develop or be sustained after completion of
the offering. We are negotiating the initial offering price of the common stock
with the underwriters. However, the initial offering price may not be indicative
of the prices that will prevail in the public market after the offering. The
trading price of our common stock could fluctuate in response to factors such
as:
- general market conditions;
- quarterly fluctuations in our revenues and financial results
both in absolute terms and relative to analyst and investor
expectations;
- announcements of technological innovations or new products;
- disputes or other developments concerning proprietary rights,
including copyright and litigation matters;
- publicity regarding actual or potential results with respect to
technologies or products under development;
- public concern as to the feasibility of new technologies;
- changes in recommendations of securities analysts; and
- other events or factors, many of which are beyond our control.
In addition, the stock market in general, and the Nasdaq National Market and
software companies in particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating
performance of such companies. The trading prices of many software companies'
stocks are at or near historical highs and these trading prices and multiples
are substantially above historical levels. These trading prices and multiples
may not be sustained. These broad market and industry factors may reduce our
stock price, regardless of our actual operating performance. In the past,
following periods of volatility in the market price of a company's securities,
securities class-action litigation has often been instituted against such
companies. Such litigation, if instituted, could result in substantial costs and
a diversion of management's attention and resources, which would harm our
business, financial condition and results of operations.
CONTROL BY MANAGEMENT AND EXISTING STOCKHOLDERS MAY LIMIT YOUR ABILITY TO
INFLUENCE THE OUTCOME OF DIRECTOR ELECTIONS AND CERTAIN TRANSACTIONS
Upon completion of this offering, our principal stockholders, executive
officers, directors and affiliated individuals and entities together will
beneficially own approximately _____% of the outstanding shares of common stock
(_____% if the underwriters' over-allotment option is exercised in full). As a
result, these stockholders, acting together, will be able to influence
significantly and possibly control most matters that require approval by our
stockholders, including approvals of amendments to our Certificate of
Incorporation, mergers or other business combination transactions, going private
transactions and other fundamental transactions.
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SUBSTANTIAL FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET COULD CAUSE
OUR STOCK PRICE TO FALL
If our stockholders sell substantial amounts of our common stock in the public
market following the offering, the market price of our common stock could fall.
Such sales also might make it more difficult for us to sell equity or
equity-related securities in the future at a time and price that we deem
appropriate.
Upon completion of this offering, we will have approximately _________________
shares of common stock outstanding, of which approximately ___________________
shares (approximately ______________________ if the underwriters' over-allotment
option is exercised in full) will be freely transferable without restriction or
registration under the Securities Act of 1933 (the "Securities Act"), unless
such shares are held by our affiliates, as that term is defined in Rule 144
under the Securities Act. All of our directors and officers and certain
stockholders have agreed not to sell or otherwise dispose of any of their shares
for 180 days after the date of this prospectus. Sales of common stock by
existing stockholders in the public market, or the availability of such shares
for sale, could adversely affect the market price of the common stock.
In addition, as soon as practicable after the date of this prospectus, we intend
to file a registration statement on Form S-8 with the Securities and Exchange
Commission covering the 4,457,547 shares of common stock reserved for issuance
under our equity incentive plans. On that date, at least 964,365 shares will be
subject to immediately exercisable options (based on options outstanding and
exercisable on March 31, 1999). Sales of a large number of shares could have an
adverse effect on the market price for our common stock.
After this offering, the holders of 7,063,748 shares of common stock and common
stock issuable upon conversion of a debenture and upon exercise of warrants to
purchase common stock will be entitled to certain rights with respect to
registration of such shares under the Securities Act. If those holders, by
exercising their registration rights, cause a large number of securities to be
registered and sold in the public market, such sales could reduce our stock
price. For a further description of the eligibility of shares for sale into the
public market following the offering see "Shares Eligible for Future Sale."
CERTAIN PROVISIONS IN OUR CORPORATE CHARTER AND BYLAWS MAY DISCOURAGE TAKE-OVER
ATTEMPTS AND THUS DEPRESS OUR STOCK PRICE
Provisions in our Certificate of Incorporation, as amended and restated upon the
closing of this offering may have the effect of delaying or preventing a change
in control or changes in our management. These provisions include:
- the right of our board of directors, without stockholder
approval, to issue additional shares of common stock and to fix
the rights, preferences and privileges of and issue up to
5,000,000 shares of preferred stock with voting, conversion,
dividend and other rights and preferences that could adversely
affect the voting power or other rights of the holders of common
stock;
- a requirement that any action required or permitted to be taken
by our stockholders must be effected at a duly called annual or
special meeting of stockholders and may not be effected by
written consent; and
- the requirement that at least 10% of the outstanding shares are
needed to call a special meeting of stockholders.
These provisions could discourage potential take-over attempts and could reduce
our stock price. In addition, these provisions may limit the ability of
stockholders to remove our current management.
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DELAWARE LAW MAY INHIBIT POTENTIAL ACQUISITION BIDS FOR CONTINUUS WHICH MAY
REDUCE OUR STOCK PRICE AND PREVENT CHANGES IN MANAGEMENT
Certain provisions of Delaware law may inhibit potential acquisition bids for
Continuus. We are subject to the antitakeover provisions of the Delaware General
Corporation Law, which regulates corporate acquisitions. Delaware law prevents
certain Delaware corporations, which includes Continuus, from engaging, under
certain circumstances, in a "business combination" with any "interested
stockholder" for three years following the date that such stockholder became an
interested stockholder. For purposes of Delaware law, a "business combination"
includes, among other things, a merger or consolidation involving Continuus and
the interested stockholder and the sale of more than 10% of our assets. In
general, Delaware law defines an "interested stockholder" as any entity or
person beneficially owning 15% or more of the outstanding voting stock of a
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
YOUR INVESTMENT IN CONTINUUS COMMON STOCK FACES IMMEDIATE AND SUBSTANTIAL
DILUTION
The initial public offering price is substantially higher than the book value
per share of our common stock. Investors purchasing common stock in this
offering will, therefore, incur immediate dilution of $________ in net tangible
book value per share of common stock. This dilution figure deducts the estimated
underwriting discounts and commissions and estimated offering expenses payable
by us from the initial public offering price. Investors will incur additional
dilution upon the exercise of outstanding stock options.
WE HAVE BROAD DISCRETION AS TO USE OF THE PROCEEDS AND HOW WE INVEST THESE
PROCEEDS MAY NOT YIELD A FAVORABLE RETURN
We will have broad discretion as to the use of the proceeds from this offering
and we may not be able to invest these proceeds to yield a significant return.
Our primary purpose is to create a public market for our common stock. As of the
date of this prospectus, we do not plan to use the proceeds from this offering
other than for working capital and general corporate purposes. We may also use
the proceeds in future strategic acquisitions of, or investments in, businesses
that offer products, services and technologies that further our ability to
provide enterprise software asset management solutions to businesses or increase
our ability to sell our products and services to new markets. Until the need
arises to use the proceeds, we plan to invest the net proceeds in investment
grade, interest-bearing securities.
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY
UNCERTAIN
You should not rely on forward-looking statements in this prospectus. Certain
statements under the captions "Prospectus Summary," "Risk Factors," "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," and elsewhere in this prospectus are
"forward-looking statements." These forward-looking statements include, but are
not limited to, statements about our plans, objectives, expectations and
intentions and other statements contained in the prospectus that are not
historical facts. When used in this prospectus, the words "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar
expressions are generally intended to identify forward-looking statements.
Because these forward-looking statements involve risks and uncertainties, there
are important factors that could cause actual results to differ materially from
those expressed or implied by these forward-looking statements, including our
plans, objectives, expectations and intentions and other factors discussed under
"Risk Factors."
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USE OF PROCEEDS
We estimate that we will receive $________________ ($_________________ if the
underwriters' over-allotment option is exercised in full) in net proceeds from
the sale of the ______________ shares of common stock we are offering hereby at
an assumed initial public offering price of $____________ per share. We will not
receive any proceeds from the sale of shares of common stock by our selling
stockholders.
We expect to use the net proceeds from this offering principally for working
capital and general corporate purposes. We also anticipate using a portion of
the proceeds to fund acquisitions of complementary businesses, although there
are no current arrangements or understandings with respect to any specific
acquisitions. We can not guarantee that we will not complete any acquisitions in
the future. Pending use of the net proceeds for the above purposes, we intend to
invest the net proceeds of this offering in short-term, interest bearing,
investment grade securities.
DIVIDEND POLICY
To date, we have never declared nor paid any cash dividends on our common stock.
We currently intend to retain any earnings for funding growth and, therefore, do
not anticipate paying any cash dividends in the future.
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CAPITALIZATION
The following table sets forth our long-term obligations and capitalization (i)
as of March 31, 1999; (ii) on a pro forma basis to reflect the issuance of
common stock in connection with the conversion of the preferred stock upon the
closing of this offering and the receipt of $1,547,766 from the exercise of
warrants to purchase 278,125 shares of common stock concurrently with the
closing of this offering; and (iii) on a pro forma as adjusted basis to give
effect to this offering at an assumed initial public offering price of $ per
share and the application of the estimated net proceeds from the offering.
The table below excludes (i) 2,452,830 shares of common stock reserved for
issuance under our current stock option plan, of which 1,257,671 shares were
subject to outstanding options as of March 31, 1999 at a weighted average
exercise price of $3.27 per share, (ii) 1,179,033 shares of common stock
reserved for issuance and subject to outstanding options under our initial stock
option plan as of March 31, 1999 at a weighted average exercise price of $1.58
per share; (iii) 1,033,737 shares of common stock reserved for issuance upon
exercise of outstanding warrants as of March 31, 1999 at a weighted average
exercise price of $1.25 per share; and (iv) 1,078,167 shares of common stock
issuable upon conversion of a $6 million senior secured convertible debenture.
You should read this table in conjunction with our consolidated financial
statements and related notes thereto.
<TABLE>
<CAPTION>
MARCH 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term obligations, including current
maturities......................................... $ 7,068 $ 7,068 $ 7,068
-------- -------- --------
Stockholders' deficit:
Preferred stock, $.001 par value; 5,000,000 shares
authorized, no shares issued or outstanding;
actual, pro forma and as adjusted............... -- -- --
Series A through E convertible preferred stock, no
par value; 4,691,625 shares authorized;
4,306,454 shares issued and outstanding, actual,
pro forma or pro forma as adjusted.............. 18,018 -- --
Common stock and additional paid-in capital $.001
par value; 30,000,000 shares authorized;
1,673,640, 6,258,219 and shares issued
and outstanding, actual, pro forma or pro
forma as adjusted............................. 1,968 21,782
Warrants to purchase common stock.................. 114 114 114
Warrants to purchase preferred stock............... 248 -- --
Accumulated deficit.................................. (23,633) (23,633) (23,633)
-------- -------- --------
Total stockholders' deficit................... (3,285) (1,737)
-------- -------- --------
Total capitalization....................... $ 3,783 $ 5,331 $
======== ======== ========
</TABLE>
See Consolidated Financial Statements for details of each series of outstanding
preferred stock.
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DILUTION
Our pro forma net tangible book value (deficit) as of March 31, 1999 was
approximately $(2,019,234), or $(0.32) per share of common stock. Pro forma net
tangible book value per share represents the amount of total tangible assets
less total liabilities divided by 6,258,219 shares of common stock outstanding
after giving effect to the conversion of all 4,306,454 outstanding shares of
preferred stock into common stock and the receipt of $1,547,766 upon the
exercise of warrants to purchase 278,125 shares.
After giving effect to the sale of the _________________ shares of common stock
offered hereby at an assumed initial public offering price of $_________________
per share and our receipt of the estimated net proceeds therefrom, our pro forma
net tangible book value at March 31, 1999 would have been approximately
$_______________ million, or $_______________ per share. This represents an
immediate increase in pro forma net tangible book value of $_______________ per
share to existing stockholders and an immediate dilution in pro forma net
tangible book value of $ per share to new investors. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value (deficit) per share..... (0.32)
Increase in pro forma net tangible book value per share
attributable to new investors..........................
------
Pro forma net tangible book value per share after this
offering..................................................
------
Net tangible book value dilution per share to new
investors.............................................. $
======
</TABLE>
The table below summarizes, on a pro forma basis, as of March 31, 1999, the
following differences between our existing stockholders and new investors
purchasing our common stock in this offering:
- the number of shares purchased from Continuus;
- the aggregate cash consideration paid; and
- the average price per share paid.
The table also gives effect, on a pro forma basis to the conversion of all
outstanding shares of preferred stock into common stock and the receipt of
$1,547,766 upon the exercise of warrants to purchase 278,125 shares of common
stock:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............. 6,258,219 % $21,533,259 % $3.44
New investors.....................
--------- ----- ----------- -----
Total........................ 100.0% $ 100.0%
========= ===== =========== =====
</TABLE>
The foregoing computation assumes the exercise of no stock options or warrants
except as noted above, nor the conversion of any of our indebtedness into
equity, after March 31, 1999. As of March 31, 1999, there were outstanding
options to purchase 2,436,704 shares of common stock at a weighted average
exercise price of $2.45 per share, warrants to purchase 1,033,737 shares of
common stock at a weighted average exercise price of $1.25 per share and a
debenture convertible into 1,078,167 shares of common stock. To the extent these
options and warrants are exercised or the debenture converted, there will be
further dilution to new investors. See "Management -- Equity Incentive Plans,"
"Description of Capital Stock" and Notes 8 and 10 of Notes to Consolidated
Financial Statements.
22
<PAGE> 25
The sale of common stock by the selling stockholders in this offering will
reduce the pro forma number of shares held by existing stockholders as of March
31, 1999 to _______________, or approximately ____________% of the total
number of shares of common stock outstanding immediately after this offering
( ____________% if the underwriters exercise their over-allotment option in
full), and will increase the number of shares to be purchased by new
stockholders to _______________, or approximately ____________% of the total
number of shares of common stock outstanding immediately after this offering
( ____________% if the underwriters exercise their over-allotment option in
full). See "Principal and Selling Stockholders."
23
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
You should read the following selected consolidated financial data in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and related
Notes thereto appearing elsewhere in this prospectus. The following selected
consolidated statement of operations data for the years ended December 31, 1996,
1997 and 1998 and the three months ended March 31, 1998 and 1999 and the
consolidated balance sheet data as of December 31, 1997 and 1998 and March 31,
1999 have been derived from audited and unaudited consolidated financial
statements included elsewhere in this prospectus. The consolidated data
presented below for the years ended December 31, 1994 and 1995 and at December
31, 1994, 1995 and 1996 are derived from audited consolidated financial
statements that are not included in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- ---------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
Software licenses......................... $ 3,887 $ 8,664 $ 9,611 $13,829 $14,429 $3,745 $4,172
Services.................................. 2,478 4,436 6,488 9,434 13,007 3,065 4,067
------- ------- ------- ------- ------- ------ ------
Total revenues.......................... 6,365 13,100 16,099 23,263 27,436 6,810 8,239
------- ------- ------- ------- ------- ------ ------
Cost of revenues:
Software licenses......................... 582 535 775 650 654 167 156
Services.................................. 2,264 2,583 4,207 6,007 7,446 1,681 1,945
------- ------- ------- ------- ------- ------ ------
Total cost of revenues.................. 2,846 3,118 4,982 6,657 8,100 1,848 2,101
------- ------- ------- ------- ------- ------ ------
Gross profit................................ 3,519 9,982 11,117 16,606 19,336 4,962 6,138
------- ------- ------- ------- ------- ------ ------
Operating expenses:
Sales and marketing....................... 5,347 9,296 11,776 12,079 15,469 3,577 4,098
Research and development.................. 1,964 2,434 3,473 3,574 4,493 1,065 1,233
General and administrative................ 1,204 1,565 1,720 1,896 2,483 749 704
------- ------- ------- ------- ------- ------ ------
Total operating expenses................ 8,515 13,295 16,969 17,549 22,445 5,391 6,035
------- ------- ------- ------- ------- ------ ------
Income (loss) from operations............... (4,996) (3,313) (5,852) (943) (3,109) (429) 103
Other expense, net........................ 33 94 198 637 750 207 296
------- ------- ------- ------- ------- ------ ------
Loss before income tax provision............ (5,029) (3,407) (6,050) (1,580) (3,859) (636) (193)
Income tax provision........................ 1 4 3 3 7 13 5
------- ------- ------- ------- ------- ------ ------
Net loss.................................... $(5,030) $(3,411) $(6,053) $(1,583) $(3,866) $ (649) $ (198)
======= ======= ======= ======= ======= ====== ======
Pro forma basic and diluted net loss per
share(1).................................. $ (0.62) $(0.03)
======= ======
Pro forma basic and diluted weighted average
shares(1)................................. 6,202 6,222
======= ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------- MARCH 31,
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 1,812 $ 3,018 $ 1,189 $ 6,175 $ 2,452 $ 2,357
Working capital (deficit)....................... 470 1,566 (2,385) 4,452 833 826
Total assets.................................... 4,178 9,166 8,563 17,653 12,748 13,323
Long-term liabilities........................... 193 717 848 6,723 6,440 6,376
Total stockholders' equity (deficit)............ 1,042 3,555 (458) 664 (3,155) (3,285)
</TABLE>
- -------------------------
(1) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the method used to determine pro forma basic and diluted net loss per
share.
24
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our Consolidated
Financial Statements and other financial information appearing elsewhere in the
prospectus. In addition to historical information, the following discussion and
other parts of that prospectus contain certain forward-looking statements which
involve risk and uncertainties. Actual events and results may differ materially
from those anticipated in these forward-looking statements as a result of
various factors, including the matters set forth under the caption "Risk
Factors" and elsewhere in this prospectus.
OVERVIEW
We are a leading provider of software products and services for e-asset
management, an emerging market segment that enables organizations to more
effectively develop, enhance, deploy and manage their Internet and enterprise
software systems. We originally incorporated in 1984 as a supplier of
application software for the automotive industry. In 1987, we sold our
application software business to focus on the development of a software
configuration management product. In 1994, we released the 4.0 version of the
Continuus Change Management Suite. In May 1998, we released Continuus
WebSynergy, a web content and application management solution. Our revenues were
$16.1 million in 1996, $23.3 million in 1997 and $27.4 million in 1998. Our
revenues were $6.8 million in the three months ended March 31, 1998 and $8.2
million in the three months ended March 31, 1999. We incurred net losses for
each fiscal year from inception through 1998 and, as of March 31, 1999, had an
accumulated deficit of $23.6 million.
Substantially all revenues have been derived from software licenses or from
related services. Software license revenues are primarily based upon the number
of end-user seats and the number of computing platforms. Clients often obtain an
initial license for small groups and may later purchase additional licenses to
cover more users. Currently, approximately half of our software license revenues
result from sales to existing customers. Software license transactions generally
average less than $100,000, although larger transactions do occur. We recognize
revenues in accordance with the American Institute of Certified Public
Accountants Statement of Position No. 97-2. License revenues from sales to end
users are recognized upon shipment of the product if a signed contract exists,
the fee is fixed and determinable and collection is deemed probable. If an
acceptance period is provided, revenue is recognized upon the earlier of
customer acceptance or the expiration of that period.
Service revenue includes consulting, training and maintenance services. We
recognize consulting and training service revenue when earned and maintenance
revenues ratably over the term of the agreement, generally 12 months. Consulting
and training revenues are dependent upon the number of new software licenses and
the number of employees and consultants available to staff engagements.
Maintenance revenues are also dependent upon new software licenses and the rate
at which existing customers renew their support agreements. The gross margins on
the software licenses are significantly higher than the gross margins achieved
for services. Total gross margins may be lower to the extent that service
revenues increase as a percentage of total revenues.
We market our software and services in North America through a direct sales
organization. Since 1995, we have invested significant financial and management
resources to establish and grow our direct sales and support operations in
France, Germany and the United Kingdom. Our foreign subsidiaries bill customers
and incur expenses in their local currencies which are translated into U.S.
dollars for financial accounting purposes. Accordingly, fluctuations in foreign
currency exchange rates may cause fluctuations in our reported operating
results. In addition, fluctuations in foreign currency exchange rates impact the
dollar value of foreign currency-denominated accounts receivable and other
assets. We do not currently utilize foreign currency hedging instruments;
however, we believe that hedging may be utilized in the future to manage risks
associated with foreign currency fluctuations.
25
<PAGE> 28
We market our software through distributors covering Australia, Denmark,
Finland, India, Italy, Israel, the Netherlands, Norway, Spain and Sweden. The
transactions with our distributors are conducted in U.S. dollars. Total revenues
from customers located outside North America accounted for approximately 33.5%
of total revenues in 1996, 47.2% in 1997, 51.8% in 1998, and 42.6% and 48.2% for
the three months ended March 31, 1998 and 1999.
RESULTS OF OPERATIONS
The following tables set forth, for the periods indicated the percentage of
revenues represented by certain line items in our Consolidated Statements of
Operations:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------- --------------
1996 1997 1998 1998 1999
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses........................... 59.7% 59.4% 52.6% 55.0% 50.6%
Services.................................... 40.3 40.6 47.4 45.0 49.4
----- ----- ----- ----- -----
Total revenues........................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Cost of revenues:
Software licenses........................... 4.8 2.8 2.4 2.5 1.9
Services.................................... 26.1 25.8 27.1 24.7 23.6
----- ----- ----- ----- -----
Total cost of revenues................... 30.9 28.6 29.5 27.2 25.5
----- ----- ----- ----- -----
Gross profit.................................. 69.1 71.4 70.5 72.8 74.5
----- ----- ----- ----- -----
Operating expenses:
Sales and marketing......................... 73.1 51.9 56.4 52.5 49.7
Research and development.................... 21.6 15.4 16.4 15.6 15.0
General and administrative.................. 10.7 8.2 9.1 11.0 8.5
----- ----- ----- ----- -----
Total operating expenses................. 105.4 75.5 81.9 79.1 73.2
----- ----- ----- ----- -----
Income (loss) from operations................. (36.3) (4.1) (11.4) (6.3) 1.3
Other expense, net.......................... 1.2 2.7 2.7 3.0 3.6
----- ----- ----- ----- -----
Loss before income tax provision.............. (37.5) (6.8) (14.1) (9.3) (2.3)
Income tax provision........................ 0.0 0.0 0.0 .2 0.1
----- ----- ----- ----- -----
Net loss...................................... (37.5)% (6.8)% (14.1)% (9.5)% (2.4)%
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------- --------------
1996 1997 1998 1998 1999
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Software license revenues.................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of software licenses.................... 8.1 4.7 4.5 4.5 3.7
----- ----- ----- ----- -----
Gross margin............................... 91.9% 95.3% 95.5% 95.5% 96.3%
===== ===== ===== ===== =====
Services revenue............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services............................. 64.8 63.7 57.2 54.8 47.8
----- ----- ----- ----- -----
Gross margin............................... 35.2% 36.3% 42.8% 45.2% 52.2%
===== ===== ===== ===== =====
</TABLE>
26
<PAGE> 29
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND 1999
REVENUES
Software Licenses. Software license revenues were $3.7 million for the three
months ended March 31, 1998 and $4.2 million for the three months ended March
31, 1999. This represents an increase of 11.4%. The increase was primarily due
to an increase in the number and experience level of sales personnel. Software
license revenues in North America were $1.8 million for the three months ended
March 31, 1998 and $2.2 million for the three months ended March 31, 1999,
representing an increase of 22.2%. Software license revenues from international
operations were $1.9 million for the three months ended March 31, 1998 and $2.0
million for the three months ended March 31, 1999, representing an increase of
5.3%.
Services. Service revenues were $3.1 million for the three months ended March
31, 1998 and $4.1 million for the three months ended March 31, 1999. This
represents an increase of 32.7%. This increase was primarily due to increases in
consulting and training services for new customers, which reflects the growth in
software license revenues, and consulting, training and maintenance for existing
customers.
COST OF REVENUES
Cost of Software Licenses. The cost of software license revenues includes both
the amortization of prepaid royalty costs associated with third-party software
which is embedded in our products and the costs associated with product
documentation, packaging and shipping. The cost of software license revenues was
$167,000 for the three months ended March 31, 1998 and $156,000 for the three
months ended March 31, 1999, representing a decrease of 6.6%. This decrease was
primarily due to lower product documentation costs. As a percentage of software
license revenues, cost of software licenses was 4.5% for the three months ended
March 31, 1998 and 3.7% for the three months ended March 31, 1999.
Cost of Services. Cost of service revenues consists primarily of salaries and
related expenses for consultants and technical support personnel. Cost of
service revenues was $1.7 million for the three months ended March 31, 1998 and
$1.9 million for the three months ended March 31, 1999. This represents an
increase of 15.7%. This increase was primarily due to increases in the size of
our professional services organization worldwide. As a percentage of service
revenues, cost of services was 54.8% for the three months ended March 31, 1998
and 47.8% for the three months ended March 31, 1999. This decrease as a
percentage of service revenue was primarily due to increased utilization as new
employees became more productive.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses consist primarily of salaries,
commissions and bonuses earned by sales and marketing personnel, field office
expenses, travel and entertainment and promotional expenses. Sales and marketing
expenses were $3.6 million for the three months ended March 31, 1998 and $4.1
million for the three months ended March 31, 1999, representing an increase of
14.6%. This increase was due to higher commissions, resulting from revenue
growth, higher recruiting and training costs associated with hiring new
personnel and increased marketing expenditures. As a percentage of total
revenues, sales and marketing expenses were 52.5% for the three months ended
March 31, 1998 and 49.7% for the three months ended March 31, 1999.
Research and Development. Research and development expenses consist primarily of
expenses related to software development personnel and other costs associated
with product development. All costs incurred in the research and development of
software products and enhancements to existing software products have been
expensed as incurred. Research and development expenses were
27
<PAGE> 30
$1.1 million for the three months ended March 31, 1998 and $1.2 million for the
three months ended March 31, 1999, representing an increase of 15.8%. This
increase was primarily due to staffing increases to support the development of
new products as well as the enhancement of existing products. As a percentage of
total revenues, research and development expenses were 15.6% for the three
months ended March 31, 1998 and 15.0% for the three months ended March 31, 1999.
General and Administrative. General and administrative expenses consist
primarily of salaries, bonuses, payroll taxes and administrative costs,
including legal and accounting fees and bad debts. General and administrative
expenses were $749,000 for the three months ended March 31, 1998 and $704,000
for the three months ended March 31, 1999, representing a decrease of 6.0%. This
decrease was primarily due to financing costs incurred in the three months ended
March 31, 1998. As a percentage of total revenues, general and administrative
expenses were 11.0% for the three months ended March 31, 1998 and 8.5% for the
three months ended March 31, 1999.
Other Expenses. Other expenses consist primarily of interest expense, sales tax
expense and foreign currency translation. Other expenses were $207,000 for the
three months ended March 31, 1998 and $296,000 for the three months ended March
31, 1999, representing an increase of 43.0%. This increase was primarily due to
higher losses from foreign currency translation. As a percentage of total
revenues, other expenses were 3.0% for the three months ended March 31, 1998 and
3.6% for the three months ended March 31, 1999.
Income Tax Provision. The income tax provision for the three months ended March
31, 1998, and 1999 consisted solely of minimum state income taxes due to the
Company's net loss in each of those periods.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
REVENUES
Software Licenses. Software license revenues were $9.6 million in 1996, $13.8
million in 1997 and $14.4 million in 1998, representing increases of 43.9% from
1996 to 1997 and 4.3% from 1997 to 1998. The increase from 1996 to 1997 was
primarily due to increases in the number of sales people as well as the release
of Windows based products and a growing market acceptance of our products, which
improved account executive productivity. The lower growth from 1997 to 1998
stemmed from a reduction in the sales force in early 1998 which slowed software
license revenues, particularly in North America, until replacements could be
recruited and become productive. The slowdown in software license revenues was
partially offset by sales of licenses of Continuus WebSynergy, which was
released in mid-1998. Software license revenues in North America were $5.7
million in 1996, $6.7 million in 1997 and $6.6 million in 1998, representing an
increase of 17.0% from 1996 to 1997 and a decrease of 1.5% from 1997 to 1998.
Software license revenues from international operations were $3.9 million in
1996, $7.1 million in 1997 and $7.8 million in 1998, representing increases of
83.2% from 1996 to 1997 and 9.8% from 1997 to 1998.
Services. Service revenues were $6.5 million in 1996, $9.4 million in 1997 and
$13.0 million in 1998, representing increases of 45.4% from 1996 to 1997 and
37.9% from 1997 to 1998. The increases in both periods were primarily due to
increases in consulting and training services for new customers, which reflects
the number of software licenses sold, and consulting, training and maintenance
services for existing customers. Service revenue increased as a percentage of
total revenues, from 40.3% in 1996 and 40.6% in 1997, to 47.4% in 1998,
primarily due to lower software license revenue growth in 1998.
COST OF REVENUES
Cost of Software Licenses. Cost of software license revenues was $775,000 in
1996, $650,000 in 1997 and $654,000 in 1998, representing a decrease of 16.1%
from 1996 to 1997 and an increase of 0.6%
28
<PAGE> 31
from 1997 to 1998. The decrease from 1996 to 1997 was primarily due to lower
product documentation costs. As a percentage of software license revenues, cost
of software licenses was 8.1% in 1996, 4.7% in 1997 and 4.5% in 1998.
Cost of Services. Cost of service revenues was $4.2 million in 1996, $6.0
million in 1997 and $7.4 million in 1998, representing increases of 42.8% from
1996 to 1997 and 24.0% from 1997 to 1998. The increases in both periods were
primarily due to costs associated with increasing the size of our professional
services organization worldwide. As a percentage of service revenue, cost of
services was 64.8% in 1996, 63.7% in 1997 and 57.2% in 1998. These decreases as
a percentage of service revenue were primarily due to price increases for
international consulting and training, which became effective in 1997, and from
increased utilization as new employees became more productive.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses were $11.8 million in 1996,
$12.1 million in 1997 and $15.5 million in 1998, representing increases of 2.6%
from 1996 to 1997 and 28.1% from 1997 to 1998. The increase from 1996 to 1997
was primarily due to growth in the worldwide field sales organizations and
significantly higher commissions due to revenue growth, offset by reduced
marketing expenditures. The increase from 1997 to 1998 was due to higher
commissions resulting from revenue growth, recruiting and training costs
associated with hiring new personnel and increased marketing expenditures. As a
percentage of total revenues, sales and marketing expenses were 73.1% in 1996,
51.9% in 1997 and 56.4% in 1998. These costs decreased as a percentage of total
revenues from 1996 to 1997, primarily because sales personnel hired in 1996 were
more productive in 1997 and also because recruiting and training costs were
lower in 1997. We expect that sales and marketing expenses will continue to
increase in absolute dollars as we continue to hire additional sales and
marketing personnel, establish additional sales offices and increase promotional
activities.
Research and Development. Research and development expenses were $3.5 million in
1996, $3.6 million in 1997 and $4.5 million in 1998, representing an increase of
2.9% from 1996 to 1997 and an increase of 25.7% from 1997 to 1998. The increase
from 1997 to 1998 was primarily due to staffing increases made to support the
development of new products as well as the enhancement of existing products. As
a percentage of total revenues, research and development expenses were 21.6% in
1996, 15.4% in 1997 and 16.4% in 1998. We expect research and development
expenditures will continue to increase in absolute dollars as we continue to
hire additional engineering personnel.
General and Administrative. General and administrative expenses were $1.7
million in 1996, $1.9 million in 1997 and $2.5 million in 1998, representing an
increase of 10.2% from 1996 to 1997 and an increase of 31.0% from 1997 to 1998.
The increase from 1997 to 1998 was primarily due to financing costs and
increased staffing. As a percentage of total revenues, general and
administrative expenses were 10.7% in 1996, 8.2% in 1997 and 9.1% in 1998. We
expect general and administrative expenses to continue to increase in absolute
dollars as we hire additional administrative personnel, incur costs associated
with being a public company and move to larger facilities in 2000.
Other Expenses. Other expenses were $198,000 in 1996, $637,000 in 1997 and
$750,000 in 1998, representing an increase of 221.7% from 1996 to 1997 and an
increase of 17.7% from 1997 to 1998. The increases from 1996 to 1997 and from
1997 to 1998 were primarily due to higher interest expense net of interest
income. As a percentage of total revenues, other expenses were 1.2% in 1996,
2.7% in 1997 and 2.7% in 1998.
Income Tax Provision. The income tax provision for the years ended December 31,
1996, 1997 and 1998 consisted solely of minimum state income taxes due to the
Company's net loss in each of those periods.
29
<PAGE> 32
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth unaudited quarterly results for each of the nine
quarters ended March 31, 1999, together with such data as a percentage of total
revenues. In the opinion of management, this quarterly information has been
prepared on the same basis as the annual Consolidated Financial Statements
presented elsewhere in this prospectus and includes all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the
information for the periods presented when read in conjunction with the
Consolidated Financial Statements and the Notes thereto. The operating results
for any quarter are not necessarily indicative of results of any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1997 1997 1997 1997 1998 1998 1998 1998 1999
--------- -------- --------- -------- --------- -------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses....... $2,641 $3,228 $3,640 $4,320 $3,745 $ 3,565 $ 2,852 $4,267 $4,172
Services................ 1,934 2,292 2,441 2,767 3,065 3,170 3,256 3,516 4,067
------ ------ ------ ------ ------ ------- ------- ------ ------
Total revenues........ 4,575 5,520 6,081 7,087 6,810 6,735 6,108 7,783 8,239
Cost of revenues:
Software licenses....... 133 207 163 147 167 169 157 161 156
Services................ 1,244 1,390 1,620 1,753 1,681 1,930 1,935 1,900 1,945
------ ------ ------ ------ ------ ------- ------- ------ ------
Total cost of
revenues............ 1,377 1,597 1,783 1,900 1,848 2,099 2,092 2,061 2,101
------ ------ ------ ------ ------ ------- ------- ------ ------
Gross profit.............. 3,198 3,923 4,298 5,187 4,962 4,636 4,016 5,722 6,138
------ ------ ------ ------ ------ ------- ------- ------ ------
Operating expenses:
Sales and marketing..... 2,489 2,915 3,059 3,616 3,577 3,946 3,932 4,014 4,098
Research and
development........... 823 909 859 983 1,065 1,123 1,159 1,146 1,233
General and
administrative........ 443 467 487 499 749 548 679 507 704
------ ------ ------ ------ ------ ------- ------- ------ ------
Total operating
expenses............ 3,755 4,291 4,405 5,098 5,391 5,617 5,770 5,667 6,035
------ ------ ------ ------ ------ ------- ------- ------ ------
Income (loss) from
operations.............. (557) (368) (107) 89 (429) (981) (1,754) 55 103
Other expense, net...... 143 105 153 236 207 142 138 263 296
------ ------ ------ ------ ------ ------- ------- ------ ------
Loss before income
taxes................... (700) (473) (260) (147) (636) (1,123) (1,892) (208) (193)
Income tax provision
(benefit)............... -- -- -- 3 13 4 2 (12) 5
------ ------ ------ ------ ------ ------- ------- ------ ------
Net loss.................. $ (700) $ (473) $ (260) $ (150) $ (649) $(1,127) $(1,894) $ (196) $ (198)
====== ====== ====== ====== ====== ======= ======= ====== ======
AS A PERCENTAGE OF TOTAL REVENUES
-----------------------------------------------------------------------------------------------------
Revenues:
Software licenses....... 57.7% 58.5% 59.9% 61.0% 55.0% 52.9% 46.7% 54.8% 50.6%
Services................ 42.3 41.5 40.1 39.0 45.0 47.1 53.3 45.2 49.4
------ ------ ------ ------ ------ ------- ------- ------ ------
Total revenues........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Software licenses....... 2.9 3.8 2.7 2.1 2.5 2.5 2.6 2.1 1.9
Services................ 27.2 25.2 26.6 24.7 24.7 28.7 31.7 24.4 23.6
------ ------ ------ ------ ------ ------- ------- ------ ------
Total cost of
revenues............ 30.1 29.0 29.3 26.8 27.2 31.2 34.3 26.5 25.5
------ ------ ------ ------ ------ ------- ------- ------ ------
Gross profit.............. 69.9 71.0 70.7 73.2 72.8 68.8 65.7 73.5 74.5
------ ------ ------ ------ ------ ------- ------- ------ ------
Operating expenses:
Sales and marketing..... 54.4 52.8 50.3 51.0 52.5 58.6 64.4 51.6 49.7
Research and
development........... 18.0 16.5 14.1 13.9 15.6 16.7 19.0 14.7 15.0
General and
administrative........ 9.7 8.5 8.0 7.0 11.0 8.1 11.1 6.5 8.5
------ ------ ------ ------ ------ ------- ------- ------ ------
Total operating
expenses............ 82.1 77.8 72.4 71.9 79.1 83.4 94.5 72.8 73.2
------ ------ ------ ------ ------ ------- ------- ------ ------
Income (loss) from
operations.............. (12.2) (6.8) (1.7) 1.3 (6.3) (14.6) (28.8) 0.7 1.3
Other expense, net...... 3.1 1.9 2.5 3.3 3.0 2.1 2.3 3.4 3.6
------ ------ ------ ------ ------ ------- ------- ------ ------
Loss before income
taxes................... (15.3) (8.7) (4.2) (2.0) (9.3) (16.7) (31.1) (2.7) (2.3)
Income tax provision
(benefit)............... -- -- -- -- 0.2 0.1 -- (0.2) 0.1
------ ------ ------ ------ ------ ------- ------- ------ ------
Net loss.................. (15.3)% (8.7)% (4.2)% (2.0)% (9.5)% (16.8)% (31.1)% (2.5)% (2.4)%
====== ====== ====== ====== ====== ======= ======= ====== ======
</TABLE>
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Our software license revenues for the three months ended September 30, 1998 were
lower than in prior quarters primarily due to reductions in the sales force in
early 1998 and the time required to rebuild our sales force. Our sales and
marketing expenses as a percentage of total revenues were higher in the three
months ended June 30, 1998 and September 30, 1998 due to the decreases in total
revenues and to a lesser extent increases in costs of recruiting and training
new sales personnel and increased advertising expenses.
We expect to be affected by seasonal trends in customer buying patterns in the
future. We believe that it is likely that we will experience relatively higher
revenues in our fiscal quarters ending December 31 and relatively lower revenues
in our fiscal quarters ending March 31 as a result of customer buying patterns.
To the extent future international operations continue to constitute a high
percentage of our total revenues, we anticipate that we may also experience
relatively weaker demand in the fiscal quarters ending on September 30 as a
result of reduced sales activity in Europe during the summer months.
Our quarterly and annual operating results have fluctuated in the past and are
likely to fluctuate significantly in the future due to a variety of factors,
many of which are outside of our control. For a discussion of some of those
factors, see "Risk Factors -- Our operating results fluctuate significantly,
which may cause the price of our stock to fall." Because of these and other
factors, our quarterly revenues, expenses and results of operations could vary
significantly in the future, and period-to-period comparisons should not be
relied upon as indications of future performance.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, we had cash and cash equivalents of approximately $2.4
million, a decrease of $95,000 from December 31, 1998. Since inception, we have
financed our operations primarily through private placements of our equity
securities, which have provided net proceeds totaling $18.4 million as of March
31, 1999. We also borrowed $6.0 million through the issuance of a senior secured
convertible debenture in 1997. As of March 31, 1999, we had $1.1 million
outstanding under capital equipment lease lines of credit and no other
outstanding lines of credit. See "Description of Certain Indebtedness."
Our operating activities used cash of $450,000 in 1997, $2.2 million in 1998 and
we generated cash of $78,000 in the three months ended March 31, 1999. The
increase in cash used by operating activities in 1998 was primarily due to the
increase in the net loss from 1997 to 1998. Our investing activities used
approximately $93,000 in 1997 and $439,000 in 1998. The Company's financing
activities provided $5.5 million in 1997. The primary source of funds in 1997
was the issuance of the $6.0 million senior secured convertible debenture. We
used $1.1 million in financing activities in 1998 primarily for capital lease
payments. We generated cash during the three months ended March 31, 1999
primarily from the reduced loss from operations.
Expenditures for property and equipment were $1.2 million in 1997, $1.0 million
in 1998 and $170,000 for the three months ended March 31, 1999. Most property
acquired in 1997 and 1998 was computer hardware and software and was financed
through capital leases. We anticipate that we will purchase similar levels of
new equipment through the remainder of 1999. We anticipate moving to larger
facilities in the first quarter of 2000 when our current lease expires, which
will increase our expenditures for new property and equipment.
We believe that our existing cash balances and cash from operations will be
sufficient to finance our operations through at least the next 18 months. If
additional financing is needed, there can be no assurances that such financing
will be available to us on commercially reasonable terms.
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IMPACT OF YEAR 2000 PROBLEMS
Many computers, software applications and other equipment are not capable of
distinguishing 21st century dates from 20th century dates. As a result,
beginning on January 1, 2000, some computers, software and other equipment could
fail to operate or fail to produce correct results if "00" is interpreted to
mean 1900, rather than 2000. These problems are commonly referred to as the
"year 2000 problem."
GENERAL READINESS ASSESSMENT. The year 2000 problem affects the computers,
software applications and other equipment that we use, operate or maintain for
our operations. As a result, we have established a year 2000 readiness committee
fully supported by representatives of all departments.
ASSESSMENT OF CONTINUUS' SOFTWARE PRODUCTS. Beginning in 1997, we began
assessing the ability of our software to operate properly in the year 2000. We
believe the latest revisions (version 4.5 and higher) of our currently available
software products on Windows and supported variants of UNIX are year 2000
compliant and that such software accurately processes date data from, into and
between the 20th and 21st centuries. In particular, in June 1998, we issued a
new version of our Continuus Change Management Suite that is year 2000
compliant. However, only approximately 25% of our customers have installed the
year 2000 compliant version of the Continuus Change Management Suite to date.
The needs of the majority of our customers to install the year 2000 compliant
version by the end of 1999 may require substantial assistance from our
consulting personnel later this year, which could interfere with our ability to
fulfill all demands for our services. As we design and develop new products, we
subject them to testing for year 2000 compliance. We expect to continue to test
our software and products for year 2000 compliance and compliance when used with
other standard operating systems or computer platforms, including those
developed by other companies.
ASSESSMENT OF INTERNAL INFRASTRUCTURE. We have substantially completed year 2000
testing of our major information technology systems and have identified those
components which are not year 2000 compliant. In addition, we continue to test
our systems on an ongoing basis and will attempt to remediate any year 2000
problems.
SYSTEMS OTHER THAN INFORMATION TECHNOLOGY SYSTEMS. In addition to computers and
related systems, the operation of office and facilities equipment, such as fax
machines, telephone switches, security systems and other common devices may be
affected by the year 2000 problem. We are currently assessing the potential
effect and costs of remediating the year 2000 problem on our office equipment
and our facilities and expect to complete the process before the occurrence of
any material disruption of our business.
VENDORS AND SUPPLIERS. We have communicated with external vendors and suppliers
that provide us with material software and information systems to determine the
extent to which their failure to remedy their own year 2000 problems would
materially affect us. Based on our vendors' and suppliers' representations, we
believe that the third-party hardware and software we employ is year 2000
compliant, except for one application which is expected to be updated and become
year 2000 compliant in the second quarter of 1999. As we establish relationships
with additional third parties, we intend to identify and resolve issues
involving the year 2000 problem. However, we have limited or no control over the
actions of these third parties. Thus, while we expect that we will be able to
resolve any issues involving third parties, there can be no assurance that such
parties will resolve any or all year 2000 problems before the occurrence of a
material disruption to the operation of our business. Any failure of these third
parties to timely resolve year 2000 problems with their systems could harm our
business.
COSTS OF REMEDIATION. To date, we have not incurred any material costs directly
associated with year 2000 compliance efforts, except for compensation expense
associated with salaried employees who have devoted some of their time to year
2000 assessment and remediation efforts. We estimate the
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total cost to us of completing any required modification, upgrades or
replacements of our internal systems will not exceed $50,000, most of which we
expect to incur before the end of the third quarter of 1999. This estimate is
being monitored, and we will revise it as additional information becomes
available.
MOST LIKELY CONSEQUENCES OF YEAR 2000 PROBLEMS. We expect to identify and
resolve all year 2000 problems that could harm our business operations before
any disruption occurs. However, we believe that it is not possible to determine
with complete certainty that all year 2000 problems affecting us have been
identified or corrected. The number of devices and systems that could be
affected and the interactions among these devices and systems are too numerous
to address. In addition, no one can accurately predict which year 2000
problem-related failures will occur or the severity, timing, duration or
financial consequences of these potential failures. As a result, we believe that
the following consequences are possible:
- a significant number of operational inconveniences and
inefficiencies for us and our customers that will divert
management's time and attention as well as financial and human
resources from ordinary business activities;
- possible minor business disputes and claims, including claims
under product warranty, due to year 2000 problems experienced by
our customers and incorrectly attributed to our products or
performance, which we believe will be resolved in the ordinary
course of business; and
- possible serious business disputes alleging that we failed to
comply with the terms of contracts or industry standards, some
of which could result in litigation or contract termination.
CONTINGENCY PLANS. We are currently developing contingency plans to be
implemented if our efforts to identify and correct year 2000 problems affecting
our internal systems are not effective. We expect to complete our contingency
plans by the end of the second quarter of 1999. Depending on the systems
affected, these plans could include:
- accelerated replacement of affected equipment or software;
- short to medium-term use of back-up equipment and software or
other redundant systems;
- increased work hours for our personnel or the hiring of
additional information technology staff; and
- the use of contract personnel to correct, on an accelerated
basis, any year 2000 problems that arise or to provide interim
alternate solutions for information system deficiencies.
The discussion of our efforts and expectations relating to year 2000 compliance
are forward-looking statements. Our ability to achieve year 2000 compliance, and
the level of incremental costs associated with compliance, could be adversely
affected by, among other things, the availability and cost of contract personnel
and external resources, third party suppliers' ability to modify proprietary
software, and unanticipated problems not identified in our ongoing review.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, which we are
required to adopt effective in 2000. SFAS No. 133 will require us to record all
derivatives on the balance sheet at fair value. We do not
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<PAGE> 36
currently engage in hedging activities but will continue to evaluate the effects
of adopting SFAS No. 133. The Company will adopt SFAS No. 133 in 2000.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our financial instruments include cash and long-term debt. At March 31, 1999,
the carrying values of our financial instruments approximated their fair values
based on current market prices and our incremental borrowing rate.
We have not invested in derivative financial instruments. We have foreign
currency exposure since we transact business in foreign currencies. However,
foreign currency translation and transaction gains and losses have not been
significant. A significant change in foreign currency values could harm our
financial position and results of operations.
EUROPEAN MONETARY UNION
Within Europe, the European Economic and Monetary Union introduced a new
currency, the euro, on January 1, 1999. The new currency is in response to the
European Union's policy of economic convergence to harmonize trade policy,
eliminate business costs associated with currency exchange and to promote the
free flow of capital, goods and services.
On January 1, 1999, the participating countries adopted the euro as their local
currency, initially available for currency trading on currency exchanges and
non-cash transactions such as banking. The existing local currencies, or legacy
currencies, will remain legal tender through January 1, 2002. Beginning on
January 1, 2002, euro-denominated bills and coins will be issued for cash
transactions. For a period of up to six months from this date, both legacy
currencies and the euro will be legal tender. On or before July 1, 2002, the
participating countries will withdraw all legacy currencies and exclusively use
the euro.
Our transactions are recorded in both U.S. dollars and foreign currencies.
Future transactions may be recorded in the euro. We have not incurred and do not
expect to incur any significant costs from the continued implementation of the
euro. However, the currency risk of the euro could harm our business.
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BUSINESS
COMPANY OVERVIEW
We are a leading provider of software products and services for e-asset
management, an emerging market segment that enables organizations to more
effectively develop, enhance, deploy and manage their Internet and enterprise
software systems. We provide the applications and infrastructure for managing an
enterprise's software-related assets, processes, projects and people. Our
integrated product line, consisting of the Continuus WebSynergy Suite and the
Continuus Change Management Suite, simplifies the development of the most
complex and demanding Internet and software applications. We also offer
Continuus Professional Services which include consulting, training and
maintenance services to facilitate the successful implementation of our
solutions. Since 1995, we have licensed our products to over 400 organizations
worldwide.
INDUSTRY BACKGROUND
In today's increasingly competitive global markets, businesses are seeking to
continuously improve their products, services and operations. Businesses have
invested billions of dollars in information technology to more effectively
develop and operate new products, automate core processes within the enterprise
and extend business interactions to external parties. Software has become
essential for many critical business operations and is one of the most strategic
assets for companies. Today, businesses are developing the next generation of
software applications as well as extending existing applications to offer
differentiated products and unique services to customers. These efforts to
create new business opportunities, enhance competitive advantage and further
automate business processes are leading to explosive growth in the scale and
complexity of software and software-related assets in organizations.
The Internet has further added complexity by increasing both the number and
sophistication of new applications and extending applications beyond the
enterprise. The Internet has highlighted and accelerated the trend that software
has become a major driver to both revenue growth and expense reduction.
Increasingly, businesses are using the Internet for general communication,
electronic commerce and complex applications. Business activities over the
Internet extend traditional business processes and transform the ways in which
organizations connect to and provide services to their customers, vendors,
employees and other partners. As organizations extend their core processes over
the Internet and conduct significant volumes of business through the Internet,
quality problems and delays in delivering those new Internet applications can
have an immediate, significant negative impact on customer service, revenue and
profitability.
The increased value of software is not simply driven by the Internet. Software
has increasingly become a critical value-added component of products as diverse
as automobiles, cellular telephones, medical instruments, home appliances and
defense and aerospace systems. In addition, future generations of many of these
devices will be networked, further increasing the scale and complexity of
embedded software. As software becomes more essential for many uses, businesses
are continuously seeking to develop new applications and increase product
functionality while compressing release cycles. These factors have made it
increasingly difficult to develop, deploy and manage software projects.
The importance of software and the rapid adoption of the Internet are increasing
the need for products and services for managing, developing, enhancing and
deploying Internet and enterprise software systems as strategic business assets.
A key challenge for businesses is managing rapid and unpredictable business and
technological change within increasingly complex and heterogeneous computing
environments. For example, companies have spent considerable time and money to
solve year 2000 problems and to convert existing applications to an
Internet-based infrastructure. The
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Standish Group estimated that in 1998 as few as 26% of all corporate IT software
projects were completed on time and on budget.
In response to increased technical complexity and the need to deliver
applications in accelerated "Internet time," businesses are also adopting more
complex organizational strategies. As organizations are increasingly
distributing development across locations to take advantage of the best
qualified developers and most cost-effective resources, they must control and
manage an even more complex development process. In addition, on many Internet
application projects, there are hundreds of content contributors. Coordinating
the efforts of content contributors and software developers is a highly complex
and error-prone process.
To date, software providers have developed products that address discrete
aspects of Internet and enterprise software asset management, including software
version control, project management, web content management, change request
tracking, software build automation and automated software distribution. This
has led many organizations to use fragmented collections of tools and point-
solutions, often deployed on a project-by-project basis, thus creating isolated
collections of software assets and non-integrated processes. With these partial
solutions, organizations are unable to share best practices, create management
visibility or reuse components across teams and projects. Alternatively, many
organizations have developed asset management solutions internally and have
built them on top of version control products. These internally developed
systems are expensive to maintain and are generally not flexible or scalable.
Also, internally developed systems and most commercial packages were not
designed to handle the technology changes of the Internet.
Consequently, businesses are now seeking comprehensive and integrated solutions
that address all aspects of Internet and enterprise software asset management,
rather than toolkits and point solutions. A fully integrated Internet and
enterprise software asset management solution must:
- provide the ability to manage an organization's complete
portfolio of software-related assets, projects, processes and
people;
- manage internally developed business applications, purchased
software packages, Internet-based systems and software into
other products or devices;
- allow both software developers and Internet content contributors
to collaborate in a common team environment;
- allow management to monitor the status of projects, control
process and control approval cycles; and
- be highly scalable and adaptable to changes in technologies,
organizational structure and project team composition.
THE CONTINUUS SOLUTION
Continuus provides e-asset management solutions that enable organizations to
more effectively develop, enhance, deploy and manage their Internet and
enterprise software systems. Our solution is specifically designed to support
the collaborative development, management, approval and deployment of all types
of software, Internet applications and web content. Our integrated product line,
consisting of the Continuus WebSynergy Suite and the Continuus Change Management
Suite, utilizes a flexible and scalable architecture with embedded workflow
capability which simplifies the Internet and software development process and is
capable of handling the most complex and demanding applications. We also offer
Continuus Professional Services which include consulting, training and
maintenance services to facilitate the successful implementation of the
Continuus WebSynergy and Continuus Change Management Suites.
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Our comprehensive solutions provide our customers with the following key
benefits:
REDUCE TIME TO DELIVER INTERNET AND ENTERPRISE SOFTWARE APPLICATIONS.
Organizations using our solutions can more rapidly and predictably deliver
Internet and software development projects, thereby improving organizational
competitiveness and effectiveness. Our products increase productivity by
providing a common team environment for all participants in the development of
an Internet or software project, no matter what their level of technical
proficiency. By providing a common set of shared processes and a common platform
for team communication and collaboration, our products enable better
coordination of activities within teams and across multiple locations. Our
products also accelerate development by automating many of the error-prone
manual and repetitive tasks associated with software development, without
introducing levels of control and restrictions that developers will resist. In
addition, our task-based workflow capability automatically provides visibility
to the status of in-process development tasks. This reduces development cycles
by enabling management to accurately evaluate project status and to ensure that
problems are continually tracked and fixed early in the development process.
IMPROVE THE QUALITY OF E-ASSETS. Our solution enables organizations to increase
software quality and integrity by continuously improving the processes used to
develop, enhance, deploy and manage Internet and software-based systems. Our
products provide non-intrusive process management capabilities that allow a
project team or organization to implement and enforce company or industry best
practices. This process automation eliminates many of the typical sources of
errors in building and configuring large software systems or Internet
applications. Our products' team collaboration capabilities eliminate errors
arising from team coordination issues such as interference from parallel changes
to shared components. Our solutions improve the quality of software assets by
enabling management to deploy only tested and approved new versions of
components or entire systems. For example, Continuus WebSynergy's workflow and
staging support ensure that only approved content changes become available on an
organization's production web servers.
MORE EFFECTIVELY MANAGE E-ASSETS. Our products are built on a common shared
repository that catalogs and manages an organization's entire portfolio of
e-assets. These assets include technical software that may itself be a product
or may be embedded into a business's products, and IT applications, such as
internally developed client-server applications, packaged applications and
Internet applications. E-assets include software source code as well as design
specifications, test scripts, build procedures and make files, documentation and
help files and web content, including HTML and XML components and video,
graphics and sound components. We track where assets are used, ensure that no
assets are lost over time and provide a complete asset change history. Our
repository also provides a foundation for improving an organization's return on
investment in its e-assets by enabling component reuse.
QUICKLY ADAPT TO ORGANIZATIONAL AND TECHNOLOGICAL CHANGE. As organizations grow
and restructure, our products can be quickly and easily reconfigured to adapt to
these changes. The distributed architecture of our products can support a small
development team managing a single development project in a single location and
then rapidly scale to support hundreds of developers working on dozens of
concurrent projects dispersed across several locations. Our product's flexible
process infrastructure allows individual projects to adapt processes and
policies to project needs while complying with organization-wide standards. Our
product architecture is also open to provide maximum flexibility and
interoperability and supports a wide range of different development languages
and developer tools, as well as internally developed and externally sourced
software and other components.
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STRATEGY
Our objective is to become the leader in the emerging market for e-asset
management solutions. The key elements of our strategy are:
PROVIDE COMPREHENSIVE E-ASSET MANAGEMENT SOLUTIONS. We believe that our
consistent innovation has made us a leader in providing comprehensive e-asset
management solutions. We will continue to extend our current product suite to
provide comprehensive, integrated solutions for managing e-assets over their
entire life cycles. Continuus Change Management Suite and Continuus WebSynergy
Suite provide the core applications and platform for our solutions. In 1998, we
built upon our leadership position in integrated change management products by
introducing Continuus WebSynergy to address the challenges of developing and
managing Internet applications. In 1999, we plan to launch Continuus WebPT, an
Internet-enabled change request and problem tracking component of our product
line. We also plan to enhance the entire product line with new features that
allow management to monitor project status. In addition, we plan to release new
versions of Continuus WebSynergy and Continuus Change Management Suites. We also
intend to continue to extend our product line through relationships with other
software vendors.
FOCUS ON INTERNET AND E-COMMERCE APPLICATION MANAGEMENT. Continuus WebSynergy
addresses the critical issues associated with managing the development and
deployment of Internet applications including corporate intranet applications,
corporate web sites and e-commerce applications. We intend to focus on selling
to companies in industry sectors where the deployment of Internet applications
provides a key competitive advantage. We also intend to focus on the rapidly
growing community of e-commerce vendors and Internet and application service
providers. We believe that these customers will have a need for the full
Continuus Change Management Suite as well as Continuus WebSynergy Suite to
manage applications, web content and related software asset development.
FOCUS ON SUCCESSFUL CUSTOMER IMPLEMENTATION. We believe that initial and ongoing
customer satisfaction can lead to significant revenue opportunities in the
future. Currently, approximately half of our license revenue comes from existing
customers expanding their use of Continuus products. Our long-term success
depends upon our customer's successful implementation of our products. Therefore
we intend to increase the size of our consulting and training staff as well as
to increase the scope of the service offerings we provide. We anticipate that
our expanded service offerings will focus on high value-added services that
result in an increased rate of enterprise-wide deployment of Continuus products
within our customers. We also expect to continue to augment our service
offerings through relationships with regional and national consulting firms,
systems integrators and other service providers.
LEVERAGE OUR CUSTOMER BASE. Since 1995, we have licensed our products to over
400 organizations worldwide and intend to expand the use of our products within
our existing customer accounts. We believe many customers would benefit from
deploying the Continuus Change Management Suite more broadly and utilizing
Continuus WebSynergy as they develop and deploy Internet-based applications. We
intend to make additional sales of our products and services to our existing
customers to help them meet these growing needs.
EXPAND SALES COVERAGE. We have already established effective direct sales
channels in North America and Europe. In 1998, North America contributed
approximately 48% of revenues and Europe contributed approximately 52%. In
targeted markets where we choose not to maintain our own sales force, we use
distributors to sell our products. We intend to expand our domestic and
international sales coverage in order to penetrate new markets and to increase
our presence in existing markets. We will also seek to expand our sales channels
to utilize the most effective means to reach the various sub-markets for our
products and services.
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EXPAND PARTNERING AND STRATEGIC RELATIONSHIPS. Currently, we have strategic
partnerships with leading vendors of complementary products and services such as
Mercury Interactive and Tivoli, a division of IBM. We plan to continue to
establish strategic relationships with various partners to supplement and extend
our direct sales force, expand the scope of our consulting and training
capabilities, leverage our marketing efforts, enhance our product suite and
establish technology standards. We intend to integrate our products with those
of strategic partners to generate additional license revenues and to support
joint marketing efforts. We also plan to expand our partnerships with vendors of
desktop tools used by software developers, software quality engineers,
designers, content contributors and others to provide better integrated
solutions for our current and potential customers.
PRODUCTS
Continuus provides an integrated suite of applications and a platform for
managing an enterprise's software-related assets, processes, projects and
people. The Continuus Change Management Suite provides a platform for software
developers building technical and embedded software or commercial IT
applications. Continuus WebSynergy Suite extends our solutions to meet the needs
of web masters, content contributors and other members of the Internet
application development community. Used together, the Continuus products provide
a complete solution for building, delivering and managing the full range of
client-server, intranet and e-commerce applications found in today's enterprise.
Our products contain the following five key capabilities:
TASK-BASED CHANGE MANAGEMENT. Our product line's task-based change management
capability provides an intuitive way for developers to interact with our change
management environment. It also provides management with a non-intrusive ability
to monitor and control the development process. The task-based approach allows
for changes to multiple components or files to be logically grouped into related
sets and then operated on as a set. This allows the user to improve software
quality and reduce the time it takes to complete a project through reducing bad
builds, wasted developer time and release cycles.
TEAM DEVELOPMENT SUPPORT. Our product line provides a wide range of features and
capabilities designed to improve the productivity of team-based software
development. We provide a controlled process or workflow to coordinate the work
of multiple developers in a project team and control the actions that
individuals can take based on their role in the project and the stage in the
project life cycle. The Continuus Change Management Suite provides each user
with an insulated personal work area that protects the user from being affected
by the work of other developers, while at the same time notifying the user of
changes or actions by other members of the team. Parallel development support is
a feature that removes development bottlenecks by allowing several developers to
make changes to shared components and enabling multiple projects to
simultaneously share a common base of components.
DISTRIBUTED DEVELOPMENT SUPPORT. Our product line provides distributed
management capabilities. Individual developers and small groups can use our
remote development support to work from copies of components with only
occasional connections to a server without losing the control and collaboration
capabilities of the Continuus solution. Our Distributed Change Management
capability supports distributed development teams of any size by providing
task-based change management across multiple servers and allowing multiple teams
to work in a decentralized mode, while synchronizing shared objects or entire
systems.
SCALABILITY AND FLEXIBILITY. Our product line supports the needs of teams
ranging in size from less than a dozen to over a thousand developers and
organizations with a few to dozens of concurrent projects controlled by many
different teams. Customers can adapt our products to a wide range of
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operating configurations, providing individual projects with the ability to
adapt processes and policies to organization-wide standards. Our product line
also supports a wide range of different development languages and tools, as well
as internally developed and externally sourced software and other objects.
OPEN AND EXTENSIBLE ARCHITECTURE. Our product architecture provides a foundation
for the ongoing development of the Continuus product line and enables a highly
scalable, high performance and high availability enterprise solution. A key
attribute of the product architecture is that it is designed using an
object-oriented approach. In particular, our repository database is based on an
object-oriented data model that can be easily extended to support new object
types using a graphical user interface. The object oriented data model is mapped
to a relational data model to take advantage of industry-standard relational
database engines. The repository database is also open so that users can access
it directly to perform their own querying and reporting. Our product line does
not use proprietary technology that replaces standard components of the
operating system. Our products also have an open command interface that allows
all interactive functions to be accessed by outside programs and scripts. The
combination of an open repository and open command interface provides a
straightforward means to extend the product.
The following tables describe the products offered by Continuus:
CONTINUUS CHANGE MANAGEMENT SUITE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PRODUCTS DESCRIPTION PLATFORMS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
CLIENT PRODUCTS
- ------------------------------------------------------------------------------------------------------
Continuus/CM Provides a task-based, workflow-centric approach to - Windows 3.11
(Change Management) software configuration management that automates manual, Windows for
error-prone development processes yielding more Workgroups
productive teams and higher quality software. - Windows 95/98
- ---------------------- - Windows NT
Continuus/PT Simplifies the process of managing change requests - SUN Solaris
(Problem Tracking) across software development projects. The product's - HP-UX
automated workflow and graphical user interface support - IBM AIX
team collaboration and communication. Fully integrated - SGI IRIX
with Continuus/CM, the product provides graphical - Digital UNIX for
querying and reporting of real-time development metrics Alpha
- ---------------------- and status. - Siemens SINIX
Continuus/OM
(Object Make) Provides an object-oriented build management facility
that automates software builds and release processes.
The product's distributed architecture enables
management of builds on any network-available platform
providing a high performance, scalable solution for
development teams of any size.
- ------------------------------------------------------------------------------------------------------
SERVER PRODUCTS
- ------------------------------------------------------------------------------------------------------
Workgroup Server Provides a highly scalable platform for managing all - Windows NT
types of e-assets. The product adapts to the growing - SUN Solaris
needs of the organization through a multi-tier - HP-UX
architecture that scales to support any size remote and - IBM AIX
distributed development team, with all team members - SGI IRIX
sharing a central, active repository. Workgroup Server - Digital UNIX for
- ---------------------- manages access to and control of any type of e-asset. Alpha
Continuus/DCM - Siemens SINIX
(Distributed Change Provides distributed change management capabilities
Management) supporting multi-server, geographically dispersed and
remote development efforts. Allows development
organizations to work on a decentralized basis while
providing the full benefits of the task-based
Continuus/CM solution.
- ------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 43
CONTINUUS WEBSYNERGY SUITE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRODUCTS DESCRIPTION PLATFORMS
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
CLIENT PRODUCTS
- ----------------------------------------------------------------------------------------------------
WebSynergy Provides a browser-based client for web content Any hardware
Content Client contributors supporting the creation, management and platform with either
deployment of any type of web content. The product's Netscape Navigator
task-based change management capabilities support teams of or Microsoft
software and web content contributors, allowing them to Explorer
collaborate and deliver business critical, e-commerce
applications with higher quality.
- ------------------------------------------------------------------------------
WebPT Automates and simplifies the management of change requests
(to be released for web applications. WebPT is fully integrated with
mid-1999) Continuus/PT and supports change management of content and
software components across diverse development teams.
- ----------------------------------------------------------------------------------------------------
SERVER PRODUCTS
- ----------------------------------------------------------------------------------------------------
TeamSynergy As an upgrade to the Continuus Workgroup Server, applies - Sun Solaris
Server the proven capabilities and scalable Continuus server - HP-UX
architecture to the challenge of managing large, - Windows NT
distributed development teams building business critical
web applications.
- ----------------------------------------------------------------------------------------------------
</TABLE>
CONSULTING SERVICES AND SUPPORT
We offer customers a wide range of consulting, training and technical support
services. Given the complexities of Internet and enterprise software application
development, deployment and management, our experienced consultants can help
reduce the time and risk associated with our product deployments. As of March
31, 1999, the Company's consulting services and support organization consisted
of 54 employees. Our professional services organization provides the following
services:
PLANNING, CONSULTING AND IMPLEMENTATION SERVICES. We offer a wide range of
customer services to support the implementation requirements of our products to
ensure successful deployment and promote customer self-sufficiency. We offer our
customers planning, consulting and implementation services, including
requirements planning and systems integration, configuration and installation.
Our consultants can also customize our products to reflect the business and
technological needs of the customer with services such as advanced methodology
and process planning, makefile setup and product customization for the
customer's environment.
CUSTOMER EDUCATION AND TRAINING. We offer standard and customized training
courses designed to meet the needs of the various classes of users and
administrators of our products. Training classes are provided at our facilities
or on-site at customer locations. Fees for education and training services are
in addition to and separate from software licensing fees and are typically
charged per student, per class or on a per diem basis.
SOFTWARE MAINTENANCE AND SUPPORT. We provide telephone, electronic mail, web and
facsimile customer support through technical support centers located in Irvine,
California and Dublin, Ireland. Software maintenance and support services are
not included in software license fees. These support services include software
updates, maintenance releases and technical support.
CUSTOMERS
Our customer base is divided between the two major segments of the overall
enterprise software asset management market: the technical market segment and
the corporate IT market segment. The
41
<PAGE> 44
technical market consists of organizations that develop software as a product or
as a component of a product including independent software vendors, computer
hardware vendors, defense and aerospace organizations, medical instrument
manufacturers, telecommunications equipment suppliers and transportation
equipment manufacturers. The corporate IT market consists of the information
technology departments of Fortune 500 class and government organizations.
The following is a partial representative list of our customers who have
licensed our products in the last three years:
FINANCIAL SERVICES
Deutsche Morgan Grenfell
Dresdner Bank
Lehman Bros.
Liberty Mutual Insurance
Morgan Stanley
Prudential
Union Bank of Switzerland
Westdeutsche Landesbank
TELECOMMUNICATIONS
AT&T
Bell Atlantic
Bouygues Telecom
British Telecom
Deutsche Telekom
GTE
Nokia
Southwestern Bell Communications
Teligent
US West Communication Group
GOVERNMENT
Defense Research Agency (UK)
National Security Agency
OFD (German Ministry of Finance)
Rechenzentrum der Bund esfinanzverwaltung
DEFENSE AND AEROSPACE
Boeing
Dassault Aviation
Hughes
Jeppesen Sanderson
Lockheed Martin
Raytheon
MANUFACTURING AND ELECTRONICS
ABB
ATI Technologies
Baker Hughes
BMW
Compaq
Dialogic
General Motors
Johnson Controls
Magnetti Marelli
Motorola
Philips
Siemens
Texas Instruments
Volkswagen
SOFTWARE AND SERVICES
Cobalt Group
Computer Sciences Corp.
Compuware
Engineering Animation, Inc.
GEAC
ISG Technologies
Kronos
Lawson
New Era of Networks
Novell
QAD
Saville Systems
Telcordia Technologies
USinternetworking
SERVICES
DHL
United Healthcare
The following examples are representative of how large organizations use our
products and professional services to build and enable enterprise-critical
applications.
E-Commerce Service Company. The e-commerce service company is a leading
provider of e-commerce implementation and hosting services for business critical
applications over the Internet. Customers engage the e-commerce service company
to deliver e-commerce and enterprise software applications that automate core
business processes. The e-commerce service company is typically retained on a
fixed price, fixed time basis, making predictable and rapid application delivery
critical to its success. The e-commerce service company sought to improve
application delivery times, improve internal and external communications and
better manage client deliverables. In addition, the e-commerce service company
also needed a single platform to manage the complexity of both a rapidly
expanding web and application development organization and an increasing
customer base.
42
<PAGE> 45
To streamline and automate the application development and deployment process,
the e-commerce service company implemented the Continuus Change Management
solution. Our solution enabled development team members of varying technical
backgrounds to collaborate on the development and management of applications
from multiple locations or on-site at customer facilities. The Continuus Change
Management solution is also used to implement a consistent development process
throughout the organization and improves management's ability to monitor project
status.
Major European Bank. The major European bank is a global financial services
firm with over 45,000 employees operating in over 70 countries. More than eighty
percent of the major European bank's banking services were dependent on its
software. The major European bank's goal was to improve the quality and reduce
delivery time of core banking applications while coordinating its globally
distributed development teams. Concurrently, the major European bank needed to
migrate its legacy systems to client/server and Internet-based applications.
The major European bank implemented our Continuus Change Management solution to
connect distributed development teams and to establish a standard set of best
practices across application development projects. As a result of the
implementation of our solution, the major European bank was able to manage
business critical development processes such as the Euro conversion and year
2000 application efforts. The major European bank used our task-based management
capabilities to streamline or eliminate respective tasks, yielding an increase
in overall developer productivity.
Global Automobile Manufacturer. The global automobile manufacturer is one of
the world leaders in high performance and luxury automobiles. It faced
challenges in managing and developing both software embedded in its automobiles
and corporate IT systems used to run the business. To realize improved
productivity with its automobile-based software development efforts, the global
automobile manufacturer utilizes a series of common software components that are
customized to meet stringent government or market requirements for a specific
model of automobile. Our customer needed a way to manage software teams building
these common components as well as the distributed teams performing
customizations. In its move from legacy application development for internal
systems, the global automobile manufacturer also needed a way to manage its
internal development process across legacy, client/server and web-based
applications.
The global automobile manufacturer implemented our Continuus Change Management
Suite as well as Continuus WebSynergy. The Continuus Change Management Suite
controls the global automobile manufacturer's distributed software development
environment allowing geographically distributed teams to collaborate as if
co-located. Component-based development is facilitated as development teams and
managers can quickly locate and modify core software components across multiple
car lines. The product's audit trail, workflow and security capabilities ensure
that the global automobile manufacturer is delivering software components that
meet internal best practices.
SALES AND MARKETING
We sell our products in North America, France, Germany and the United Kingdom,
through our direct sales and services organizations. As of March 31, 1999, our
North American sales staff included 36 people located in California, Colorado,
Georgia, Illinois, Massachusetts, Minnesota, New Jersey, New York, Ontario,
Texas and Virginia. As of March 31, 1999, our international sales and marketing
staff included 31 people located in France, Germany and the United Kingdom.
Typically, each sales person is teamed with an engineer to assist in pre-sales
activities and transitioning new accounts to our professional services
organization for implementation support. The time between initial customer
contact and an actual sales order may span six months or more. We also maintain
telemarketing organizations in North America and the United Kingdom. The
telemarketing groups' primary responsibility is to work closely with the direct
sales teams to proactively identify and qualify
43
<PAGE> 46
high quality new prospects for our products. We also have distributors covering
Australia, Denmark, Finland, India, Israel, Italy, the Netherlands, Norway,
Spain and Sweden.
We market our products through public relations activities, user group meetings,
programs to work closely with industry analysts and other influential third
parties, seminars, conference sponsorship, trade shows, telemarketing and direct
mail campaigns. We also utilize the web for advertising campaigns on frequently
visited web sites including those of our strategic partners. We use our web
site, www.continuus.com, to establish our market presence, generate leads and
extend our program offerings to customers and strategic partners.
RESEARCH AND DEVELOPMENT
We have historically made significant investments in research and development
and related activities to maintain and enhance our product lines. We expect that
we will continue to devote a substantial portion of our resources to enhancing
and adding functionality to existing products, developing new products and
integrating our products with products from other leading vendors. We will also
evaluate on an ongoing basis externally developed technologies for integration
into our products.
COMPETITION
The market for Internet and enterprise software asset management products and
services is highly competitive and constantly evolving. We expect competition to
persist and intensify in the future. We have four primary sources of
competition:
- vendors of point solution software that address limited
functional components of enterprise software asset management
such as software configuration management vendors, including
Rational Software and MERANT;
- vendors of point solution software that address only limited
functional components of Internet asset management, such as
Interwoven and MKS;
- in-house development efforts by current and potential customers;
and
- larger vendors whose product lines include components of
Internet and enterprise software asset management, such as
Computer Associates, IBM and Microsoft.
Many of our competitors have longer operating histories and significantly
greater financial, technical, marketing, and other resources than we do and thus
may be able to respond more quickly to new or changing opportunities,
technologies and customer requirements. Also, many current and potential
competitors have greater name recognition and more extensive customer bases that
could be leveraged, thereby gaining market share to our detriment. Such
competitors may be able to undertake more extensive promotional activities,
adopt more aggressive pricing policies and offer more attractive terms to
purchasers than we can. In addition, current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to enhance their products. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
We seek to protect our software, documentation and other written materials
primarily through a combination of trademark, trade secret and copyright laws,
confidentiality procedures and contractual provisions. For example, we license
rather than sell our software and require licensees to enter into license
agreements that impose restrictions on the licensees' ability to utilize the
software. In addition, we seek to avoid disclosure of our trade secrets, by,
among other things, requiring those persons with access to our proprietary
information to execute confidentiality agreements with us.
44
<PAGE> 47
EMPLOYEES
As of March 31, 1999, we had 172 full-time employees, including 37 in research
and development, 54 in professional services, 67 in sales and marketing and 14
in general and administration. Of the total, 110 were based in the United
States, 25 in the United Kingdom, 8 in Ireland, 12 in France and 17 in Germany.
Our employees are not represented by any collective bargaining unit, and we have
never experienced a work stoppage. We believe our relations with our employees
are good.
FACILITIES
Our principal executive offices are located in Irvine, California and consist of
approximately 17,000 square feet under a lease expiring March 31, 2000. We also
lease office space in Paris, France; Munich, Germany; Dublin, Ireland;
Bracknell, United Kingdom; San Mateo and Laguna Hills, California; Schaumburg,
Illinois; Rockville, Maryland; Cambridge, Massachusetts; Morristown, New Jersey;
White Plains, New York and Dallas, Texas. We believe that we will require
additional space, including in Irvine, California as well as Germany, within the
next 12 months, but that suitable additional space will be available on
commercially reasonable terms.
45
<PAGE> 48
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding our executive
officers and directors as of March 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
John R. Wark......................... 47 President, Chief Executive Officer and Chairman of
the Board of Directors
Steven L. Johnson.................... 39 Vice President, Finance and Chief Financial Officer
William A. Philbin................... 39 Vice President, Marketing
James M. Carrigan.................... 47 Vice President, Research and Development
Geoffrey W. Haggart.................. 43 Vice President, European Operations
David McCann......................... 39 Vice President, Americas Operations
Fred B. Cox(1)....................... 61 Director
Kevin G. Hall(2)..................... 40 Director
Stewart A. Schuster(2)............... 53 Director
Sol Zechter.......................... 71 Director
</TABLE>
- -------------------------
(1) Mr. Cox is expected to retire from the board upon completion of this
offering unless a suitable replacement is identified earlier.
(2) Member of the Compensation Committee and Audit Committee
John R. Wark has served as our President, Chief Executive Officer and Chairman
of the board of directors since November 1994. Prior to joining Continuus, Mr.
Wark served as Vice President, Marketing and Development at Progress Software
Corporation, a software development tool and database system provider, from
February 1992 to November 1994. Prior to his tenure with Progress Software, he
served as a Vice President of the Applications Software Division of Pansophic
Systems.
Steven L. Johnson has served as our Vice President and Chief Financial Officer
since December 1998. From August 1988 to June 1998, he was employed by
Subscriber Computing, Inc., an application software company serving the wireless
telecommunications market. From June 1993 to June 1998, Mr. Johnson served as
Subscriber Computing's Vice President and Chief Financial Officer.
William A. Philbin has served as our Vice President, Marketing since August
1998. From February 1996 until August 1998, he was our Vice President Research
and Development. Mr. Philbin was employed by Progress Software Corporation from
March 1992 to February 1996, where he served in several positions, including
Director of Midrange Systems.
James M. Carrigan has served as our Vice President, Research and Development
since August 1998. Mr. Carrigan was Vice President, Research and Development for
Quarterdeck Corporation from April 1997 to August 1998. Before Quarterdeck, Mr.
Carrigan was the General Manager for Thuridion, a consulting firm from February
1996 to January 1997. Mr. Carrigan previously served as Director of Software
Services for Locus Computing Corp., a software company, from May 1989 to June
1996.
Geoffrey W. Haggart has served as our Vice President, European Operations since
March 1997 and from September 1995 to February 1997 as Managing Director of our
UK operations. Mr. Haggart was Vice President, Northern European Sales for
Legent Corporation from April 1995 to August 1995 and from January 1993 to March
1995 he served as Legent's Nordic Regional Manager.
David McCann has served as our Vice President, Americas Operations since March
1999. Mr. McCann was President and Chief Executive Officer of SOS Communications
Inc, a wireless services company, from July 1998 to March 1999. He served as
Vice President and General Manager of a division of Subscriber Computing, Inc.,
a telecommunications applications software company,
46
<PAGE> 49
from January 1998 to June 1998 and Vice President and General Manager of the
Spatialware Division of Mapinfo Corporation from July 1996 to November 1997. Mr.
McCann also served as Vice President of Worldwide Marketing for the Client
Server Division of Unisys Corporation from March 1993 to June 1996.
Fred B. Cox has served as a director of Continuus since 1994, prior to which Mr.
Cox served as our President for four years. He is currently the Chairman of the
board of directors and co-founder of Emulex, a publicly traded designer and
manufacturer of network connectivity products.
Kevin G. Hall has served as a director of Continuus since 1994. Mr. Hall is a
general partner of Norwest Venture Partners, a private investment firm, where he
focuses on software, communications and semiconductors.
Stewart A. Schuster has served as a director of Continuus since May 1997. Dr.
Schuster has been a venture partner of Brentwood Venture Capital, a private
investment firm, since December 1995. Dr. Schuster served as Executive Vice
President of Marketing at Sybase, Inc., a database solutions company, from 1986
to 1995.
Sol Zechter has served as a director of Continuus since 1994, prior to which Mr.
Zechter served as our Chief Executive Officer from 1991 until 1994. Mr. Zechter
served as the Senior Vice President of Emulex from 1982 to 1991.
All directors hold office until our next annual meeting of stockholders and
until their successors have been elected and qualified. Officers serve at the
discretion of the board of directors. There are no family relationships between
any of our directors or executive officers.
BOARD COMPOSITION
The board of directors is comprised of five members, four of whom are
non-employee directors.
BOARD COMMITTEES
Following the offering, the Compensation Committee will consist of Mr. Hall and
Dr. Schuster. The Compensation Committee makes recommendations regarding our
1997 Equity Incentive Plan and Employee Stock Purchase Plan, and makes decisions
concerning salaries and incentive compensation for our employees and
consultants.
Following the offering, the Audit Committee will consist of Mr. Hall and Dr.
Schuster. The Audit Committee makes recommendations to the board of directors
regarding the selection of independent auditors, reviews the results and scope
of the audit and other services provided by our independent auditors and reviews
and evaluates our audit and control functions.
DIRECTOR COMPENSATION
All directors are reimbursed for certain expenses in connection with attendance
at board and committee meetings. Historically, our non-employee directors have
not received cash compensation for their services on the board of directors or
any committee of the board. Dr. Schuster and Mr. Hall received options to
purchase 75,000 shares of common stock under our 1997 Equity Incentive Plan. The
options granted to Dr. Schuster vest quarterly over a four-year period. The
options granted to Mr. Hall vest annually over a four-year period.
47
<PAGE> 50
As of the date of this prospectus, our non-employee directors will receive
$2,000 per board meeting attended and $500 per committee meeting attended.
Non-employee directors will also receive the following automatic grants of
options under our 1997 Equity Incentive Plan:
- a one-time option to purchase 7,500 shares of common stock,
granted on the later to occur of July 1, 1999 and the date of
this prospectus, for each non-employee director serving as of
the date of this prospectus; and
- an option to purchase 7,500 shares of common stock, granted on
the date of each annual meeting of our stockholders after the
date of this prospectus, for each person who is a non-employee
director following such annual meeting.
The options granted to non-employee directors serving as of the date of this
prospectus and the options granted on the date of each annual meeting shall vest
on the anniversary of the date of the grant. The exercise price of options
granted to non-employee directors shall be equal to 100% of the fair market
value of common stock on the date of grant and are generally non-transferable.
See "-- Equity Incentive Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers 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 our board of directors or Compensation Committee. See
"Certain Transactions" for a description of transactions between Continuus and
entities affiliated with members of the Compensation Committee.
48
<PAGE> 51
EXECUTIVE COMPENSATION
The following table sets forth certain information for the year ended December
31, 1998, regarding the compensation of our Chief Executive Officer and the four
other most highly compensated executive officers whose salary and bonus during
the fiscal year ended December 31, 1998 were in excess of $100,000. These
officers are referred to as Named Executive Officers elsewhere in this
prospectus. In accordance with the rules of the Securities and Exchange
Commission, the compensation described in this table does not include medical,
group life insurance or other benefits which are available generally to all our
salaried employees and certain perquisites and other personal benefits received
which do not exceed the lesser of $50,000 or 10% of any officer's salary and
bonus disclosed in this table. The Other Annual Compensation column in the table
includes relocation expenses in connection with hiring employees.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) OPTIONS(#) ($)(1)
- --------------------------- ---- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John R. Wark.................... 1998 175,000 50,000 -- 42,453 --
President and Chief Executive
Officer
Joseph S. Campbell.............. 1998 162,582 59,929 -- -- 55,460
Former Senior Vice President,
Worldwide Field Operations(2)
John J. Laskey.................. 1998 136,817 20,000 -- 46,226 --
Former Vice President, Finance
and Chief Financial Officer(3)
William A. Philbin.............. 1998 142,096 -- -- 46,226 --
Vice President, Engineering
Geoffrey W. Haggart............. 1998 124,342 95,739 14,921 47,736 --
Vice President, European
Operations
</TABLE>
- -------------------------
(1) Represents reimbursements for relocation expenses.
(2) Mr. Campbell left Continuus on November 13, 1998.
(3) Mr. Laskey left Continuus on October 23, 1998.
49
<PAGE> 52
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information with respect to stock options
granted to each of the Named Executive Officers during the year-ended December
31, 1998, including the potential realizable value over the ten-year term of the
options, based on assumed rates of stock appreciation of 5% and 10%, compounded
annually. These assumed rates of appreciation comply with the rules of the SEC
and do not represent our estimate of future stock price. Actual gains, if any,
on stock option exercises will depend on the future performance of our common
stock.
In 1998, we granted options to purchase up to an aggregate of 921,667 shares to
employees. All options were under our 1997 Equity Incentive Plan at an exercise
price equal to the fair market value of our common stock on the date of grant.
All options have a term of ten years. Option shares vest over four years.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AS ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM($)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR(%) PER SHARE($) DATE 5% 10%
- ------------------------------ ---------- -------------- -------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
John R. Wark.................. 42,453 4.6 1.99 1/15/08 53,155 134,154
Joseph S. Campbell............ -- -- -- -- -- --
John J. Laskey................ 37,736 4.1 1.99 1/25/99 47,249 119,247
8,490 1.0 1.99 1/25/99 10,631 26,829
William A. Philbin............ 37,736 4.1 1.99 7/17/08 47,249 119,247
1,132 * 1.99 4/30/08 1,417 3,577
7,358 1.0 1.99 1/15/08 9,213 23,252
Geoffrey W. Haggart........... 28,302 3.1 1.99 7/17/08 35,436 89,435
19,434 2.1 1.99 1/15/08 24,333 61,411
</TABLE>
- -------------------------
* Represents less than one percent of total options granted to employees in
1998.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth, with respect to each of the Named Executive
Officers, concerning exercisable and unexercisable options held as of December
31, 1998.
The "Value of Unexercised In-the-Money Options at December 31, 1998" is based on
a value of $ per share, the initial public offering price, less the per
share exercise price, multiplied by the number of shares issued upon exercise of
the option.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN THE
UNDERLYING OPTIONS AT MONEY OPTIONS AT
SHARES ON DECEMBER 31, 1998 (#) DECEMBER 31, 1998 ($)
ACQUIRED VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John R. Wark................. -- -- 286,357 82,822
Joseph S. Campbell........... -- -- 37,735 --
John J. Laskey............... -- -- 72,895 --
William A. Philbin........... -- -- 52,593 71,932
Geoffrey W. Haggart.......... -- -- 25,504 78,265
</TABLE>
50
<PAGE> 53
EMPLOYMENT AGREEMENTS
On May 31, 1997, we entered into a President/CEO Change in Control Severance
Benefits Agreement with John Wark. The severance benefit agreement provides that
upon certain changes in control of Continuus, and the subsequent termination
without cause of Mr. Wark, he is entitled to a continuation of base salary for
twelve months, payment of his target bonus (if applicable), accelerated vesting
of options, and continued health care benefit coverage as permitted by COBRA
(Internal Revenue Code Section 4980B).
We have entered into Executive Change in Control Severance Benefits Agreements
with each of William A. Philbin, Steven L. Johnson, David McCann, Geoffrey W.
Haggart and James M. Carrigan. The agreements provide that upon certain changes
in control of Continuus, and the subsequent termination without cause of such
executives, they are entitled to a continuation of base salary for between six
and nine months, a portion of their target bonus, continued or accelerated
vesting of options, and continued health care benefit coverage as permitted by
COBRA.
EQUITY INCENTIVE PLANS
EMPLOYEE STOCK OPTION PLAN AND 1997 EQUITY INCENTIVE PLAN. We adopted our
initial stock option plan, the Employee Stock Option Plan, in November 1991. Of
the 1,754,717 shares of common stock reserved for issuance on the exercise of
grants under the Employee Stock Option Plan, options for 1,179,033 shares remain
outstanding. We do not intend to make any additional grants under the Employee
Stock Option Plan. The Employee Stock Option Plan expires in November 2001
unless sooner terminated by the board. We adopted our current stock option plan,
the 1997 Equity Incentive Plan in December 1997. Of the 2,452,830 shares of our
common stock reserved for issuance on the exercise of grants under the 1997
Equity Incentive Plan, options for 1,257,671 shares are issued and outstanding
as of March 31, 1999. The 1997 Equity Incentive Plan will terminate in December
2007, unless sooner terminated by the board.
Both plans permit the granting of options intended to qualify as incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended. Under the 1997 Equity Incentive Plan, incentive stock options may be
granted to employees, officers and employee directors. Employee directors are
not eligible for incentive stock options under the Employee Stock Option Plan.
Incentive stock options as well as options that do not qualify for favorable tax
treatment, nonstatutory stock options, may be granted to employees, directors
and consultants under the 1997 Equity Incentive Plan. The Employee Stock Option
Plan permits grants of nonstatutory stock options only to employees, including
officers. The 1997 Equity Incentive Plan also permits the granting of stock
bonuses and rights to purchase restricted stock. Both plans forbid option grants
for more than 377,358 shares of our common stock in any calendar year to any one
person.
The plans are administered by the board of directors of Continuus or a committee
appointed by the board. Subject to the limitations set forth in each of the
plans, the board has the authority to select the persons to whom grants are to
be made, to determine whether an option is to be an incentive stock option or a
nonstatutory stock option, to establish the time or times when a person shall be
permitted to receive stock pursuant to a grant under one of the plans, and the
number of shares granted. Under the 1997 Equity Incentive Plan, the board may
also determine whether a grant will include a stock bonus, a right to purchase
restricted stock, or a combination of both.
The maximum term of options granted under the plans is ten years. The aggregate
fair market value, determined at the time of grant, of the shares of common
stock which incentive stock options are exercisable for by an optionee during
any calendar year may not exceed $100,000. If this amount is exceeded, the
incentive stock options which exceed the limit shall be treated as nonstatutory
stock options. Options granted under the plans generally are non-transferable
and expire three months after
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<PAGE> 54
the termination of an optionee's service to Continuus. If an optionee is
permanently disabled or dies during his or her service to Continuus, under the
Employee Stock Option Plan such person's options may be exercised up to 12
months following such disability or death. Under the 1997 Equity Incentive Plan,
options may be exercised up to 12 months following such disability and 18 months
following death.
The exercise price of options granted under the plans is determined by the board
in accordance with the guidelines set forth in the plans. The exercise price of
an incentive stock option cannot be less than 100% of the fair market value of
the common stock on the date of the grant. The exercise price of a nonstatutory
stock option cannot be less than 85% of the fair market value of the common
stock on the date of grant. Options granted under the plans vest at the rate
specified in the option agreement. The exercise price of incentive stock options
granted to any person who at the time of grant owns stock representing more than
10% of the total combined voting power of all classes of our capital stock must
be at least 110% of the fair market value of the common stock on the date of
grant and the term of the options cannot exceed five years.
Any stock bonuses or restricted stock purchase awards granted under the 1997
Equity Incentive plan shall be in the form approved by the board. The purchase
price under any restricted stock purchase agreement will not be less than 85% of
the fair market value of our common stock on the date of grant. Stock bonuses
and restricted stock purchase agreements are generally non-transferable.
The plans provide that shares subject to options, stock bonuses and restricted
stock purchases, that have expired or otherwise terminated without having been
exercised in full again become available for grant.
Upon certain changes in control, under the plans, all outstanding options, stock
bonuses and restricted stock must either be assumed or substituted by the
surviving entity. In the event the surviving entity does not assume or
substitute them, the vesting of the options, stock bonuses and restricted stock
shall be accelerated prior to the change in control and they shall be terminated
if not exercised prior to such event.
EMPLOYEE STOCK PURCHASE PLAN
In April 1999, we adopted the 1999 Employee Stock Purchase Plan covering an
aggregate of 250,000 shares of common stock. The Employee Stock Purchase Plan is
intended to qualify as an employee stock purchase plan within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended. Under the Employee
Stock Purchase Plan, the board may authorize participation by eligible
employees, including officers, in periodic offerings. The initial offering under
the plan will commence on the date of this prospectus and terminate on January
31, 2000.
Unless otherwise determined by the board, employees are eligible to participate
in the plan only if they are employed by us or our subsidiary for at least 20
hours per week and for at least five months per calendar year. Employees who
participate in an offering may have up to 15% of their earnings withheld
pursuant to the plan. The amount withheld is then used to purchase shares of our
common stock on dates determined by the board. The price of common stock
purchased under the plan will be equal to 85% of the lower of the fair market
value of the common stock at the commencement date of each offering period or
the fair market value on the relevant purchase date. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment with us.
In the event of a merger, reorganization, consolidation or liquidation involving
Continuus, the board has discretion to provide that each right to purchase
common stock will be assumed or an equivalent right substituted by the successor
corporation, or the board may shorten this offering period and provide for all
sums collected by payroll deductions to be applied to purchase stock immediately
prior
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<PAGE> 55
to such merger or other transaction. The board has the authority to amend or
terminate the plan, provided that such amendment or termination does not
adversely affect any outstanding rights to purchase common stock.
401(k) PLAN
Effective January 1, 1987, we adopted the Continuus Software Corporation
Retirement Savings Plan, a 401(k) plan, covering employees. Pursuant to the
401(k) plan, eligible employees may elect to reduce their current compensation
by up to the statutorily prescribed annual limit ($10,000 in 1998) and have the
amount of such reduction contributed to the 401(k) plan. The 401(k) plan allows
for Continuus to make discretionary matching contributions. Employees who are 18
years of age or older and who have served at least 1,000 hours with Continuus
during a calendar year are eligible for matching contributions. Our
contributions, if any, become 25% vested after one year of service, with an
additional 25% becoming vested for each year of service thereafter. We made no
discretionary contributions in 1998. The 401(k) plan is intended to qualify
under Section 401 of the Internal Revenue Code of 1986, as amended, so that
contributions by employees and Continuus to the 401(k) plan, and income earned
on the 401(k) plan contributions, are not taxable to employees until withdrawn
from the 401(k) plan. Qualification under Section 401 also allows us to deduct
our contributions, if any, when we make them. The trustee under the 401(k) plan,
at the direction of each participant, invests the employee salary deferrals in
selected investment options.
LIMITATIONS ON DIRECTORS' AND EXECUTIVE OFFICERS' LIABILITY AND INDEMNIFICATION
Our Bylaws provide that we will indemnify our directors and executive officers
and may indemnify our other officers, employees and other agents to the fullest
extent permitted by Delaware law. We are also empowered under our Bylaws to
enter into indemnification contracts with our directors and officers and to
purchase insurance on behalf of any person we are required or permitted to
indemnify. Pursuant to this provision, we have entered into indemnification
agreements with each of our directors and executive officers.
In addition, our Restated Certificate of Incorporation provides that our
directors will not be personally liable to Continuus or our stockholders for
monetary damages for any breach of fiduciary duty as a director, except for
liability (i) for any breach of the directors' duty of loyalty to Continuus or
our stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law or (iv) for any transaction from which the
director derives an improper personal benefit. The Restated Certificate of
Incorporation also provides that if the Delaware General Corporation Law is
amended after the approval by our stockholders of the Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of our directors shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
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CERTAIN TRANSACTIONS
The following is a description of transactions since January 1, 1996, to which
we have been a party, in which the amount involved in the transaction exceeds
$60,000 and in which any director, executive officer or holder of more than 5%
of our capital stock had or will have a direct or indirect material interest
other than compensation arrangements which are otherwise required to be
described under "Management."
In May 1996, we sold in a private placement 361,178 shares of Series D preferred
stock at $5.57 per share in exchange for an aggregate purchase price of
$2,010,002 pursuant to a Series D Preferred Stock Purchase Agreement dated May
30, 1996. Upon the closing of this offering, each share of Series D preferred
stock will automatically convert into one share of common stock. See Note 8 of
Notes to Consolidated Financial Statements for a description of the Series D
preferred stock. The following directors and beneficial owners of more than five
percent of our common stock (assuming conversion of all shares of preferred
stock into common stock) acquired beneficial ownership of Series D preferred
stock:
<TABLE>
<CAPTION>
DIRECTORS/5% STOCKHOLDERS NUMBER OF SHARES
- ------------------------- ----------------
<S> <C>
Kevin G. Hall / Norwest Equity Partners, V.................. 123,090
Stewart A. Schuster / Brentwood Associates VI, L.P.......... 89,847
Accel IV L.P.(1)............................................ 34,139
Advanced Technology Partners III............................ 58,400
Fred B. Cox(2).............................................. 26,954
Sol Zechter(3).............................................. 8,984
</TABLE>
- -------------------------
(1) Includes 1,468 shares held by Accel Investors '95 L.P., 648 shares held by
Accel Keiretsu L.P. and 750 shares held by Ellmore C. Patterson Partners.
(2) Includes 26,954 shares held by the Cox Living Trust dated May 26, 1988 of
which Mr. Cox is the co-Trustee.
(3) Includes 8,984 shares held by the Zechter Family Trust dated March 6, 1996
of which Mr. Zechter is the Trustee.
In January 1997 we issued warrants to purchase 184,938 shares of Series E
preferred stock at $5.57 per share in connection with the issuance of promissory
notes in the aggregate principal amount of $1,029,502. In May 1997, we sold in
private placements 470,849 shares of Series E preferred stock and warrants to
purchase 93,190 shares of Series E preferred stock in exchange for an aggregate
purchase price of $2,623,073 pursuant to a Series E Preferred Stock Purchase
Agreement dated May 19, 1997. Upon the closing of this offering, each share of
Series E preferred stock will automatically convert into one share of common
stock and the warrants issued in both January and May 1997 will terminate if not
exercised. See Note 8 of Notes to Consolidated Financial Statements for a
description of the Series E preferred stock. The following directors and
beneficial owners of more than five percent of our common stock (assuming
conversion of all shares of preferred stock into common stock) acquired
beneficial ownership of Series E preferred stock and common stock issuable upon
conversion of warrants pursuant to the Series E purchase agreement:
<TABLE>
<CAPTION>
NUMBER OF
DIRECTORS/5% STOCKHOLDERS NUMBER OF SHARES WARRANT SHARES
- ------------------------- ---------------- --------------
<S> <C> <C>
Kevin G. Hall / Norwest Equity Partners, V......... 183,583 106,659
Stewart A. Schuster / Brentwood Associates VI,
L.P.............................................. 132,052 76,720
Accel IV L.P.(1)................................... 58,359 33,873
Advanced Technology Partners III................... 85,503 49,672
</TABLE>
- -------------------------
(1) Includes 2,509 shares and 1,456 warrant shares held by Accel Investors '95
L.P., 1,108 shares and 643 warrant shares held by Accel Keiretsu L.P. and
1,283 shares and 744 warrant shares held by Ellmore C. Patterson Partners.
We have entered into employment letter agreements with John R. Wark, our
President and Chief Executive Officer, Steven L. Johnson, our Vice President,
Finance and Chief Financial Officer,
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<PAGE> 57
William A. Philbin, our Vice President, Marketing, Geoffrey W. Haggart, our Vice
President, European Operations, James M. Carrigan, our Vice President, Research
and Development and David McCann, our Vice President, Americas Operations. We
have also entered into agreements with Mr. Wark, Mr. Johnson, Mr. Philbin, Mr.
Haggart, Mr. Carrigan and Mr. McCann providing for severance benefits upon their
termination, without cause, subsequent to a change in control. See
"Management -- Employment Agreements."
In September 1997, we sold $6.0 million in principal amount of a 12% senior
secured convertible debenture, Due September 23, 2002, to London Pacific Life &
Annuity Company. Interest on the debenture accrues at a rate of 12% and is
payable quarterly in arrears. Upon certain changes in control, we must repay all
outstanding principal of the debenture plus any accrued interest thereon, or, at
the discretion of London Pacific, convert the debenture into our common at a
purchase price of $5.57 per share. The debenture is otherwise convertible at the
option of London Pacific at the same conversion price, $5.57 per share, subject
to adjustment upon the occurrence of certain events. The debenture is secured by
our assets.
We have granted options to certain of our directors and executive officers. We
have also entered into indemnification agreements with each of our directors and
executive officers. See "Management -- Stock Option Grants in Last Fiscal Year"
and "-- Limitations on Directors' and Executive Officers' Liability and
Indemnification."
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<PAGE> 58
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of March 31, 1999, and as adjusted
to reflect the sale of the shares of common stock offered hereby, by each holder
of more than 5% of our common stock. The table also sets forth such information
for our directors and Named Executive Officers individually and all directors
and executive officers as a group. Unless otherwise indicated, the principal
address of each of the persons and entities below is in the care of Continuus
Software Corporation, 108 Pacifica, Irvine, California 94025.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Except as indicated by footnote, and subject
to community property laws where applicable, the persons named in the table
below have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them. Percentage of beneficial ownership is
based on 6,258,219 shares of common stock outstanding as of March 31, 1999
(after giving effect to a 1-for-2.65 reverse stock split, the conversion of all
outstanding shares of preferred stock into 4,306,454 post-split shares of common
stock and the conversion of 278,125 shares of common stock reserved for issuance
upon exercise of warrants to purchase common stock at $5.57 per share) and
shares of common stock outstanding after completion of this offering.
All shares shown below for John R. Wark, William A. Philbin, Geoffery W.
Haggart, and Stewart A. Schuster are issuable upon the exercise of stock options
within 60 days of March 31, 1999.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE THE OWNED AFTER THE
OFFERING SHARES OFFERING
------------------- BEING -------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------------ --------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Norwest Equity Partners IV(1)................... 1,911,390 28.6 --
Brentwood Associates VI, L.P.(2)................ 1,374,865 20.9 --
Fred T. Cox(3).................................. 938,701 14.7 --
London Pacific Life & Annuity Company(4)........ 1,078,167 14.7 --
Advanced Technology Ventures III(5)............. 890,218 13.8 --
Sol Zechter(6).................................. 710,196 11.2 --
Accel Partners IV, L.P.(7)...................... 607,589 9.5 --
Bernhardt Associates(8)......................... 305,658 4.9 --
John R. Wark.................................... 310,220 4.7 --
William A. Philbin.............................. 62,382 1.0 --
Geoffrey W. Haggart............................. 31,922 * --
Stewart A. Schuster............................. 8,844 * --
All directors and executive officers as a group
(10 persons)(9)............................... 2,104,716 30.3
</TABLE>
- -------------------------
* Represents beneficial ownership of less than one percent.
(1) Principal address is 245 Lytton Avenue, Suite 250, Palo Alto, California
94301. Includes 236,209 shares subject to warrants exercisable within 60
days of March 31, 1999; Includes 681,980 shares held by Norwest Equity
Partners V and 180,872 shares subject to warrants exercisable within 60
days of March 31, 1999 held by Norwest Equity Partners V.
(2) Principal address is 2730 Sand Hill Road, Suite 250, Menlo Park, California
94025. Includes 307,277 shares subject to warrants exercisable within 60
days of March 31, 1999.
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<PAGE> 59
(3) Includes 75,469 shares held by Eric T. Cox, 75,469 shares held by Fred B.
Cox III, 419,161 shares held by the Cox Living Trust, 5,390 shares subject
to warrants exercisable within 60 days of March 31, 1999 held by the Cox
Living Trust and 75,469 shares held by Alicia Cox Stanfil. Also includes
43,207 shares subject to options exercisable within 60 days of March 31,
1999.
(4) Principal address is 3109 Poplarwood Court, Suite 108, Raleigh, North
Carolina 27604. All 1,078,167 shares are subject to a senior secured
convertible debenture with a conversion price of $0.79 per share held by
London Pacific Life & Annuity Company which may be converted at any time at
the option of London Pacific.
(5) Principal address is 1000 El Camino Real, Suite 360, Menlo Park, California
94025. Includes 195,628 shares subject to warrants exercisable within 60
days of March 31, 1999.
(6) Includes 7,547 shares held by Richard Harlan Zechter, as Custodian of
Caroline Elisa Zechter, UGMA, 7,547 shares held by Richard Harlan Zechter
as Custodian of Mariela Adrienna Zechter, UGMA, 48,050 shares held by
Lawrence G. Zechter, 137,966 shares held by Sol Zechter as Trustee of the
Sheila Claire Zechter Annuity Trust, 137,966 shares held by Sol Zechter as
Trustee of the Sol Zechter Annuity Trust, 169,893 shares held by Sol
Zechter as Trustee of the Sol Zechter Family Trust, 102,615 shares subject
to warrants and options exercisable within 60 days of March 31, 1999 held
by Sol Zechter as Trustee of the Sol Zechter Family Trust, 49,306 shares
held by Richard H. Zechter and 49,306 shares held by Susan C. Zechter.
(7) Principal address is 428 University Avenue, Palo Alto, California 94301.
Includes 20,975 shares held by Accel Investors '95 L.P., 5,149 shares
subject to outstanding warrants exercisable within 60 days of March 31,
1999 held by Accel Investors '95 L.P., 9,267 shares held by Accel Keiretsu
L.P., 2,275 shares subject to outstanding warrants exercisable within 60
days of March 31, 1999 held by Accel Keiretsu L.P., 10,730 shares held by
Ellmore C. Patterson Partners and 2,633 shares subject to outstanding
warrants exercisable within 60 days of March 31, 1999 held by Ellmore C.
Patterson Partners.
(8) Principal address is 25382 Rainwood, Laguna Niguel, California 92677.
Includes 128,301 shares held by David H. Bernhardt and 113,207 shares held
by Steven T. Bernhardt.
(9) Includes 679,046 shares subject to options exercisable within 60 days of
March 31, 1999.
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<PAGE> 60
DESCRIPTION OF CAPITAL STOCK
Effective upon the closing of this offering, our authorized capital stock will
consist of 30,000,000 shares of common stock, $.001 par value, and 5,000,000
shares of preferred stock, $.001 par value.
COMMON STOCK
As of March 31, 1999, there were 6,258,219 shares of common stock outstanding,
after giving effect to the conversion of all outstanding shares of preferred
stock into 4,306,454 shares of common stock and assuming the issuance of 278,125
shares of common stock upon the exercise of certain warrants upon the completion
of this offering.
The holders of common stock are entitled to one vote per share on all matters to
be voted on by the stockholders. Subject to preferences that may be applicable
to any outstanding shares of preferred stock, holders of common stock are
entitled to receive ratably such dividends as may be declared by the board of
directors out of funds legally available therefor. In the event we liquidate,
dissolve or wind up, holders of common stock are entitled to share ratably in
all assets remaining after payment of liabilities and the liquidation
preferences of any outstanding shares of preferred stock. Holders of common
stock have no preemptive, conversion, subscription or other rights. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are, and all shares of common stock to be
outstanding upon completion of this offering will be, fully paid and
nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of preferred stock
will be converted into 4,306,454 shares of common stock. See Note 8 of Notes to
Consolidated Financial Statements for a description of the currently outstanding
preferred stock. Following the conversion, our Certificate of Incorporation will
be amended and restated to delete all references to such shares of preferred
stock. Under the Certificate of Incorporation, as amended and restated upon the
closing of this offering, the Board has the authority, without further action by
stockholders, to issue up to 5,000,000 shares of preferred stock in one or more
series and to fix the rights, preferences, privileges, qualifications and
restrictions granted to or imposed upon such preferred stock, including dividend
rights, conversion rights, voting rights, rights and terms of redemption,
liquidation preference and sinking fund terms, any or all of which may be
greater than the rights of the common stock. The issuance of preferred stock
could adversely affect the voting power of holders of common stock and reduce
the likelihood that such holders will receive dividend payments and payments
upon liquidation. Such issuance could have the effect of decreasing the market
price of the common stock. The issuance of preferred stock could have the effect
of delaying, deterring or preventing a change in control. We have no present
plans to issue any shares of preferred stock.
WARRANTS
Warrants outstanding to purchase shares of our common stock as of March 31, 1999
are listed below:
- 720,148 shares at an exercise price of $0.66 per share,
terminating December 31, 2001;
- 221,736 shares at an exercise price of $1.53 per share,
terminating May 29, 2003;
- 15,849 shares at an exercise price of $3.47 per share,
terminating five years from the closing of this offering;
- 38,268 shares of an exercise price of $5.57 per share,
terminating five years from the closing of this offering;
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<PAGE> 61
- 37,735 shares at an exercise price of $5.57 per share,
terminating June 4, 2001; and
- 278,125 shares at an exercise price of $5.57 per share,
terminating upon the closing of this offering.
The holder of the warrant to purchase 37,735 shares of common stock at an
exercise price of $5.57 per share is entitled to an adjustment in the exercise
price and the number of shares issuable upon its exercise, pursuant to that
certain Antidilution Agreement dated June 4, 1996. Under the terms of the
Antidilution Agreement, if we issue additional common stock for consideration
less than the then-effective exercise price of the warrant, subject to certain
exceptions, the exercise price of the warrant shall be reduced and the number of
shares issuable upon exercise shall be increased.
SENIOR SECURED CONVERTIBLE DEBENTURE
We have outstanding a Senior Secured Convertible Debenture in principal amount
of $6,000,000, due September 23, 2002 held by London Pacific Life & Annuity
Company. Interest on the debenture, which accrues at a rate of 12%, is payable
quarterly in arrears. Upon the earlier to occur of (i) an underwritten public
offering with an aggregate offering price of at least $15,000,000 and at a per
share offering price of at least $13.91 and (ii) certain changes in control, we
must repay all outstanding principal of the debenture plus any accrued interest
thereon, or, at the discretion of London Pacific, convert the debenture into our
common stock at a purchase price of $5.57 per share. The Convertible Debenture
is otherwise convertible at the option of London Pacific at the same conversion
price, $5.57 per share, subject to adjustment upon the occurrence of certain
events. The Convertible Debenture is secured by all our assets.
REGISTRATION RIGHTS
After this offering, the holders of 7,063,748 shares of common stock and common
stock issuable upon conversion of a debenture and upon exercise of warrants will
be entitled to certain rights with respect to the registration of such shares
under the Securities Act, pursuant to the Amended and Restated Investor Rights
Agreement dated March 4, 1994, as last amended on December 30, 1997. Commencing
with the date that is 180 days after this offering, the holders may require us
to file a registration statement under the Securities Act with respect to their
shares, and we are required to use our best efforts to effect to such
registration. Furthermore, the holders may require us to register their shares
on Form S-3 when such form becomes available to us. Such registration rights
terminate on the seventh anniversary of the effective date of this offering.
Under the terms of the Investors' Rights Agreement, if we propose to register
any of our securities under the Securities Act, either for our own account or
for the account of other security holders exercising registration rights, the
holders of 7,865,647 shares of common stock and common stock issuable upon
conversion of a debenture and exercise of warrants are entitled to notice of
such registration and are entitled, subject to certain limitations, to include
shares therein.
The holder of a warrant to purchase 37,735 shares of common stock is entitled to
certain rights with respect to the registration of such shares under the
Securities Act, pursuant to the Registration Rights Agreement dated June 4,
1998. Under the terms of the Registration Rights Agreement, if we propose to
register any of our securities under the Securities Act, either for our own
account or for the account of other security holders exercising registration
rights, the holder of the warrant is entitled to notice of such registration
and, subject to certain limitations, to include shares therein.
Generally, we must bear all registration and selling expenses incurred in
connection with any of the registrations described above. The registration
rights under the Investors' Rights Agreement are also subject to certain
conditions and limitations, among them the right of the underwriters of an
offering to limit the number of shares included in such registration and the
right of the board of directors to defer registration for up to six months
because such deferral is in our best interests.
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<PAGE> 62
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
We are governed by the provisions of Section 203 of the Delaware General
Corporation Law. In general, Section 203 prohibits a public Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. A "business combination" includes mergers, asset sales or
other transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of the
corporation's outstanding voting stock. The existence of this provision would be
expected to have anti-takeover effects with respect to transactions not approved
in advance by the board of directors, such as discouraging takeover attempts
that might result in a premium over the market price of the common stock.
Our Certificate of Incorporation provides that any action required or permitted
to be taken by our stockholders must be effected at a duly called annual or
special meeting of stockholders and may not be effected by any consent in
writing. Our Certificate of Incorporation also specifies that the authorized
number of directors may be changed only by resolution of the board of directors.
In addition, our Bylaws provide that special meetings of our stockholders may be
called only by the Chairman of the Board, our President or the board of
directors pursuant to a resolution adopted by a majority of the total number of
authorized directors. These and other provisions in our Certificate of
Incorporation and Bylaws could delay or make more difficult certain types of
transactions involving an actual or potential change in control or our
management (including transactions in which stockholders might otherwise receive
a premium for their shares over then current prices) and may limit the ability
of stockholders to remove our current management or approve transactions that
stockholders may deem to be in their best interests and, therefore, could
adversely affect the price of our common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is .
LISTING
We have applied to list our common stock on the Nasdaq National Market under the
trading symbol "CNSW." We have not applied to list our common stock on any other
exchange or quotation system.
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<PAGE> 63
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering, there has been no public market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect prevailing market prices. Furthermore, since only a limited
number of shares will be available for sale shortly after the offering because
of certain contractual and legal restrictions on resale described below, sales
of substantial amounts of our common stock in the public market after the
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.
Upon completion of the offering, we will have shares of common
stock outstanding, assuming no exercise of currently outstanding options or
warrants, but including warrants to purchase an aggregate of 278,125 shares of
Series E preferred stock (which will convert to common stock) to be exercised
upon the closing of this offering. Of these shares:
- The shares sold in this offering (plus any
additional shares sold upon exercise of the underwriters'
over-allotment option) will be freely transferable without
restriction under the Securities Act of 1933, as amended (the
"Securities Act"), unless they are held by our "affiliates" as
that term is used under the Securities Act and the regulations
promulgated thereunder.
- Approximately shares of common stock will be
eligible for sale (plus approximately 1,186,303 shares issuable
upon exercise of vested options will be eligible for sale) under
Securities Act Rules 144 and 701 on the ninety-first day after
the effectiveness of this offering. Our stockholders holding an
aggregate of of these shares of
common stock (plus approximately 1,258,690 shares issuable upon
exercise of vested options) have agreed pursuant to lock-up
agreements with the underwriters, subject to certain limited
exceptions, not to sell or otherwise dispose of any of the
shares held by them for a period of 180 days after the effective
date of this offering without the prior written consent of U.S.
Bancorp Piper Jaffray.
- At the end of such 180-day period, shares of
common stock (plus approximately 1,258,690 shares issuable upon
exercise of vested options) will be eligible for immediate
resale, subject to compliance with Rule 144 and Rule 701.
The holders of shares of common stock and common stock issuable
upon conversion of a debenture and exercise of all warrants outstanding as of
the effective date of this offering have the right in certain circumstances to
require Continuus to register their shares under the Securities Act for resale
to the public beginning 180 days from the effective date of this offering. If
such holders, by exercising their demand registration rights, cause a large
number of shares to be registered and sold in the public market, such sales
could have an adverse effect on the market price for our common stock. The
holders of 7,063,748 shares of common stock and common stock issuable upon
conversion of a debenture and exercise of warrants have the right in certain
circumstances to require us to include some shares when we register shares for
resale to the public for the benefit of Continuus or the benefit of another
security holder exercising its demand registration rights. If we were required
to include some shares held by such holders pursuant to the exercise of their
piggyback registration rights in a future registration, such sales may have an
adverse effect on our ability to raise needed capital. In addition, we expect to
file a registration statement on Form S-8 registering a total of approximately
4,457,547 shares of common stock subject to outstanding stock options or
reserved for issuance under our stock option plans. Such registration statement
is expected to be filed and to become effective as soon as practicable after the
effective date of this offering. Shares registered under such registration
statement will, subject to Rule 144 volume limitations applicable to our
61
<PAGE> 64
affiliates, be available for sale in the open market, unless such shares are
subject to vesting restrictions or the lock-up agreements described above.
In general, under Rule 144 as in effect on the date of this prospectus,
beginning 90 days after the effective date of the offering, one of our
affiliates, or a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares (as defined under Rule 144) for at least
one year is entitled to sell within any three-month period a number of shares
that does not exceed greater of:
- one percent of the then outstanding shares of our common stock
or
- the average weekly trading volume of our common stock in the
Nasdaq National Market during the four calendar weeks
immediately preceding the date on which notice of the sale is
filed with the Commission.
Sales pursuant to Rule 144 are subject to certain requirements relating to the
manner of sale, notice, and the availability of current public information about
Continuus. A person (or persons whose shares are aggregated) who was not one of
our affiliates at any time during the 90 days immediately preceding the sale and
who has beneficially owned Restricted Shares for at least two years is entitled
to sell such shares under Rule 144(k) without regard to the limitations
described above.
One of our employees, officers, directors or consultants who purchased or was
awarded shares or options to purchase shares pursuant to a written compensatory
plan or contract is entitled to rely on the resale provisions of Rule 701 under
the Securities Act, which permits our affiliates and non-affiliates to sell
their Rule 701 shares without having to comply with Rule 144's holding period
restrictions, in each case commencing 90 days after the date of this prospectus.
In addition, non-affiliates may sell Rule 701 shares without complying with the
public information, volume and notice provisions of Rule 144.
62
<PAGE> 65
UNDERWRITING
The underwriters named below, for whom U.S. Bancorp Piper Jaffray Inc. and CIBC
Oppenheimer Corp. are acting as representatives have agreed to buy, subject to
the terms of the purchase agreement, the number of shares listed opposite their
names below. The underwriters are committed to purchase and pay for all of the
shares if any are purchased, other than those shares covered by the
over-allotment option below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
U.S. Bancorp Piper Jaffray Inc..............................
CIBC Oppenheimer Corp.......................................
---------
Total.............................................
=========
</TABLE>
The underwriters have advised us and the selling stockholders that they propose
to offer the shares to the public at $ per share. The underwriters propose
to offer the shares to certain dealers at the same price less a concession of
not more than $0. per share. The underwriters may allow and the
dealers may reallow a concession of not more than $0. per share on
sales to certain other brokers and dealers. After the offering, these figures
may be changed by the underwriters.
We have granted to the underwriters an option to purchase up to an additional
shares of common stock from us, at the same price to the public,
and with the same underwriting discount, as set forth in the table above. The
underwriters may exercise this option any time during the 30-day period after
the date of this prospectus, but only to cover over-allotments, if any. To the
extent the underwriters exercise the option, each underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of the additional shares as it was obligated to purchase under the
purchase agreement.
The following table shows the underwriting fees to be paid to the underwriters
in connection with this offering. These amounts are shown assuming both no
exercise and full exercise of the over-allotment option.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share........................................ $ $
Total............................................ $ $
</TABLE>
We and the selling stockholders have agreed to indemnify the underwriters
against certain liabilities, including civil liabilities under the Securities
Act, or to contribute to payments that the underwriters may be required to make
in respect of those liabilities.
We and each of our directors, executive officers, certain stockholders and the
selling stockholders have agreed to certain restrictions on our ability to sell
additional shares of our common stock for a period of 180 days after the date of
this prospectus. We have agreed not to directly or indirectly offer for sale,
sell, contract to sell, grant any option for the sale of, or otherwise issue or
dispose of, any shares of common stock, options or warrants to acquire shares of
common stock, or any related security or instrument, without the prior written
consent of U.S. Bancorp Piper Jaffray. The agreements provide exceptions for (1)
sales to underwriters pursuant to the purchase agreement,
63
<PAGE> 66
(2) our sales in connection with the exercise of options granted and the
granting of options to purchase shares of common stock under the our existing
stock option plans and (3) certain other exceptions.
Prior to the offering, there has been no established trading market for the
common stock. The initial public offering price for the shares of common stock
offered by this prospectus was negotiated by us and the underwriters. Among the
factors considered in determining the initial public offering price include:
- the history of and the prospects for the industry in which we
compete;
- our past and present operations;
- our historical results of operations;
- our prospects for future earnings;
- the recent market prices of securities of generally comparable
companies; and
- the general condition of the securities markets at the time of
the offering.
There can be no assurance that the initial public offering price of the common
stock will correspond to the price at which the common stock will trade in the
public market subsequent to this offering or that an active public market for
the common stock will develop and continue after this offering.
To facilitate the offering, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of the common stock during and
after the offering. Specifically, the underwriters may over-allot or otherwise
create a short position in the common stock for their own account by selling
more shares of common stock than have been sold to them by us and the selling
stockholders. The underwriters may elect to cover any such short position by
purchasing shares of common stock in the open market or by exercising the
over-allotment option granted to the underwriters. In addition, the underwriters
may stabilize or maintain the price of the common stock by bidding for or
purchasing shares of common stock in the open market and may impose penalty
bids. If penalty bids are imposed, selling concessions allowed to syndicate
members or other broker-dealers participating in the offering are reclaimed if
shares of common stock previously distributed in the offering are repurchased,
whether in connection with stabilization transactions or otherwise. The effect
of these transactions may be to stabilize or maintain the market price of the
common stock at a level above that which might otherwise prevail in the open
market. The imposition of a penalty bid may also effect the price of the common
stock to the extent that it discourages resales of the common stock. The
magnitude or effect of any stabilization or other transactions is uncertain.
These transactions may be effected on the Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Continuus by Cooley Godward LLP, San Diego, California. Certain legal matters in
connection with the offering will be passed upon for the underwriters by Wilson
Sonsini Goodrich & Rosati, P.C., Palo Alto, California.
64
<PAGE> 67
EXPERTS
The Consolidated Financial Statements and related financial schedule as of
December 31, 1997 and 1998 and for each of the three years in the period ended
December 31, 1998 included herein and in this prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are included herein and have been so included upon the reports of such firm
given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC for the stock we
are offering by this prospectus. This prospectus does not include all of the
information contained in the registration statement. You should refer to the
registration statement and its exhibits for additional information. Whenever we
make reference in this prospectus to any of our contracts, agreements or other
documents, the references are not necessarily complete and you should refer to
the exhibits attached to the registration statement for copies of the actual
contract, agreement or other document. When we complete this offering, we will
also be required to file annual, quarterly and special reports, proxy statements
and other information with the SEC.
You can read our SEC filings, including the registration statement, over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference facilities at 450
Fifth Street, NW, Washington, DC 20549, 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. You may also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of the SEC at 450
Fifth Street, NW, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference facilities. Our
SEC filings are also available at the office of the Nasdaq National Market. For
further information on obtaining copies of our public filings at the Nasdaq
National Market, you should call (212) 656-5060.
65
<PAGE> 68
CONTINUUS SOFTWARE CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of December 31, 1997, 1998
and March 31, 1999 (Unaudited)............................ F-3
Consolidated Statements of Operations for the Years ended
December 31, 1996, 1997 and 1998 and the Three months
ended March 31, 1998 and 1999 (Unaudited)................. F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years ended December 31, 1996, 1997 and 1998 and
the Three months ended March 31, 1999 (Unaudited)......... F-5
Consolidated Statements of Cash Flows for the Years ended
December 31, 1996, 1997 and 1998 and the Three months
ended March 31, 1998 and 1999 (Unaudited)................. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 69
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Continuus Software Corporation and subsidiaries:
We have audited the accompanying consolidated balance sheets of Continuus
Software Corporation and subsidiaries as of December 31, 1997 and 1998, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for each of the three years in the period ended December 31,
1998. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Continuus Software
Corporation and subsidiaries as of December 31, 1997 and 1998, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
Costa Mesa, California
January 26, 1999, except for
paragraphs 3 and 4 of Note 1 and
paragraph 1 of Note 10, as to
which the date is April 20, 1999
The accompanying consolidated financial statements include the effects of a
reverse stock split in connection with the reincorporation in the State of
Delaware approved by the Company's Board of Directors on April 20, 1999,
anticipated to be effective prior to the closing of this offering. The above
opinion is in the form which will be signed by Deloitte & Touche LLP upon
consummation of the reverse stock split and reincorporation in the State of
Delaware which is described in Note 1 of the notes to the consolidated financial
statements and assuming that from January 26, 1999 to the date of such reverse
stock split and reincorporation, no other events have occurred that would affect
the accompanying financial statements and notes thereto.
Deloitte & Touche LLP
Costa Mesa, California
April 20, 1999
F-2
<PAGE> 70
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1997 1998 1999 PRO FORMA
-------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................... $ 6,175 $ 2,452 $ 2,357
Accounts receivable, less allowance for doubtful
accounts of $134 (1997), $339 (1998), and $397
(1999)............................................ 7,667 7,067 7,858
Prepaid expenses and other current assets........... 876 777 843
-------- -------- -------
Total current assets.............................. 14,718 10,296 11,058
Property, net....................................... 1,982 1,691 1,553
Other Assets........................................ 953 761 712
-------- -------- -------
Total assets...................................... $ 17,653 $ 12,748 $13,323
======== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable.................................... $ 1,270 $ 796 $ 1,116
Accrued liabilities................................. 3,207 3,568 3,639
Deferred revenue.................................... 4,809 4,400 4,785
Current portion of capital lease obligations........ 980 699 692
-------- -------- -------
Total current liabilities................. 10,266 9,463 10,232
Capital Lease Obligations, net of current portion... 723 440 376
Convertible Note Payable............................ 6,000 6,000 6,000
Commitments and Contingencies
Stockholders' Equity (Deficit):
Preferred stock, $.001 par value, 5,000,000 shares
authorized, no shares issued and outstanding
Series A convertible preferred stock, no par value;
2,291,518 shares authorized, 2,275,659 shares
issued and outstanding at December 31, 1997, 1998
and March 31, 1999................................ 7,900 7,900 7,900
Series B convertible preferred stock, no par value;
451,243 shares authorized, issued and outstanding
at December 31, 1997, 1998 and March 31, 1999..... 1,769 1,769 1,769
Series C convertible preferred stock, no par value;
804,667 shares authorized, 747,525 shares issued
and outstanding at December 31, 1997, 1998 and
March 31, 1999.................................... 4,118 4,118 4,118
Series D convertible preferred stock, no par value;
361,178 shares authorized, issued and outstanding
at December 31, 1997, 1998 and March 31, 1999..... 1,879 1,879 1,879
Series E convertible preferred stock, no par value;
783,019 shares authorized, 470,849 issued and
outstanding at December 31, 1997, 1998 and March
31, 1999.......................................... 2,352 2,352 2,352
Common stock and additional paid-in capital $.001
par value; 30,000,000 shares authorized,
1,604,272, 1,630,320 and 1,673,640 shares issued
and outstanding at December 31, 1997, 1998 and
March 31, 1999, actual, 6,258,219 pro forma
shares............................................ 1,853 1,900 1,968 $21,782
Warrants to purchase common stock................... 114 114 114 114
Warrants to purchase Series E convertible preferred
stock............................................. 248 248 248 --
Accumulated deficit................................. (19,569) (23,435) (23,633) (23,633)
-------- -------- ------- -------
Total stockholders' equity (deficit)...... 664 (3,155) $(3,285) $(1,737)
-------- -------- ------- =======
Total liabilities and stockholders' equity
(deficit)............................... $ 17,653 $ 12,748 $13,323
======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 71
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------- -------------------
1996 1997 1998 1998 1999
------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses................................. $ 9,611 $13,829 $14,429 $3,745 $4,172
Services.......................................... 6,488 9,434 13,007 3,065 4,067
------- ------- ------- ------ ------
Total revenues............................ 16,099 23,263 27,436 6,810 8,239
Cost of revenues:
Software licenses................................. 775 650 654 167 156
Services.......................................... 4,207 6,007 7,446 1,681 1,945
------- ------- ------- ------ ------
Total cost of revenues.................... 4,982 6,657 8,100 1,848 2,101
------- ------- ------- ------ ------
Gross profit........................................ 11,117 16,606 19,336 4,962 6,138
Operating expenses:
Sales and marketing............................... 11,776 12,079 15,469 3,577 4,098
Research and development.......................... 3,473 3,574 4,493 1,065 1,233
General and administrative........................ 1,720 1,896 2,483 749 704
------- ------- ------- ------ ------
Total operating expenses.................. 16,969 17,549 22,445 5,391 6,035
------- ------- ------- ------ ------
Income (loss) from operations....................... (5,852) (943) (3,109) (429) 103
Other expense, net.................................. (198) (637) (750) (207) (296)
------- ------- ------- ------ ------
Loss before income tax provision.................... (6,050) (1,580) (3,859) (636) (193)
Income tax provision................................ 3 3 7 13 5
------- ------- ------- ------ ------
Net loss............................................ $(6,053) $(1,583) $(3,866) $ (649) $ (198)
======= ======= ======= ====== ======
Pro forma basic and diluted net loss per share...... $ (0.62) $(0.03)
======= ======
Pro forma weighted average shares outstanding....... 6,202 6,222
======= ======
Basic and diluted net loss per share................ $ (4.06) $ (1.00) $ (2.39) $(0.40) $(0.12)
======= ======= ======= ====== ======
Weighted average shares outstanding................. 1,491 1,576 1,618 1,605 1,640
======= ======= ======= ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 72
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
WARRANTS
TO PURCHASE
CONVERTIBLE WARRANTS SERIES E
PREFERRED STOCK(1) COMMON STOCK TO PURCHASE CONVERTIBLE
------------------- ------------------- COMMON PREFERRED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT STOCK STOCK DEFICIT TOTAL
--------- ------- ---------- ------ ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996........ 3,474,427 $13,787 1,479,117 $1,702 $ -- $ -- $(11,933) $ 3,556
Issuance of preferred stock and
warrants........................ 199,684 980 -- -- 114 -- -- 1,094
Issuance of common stock.......... -- 34,642 46 -- -- -- 46
Conversion of debt to equity...... 161,494 899 -- -- -- -- -- 899
Net loss.......................... -- -- -- -- -- -- (6,053) (6,053)
--------- ------- ---------- ------ -------- -------- -------- -------
Balance at December 31, 1996...... 3,835,605 15,666 1,513,759 1,748 114 -- (17,986) (458)
Issuance of preferred stock and
warrants........................ 93,190 415 -- -- -- 83 -- 498
Issuance of common stock.......... -- -- 90,443 105 -- -- -- 105
Conversion of debt to equity...... 377,659 1,937 -- -- -- 165 -- 2,102
Net loss.......................... -- -- -- -- -- -- (1,583) (1,583)
--------- ------- ---------- ------ -------- -------- -------- -------
Balance at December 31, 1997...... 4,306,454 18,018 1,604,202 1,853 114 248 (19,569) 664
Issuance of common stock.......... -- -- 26,048 47 -- -- -- 47
Net loss.......................... -- -- -- -- -- -- (3,866) (3,866)
--------- ------- ---------- ------ -------- -------- -------- -------
Balance at December 31, 1998...... 4,306,454 18,018 1,630,250 1,900 114 248 (23,435) (3,155)
Unaudited:
Issuance of common stock.......... -- -- 43,390 68 -- -- -- 68
Net loss.......................... -- -- -- -- -- -- (198) (198)
--------- ------- ---------- ------ -------- -------- -------- -------
Balance at March 31, 1999......... 4,306,454 $18,018 1,673,640 $1,968 $ 114 $ 248 $(23,633) $(3,285)
========= ======= ========== ====== ======== ======== ======== =======
</TABLE>
- ---------------
(1) See Note 8 of Notes to the Consolidated Financial Statements for the details
of each series of convertible preferred stock.
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 73
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
--------------------------- ---------------
1996 1997 1998 1998 1999
------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss.................................................... $(6,053) $(1,583) $(3,866) $ (649) $ (198)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Provision for doubtful accounts........................... 44 62 205 13 58
Depreciation and amortization............................. 1,296 1,480 1,632 391 308
Loss (gain) on disposition of property.................... 13 (2) (1) (1) --
Changes in operating assets and liabilities: -- -- -- -- --
Accounts receivable..................................... (1,398) (3,798) 395 1,711 (849)
Inventories............................................. 273 -- -- -- --
Prepaid expenses and other assets....................... (44) (672) (69) (138) (17)
Accounts payable........................................ (264) 94 (474) 42 320
Accrued liabilities..................................... 291 1,573 361 (622) 71
Deferred revenue........................................ 849 2,396 (409) (544) 385
Other long-term liabilities............................. (77) -- -- -- --
------- ------- ------- ------ ------
Net cash provided by (used in) operating activities... (5,070) (450) (2,226) 203 78
Cash Flows From Investing Activities:
Purchases of property....................................... (208) (105) (452) (23) (29)
Proceeds from disposition of property....................... 33 12 13 6 --
------- ------- ------- ------ ------
Net cash used in investing activities................. (175) (93) (439) (17) (29)
Cash Flows From Financing Activities:
Repayments on notes payable................................. $ (100) $ (100) $ -- $ -- $ --
Borrowings (payments) on line of credit..................... 1,043 (1,043) -- -- --
Payments on obligations under capital leases................ (556) (961) (1,105) (282) (212)
Proceeds from issuance of convertible debt.................. 1,889 1,030 -- -- --
Proceeds from issuance of common stock...................... 46 105 47 17 68
Proceeds from issuance of preferred stock and warrants...... 1,094 498 -- -- --
Proceeds from issuance of note payable...................... -- 6,000 -- -- --
------- ------- ------- ------ ------
Net cash provided by (used in) financing activities... 3,416 5,529 (1,058) (265) (144)
------- ------- ------- ------ ------
Net (Decrease) Increase In Cash and Cash Equivalents........ (1,829) 4,986 (3,723) (79) (95)
Cash and Cash Equivalents, beginning of period.............. 3,018 1,189 6,175 6,175 2,452
------- ------- ------- ------ ------
Cash and Cash Equivalents, end of period.................... $ 1,189 $ 6,175 $ 2,452 $6,096 $2,357
======= ======= ======= ====== ======
Supplementary Disclosures of Cash Flow Information
Cash paid during the year for:
Interest.............................................. $ 167 $ 278 $ 880 $ 226 $ 215
======= ======= ======= ====== ======
Income taxes.......................................... $ 6 $ 282 $ 18 $ 13 $ 5
======= ======= ======= ====== ======
Noncash Items:
Acquisition of property through capital lease............... $ 1,234 $ 1,080 $ 541 $ 136 $ 141
Conversion of notes payable and accrued interest to
preferred stock........................................... $ 899 $ 2,102 $ -- $ -- $ --
Issuance of warrants to purchase common stock............... $ 114 $ -- $ -- $ -- $ --
Issuance of warrants to purchase Series E convertible
preferred stock........................................... $ -- $ 248 $ -- $ -- $ --
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 74
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations -- Continuus Software Corporation and subsidiaries (the
Company) is a leading provider of software products and services for e-asset
management, an emerging market segment that enables organizations to more
effectively develop, enhance, deploy and manage their Internet and enterprise
software systems. The Company's product line consists of the Continuus
WebSynergy Suite and the Continuus Change Management Suite which simplify the
development of complex and demanding Internet and software applications.
Products are sold direct, as well as through resellers, to both commercial and
government markets. The Company also offers Continuus Professional Services
which include consulting, training and maintenance services. The Company grants
credit to its customers in a variety of industries.
Unaudited Information -- The information set forth in these consolidated
financial statements as of March 31, 1999 and for the three months ended March
31, 1998 and March 31, 1999 is unaudited and reflects all adjustments,
consisting only of normal recurring adjustments, that, in the opinion of
management, are necessary to present fairly the financial position and results
of operations of the Company for the period. Results of operations for the
interim periods are not necessarily indicative of the results of operations for
the full fiscal year.
Stock Split -- On April 20, 1999, in connection with a proposed public offering
of the Company's common stock, the Company's Board of Directors approved a
1-for-2.65 reverse stock split of the Company's common stock. All share, per
share and conversion amounts relating to common stock, preferred stock, warrants
and stock options included in the accompanying consolidated financial statements
and footnotes have been restated to reflect the reverse stock split for all
periods presented.
Reincorporation -- The Company reincorporated in the State of Delaware on April
, 1999.
Principles of Consolidation -- The consolidated financial statements include the
accounts of Continuus Software Corporation (Continuus) and its wholly owned
subsidiaries, Continuus Software Limited (UK), Continuus Software GmbH
(Germany), Continuus Software SARL (France), and Continuus Software Company
Limited (Ireland). All intercompany balances and transactions have been
eliminated in the accompanying consolidated financial statements.
Foreign Currency Translation -- In accordance with Statement of Financial
Accounting Standards (SFAS) No. 52, Foreign Currency Translation, the United
States dollar is considered to be the functional currency for the Company's
foreign subsidiaries, and translation adjustments are included in the Company's
consolidated statements of operations. Historically, such translation
adjustments have not been significant.
Cash and Cash Equivalents -- Cash and cash equivalents represent highly liquid
securities consisting primarily of United States treasury bills, with original
maturities of less than 90 days.
Property -- Computer equipment, furniture and fixtures, and leasehold
improvements are stated at cost, net of accumulated depreciation and
amortization. Depreciation is computed using the straight-line method over
estimated useful lives of the related assets, generally ranging from three to
five years. Leasehold improvements are amortized using the straight-line method
over the life of the lease.
Other Assets -- At March 31, 1999 and December 31, 1998, other assets consist
primarily of the long-term portion of financing costs as well as refundable
deposits. The Company is amortizing
F-7
<PAGE> 75
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
deferred financing costs using the effective interest method over the term of
the related financing agreement, which is five years.
Long-Lived Assets -- The Company accounts for the impairment and disposition of
long-lived assets in accordance with SFAS No. 121, Accounting for the Impairment
of Long-Lived Assets and Long-Lived Assets to Be Disposed Of. In accordance with
SFAS No. 121, long-lived assets to be held are reviewed for events or changes in
circumstances which indicate that their carrying value may not be recoverable.
There was no impairment of the value of such assets for the year ended December
31, 1998 or the three months ended March 31, 1999.
Fair Value of Financial Instruments -- The recorded amounts of financial assets
and liabilities at December 31, 1997 and 1998 and March 31, 1999 approximate
fair value, based on the Company's incremental borrowing rate or due to the
relatively short period of time between origination of the instruments and their
expected realization.
Revenue Recognition:
During October 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Position (SOP) 97-2, Software Revenue Recognition, which provides
guidance in recognizing revenue on software transactions. SOP 97-2 is effective
for transactions entered into in fiscal years beginning after December 15, 1997,
and supersedes SOP 91-1. The Company adopted this statement, as amended, for the
year ended December 31, 1998.
Software Licenses, Services and Post-Contract Customer Support -- Revenues from
sales of software licenses are recognized upon shipment of the related product
if the requirements of SOP 97-2, as amended, are met. Revenue from service and
post-contract customer support is deferred and recognized ratably over the term
of the contract.
License Agreements -- The Company's products include software licensed from
third parties. A five-year license agreement with a third party which grants the
Company the right to embed the licensor's database software into the Company's
products is scheduled to expire in December 1999. Termination of this license
agreement could have a material adverse effect on the Company's ability to
deliver its products and a material effect on the Company's operating results
and financial condition until alternative database software is selected and
integrated into the Company's products.
Software Development Costs -- Costs incurred in the research and development of
new software products and enhancements to existing software products are
expensed as incurred until technological feasibility has been established. After
technological feasibility is established, any additional costs are capitalized
in accordance with SFAS No. 86, Accounting for the Costs of Computer Software to
Be Sold, Leased or Otherwise Marketed. Because the Company believes that its
current process for developing software is essentially completed concurrently
with the establishment of technological feasibility, no software development
costs have been capitalized as of December 31, 1997, 1998 and March 31, 1999.
Income Taxes -- Income taxes are recorded in accordance with SFAS No. 109,
Accounting for Income Taxes. This statement requires the recognition of deferred
tax assets and liabilities to reflect the future tax consequences of events that
have been recognized in the Company's financial statements or tax returns.
Measurement of the deferred items is based on enacted tax laws. In the event the
future consequences of differences between financial reporting bases and tax
bases of the Company's assets and liabilities result in a deferred tax asset,
SFAS No. 109 requires an evaluation
F-8
<PAGE> 76
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
of the probability of being able to realize the future benefits indicated by
such asset. A valuation allowance related to a deferred tax asset is recorded
when it is more likely than not that some portion or all of the deferred tax
asset will not be realized.
Stock-based Compensation -- The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees.
Net Loss Per Share and Pro Forma Net Loss Per Share -- The Company has adopted
SFAS No. 128, Earnings per Share, which replaces the presentation of "primary"
earnings per share with "basic" earnings per share and the presentation of
"fully diluted" earnings per share with "diluted" earnings per share. Basic
earnings per share is computed by dividing net income (loss) available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution of securities
by including other common stock equivalents, including stock options, warrants
and convertible preferred stock, in the weighted average number of common shares
outstanding for a period, if dilutive.
Pro forma basic earnings per share are based upon the weighted average number of
common shares outstanding and the pro forma effect of the conversion of all
outstanding shares of preferred stock into common stock and the exercise of
warrants to purchase 278,125 shares of Series E preferred stock that will
convert to shares of common stock (Note 8). Pro forma diluted earnings per share
is based upon the weighted average number of common and common equivalent shares
for each period presented and the pro forma effect of the conversion of all
outstanding shares of preferred stock into common stock and the Series E
warrants discussed above (Note 8). Common equivalent shares include stock
options and warrants using the treasury stock method but have been excluded from
the diluted earnings per share calculation as the impact would be antidilutive.
Pro Forma Information -- The Company is preparing for an initial public offering
of its common stock which, upon completion, will result in the conversion of all
outstanding shares of preferred stock into shares of common stock (Note 8). The
accompanying pro forma information, which is unaudited, gives effect to the
conversion of all outstanding shares of preferred stock into common stock at or
prior to the closing of the offering and the receipt of $1,548 from holders of
warrants to purchase 278,125 shares of Series E preferred stock, which is
convertible to common stock, upon the exercise of such warrants upon the closing
of the initial public offering.
Concentration of Credit Risk -- The Company sells its products primarily to
large commercial companies. Credit is extended based on an evaluation of the
customer's financial condition, and collateral is generally not required. The
Company also evaluates its credit customers for potential credit losses.
Use of Estimates -- The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
New Accounting Pronouncements:
For the year ended December 31, 1998, the Company adopted SFAS No. 131,
Reporting Comprehensive Income. There was no difference between the net loss and
the comprehensive net loss
F-9
<PAGE> 77
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
for the years ended December 31, 1996, 1997 and 1998 and the three months ended
March 31, 1998 and 1999.
The Company has adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information. In accordance with SFAS No. 131, the Company
has disclosed in Note 11 certain information about operating segments and
certain information about the Company's revenue types, geographic areas to which
the Company sells its products, and major customers.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which the Company is required to adopt
effective in its fiscal year 2000. SFAS No. 133 will require the Company to
record all derivatives on the balance sheet at fair value. The Company does not
currently engage in hedging activities but will continue to evaluate the effects
of adopting SFAS No. 133. The Company will adopt SFAS No. 133 in its fiscal year
2000.
2. PROPERTY
Property consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1997 1998 1999
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment............................... $ 4,045 $ 4,732 $4,896
Furniture and fixtures........................... 364 498 504
Leasehold improvements........................... 72 213 212
------- ------- ------
4,481 5,443 5,612
Less accumulated depreciation and amortization... (2,499) (3,752) (4,059)
------- ------- ------
Property, net.................................... $ 1,982 $ 1,691 $1,553
======= ======= ======
</TABLE>
3. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1997 1998 1999
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Prepaid contract costs........................... $ 360 $ -- $ --
Refundable deposits.............................. 169 450 430
Deferred financing costs, net.................... 424 311 282
------- ------- ------
$ 953 $ 761 $ 712
======= ======= ======
</TABLE>
F-10
<PAGE> 78
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1997 1998 1999
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued compensation and related expense......... $ 1,958 $ 2,230 $2,498
Other liabilities................................ 1,249 1,338 1,141
------- ------- ------
$ 3,207 $ 3,568 $3,639
======= ======= ======
</TABLE>
5. CONVERTIBLE NOTES PAYABLE
Convertible Note Payable Agreement -- During September 1997, the Company entered
into a note payable agreement with a third party. Under terms of this agreement,
the Company borrowed $6,000. The note bears interest at an annual rate of 12%.
Interest is due and payable on the first day of January, April, July, and
October, commencing on October 1, 1997. Any unpaid principal and interest shall
become due and payable at the earliest of the following circumstances: (1)
September 2002, (2) the closing of a public offering of the Company's common
stock at an aggregate valuation of not less than $15,000 and a public offering
price equal or exceeding $13.91 per share, or (3) merger or consolidation of the
Company with or into any other corporation. If either (2) or (3) occur prior to
September 2002, the holder of the note may convert the amount due into 1,078,167
shares of the Company's common stock at a conversion price of $5.57 per share.
This agreement does not allow for prepayment of the note and includes certain
financial covenants including annual capital expenditure limitations. The
Company was in compliance with all financial covenants as of December 31, 1998
and March 31, 1999.
Convertible Promissory Notes -- On April 23, 1996, the Company issued $889 of
convertible promissory notes. The notes bore interest at 8%, and principal and
interest were due on demand. The notes were convertible into shares of Series D
preferred stock, if and when the Company completed an equity financing. The
conversion price was equal to the price per share of preferred stock issued in
such financing. On May 30, 1996, in connection with an equity financing, the
$889 of convertible promissory notes, plus accrued interest of $10, was
converted into 161,494 shares of Series D preferred stock at a conversion rate
of $5.57 per share (Note 8).
On October 16, 1996, the Company issued $1,000 of convertible promissory notes.
The notes were convertible into shares of Series E preferred stock, if and when
the Company completed an equity financing. The conversion price was equal to the
price per share of preferred stock issued in such financing. On May 19, 1997, in
conjunction with an equity financing, the $1,000 of convertible promissory
notes, plus accrued interest of $46, was converted into 188,042 shares of Series
E preferred stock at a conversion rate of $5.57 per share (Note 8).
On January 22, 1997, the Company issued $1,030 of convertible promissory notes.
The notes were convertible into shares of Series E preferred stock, if and when
the Company completed an equity financing in which the Company received an
aggregate of at least $2,000. The conversion price was equal to the price per
share of preferred stock, issued in such financing. On May 19, 1997, in
connection with an equity financing, the $1,030 of convertible promissory notes,
plus accrued interest of $26, was converted into 189,617 shares of Series E
preferred stock at a conversion rate of $5.57 per share (Note 8).
F-11
<PAGE> 79
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
6. LEASES
Capital lease obligations have been recorded in the accompanying consolidated
financial statements at the present value of future minimum lease payments.
Assets financed under capital leases included in property are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1997 1998 1999
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment................................... $ 3,289 $ 3,802 $ 3,943
Less accumulated amortization........................ (1,539) (2,675) (2,919)
------- ------- -------
$ 1,750 $ 1,127 $ 1,024
======= ======= =======
</TABLE>
Amortization expense of property financed under capital leases was $603, $883,
$1,094, $261 and $245 for the years ended December 31, 1996, 1997 and 1998 and
the three months ended March 31, 1998 and 1999, respectively.
Future minimum lease payments under capital leases and the present value of
future minimum lease payments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
1999........................................................ $ 766
2000........................................................ 395
2001........................................................ 79
------
Total future minimum lease payments......................... 1,240
Less amount representing interest........................... (101)
------
Present value of future minimum lease payments.............. 1,139
Less current portion........................................ (699)
------
$ 440
======
</TABLE>
The Company also leases office space and equipment under operating leases which
expire on various dates through June 2003. Future annual minimum lease payments
under noncancelable operating lease arrangements at December 31, 1998 are as
follows:
<TABLE>
<S> <C>
1999........................................................ $ 648
2000........................................................ 281
2001........................................................ 172
2002........................................................ 109
2003........................................................ 70
------
$1,280
======
</TABLE>
Rental expense under operating leases was approximately $849, $929, $1,031, $292
and $286 for the years ended December 31, 1996, 1997 and 1998 and the three
months ended March 31, 1998 and 1999, respectively.
F-12
<PAGE> 80
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
7. COMMITMENTS AND CONTINGENCIES
In November 1991, the Company entered into an agreement with two former
shareholders of the Company, which required the Company to pay an aggregate of
1% of gross revenues subject to certain time limitations and maximum amounts.
Beginning June 1993, the Company began making quarterly payments and the last
payment was made in March 1998. The total amount paid in connection with the
agreement was $605. Accrued fees were $78 at December 31, 1997, and expense
related to this agreement was $159 and $179 for the years ended December 31,
1996 and 1997, respectively.
The Company is subject to certain litigation matters which arise in the normal
course of business. Management does not believe that the outcome of any of these
matters will have a material adverse effect on the Company's financial position
or results of operations.
8. STOCKHOLDERS' EQUITY
Preferred Stock -- Series A preferred stock (Series A) shares are convertible at
the holder's option into shares of common stock, on a share-for-share basis. The
conversion ratio may be adjusted from time to time in the event of certain
diluting events, as defined. Conversion is automatic in the event of a public
offering of the Company's common stock, meeting certain specified criteria.
Dividends on Series A are noncumulative and may be declared at the discretion of
the Board of Directors. The dividend rate is $.2777 per share per annum. Series
A shareholders have the right to elect one director and veto rights over certain
management decisions. In the event of liquidation, dissolution or merger of the
Company, each Series A shareholder has a liquidation preference equal to $3.47
per share, an amount per share of Series A then held by them equal to $.347
multiplied by the number of years between the date upon which the Series C
preferred stock shares were first issued by the Company and the date of the
distribution of any assets or surplus funds of the Company, plus an amount equal
to all declared but unpaid dividends. The increase in the Series A liquidation
preference as a result of this provision was $2,489 and $2,684 at December 31,
1998 and March 31, 1999, respectively. Such increase in the liquidation
preference will not be recognized upon the conversion of the preferred stock
into common stock upon an initial public offering.
Series B preferred stock (Series B) shares are convertible at the holder's
option into shares of common stock, on a share-for-share basis. The conversion
ratio may be adjusted from time to time in the event of certain diluting events,
as defined. Conversion is automatic in the event of a public offering of the
Company's common stock, meeting certain specified criteria. Dividends on Series
B are noncumulative and may be declared at the discretion of the Board of
Directors. The dividend rate is $.318 per share per annum. Series B shareholders
have the right to elect one director and veto rights over certain management
decisions. In the event of liquidation, dissolution or merger of the Company,
each Series B shareholder has a liquidation preference equal to $3.98 per share,
an amount per share of Series B then held by them equal to $.398 multiplied by
the number of years between the date upon which the Series B preferred stock
shares were first issued by the Company and the date of the distribution of any
assets or surplus funds of the Company, plus an amount equal to all declared but
unpaid dividends. The increase in the Series B liquidation preference as a
result of this provision was $565 and $609 at December 31, 1998 and March 31,
1999, respectively. Such increase in the liquidation preference will not be
recognized upon the conversion of the preferred stock into common stock upon an
initial public offering.
F-13
<PAGE> 81
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
Series C preferred stock (Series C) shares are convertible at the holder's
option into shares of common stock, on a share-for-share basis. The conversion
ratio may be adjusted from time to time in the event of certain diluting events,
as defined. Conversion is automatic in the event of a public offering of the
Company's common stock, meeting certain specified criteria. Dividends on Series
C are noncumulative and may be declared at the discretion of the Board of
Directors. The dividend rate is $.445 per share per annum. Series C shareholders
have veto rights over certain management decisions. In the event of liquidation,
dissolution or merger of the Company, each Series C shareholder has a
liquidation preference equal to $5.57 per share, an amount per share of Series C
then held by them equal to $.557 multiplied by the number of years between the
date upon which the Series C preferred stock shares were first issued by the
Company and the date of the distribution of any assets or surplus funds of the
Company, plus an amount equal to all declared but unpaid dividends. The increase
in the Series C liquidation preference as a result of this provision was $1,310
and $1,412 at December 31, 1998 and March 31, 1999, respectively. Such increase
in the liquidation preference will not be recognized upon the conversion of the
preferred stock into common stock upon an initial public offering.
Series D preferred stock (Series D) shares are convertible at the holder's
option into shares of common stock, on a share-for-share basis. The conversion
ratio may be adjusted from time to time in the event of certain diluting events,
as defined. Conversion is automatic in the event of a public offering of the
Company's common stock, meeting certain specified criteria. Dividends on Series
D are noncumulative and may be declared at the discretion of the Board of
Directors. The dividend rate is $.445 per share per annum. Series D shareholders
have veto rights over certain management decisions. In the event of liquidation,
dissolution or merger of the Company, each Series D shareholder has a
liquidation preference equal to $5.57 per share, an amount per share of Series D
then held by them equal to $.557 multiplied by the number of years between the
date upon which the Series D preferred stock shares were first issued by the
Company and the date of the distribution of any assets or surplus funds of the
Company, plus an amount equal to all declared but unpaid dividends. The increase
in the Series D liquidation preference as a result of this provision was $521
and $571 at December 31, 1998 and March 31, 1999, respectively. Such increase in
the liquidation preference will not be recognized upon the conversion of the
preferred stock into common stock upon an initial public offering.
Series E preferred stock (Series E) shares are convertible at the holder's
option into shares of common stock, on a share-for-share basis. The conversion
ratio may be adjusted from time to time in the event of certain diluting events,
as defined. Conversion is automatic in the event of a public offering of the
Company's common stock, meeting certain specified criteria. Dividends on Series
E are noncumulative and may be declared at the discretion of the Board of
Directors. The dividend rate is $.445 per share per annum. Series E shareholders
have veto rights over certain management decisions. In the event of liquidation,
dissolution or merger of the Company, each Series E shareholder has a
liquidation preference equal to $5.57 per share, an amount per share of Series E
then held by them equal to $.557 multiplied by the number of years between the
date upon which the Series E preferred shares were first issued by the Company
and the date of the distribution of any assets or surplus funds of the Company,
plus an amount equal to all declared but unpaid dividends. The increase in the
Series E liquidation preference as a result of this provision was $590 and $655
at December 31, 1998 and March 31, 1999, respectively. Such increase in the
liquidation preference will not be recognized upon the conversion of the
preferred stock into common stock upon an initial public offering.
F-14
<PAGE> 82
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
On May 30, 1996, the Company sold 199,684 shares of Series D preferred stock at
$5.57 per share, with net proceeds of $1,094. In connection with the financing,
the $889 of convertible promissory notes issued in April 1996 and $10 of accrued
interest were converted into 161,494 shares of Series D preferred stock at a
conversion rate of $5.57 per share (Note 5).
On May 19, 1997, the Company sold 93,190 shares of Series E preferred stock at
$5.57 per share, with net proceeds of $499. In connection with the financing,
the $1,000 and $1,030 of convertible promissory notes issued in October 1996 and
January 1997, respectively, and accrued interest on the convertible promissory
notes of $46 and $26, respectively, were converted into 377,659 shares of Series
E preferred stock at a conversion rate of $5.57 per share (Note 5).
Warrants To Purchase Common Stock -- In connection with the Series A financing,
the Company issued 720,148 warrants which can be used to purchase common stock
at an exercise price of $.66 per share. The warrants are exercisable immediately
and expire seven years from the date of grant. The fair value of these warrants
was determined to be insignificant, using the Black-Scholes option-pricing
model, and no value was ascribed to these warrants. All warrants are outstanding
at December 31, 1998 and March 31, 1999.
On May 30, 1996, in connection with Series D equity financing, the Company
granted warrants to the holders to purchase 221,736 common stock shares at $1.53
per share. The warrants are exercisable immediately and expire seven years from
the date of grant. The warrants were allocated to the holders of the Series D on
a pro rata basis based on the consideration received by the Company. The fair
value allocated to the warrants at the date of grant, using the Black-Scholes
option-pricing model, was estimated to be $114. All warrants are outstanding as
of December 31, 1998 and March 31, 1999.
Warrants to Purchase Series C Preferred Stock -- During June 1996, the Company
granted warrants to a bank to purchase 37,735 shares of Series C preferred stock
at $5.57 per share. The fair value of these warrants were determined to be
insignificant, using the Black-Scholes option-pricing model, and no value was
ascribed to such warrants. These warrants expire on June 4, 2001, and remain
outstanding as of December 31, 1998 and March 31, 1999.
Warrants to Purchase Series E Preferred Stock -- On January 22, 1997, the
Company granted warrants to the holders of the convertible promissory notes
issued on January 22, 1997, to purchase 184,938 Series E preferred stock shares
at $5.57 per share. The warrants expire three years from the date of grant or
immediately subsequent to an initial public offering. All warrants are
outstanding as of December 31, 1998 and March 31, 1999. The warrants were
allocated to the holders of the convertible promissory notes on a pro rata basis
based on the consideration received by the Company. The fair value allocated to
the warrants using the Black-Scholes pricing model at the date of grant was
$165.
On May 19, 1997, in connection with the Series E equity financing, the Company
granted warrants to purchase 93,187 Series E preferred stock shares at $5.57 per
share to the Series E investors. The warrants expire three years from the date
of grant or immediately subsequent to an initial public offering. The warrants
were allocated to the holders of the Series E preferred stock on a pro rata
basis based on the consideration received by the Company. The fair value
allocated to the warrants using the Black-Scholes pricing model at the date of
grant was estimated to be $83. All warrants are outstanding as of December 31,
1998 and March 31, 1999.
F-15
<PAGE> 83
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
The Company over the last several years granted warrants to a related party
(Note 13) to purchase 15,849 shares of Series A preferred stock at $3.47 per
share, 19,402 shares of Series C preferred stock at $5.57 per share and 18,866
shares of Series E preferred stock. These warrants are exercisable immediately
and expire ten years from the date of grant or five years after an initial
public offering, whichever is shorter. The fair value of these warrants were
determined to be insignificant, using the Black-Scholes option-pricing model,
and no value was ascribed to such warrants. All of these warrants remain
outstanding at December 31, 1998 and March 31, 1999.
9. INCOME TAXES
The income tax provision consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Current -- State........................................... $3 $3 $7
== == ==
</TABLE>
The Company's net deferred income taxes consist of the following as of December
31:
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 5,791 $ 8,304
Deferred revenue.......................................... 1,025 --
Basis difference in fixed assets.......................... 159 270
Vacation accrual.......................................... 97 124
Other..................................................... 347 63
------- -------
Total deferred tax assets................................... 7,419 8,761
Valuation allowance......................................... (7,419) (8,761)
------- -------
Net deferred income taxes................................... $ -- $ --
======= =======
</TABLE>
At December 31, 1998, the Company has net operating loss carryforwards of
approximately $15,753 and $6,637 for federal and California income tax purposes,
respectively, which will begin expiring in 2007 and 1999, respectively.
Additionally, at December 31, 1998, the Company has foreign net operating loss
carryforwards totaling approximately $5,370 in the U.K., Germany, France, and
Ireland. Portions of the foreign net operating losses will expire beginning in
2001. Pursuant to Section 382 of the Internal Revenue Code, use of the Company's
domestic net operating loss carryforwards and other tax attributes in the future
has been limited due to a cumulative change in ownership of greater than 50%,
which change in ownership has occurred in a moving three-year period. Further
ownership changes could also impact the Company's ability to utilize net
operating losses generated in the year ended December 31, 1998.
10. STOCK OPTION PLANS
EMPLOYEE STOCK PURCHASE PLAN
On April 20, 1999, the Company adopted the 1999 Employee Stock Purchase Plan
covering an aggregate of 250,000 shares of common stock. The Employee Stock
Purchase Plan is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Internal Revenue Code of 1986, as amended.
Under the Employee Stock Purchase Plan, the board may
F-16
<PAGE> 84
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
authorize participation by eligible employees, including officers, in periodic
offerings following the commencement of the plan. The initial offering under the
plan will commence on the date of this prospectus and terminate on January 31,
2000.
Unless otherwise determined by the board, employees are eligible to participate
in the plan only if they are employed for at least 20 hours per week and for at
least five months per calendar year. Employees who participate in an offering
may have up to 15% of their earnings withheld pursuant to the plan. The amount
withheld will then be used to purchase shares of the common stock on specified
dates determined by the board. The price of common stock purchased under the
plan will be equal to 85% of the lower of the fair market value of the common
stock at the commencement date of each offering period or the relevant purchase
date. Employees may end their participation in this offering at any time during
this offering period, and participation ends automatically on termination of
employment.
In the event of a merger, reorganization, consolidation or liquidation involving
Continuus, the board has discretion to provide that each right to purchase
common stock will be assumed or an equivalent right substituted by the successor
corporation, or the board may shorten this offering period and provide for all
sums collected by payroll deductions to be applied to purchase stock immediately
prior to such merger or other transaction. The board has the authority to amend
or terminate the plan, however, the board may not amend or terminate the plan if
it may adversely affect any outstanding rights to purchase common stock.
The Company's 1991 Stock Option Plan and 1997 Equity Incentive Plan (the Plans),
as amended, provide for the issuance to officers and key employees of up to a
total of 4,207,547 options to purchase common stock through the grant of
incentive stock or nonqualified stock options. Options expire no later than ten
years from the date of grant and generally become exercisable over a four-year
period.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. As permitted by SFAS No. 123, the Company has chosen to continue
to account for its employee stock-based compensation plans under APB Opinion No.
25 and provide the expanded disclosures specified in SFAS No. 123.
Had compensation cost been determined using the provisions of SFAS No. 123, the
Company's net loss would have been increased to the amounts indicated below:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------------------- ----------------
1996 1997 1998 1998 1999
------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss:
As reported........................................ $(6,053) $(1,583) $(3,866) $ (649) $ (198)
Pro forma.......................................... (6,210) (1,842) (4,104) (695) (268)
Basic and diluted net loss per share:
As reported........................................ $ (4.06) $ (1.00) $ (2.39) $(0.40) $(0.12)
======= ======= ======= ====== ======
Pro forma.......................................... $ (4.16) $ (1.17) $ (2.54) $(0.43) $(0.16)
======= ======= ======= ====== ======
</TABLE>
For purposes of estimating the compensation cost of the Company's option grants
in accordance with SFAS No. 123, the fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model,
with the following weighted average assumptions used for grants in the
F-17
<PAGE> 85
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
years 1996, 1997 and 1998 and the three months ended March 31, 1998 and 1999:
expected volatility of zero; risk-free interest rates of 6%; and expected lives
of ten years.
A summary of the status of the Plans is presented below:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------------------------------------- ---------------------
1997 1998 1999
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
FIXED EXERCISE EXERCISE EXERCISE
OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
- ------- ---------- -------- ---------- -------- ---------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of period......... 1,120,218 $1.46 1,577,469 $1.62 2,151,778 $1.78
Granted.................................. 799,584 1.70 1,285,306 3.07 481,050 5.24
Exercised................................ (90,443) 1.16 (26,048) 1.78 (43,390) 1.56
Canceled................................. (251,890) 1.40 (684,949) 3.79 (152,734) 1.88
---------- ---------- ----------
Balance, end of period................... 1,577,469 $1.62 2,151,778 $1.78 2,436,704 $2.45
========== ========== ==========
Weighted average fair value of options
granted during the year................ $0.77 $0.64 $1.09
========== ========== ==========
</TABLE>
The following tables summarize information about stock options outstanding as of
December 31, 1998 and March 31, 1999:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ .01 - .66......................... 6,225 2.87 $0.34 6,225 $0.34
.67 - 1.33......................... 7,547 3.27 0.95 7,547 0.95
1.34 - 1.99......................... 2,110,260 7.97 1.75 959,470 1.56
2.00 - 6.63......................... 27,746 9.03 4.58 3,114 3.92
--------- -------
2,151,778 976,356
========= =======
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1999 (UNAUDITED)
-------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ .01 - .66......................... 6,225 2.63 $0.34 6,225 $0.34
.67 - 1.33......................... 7,547 3.03 0.95 7,547 0.95
1.34 - 1.99......................... 1,923,988 7.72 1.75 944,953 1.58
2.00 - 6.63......................... 498,944 9.58 5.23 5,640 4.64
--------- -------
2,436,704 964,365
========= =======
</TABLE>
F-18
<PAGE> 86
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
Effective August 25, 1998, the Company's Board of Directors approved a proposal
allowing the Company's employees to reprice any existing stock option grants to
a new exercise price of $1.99 per share, which was the estimated fair market
value of the Company's common stock on August 25, 1998. A total of 363,639
options were repriced with exercise prices ranging from $3.31 to $6.63 per
share.
11. OPERATING SEGMENT, GEOGRAPHIC AND CUSTOMER INFORMATION
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
Company's chief operating decision maker, or decision making group, in deciding
how to allocate resources and in assessing performance. The operating segments
of the Company are managed separately because each segment represents a
strategic business unit that offers different products or services.
The Company's reportable operating segments include Software Licenses and
Services. The Software Licenses operating segment develops and markets the
Company's process-oriented software development management products. The
Services segment provides after-sale support for software products and fee-based
training and consulting services related to the Company products.
The Company does not allocate operating expenses to these segments, nor does it
allocate specific assets to these segments. Therefore, segment information
reported includes only revenues, cost of sales and gross profit.
F-19
<PAGE> 87
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
Operating segment data for the three years in the period ended December 31, 1998
and the three months ended March 31, 1998 and 1999 was as follows:
<TABLE>
<CAPTION>
SOFTWARE
LICENSES SERVICES TOTAL
-------- -------- -------
<S> <C> <C> <C>
Year ended December 31, 1996:
Revenues.................................................. $ 9,600 $ 6,500 $16,100
Cost of revenues.......................................... 800 4,200 5,000
------- ------- -------
Gross profit........................................... $ 8,800 $ 2,300 $11,100
======= ======= =======
Year ended December 31, 1997:
Revenues.................................................. $13,800 $ 9,500 $23,300
Cost of revenues.......................................... 700 6,000 6,700
------- ------- -------
Gross profit........................................... $13,100 $ 3,500 $16,600
======= ======= =======
Year ended December 31, 1998:
Revenues.................................................. $14,400 $13,000 $27,400
Cost of revenues.......................................... 700 7,400 8,100
------- ------- -------
Gross profit........................................... $13,700 $ 5,600 $19,300
======= ======= =======
Three months ended March 31, 1998
Revenues.................................................. $ 3,700 $ 3,100 $ 6,800
Cost of revenues.......................................... 200 1,700 1,900
------- ------- -------
Gross profit........................................... $ 3,500 $ 1,400 $ 4,900
======= ======= =======
Three months ended March 31, 1999
Revenues.................................................. $ 4,200 $ 4,100 $ 8,300
Cost of revenues.......................................... 200 1,900 2,100
------- ------- -------
Gross profit........................................... $ 4,000 $ 2,200 $ 6,200
======= ======= =======
</TABLE>
Revenues are attributed to geographic areas based on the location of the entity
to which the products or services were sold. International information is
derived primarily from European operations. Revenues, gross profit, income
(loss) from operations and assets concerning principal geographic areas in which
the Company operates are as follows:
<TABLE>
<CAPTION>
NORTH
AMERICA INTERNATIONAL TOTAL
------- -------------- -------
<S> <C> <C> <C>
Year ended December 31, 1996:
Revenues.................................................. $10,700 $ 5,400 $16,100
Gross profit.............................................. $ 6,900 $ 4,200 $11,100
Loss from operations...................................... $(5,500) $ (400) $(5,900)
Assets.................................................... $ 5,500 $ 3,100 $ 8,600
Year ended December 31, 1997:
Revenues.................................................. $12,300 $11,000 $23,300
Gross profit.............................................. $ 8,400 $ 8,200 $16,600
Income (loss) from operations............................. $(3,600) $ 2,600 $(1,000)
Assets.................................................... $11,500 $ 6,100 $17,600
</TABLE>
F-20
<PAGE> 88
CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
NORTH
AMERICA INTERNATIONAL TOTAL
------- -------------- -------
<S> <C> <C> <C>
Year ended December 31, 1998:
Revenues.................................................. $13,200 $14,200 $27,400
Gross profit.............................................. $ 9,000 $10,300 $19,300
Income (loss) from operations............................. $(6,400) $ 3,300 $(3,100)
Assets.................................................... $ 6,500 $ 6,200 $12,700
Three months ended March 31, 1998:
Revenues.................................................. $ 3,900 $ 2,900 $ 6,800
Gross profit.............................................. $ 3,700 $ 1,200 $ 4,900
Loss from operations...................................... $ (400) $ -- $ (400)
Assets.................................................... $ 9,900 $ 5,900 $15,800
Three months ended March 31, 1999:
Revenues.................................................. $ 4,300 $ 4,000 $ 8,300
Gross profit.............................................. $ 3,300 $ 2,900 $ 6,200
Income (loss) from operations............................. $(1,000) $ 1,100 $ 100
Assets.................................................... $ 7,400 $ 5,900 $13,300
</TABLE>
During the year ended December 31, 1996, sales to a single customer accounted
for approximately 12% of total revenue for the year. In fiscal 1997 and 1998 and
the three months ended March 31, 1998 and 1999, no single customer accounted for
10% or more of total revenue.
12. DEFINED CONTRIBUTION SAVINGS AND INVESTMENT PLAN
The Company has a defined contribution savings and investment plan which covers
substantially all employees. The plan provides for the deferral of up to 20% of
an employee's qualifying compensation under Section 401(k) of the Internal
Revenue Code. Company contributions may be made to the plan at the discretion of
the Company's Board of Directors. To date, no such contributions have been made.
13. RELATED-PARTY TRANSACTIONS
On April 20, 1995, the Company entered into a lease agreement with a preferred
shareholder who owns approximately 3% of the Company's total outstanding
preferred stock as of December 31, 1998. Under the amended lease agreement, the
Company was able to lease certain qualified capital equipment through June 30,
1998, up to an aggregate purchase price of $3,600. On June 30, 1998, the lease
agreement expired and was not renewed by the Company. The Company's remaining
capital lease obligation is being amortized over a three-year period, with
interest of 8.95% per annum.
F-21
<PAGE> 89
SHARES
CONTINUUS SOFTWARE CORPORATION
COMMON STOCK
CONTINUUS LOGO
---------------------------
PROSPECTUS
---------------------------
UNTIL , 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 DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
U.S. BANCORP PIPER JAFFRAY
CIBC WORLD MARKETS
, 1999
<PAGE> 90
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the common stock being registered. All the amounts
shown are estimates except for the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC Registration fee........................................ $ 11,254
NASD filing fee............................................. 4,600
Nasdaq Stock Market Listing Application fee................. 72,875
Blue sky qualification fees and expenses.................... 5,000
Director and Officer Liability Insurance.................... 250,000
Printing and engraving expenses............................. 125,000
Legal fees and expenses..................................... 250,000
Accounting fees and expenses................................ 150,000
Transfer agent and registrar fees........................... 10,000
Miscellaneous............................................... 91,271
--------
Total............................................. $970,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law, the Registrant has
broad powers to indemnify its directors and officers against liabilities they
may incur in such capacities, including liabilities under the Securities Act.
The Registrant's Restated Certificate of Incorporation and Bylaws include
provisions to (i) eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by Section 102(b)(7) of the General Corporation Law of Delaware (the "Delaware
Law") and (ii) require the Registrant to indemnify its directors and executive
officers to the fullest extent permitted by Section 145 of the Delaware Law,
including circumstances in which indemnification is otherwise discretionary.
Pursuant to Section 145 of the Delaware Law, a corporation generally has the
power to indemnify its present and former directors, officers, employees and
agents against expenses incurred by them in connection with any suit to which
they are or are threatened to be made, a party by reason of their serving in
such positions so long as they acted in good faith and in a manner they
reasonably believed to be in or not opposed to, the best interests of the
corporation and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. The Registrant believes that these
provisions are necessary to attract and retain qualified persons as directors
and officers. These provisions do not eliminate the directors' duty of care,
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware Law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for acts or omissions that the director believes to be contrary to the best
interests of the Registrant or its stockholders, for any transaction from which
the director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the director's duty to the Registrant or its
stockholders when the director was aware or should have been aware of a risk of
serious injury to the Registrant or its stockholders, for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the Registrant or its stockholders, for improper
transactions between the director and the Registrant and for improper
distributions to stockholders
II-1
<PAGE> 91
and loans to directors and officers. The provision also does not affect a
director's responsibilities under any other law, such as the federal securities
law or state or federal environmental laws.
The Registrant has entered into indemnity agreements with each of its directors
and executive officers that require the Registrant to indemnify such persons
against any and all expenses (including attorneys' fees), witness fees, damages,
judgments, fines, settlements and other amounts incurred (including expenses of
a derivative action) in connection with any action, suit or proceeding, whether
actual or threatened, to which any such person may be made a party by reason of
the fact that such person is or was a director, an officer or an employee of the
Registrant or any of its affiliated enterprises, provided that such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Registrant and, with respect to any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. The indemnification agreements also set forth certain procedures that
will apply in the event of a claim for indemnification thereunder.
At present, there is no pending litigation or proceeding involving a director,
officer or key employee of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
The Registrant has an insurance policy covering the officers and directors of
the Registrant with respect to certain liabilities, including liabilities
arising under the Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1996, the Registrant has sold and issued the following
unregistered securities:
1. On May 30, 1996, we sold 361,178 shares of Series D preferred stock
and issued warrants to purchase an additional 221,736 shares of Series E
preferred stock for an aggregate purchase price of $1,111,261. On June 4, 1996,
we issued a warrant to purchase 37,735 shares of Series C preferred stock, in
connection with an equipment lease. On January 23, 1997, we issued warrants to
purchase up to an aggregate of 184,939 shares of Series E preferred stock in
connection with the issuance of promissory notes in the aggregate amount of
$1,029,502. On May 19, 1997, we sold 93,186 shares of Series E preferred stock
and warrants to purchase an additional 93,186 shares of Series E Stock for an
aggregate purchase price of $518,610. On July 22, 1997, December 10, 1997 and
February 20, 1998, we issued warrants to purchase 6,738, 4,043 and 2,695 shares
of Series E preferred stock, respectively, in connection with equipment leases.
2. On September 23, 1997, we sold $6,000,000 in principal amount of a
12% senior secured convertible debenture, due September 23, 2002, to London
Pacific Life & Annuity Company.
The offers, sales and issuances of the above securities were deemed to be exempt
from registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, and/or Regulation D promulgated thereunder, or Rule 701
promulgated under Section 3(b) of the Securities Act as transactions by an
issuer not involving a public offering or transactions pursuant to compensatory
benefit plans and contracts relating to compensation as provided under such Rule
701. The recipients of securities in each such transaction represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates and warrants issued in such transactions.
All recipients had adequate access, through employment or other relationships,
to information about Continuus.
II-2
<PAGE> 92
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
+1.1 Form of Underwriting Agreement.
3.1 Certificate of Amendment of Certificate of Amendment and
Restatement of Articles of Incorporation and Certificate of
Amendment and Restatement of Articles of Incorporation
effective prior to Registrant's reincorporation in Delaware.
3.2 Bylaws effective prior to Registrant's reincorporation in
Delaware.
+3.3 Certificate of Incorporation, to be filed and become
effective upon the filing of this Registration Statement.
+3.4 Amended and Restated Certificate of Incorporation, to be
filed and become effective immediately following this
offering.
3.5 Form of Bylaws to become effective prior to the
effectiveness of this registration statement.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5,
10.10, 10.11, 10.22 and 10.23.
+4.2 Form of Common Stock Certificate.
+5.1 Opinion of Cooley Godward LLP.
+10.1 Form of Indemnity Agreement entered into between the
Registrant and its directors and officers.
10.2 Registrant's Employee Stock Option Plan (the "1991 Plan").
10.3 Form of Incentive Stock Option Agreement under the 1991
Plan.
10.4 Form of Incentive Stock Option Certificate under the 1991
Plan.
10.5 Form of Non-Qualified Stock Option Agreement under the 1991
Plan.
10.6 Form of Non-Qualified Stock Option Certificate under the
1991 Plan.
10.7 Registrant's 1997 Equity Incentive Plan (the "1997 Plan").
10.8 Form of Incentive Stock Option Grant Certificate under the
1997 Plan.
10.9 Registrant's 1998 Employee Stock Purchase Plan and related
offering documents.
10.10 Investors' Rights Agreement, dated March 4, 1994, as last
amended on December 30, 1997, among Registrant and certain
investors.
10.11 Co-Sale Agreement, dated March 4, 1994, as last amended on
May 19, 1997, among Registrant and certain investors.
*10.12 President/CEO Change in Control Severance Benefits
Agreement, dated May 31, 1997, among Registrant and John R.
Wark.
*10.13 Form of Executive Change in Control Severance Benefits
Agreement, dated May 31, 1997, between Registrant and each
of Steve L. Johnson, William A. Philbin. Geoffrey W.
Haggart, James M. Carrigan, and David McCann.
10.14 Stock Purchase Agreement, dated May 30, 1996, among
Registrant and certain investors.
10.15 Stock Purchase Agreement, dated May 19, 1997, among
Registrant and certain investors.
10.16 Master Lease Agreement, dated April 20, 1995, among
Registrant and Comdisco, Inc.
10.17 Global Master Rental Agreement, dated September 1, 1995,
among Registrant and Comdisco, Inc.
10.18 Warrant Agreement, dated April 20, 1995, among Registrant
and Comdisco, Inc.
10.19 Warrant Agreement, dated November 8, 1995, among Registrant
and Comdisco, Inc.
10.20 Warrant Agreement, dated February 14, 1996, among Registrant
and Comdisco, Inc.
10.21 Warrant to Purchase Stock, dated June 4, 1996, among
Registrant and Silicon Valley Bank.
10.22 Registration Rights Agreement, dated June 4, 1996, among
Registrant and Silicon Valley Bank.
10.23 Antidilution Agreement, dated June 4, 1996, among Registrant
and Silicon Valley Bank
</TABLE>
II-3
<PAGE> 93
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
10.24 Master Purchase Terms and Conditions, dated February 27,
1997, as amended March 27, 1997, among Registrant and Royal
Bank of Canada Europe Limited.
10.25 Form of Warrant to Purchase Shares of Common Stock, dated
December 23, 1994 among Registrant and certain investors.
10.26 Form of Warrant to Purchase Shares of Common Stock, dated
May 30, 1996, among Registrant and certain investors.
10.27 Form of Warrant to Purchase Shares of Series E preferred
stock, dated January 23, 1997, among Registrant and certain
investors.
10.28 Form of Warrant to Purchase Shares of Series E preferred
stock, dated May 19, 1997, among Registrant and certain
investors.
10.29 Senior Secured Convertible Debenture Purchase Agreement,
dated September 23, 1997, among Registrant and London
Pacific Life & Annuity Company.
10.30 Senior Secured Convertible Debenture, dated September 23,
1997, among Registrant and London Pacific Life & Annuity
Company.
10.31 Security Agreement, dated September 23, 1997, among
Registrant and London Pacific Life & Annuity Company.
10.32 Standard Office Lease -- Gross, dated March 5, 1992, as last
amended September 15, 1998, among Registrant, The French
Company and certain individuals.
++10.33 Value Added Reseller License Agreement, dated September 24,
1992, as last amended March 31, 1995, among Registrant and
Informix Software, Inc.
10.34 Warrant Agreement, dated May 20, 1997, among Registrant and
Comdisco, Inc.
10.35 Warrant Agreement, dated July 22, 1997, among Registrant and
Comdisco, Inc.
10.36 Warrant Agreement, dated December 10, 1997, among Registrant
and Comdisco, Inc.
10.37 Warrant Agreement, dated February 20, 1998, among Registrant
and Comdisco, Inc.
21.1 Subsidiaries of Registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1 Power of Attorney. Reference is made to page II-6.
27 Financial Data Schedule.
</TABLE>
- -------------------------
* Indicates management compensatory plan, contract or agreement.
+ To be filed by amendment.
++ Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions will be filed separately with the Securities
and Exchange Commission.
(B) FINANCIAL STATEMENT SCHEDULES.
All schedules, with the exception of Schedule II (Valuation and Qualifying
Account) have been omitted because they are not required, are not applicable or
the information is included in the consolidated financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to provisions described in Item 14 of this Registration Statement, or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities
II-4
<PAGE> 94
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) That, for purposes of determining any liability under the Act,
each filing of the registrant's annual report to Section 13(a) or 15(d) of
the Exchange Act (and, where applicable, each filing of employee benefits
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement 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.
(2) 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.
(3) 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-5
<PAGE> 95
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, County of Orange, State of California, on the
23rd day of April 1999.
By: /s/ JOHN R. WARK
---------------------------------------
John R. Wark
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John R. Wark and Steven L. Johnson, and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments (including post-
effective amendments, exhibits thereto and other documents in connection
therewith) to this Registration Statement and any subsequent registration
statement filed by the registrant pursuant to Rule 462(b) of the Securities Act
of 1933, as amended, which relates to this Registration Statement, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOHN R. WARK President, Chief Executive and Director April 23, 1999
- ------------------------------------------ (Principal Executive Officer)
John R. Wark
/s/ STEVEN L. JOHNSON Vice President, Finance and Chief April 23, 1999
- ------------------------------------------ Financial Officer (Principal Financial
Steven L. Johnson and Accounting Officer)
/s/ KEVIN G. HALL Director April 23, 1999
- ------------------------------------------
Kevin G. Hall
/s/ STEWART A. SCHUSTER Director April 23, 1999
- ------------------------------------------
Stewart A. Schuster
/s/ FRED B. COX Director April 23, 1999
- ------------------------------------------
Fred B. Cox
/s/ SOL ZECHTER Director April 23, 1999
- ------------------------------------------
Sol Zechter
</TABLE>
II-6
<PAGE> 96
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
+1.1 Form of Underwriting Agreement.
3.1 Certificate of Amendment of Certificate of Amendment and
Restatement of Articles of Incorporation and Certificate of
Amendment and Restatement of Articles of Incorporation
effective prior to Registrant's reincorporation in Delaware.
3.2 Bylaws effective prior to Registrant's reincorporation in
Delaware.
+3.3 Certificate of Incorporation, to be filed and become
effective upon the filing of this Registration Statement.
+3.4 Amended and Restated Certificate of Incorporation, to be
filed and become effective immediately following this
offering.
3.5 Form of Bylaws to become effective prior to the
effectiveness of this registration statement.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5,
10.10, 10.11, 10.22 and 10.23.
+4.2 Form of Common Stock Certificate.
+5.1 Opinion of Cooley Godward LLP.
+10.1 Form of Indemnity Agreement entered into between the
Registrant and its directors and officers.
10.2 Registrant's Employee Stock Option Plan (the "1991 Plan").
10.3 Form of Incentive Stock Option Agreement under the 1991
Plan.
10.4 Form of Incentive Stock Option Certificate under the 1991
Plan.
10.5 Form of Non-Qualified Stock Option Agreement under the 1991
Plan.
10.6 Form of Non-Qualified Stock Option Certificate under the
1991 Plan.
10.7 Registrant's 1997 Equity Incentive Plan (the "1997 Plan").
10.8 Form of Incentive Stock Option Grant Certificate under the
1997 Plan.
10.9 Registrant's 1998 Employee Stock Purchase Plan and related
offering documents.
10.10 Investors' Rights Agreement, dated March 4, 1994, as last
amended on December 30, 1997, among Registrant and certain
investors.
10.11 Co-Sale Agreement, dated March 4, 1994, as last amended on
May 19, 1997, among Registrant and certain investors.
*10.12 President/CEO Change in Control Severance Benefits
Agreement, dated May 31, 1997, among Registrant and John R.
Wark.
*10.13 Form of Executive Change in Control Severance Benefits
Agreement, dated May 31, 1997, between Registrant and each
of Steve L. Johnson, William A. Philbin. Geoffrey W.
Haggart, James M. Carrigan, and David McCann.
10.14 Stock Purchase Agreement, dated May 30, 1996, among
Registrant and certain investors.
10.15 Stock Purchase Agreement, dated May 19, 1997, among
Registrant and certain investors.
10.16 Master Lease Agreement, dated April 20, 1995, among
Registrant and Comdisco, Inc.
10.17 Global Master Rental Agreement, dated September 1, 1995,
among Registrant and Comdisco, Inc.
10.18 Warrant Agreement, dated April 20, 1995, among Registrant
and Comdisco, Inc.
10.19 Warrant Agreement, dated November 8, 1995, among Registrant
and Comdisco, Inc.
</TABLE>
II-7
<PAGE> 97
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
10.20 Warrant Agreement, dated February 14, 1996, among Registrant
and Comdisco, Inc.
10.21 Warrant to Purchase Stock, dated June 4, 1996, among
Registrant and Silicon Valley Bank.
10.22 Registration Rights Agreement, dated June 4, 1996, among
Registrant and Silicon Valley Bank.
10.23 Antidilution Agreement, dated June 4, 1996, among Registrant
and Silicon Valley Bank.
10.24 Master Purchase Terms and Conditions, dated February 27,
1997, as amended March 27, 1997, among Registrant and Royal
Bank of Canada Europe Limited.
10.25 Form of Warrant to Purchase Shares of Common Stock, dated
December 23, 1994 among Registrant and certain investors.
10.26 Form of Warrant to Purchase Shares of Common Stock, dated
May 30, 1996, among Registrant and certain investors.
10.27 Form of Warrant to Purchase Shares of Series E preferred
stock, dated January 23, 1997, among Registrant and certain
investors.
10.28 Form of Warrant to Purchase Shares of Series E preferred
stock, dated May 19, 1997, among Registrant and certain
investors.
10.29 Senior Secured Convertible Debenture Purchase Agreement,
dated September 23, 1997, among Registrant and London
Pacific Life & Annuity Company.
10.30 Senior Secured Convertible Debenture, dated September 23,
1997, among Registrant and London Pacific Life & Annuity
Company.
10.31 Security Agreement, dated September 23, 1997, among
Registrant and London Pacific Life & Annuity Company.
10.32 Standard Office Lease -- Gross, dated March 5, 1992, as last
amended September 15, 1998, among Registrant, The French
Company and certain individuals.
++10.33 Value Added Reseller License Agreement, dated September 24,
1992, as last amended March 31, 1995, among Registrant and
Informix Software, Inc.
10.34 Warrant Agreement, dated May 20, 1997, among Registrant and
Comdisco, Inc.
10.35 Warrant Agreement, dated July 22, 1997, among Registrant and
Comdisco, Inc.
10.36 Warrant Agreement, dated December 10, 1997, among Registrant
and Comdisco, Inc.
10.37 Warrant Agreement, dated February 20, 1998, among Registrant
and Comdisco, Inc.
21.1 Subsidiaries of Registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1 Power of Attorney. Reference is made to page II-6.
27 Financial Data Schedule.
</TABLE>
- -------------------------
* Indicates management compensatory plan, contract or agreement.
+ To be filed by amendment.
++ Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions will be filed separately with the Securities
and Exchange Commission.
II-8
<PAGE> 98
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNT
<TABLE>
<CAPTION>
BALANCE AT CHARGES, BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful accounts............... $ 92 $ 24 $ (5) $111
Year ended December 31, 1997:
Allowance for doubtful accounts............... $111 $ 63 $(40) $134
Year ended December 31, 1998:
Allowance for doubtful accounts............... $134 $250 $(45) $339
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF AMENDMENT AND RESTATEMENT OF
ARTICLES OF INCORPORATION
OF
CONTINUUS SOFTWARE CORPORATION
JOHN WARK and JOHN LASKEY certify that:
They are the President and Chief Executive Officer, and Chief Financial
Officer and Secretary, respectively, of Continuus Software Corporation, a
California corporation.
Section B(4)(c)(i)(4)(F) of Article III (concerning the definition of
"Additional Shares of Common") of the Certificate of Amendment and Restatement
of Articles of Incorporation of said corporation is hereby amended to read in
its entirety as follows:
"to officers, directors, and employees of, and consultants to, the
corporation pursuant to stock option plans or agreements as designated
and approved by the Board of Directors, in an aggregate amount of not
more than 7,650,000 shares (of which 4,237,563 shares are subject to
options outstanding as of December 30, 1997 and an additional 3,412,437
shares remain available for issuance as of December 30, 1997, provided
that shares subject to options that expire pursuant to the terms of such
options or that are repurchased by the corporation at a price equal to
cost thereof to the holder pursuant to the terms of the agreement by
which such shares were purchased from the corporation shall again become
available for issuance under this subparagraph (F)), subject to
appropriate adjustment for any stock split, recapitalization or similar
event;"
The foregoing amendment to the Certificate of Amendment and Restatement
of Articles of Incorporation of said corporation has been duly approved by the
board of directors.
The foregoing amendment was approved by the holders of the requisite
number of shares of said corporation in accordance with Sections 902 and 903 of
the California General Corporation Law; the total number of outstanding shares
of each class entitled to vote with respect to the foregoing amendments was
4,240,353 shares of Common Stock, 6,030,523 shares of Series A Preferred Stock,
1,195,809 shares of Series B Preferred Stock, 1,980,950 shares of Series C
Preferred Stock, 957,144 shares of Series D Preferred Stock and 1,247,762 shares
of Series E Preferred Stock. The number of shares voting in favor of the
foregoing amendments equaled or exceeded the vote required, such required vote
being a majority of the outstanding shares of Common Stock voting alone as a
single class, at least 67% of the outstanding shares of Preferred Stock voting
alone as a single class, and a majority of the outstanding shares of Common
Stock and Preferred Stock voting together as a single class.
<PAGE> 2
/s/ John Wark
---------------------------------------------
JOHN WARK
President and Chief Executive Officer
/s/ John Laskey
---------------------------------------------
JOHN LASKEY
Chief Financial Officer and Secretary
Each of the undersigned declares under penalty of perjury that the
statements contained in the foregoing certificate are true and correct of his
own knowledge, and that this declaration was executed on January 12, 1998, at
Irvine, California.
/s/ John Wark
---------------------------------------------
JOHN WARK
President and Chief Executive Officer
/s/ John Laskey
---------------------------------------------
JOHN LASKEY
Chief Financial Officer and Secretary
<PAGE> 3
CERTIFICATE OF AMENDMENT AND RESTATEMENT
OF
ARTICLES OF INCORPORATION
OF
CONTINUUS SOFTWARE CORPORATION,
A CALIFORNIA CORPORATION
The undersigned, John Wark and John Laskey, certify that:
ONE: They are the duly elected President and Secretary, respectively, of
Continuus Software Corporation, a California corporation.
TWO: The Articles of Incorporation of this corporation are amended and
restated to read in full as follows:
ARTICLE I
The name of this corporation is Continuus Software Corporation.
ARTICLE II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code. ARTICLE III
A. CLASSES OF STOCK. This corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is sixty
million
1.
<PAGE> 4
(60,000,000). Forty million (40,000,000) shares shall be Common Stock.
Twenty million (20,000,000) shares shall be Preferred Stock.
The Preferred Stock may be issued from time to time in one or more
series. Except as provided in this Article III, the Board of Directors is hereby
authorized to determine and alter the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock, and to fix the number of shares of any such series of Preferred Stock and
the designation of any such series of Preferred Stock. The Board of Directors,
within the limits and restrictions stated in this Article III or in any
resolution or resolutions of the Board of Directors originally fixing the number
of shares constituting any series, may increase or decrease (but not below the
number of shares of such series then outstanding) the number of shares of any
series subsequent to the issuance of shares of that series.
B. RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS OF THE SERIES A
PREFERRED STOCK, SERIES B PREFERRED STOCK AND SERIES C PREFERRED STOCK, SERIES D
PREFERRED STOCK AND SERIES E PREFERRED STOCK
1. DESIGNATION OF PREFERRED. Six million seventy-two thousand five
hundred twenty-three (6,072,523) shares of the Preferred Stock are hereby
designated Series A Preferred Stock (the "Series A Preferred"), one million one
hundred ninety-five thousand eight hundred nine (1,195,809) shares of the
Preferred Stock are hereby designated Series B Preferred Stock (the "Series B
Preferred"), two million one hundred thirty-two thousand three hundred
sixty-eight (2,132,368) shares of the Preferred Stock
2.
<PAGE> 5
are hereby designated Series C Preferred Stock (the "Series C Preferred"), nine
hundred fifty-seven thousand one hundred forty-four (957,144) shares of the
Preferred Stock are hereby designated Series D Preferred Stock (the "Series D
Preferred") and two million seventy-five thousand (2,075,000) shares of
Preferred Stock are hereby designated Series E Preferred Stock (the "Series E
Preferred") (the Series A Preferred, the Series B Preferred, the Series C
Preferred, the Series D Preferred and the Series E Preferred are collectively
referred to herein as the "Preferred"), with the respective rights, preferences
and privileges specified herein.
2. DIVIDEND RIGHTS OF THE PREFERRED.
(a) The holders of the Preferred shall be entitled to receive
dividends at the rate of $0.1048 per share of Series A Preferred per annum,
$0.12 per share of Series B Preferred per annum, $0.168 per share of Series C
Preferred per annum, and $0.168 per share of Series D Preferred per annum, and
$0.168 per share of Series E Preferred per annum, when, as and if declared by
the Board of Directors out of any funds legally available therefor, prior and in
preference to any declaration or payment of any dividend on the Common Stock of
this corporation (the "Common") payable other than in Common or other securities
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common. Dividends, if paid, or if declared
and set apart for payment, must be paid contemporaneously on all series of
Preferred Stock for which any shares are issued and outstanding, and, if less
than full
3.
<PAGE> 6
dividends are paid or declared and set apart for payment, the same percentage of
the dividend rate shall be paid on or declared and set apart for payment for
each series of Preferred Stock for which any shares are issued and outstanding.
No dividends or other distributions shall be made with respect to the Common in
any year, other than dividends payable solely in Common, until all declared
dividends on the Preferred Stock with respect to such year have been paid or
declared and set apart for payment. With respect to the Series A Preferred, the
Series B Preferred, the Series C Preferred, the Series D Preferred and the
Series E Preferred, such dividends shall not be cumulative. No interest (or
equivalent) shall be earned or accrued on any unpaid dividends. The Board shall
not be obligated to declare dividends, notwithstanding the availability of funds
for that purpose.
3. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding
up of the corporation, either voluntary or involuntary, the holders of the
Series D Preferred and the Series E Preferred shall be entitled to receive,
prior and in preference to any distribution of any of the assets or surplus
funds of the corporation to the holders of the Series A Preferred, Series B
Preferred, Series C Preferred and Common by reason of their ownership thereof,
the sum of (i) $2.10 per share for each share of Series D Preferred and Series E
Preferred then held by them, (ii) an amount per share of Series D Preferred and
Series E Preferred then held by them equal to $0.21 multiplied by the number of
years
4.
<PAGE> 7
between the dates upon which the Series D Preferred and Series E Preferred, as
the case may be, was first issued by the corporation and the date of the
distribution provided for in this Section 3 (with any partial year pro-rated
based on the ratio that the number of days in such partial year bears to 365)
and (iii) an amount equal to all declared but unpaid dividends on the Series D
Preferred and Series E Preferred then held by them. If the assets and funds thus
distributed among the holders of the Series D Preferred and Series E Preferred
shall be insufficient to permit the payment to such of the full aforesaid
preferential amount, then the entire assets and funds of the corporation legally
available for distribution shall be distributed among the holders of the Series
D Preferred and Series E Preferred in proportion to the full preferential amount
to which each of them would be entitled in accordance with this paragraph.
(b) After payment has been made to the holders of the Series
D Preferred and Series E Preferred of the full amounts to which they shall be
entitled pursuant to paragraph 3(a), in the event of any liquidation,
dissolution, or winding up of the corporation, either voluntarily or
involuntarily, the holders of the Series A Preferred, Series B Preferred and
Series C Preferred shall be entitled to receive, prior and in preference to any
distribution of assets or surplus funds of the corporation to the holders of the
Common by reason of their ownership thereof,
with respect to the Series A Preferred, the sum of (i) $1.31 per
share for each share of Series A Preferred
5.
<PAGE> 8
then held by them, (ii) an amount per share of Series A Preferred then held by
them equal to $0.131 multiplied by the number of years between the date upon
which the Series C Preferred was first issued by the corporation and the date of
the distribution provided for in this Section 3 (with any partial year pro-rated
based on the ratio that the number of days in such partial year bears to 365)
and (iii) an amount equal to all declared but unpaid dividends on the Series A
Preferred then held by them,
with respect to the Series B Preferred, the sum of (i) $1.50 per share
for each share of Series B Preferred then held by them, (ii) an amount per share
of Series B Preferred then held by them equal to $0.15 multiplied by the number
of years between the date upon which the Series C Preferred was first issued by
the corporation and the date of the distribution provided for in this Section 3
(with any partial year pro-rated based on the ratio that the number of days in
such partial year bears to 365) and (iii) an amount equal to all declared but
unpaid dividends on the Series B Preferred then held by them,
with respect to the Series C Preferred, the sum of (i) $2.10 per share
for each share of Series C Preferred then held by them, (ii) an amount per share
of Series C Preferred then held by them equal to $0.21 multiplied by the number
of years between the date upon which the Series C Preferred was first issued by
the corporation and the date of the distribution provided for in this Section 3
(with any partial year pro-rated based on the ratio that the number of days in
such partial year bears to 365) and (iii) an amount equal to all declared but
unpaid dividends on the Series C Preferred then held by them, and
6.
<PAGE> 9
If, upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series A Preferred, Series B Preferred and
Series C Preferred shall be insufficient to permit the payment to such holders
of the full aforesaid preferential amount, then the entire assets and funds of
the corporation legally available for distribution (after payment has been made
to the holders of the Series D Preferred and the Series E Preferred of the full
amounts provided for under paragraph 3(a)) shall be distributed ratably among
the holders of the Series A Preferred, the Series B Preferred and the Series C
Preferred in proportion to the preferential amount each such holder would have
been entitled to receive pursuant to this Section 3 if such distribution had
been sufficient to permit the full payment of such preferential amount.
(c) Upon the completion of the distributions provided for in
paragraphs 3(a) and 3(b) all of the assets or surplus funds remaining in the
corporation shall be distributed pro rata among the holders of Common based on
the number of shares of Common held by each such holder.
(d) For purposes of this Section 3, a merger or
consolidation of the corporation with or into any other corporation or
corporations, or the merger of any other corporation or corporations into the
corporation, in which consolidation or merger the shareholders of the
corporation receive distributions in cash or in securities of another
corporation or corporations as a result of such consolidation or merger
(excluding in any event a merger the sole purpose of which is to change the
state of incorporation of the
7.
<PAGE> 10
corporation), or a sale of all or substantially all of the assets of the
corporation, shall be treated as a liquidation, dissolution or winding up of the
corporation.
4. CONVERSION. The holders of the Preferred shall have conversion
rights as follows (the "Conversion Rights"):
(a) OPTIONAL AND AUTOMATIC CONVERSION.
Each share of the Preferred shall be convertible at the
option of the holder thereof, without payment of additional consideration, at
any time after the date of issuance of such share, at the office of the
corporation or any transfer agent for the Preferred, into such number of fully
paid and nonassessable shares of Common as is determined by dividing $1.31 per
share of Series A Preferred, $1.50 per share of Series B Preferred, $2.10 per
share of Series C Preferred, $2.10 per share of Series D Preferred and $2.10 per
share of Series E Preferred by the Series A Conversion Price, the Series B
Conversion Price, the Series C Conversion Price, the Series D Conversion Price
and the Series E Conversion Price, respectively, determined as hereinafter
provided, in effect at the time of conversion. The price at which shares of
Common shall be deliverable upon conversion of (i) the Series A Preferred shall
initially be $1.31 per share of Common (the "Series A Conversion Price"), (ii)
the Series B Preferred shall initially be $1.50 per share of Common (the "Series
B Conversion Price"), (iii) the Series C Preferred shall initially be $2.10 per
share of Common (the "Series C Conversion Price"), (iv) the Series D Preferred
shall initially be $2.10 per share of Common (the "Series D Conversion Price")
and (v) the Series E Preferred shall initially be $2.10 per share of Common (the
"Series E Conversion Price"). The Series A Conversion Price, the Series B
Conversion Price, the Series C Conversion Price, the Series D Conversion Price
and
8.
<PAGE> 11
the Series E Conversion Price are hereinafter collectively referred to as
the "Conversion Price." The Conversion Price shall be subject to adjustment as
hereinafter provided.
Each share of Preferred shall automatically be converted into shares
of Common at the then effective Conversion Price upon (i) the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Act"), covering the
offer and sale of Common (whether for the account of the corporation or for the
account of one or more shareholders of the corporation) of the corporation to
the public at an aggregate offering price of not less than $15,000,000 and at a
public offering price (prior to underwriters' discounts and expenses) equal to
or exceeding $5.25 per share of Common, subject to adjustment for stock
dividends, combinations or splits with respect to such shares or (ii) the
written consent of holders of more than 67% of the then outstanding shares of
Preferred voting together as a single class. In the event of the automatic
conversion of any series of Preferred as aforesaid, the conversion shall be
deemed to have occurred automatically at the closing of such public offering or
upon execution and delivery of such written consents to the corporation, as
applicable.
(b) MECHANICS OF CONVERSION.
No fractional shares of Common shall be issued upon
conversion of the Preferred. In lieu of any fractional shares to which the
holder would otherwise be entitled, the corporation shall pay cash equal to such
fraction multiplied by the then effective Conversion Price. Before any holder of
the Preferred shall be entitled to convert the same into full shares of Common,
it shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the corporation or of any transfer agent for the Preferred, and
shall give
9.
<PAGE> 12
written notice to the corporation at such office that it elects to convert the
same (except that no such written notice of election to convert shall be
necessary in the event of an automatic conversion pursuant to Section 4(a)). The
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Preferred a certificate or certificates, registered in
such names as specified by the holder, for the number of shares of Common to
which he shall be entitled as aforesaid and a check payable to the holder in the
amount of any cash amounts payable as the result of a conversion into fractional
shares of Common, and any accrued and unpaid dividends on the converted
Preferred. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of the
Preferred to be converted, and the person or persons entitled to receive the
shares of Common issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common on such date (except
that in the event of an automatic conversion pursuant Section 4(a) such
conversion shall be deemed to have been made immediately prior to the closing of
the offering or the execution and delivery of the written consents referred to
in such Section 4(a)). If the conversion is in connection with an underwritten
offer of securities registered pursuant to the Act, the conversion may, at the
option of any holder tendering Preferred for conversion, be conditioned upon the
closing with the underwriter of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common issuable
upon such conversion of the Preferred shall not be deemed to have converted such
Preferred until immediately prior to the closing of such sale of securities.
10.
<PAGE> 13
(c) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this
Section 4(c), the following definitions shall apply:
(1) "OPTIONS" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire either Common or
Convertible Securities.
(2) "ORIGINAL ISSUE DATE" shall mean, with
respect to any series of the Preferred, the date on which the first share of
such series was first issued.
(3) "CONVERTIBLE SECURITIES" shall mean any
evidences of indebtedness, shares or other securities convertible into or
exchangeable for Common.
(4) "ADDITIONAL SHARES OF COMMON" shall mean all
shares of Common issued (or, pursuant to Section 4(c)(iii), deemed to be issued)
by the corporation after the Original Issue Date, other than shares of Common
issued or issuable or deemed to be issued:
(A) upon conversion of shares of the
Series A Preferred, the Series B Preferred, the Series C Preferred, the Series D
Preferred and/or the Series E Preferred;
11.
<PAGE> 14
(B) upon issuance by the corporation or
exercise by holders thereof of those certain warrants dated December 29, 1994 to
purchase up to an aggregate of 1,908,397 shares of Common, outstanding warrants
to purchase up to an aggregate of 42,000 shares of Series A Preferred and
outstanding warrants to purchase up to an aggregate of 151,418 shares of Series
C Preferred;
(C) upon issuance by the corporation or
exercise by holders thereof of warrants to purchase up to an aggregate of
587,618 shares of Common issued substantially concurrently with the Series D
Preferred;
(D) upon issuance by the corporation or
exercise by holders thereof of warrants to purchase up to an aggregate of
782,834 shares of Series E Preferred Stock;
(E) as a result of an adjustment made
pursuant to Sections 4(c)(iv), (vi) or (vii);
(F) to officers, directors, and
employees of, and consultants to, the corporation pursuant to stock option plans
or agreements as designated and approved by the Board of Directors, in an
aggregate amount of not more than 4,650,000 shares (of which 3,584,858 shares
are subject to options outstanding as of May 15, 1997 and an additional 336,142
shares remain available for issuance as of May 15, 1997, provided that shares
subject to options that expire pursuant to the terms of such options or that are
repurchased by the corporation at a price equal to cost thereof to
12.
<PAGE> 15
the holder pursuant to the terms of the agreement by which such shares were
purchased from the corporation shall again become available for issuance under
this subparagraph (F)), subject to appropriate adjustment for any stock split,
recapitalization or similar event;
(G) as a dividend or distribution on
Preferred; or
(H) by way of dividend or other
distribution on shares of Common excluded from the definition of Additional
Shares of Common by the foregoing clauses (A), (B), (C), (D), (E), (F), (G) or
this clause (H) or on shares of Common so excluded.
(ii) NO ADJUSTMENT OF CONVERSION PRICE: No adjustment in
the Conversion Price of a particular share of Preferred shall be made in respect
of the issuance of Additional Shares of Common unless the consideration per
share for an Additional Share of Common issued or deemed to be issued by the
corporation is less than the Conversion Price in effect on the date of, and
immediately prior to such issue, for such share of Preferred.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON.
(1) OPTIONS AND CONVERTIBLE SECURITIES. In the
event the corporation at any time or from time to time after the Original Issue
Date shall issue any Options or Convertible Securities, or shall fix a record
date for the
13.
<PAGE> 16
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that Additional Shares of Common shall
not be deemed to have been issued unless the consideration per share (determined
pursuant to Section 4(c)(v) hereof) of such Additional Shares of Common would be
less than the Conversion Price in effect on the date of and immediately prior to
such issue, or such record date, as the case may be, and provided further that
in any such case in which Additional Shares of Common are deemed to be issued;
(A) no further adjustment in the Conversion Price shall
be made upon the subsequent issue of Convertible Securities or shares of Common
upon the exercise of such Options or conversion or exchange of such Convertible
Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the corporation, or decrease in the number of shares of
Common
14.
<PAGE> 17
issuable, upon the exercise, conversion or exchange thereof, the Conversion
Price computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be recomputed to
reflect such increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities; and
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration, be recomputed
as if:
(i) in the case of Convertible Securities or
Options for Common the only Additional Shares of Common issued were the shares
of Common, if any, actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the corporation for
the issue of all such Options, whether or not exercised, plus the consideration
actually received by the corporation upon such exercise, or for the issue of all
such Convertible Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the corporation upon such
conversion or exchange, and
15.
<PAGE> 18
(ii) in the case of Options for Convertible
Securities only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the corporation for the Additional Shares of Common
deemed to have been then issued was the consideration actually received by the
corporation for the issue of all such Options, whether or not exercised, plus
the consideration deemed to have been received by the corporation upon the issue
of the Convertible Securities with respect to which such Options were actually
exercised; and
(D) no readjustment pursuant to clause (B) or (C) above
shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (i) the Conversion Price on the original adjustment date
prior to the original adjustment, or (ii) the Conversion Price that would have
resulted from any issuance of Additional Shares of Common between the original
adjustment date and such readjustment date.
(2) STOCK DIVIDENDS AND SUBDIVISIONS. In the event that the
corporation at any time or from time to time after the Original Issue Date shall
declare or pay any dividend on the Common payable in Common, or effect a
subdivision of the outstanding shares of Common into a greater number of shares
of Common (by reclassification or otherwise than by payment of a dividend in
Common)
16.
<PAGE> 19
then and in any such event, Additional Shares of Common shall not be deemed to
have been issued, but rather the provisions of Section 4(c)(vi) below shall
apply.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON.
In the event this corporation shall issue
Additional Shares of Common (including Additional Shares of Common deemed to be
issued pursuant to Section 4(c)(iii)) without consideration or for a
consideration per share less than the Conversion Price in effect on the date of
and immediately prior to such issue, then and in such event, such Conversion
Price shall be reduced, concurrently with such issue, to a price (calculated to
the nearest cent) determined by multiplying such Conversion Price by a fraction,
the numerator of which shall be the number of shares of Common outstanding
immediately prior to such issue plus the number of shares of Common which the
aggregate consideration received by the corporation for the total number of
Additional Shares of Common so issued would purchase at such Conversion Price
and the denominator of which shall be the number of shares of Common outstanding
immediately prior to such issue plus the number of such Additional Shares of
Common so issued; provided, however, that for the purposes of this Section (iv),
all shares of Common issuable upon conversion of outstanding Convertible
Securities, shall be deemed to be outstanding, and immediately after any
Additional Shares of Common are deemed issued pursuant to Section (iii), such
Additional Shares of Common shall be deemed to be outstanding.
(v) DETERMINATION OF CONSIDERATION.
For purposes of Section 4(c), the consideration
received by the
17.
<PAGE> 20
corporation for the issue of any Additional Shares of Common shall be computed
as follows:
(1) CASH AND PROPERTY: Such consideration
shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property
other than cash, be computed at the fair value thereof at the time of such
issue, as determined in good faith by the corporation's Board of Directors; and
(C) in the event Additional Shares of
Common are issued together with other shares or securities or other assets of
the corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the corporation for Additional Shares of
Common deemed to have been issued pursuant to Section 4(c)(iii)(1), relating to
Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or
receivable by the corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a
18.
<PAGE> 21
subsequent adjustment of such consideration) payable to the corporation upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and the conversion or exchange of
such Convertible Securities by
(y) the maximum number of shares of Common (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(vi) ADJUSTMENTS FOR SUBDIVISIONS, DIVIDENDS,
COMBINATIONS OR CONSOLIDATIONS OF COMMON.
(1) In the event the outstanding shares of
Common shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common, the Conversion Price in effect immediately
prior to such combination or consolidation shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
(2) In the event the corporation shall
declare or pay any dividend on the Common payable in Common or in the event the
outstanding shares of Common shall be subdivided, by reclassification or
otherwise than by payment of a dividend in Common, into a greater number of
shares of Common, the Conversion Price in effect immediately prior to such
dividend or subdivision shall be proportionately decreased:
19.
<PAGE> 22
(A) in the case of any such dividend,
immediately after the close of business on the record date for the determination
of holders of any class of securities entitled to receive such dividend, or
(B) in the case of any such subdivision,
at the close of business on the date immediately prior to the date upon which
such corporate action becomes effective.
If such record date shall have been fixed and such dividend shall not
have been fully paid on the date fixed therefor, the adjustment previously made
in the Conversion Price which became effective on such record date shall be
canceled as of the close of business on such record date, and thereafter the
Conversion Price shall be adjusted as of the time of actual payment of such
dividend.
(vii) ADJUSTMENTS FOR OTHER RECLASSIFICATIONS,
DIVIDENDS AND DISTRIBUTIONS.
If there occurs any capital reorganization or
any reclassification of the capital stock of the Corporation (other than any
subdivision, dividend, combination, consolidation or other transaction provided
for in Section 2, Section 3(c) or Section 4(c)(vi)), each share of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred shall thereafter be convertible into the same kind and amounts of
securities or other assets, or both, that were issuable or distributable to the
holders of shares of outstanding Common Stock of the Corporation upon such
reorganization or reclassification, in respect of that number of shares of
Common Stock into which such
20.
<PAGE> 23
shares of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred might have been converted immediately prior to
such reorganization or reclassification; and in any such case, appropriate
adjustments (as determined by the Board of Directors) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred to the end that
the provisions of these Articles shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or other assets thereafter
deliverable upon the conversion of the Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred.
(d) NO IMPAIRMENT. The corporation will
not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred against
impairment.
(e) CERTIFICATE AS TO ADJUSTMENTS. Upon
the occurrence of each adjustment or readjustment of the Conversion Price
pursuant to this Section 4, the corporation at its expense shall promptly
compute such adjustment or readjustment in
21.
<PAGE> 24
accordance with the terms hereof and furnish to each holder of Preferred a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The corporation
shall, upon the written request at any time of any holder of Preferred, furnish
or cause to be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the Conversion Price at the time in
effect, and (iii) the number of shares of Common and the amount, if any, of
other property which at the time would be received upon the conversion of
Preferred.
(f) NOTICES OF RECORD DATE. In the event
that this corporation shall propose at any time:
(i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the
holders of any class or series of its stock any additional shares of stock of
any class or series or other rights;
(iii) to effect any reclassification or
recapitalization of its Common shares outstanding involving a change in the
Common shares; or
(iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all its property or
business, or to
22.
<PAGE> 25
liquidate, dissolve or wind up; then, in connection with each such event, this
corporation shall send to the holders of the Preferred shares:
(1) at least 10 days' prior written notice
of the date on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of Common
shares shall be entitled thereto) or for determining rights to vote in respect
of the matters referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to
in (iii) and (iv) above, at least 10 days' prior written notice of the date when
the same shall take place (and specifying, if practicable, or estimating the
date on which the holders of Common shares shall be entitled to exchange their
Common shares for securities or other property deliverable upon the occurrence
of such event). Each such written notice shall be given by first class mail,
postage prepaid, addressed to the holders of the Preferred at the address for
each such holder as shown on the books of this corporation.
(g) COMMON STOCK RESERVED. The corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of Preferred, such number of shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all outstanding shares of the
Preferred, and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the
23.
<PAGE> 26
conversion of all then outstanding shares of the Preferred, the corporation
shall take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
5. VOTING RIGHTS.
(a) Except as otherwise required by law or hereunder, each
share of Common Stock issued and outstanding shall have one vote, each share of
Preferred issued and outstanding shall have the number of votes equal to the
number of shares of Common Stock into which such share of Preferred is
convertible as adjusted from time to time pursuant to Section 4 hereof and the
Common Stock, Series A Preferred, Series B Preferred, Series C Preferred, Series
D Preferred and Series E Preferred shall vote together as a single class.
Fractional votes by the holders of Preferred shall not, however, be permitted
and any fractional voting rights resulting from the above formula (after
aggregating all shares into which shares of Preferred held by each holder could
be converted) shall be rounded to the nearest whole number.
(b) Notwithstanding Section 5(a), the holders of the Series
A Preferred voting together as a single class shall be entitled to elect one (1)
director, the holders of the Series B Preferred voting together as a single
class shall be entitled to elect one (1) director and all remaining directors
shall be elected by the holders of the Common and the Preferred voting together
as a single class.
24.
<PAGE> 27
6. COVENANTS. In addition to any other rights provided by law, this
corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than 67% of all outstanding shares of
Preferred, voting as a single class:
(a) alter or change the rights, preferences, or privileges
of the Preferred materially or adversely;
(b) increase or decrease the number of members of the Board
of Directors of the corporation;
(c) increase the authorized number of shares of Preferred
Stock or any series thereof;
(d) take any action that results in any merger or
consolidation of the corporation, any acquisition of all or substantially all of
the assets of the corporation or any reorganization of the corporation's capital
structure; or
(e) create any new class or series of Preferred Stock or any
other securities convertible into equity securities of the corporation.
7. RESIDUAL RIGHTS. All rights accruing to the outstanding shares
of this corporation not expressly provided for to the contrary herein shall be
vested in the Common.
8. CONSENT FOR CERTAIN REPURCHASES DEEMED TO BE DISTRIBUTIONS. Each
holder of an outstanding share of Preferred shall be deemed to have consented,
for
25.
<PAGE> 28
purposes of Section 502, 503 and 506 of the California Corporations Code, to
distributions by the corporation in connection with the repurchase of shares of
Common issued to or held by officers, directors or employees of or consultants
to the corporation upon termination of their employment or services pursuant to
agreements providing for the right of said repurchase between the corporation
and such person.
ARTICLE IV
A. The liability of the directors of this corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
B. This corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the California Corporations Code) for
breach of duty to the Corporation and its shareholders through bylaw provisions
or through agreements with agents, or both, in excess of the indemnification
otherwise permitted by Section 317 of the California Corporations Code, subject
to the limits on such excess indemnification set forth in Section 204 of the
California Corporations Code.
C. Any repeal or modification of the provisions of this Article
shall not adversely affect the rights under this Article in effect at the time
of the alleged occurrence of any act or omission to act giving rise to liability
or indemnification.
THREE: The foregoing amendment and restatement of Articles of
Incorporation has been duly approved by the Board of Directors of said
corporation.
FOUR: The foregoing amendment and restatement of Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Sections 902 and
26.
<PAGE> 29
903 of the California Corporations Code. The total number of outstanding shares
of the corporation is 4,136,499 shares of Common, 6,030,523 shares of Series A
Preferred, 1,195,809 shares of Series B Preferred, 1,980,950 shares of Series C
Preferred and 957,144 of Series D Preferred. The number of shares voting in
favor of the amendment equaled or exceeded the vote required. The percentage
required was more than 50% of the outstanding Common voting as a single class,
more than 50% of the outstanding Series A Preferred voting as a single class,
more than 50% of the outstanding Series B Preferred voting as a single class,
more than 50% of the outstanding Series C Preferred voting as a single class,
more than 50% of the outstanding Series D Preferred voting as a single class, at
least 67% of the outstanding Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred voting as a single class, and more than 50% of
the outstanding Common, Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred voting together as a single class.
27.
<PAGE> 30
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of our own knowledge.
DATE: May 9, 1997 /s/ John Wark
-------------------------------- ---------------------------------------
John Wark, President
/s/ John Laskey
---------------------------------------
John Laskey, Secretary
28.
<PAGE> 1
EXHIBIT 3.2
BYLAW AMENDMENT
APPROVED BY THE BOARD OF DIRECTORS
FEBRUARY 24, 1998
APPROVED BY THE SHAREHOLDERS
FEBRUARY 24, 1998
ARTICLE III
SECTION 2. NUMBER OF DIRECTORS. The authorized number of directors of the
corporation shall be not less than a minimum of four (4) nor more than a maximum
of seven (7) and the number of directors presently authorized is six (6). The
exact number of directors shall be set within these limits from time to time (a)
by approval of the Board of Directors, or (b) 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 at least a
majority of the required quorum) or by the written consent of the shareholders
pursuant to Article II, Section 9 hereinabove.
Any amendment of these bylaws changing the maximum or minimum number of
directors may be adopted only by the affirmative vote of a majority of the
outstanding shares entitled to vote; provided, that an amendment reducing the
minimum number of directors to less than five (5) cannot be adopted if votes
cast against its adoption at a meeting, or the shares not consenting to it in
the case of action by written consent are equal to more than 16-2/3 percent of
the outstanding shares entitled to vote.
<PAGE> 2
BYLAWS
OF
COMPUTERS WEST, INC.
A CALIFORNIA CORPORATION
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICES. The Board of Directors (hereinafter
at times referred to as "the Board") shall fix the location of the principal
executive office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside this state, and
the corporation has one or more business offices in this state, the Board of
Directors shall likewise fix and designate a principal business office in the
State of California.
SECTION 2. OTHER OFFICES. The Board of Directors may at any time
establish branch or subordinate offices at any place or places.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of shareholders shall be
held at any place within or without the State of California designated by the
Board of Directors. In the absence of any such designation, shareholders'
meetings shall be held at the principal executive office of the corporation.
SECTION 2. ANNUAL MEETINGS. The annual meeting of shareholders
shall be held each year on a date and at a time designated by the Board of
Directors. The date so designated shall be within five (5) months after the end
of the fiscal year of the corporation, and within fifteen (15) months after the
last annual meeting. At each annual meeting directors shall be elected, and any
other proper business may be transacted.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders
may be called at any time by the Board, the Chairman of the Board, the
President, or by the holders of shares entitled to cast not less than ten
percent (10%) of the votes at such meeting.
Persons other than the Board who are entitled to call a meeting
may send a request in writing to the Chairman of the Board, the President, any
Vice President or the Secretary. The officer shall cause notice to be given to
the shareholders entitled to vote that a meeting will be held at a time
requested by the person or persons calling the meeting, not less than
thirty-five (35) nor more than sixty (60) days after the receipt of the request.
If the notice is not given within twenty (20) days after receipt of the request,
the persons entitled to call the meeting may give the notice.
1.
<PAGE> 3
SECTION 4. NOTICE OF SHAREHOLDERS' MEETINGS. Written notice of
any meeting of shareholders shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, and shall specify the place,
date and hour of the meeting and the general nature of the business to be
transacted.
Notice of a shareholders' meeting shall be given either
personally or by mail or by other means of written communication, addressed to
the shareholder at the address of such shareholder appearing on the books of the
corporation or given by the shareholder to the corporation for the purpose of
notice; or, if no such address appears or is given, at the place where the
principal executive office of the corporation is located or by publication at
least once in a newspaper of general circulation in the county in which the
principal executive office is located. Notice by mail shall be deemed to have
been given at the time a written notice is deposited in the United States mails,
postage prepaid. Any other written notice shall be deemed to have been given at
the time it is personally delivered to the recipient or is delivered to a common
carrier for transmission, or actually transmitted by the person giving the
notice by electronic means, to the recipient.
If action is proposed to be taken at any meeting for approval of
(i) contracts or transactions in which a director has a direct or indirect
financial interest, pursuant to Section 310 of the Corporations Code of
California, (ii) an amendment to the articles of incorporation, pursuant to
Section 902 of such Code, (iii) a reorganization of the corporation, pursuant to
Section 1201 of such Code, (iv) dissolution of the corporation, pursuant to
Section 1900 of such Code, or (v) a distribution to preferred shareholders,
pursuant to Section 2007 of such Code, the notice shall also state the general
nature of such proposal.
SECTION 5. QUORUM. The presence in person or by proxy of the
persons entitled to vote a majority of the voting shares at any meeting shall
constitute a quorum for the transaction of business. Business may be continued
after the withdrawal of enough shareholders to leave less than a quorum if any
action taken (other than adjournment) is approved by at least a majority of the
shares required to constitute a quorum.
SECTION 6. VOTING. Except as otherwise provided in the California
General Corporations Law, shareholders on the record date fixed by the Board of
Directors in accordance with Article VII, Section 1 are entitled to notice and
to vote, notwithstanding the transfer of any shares on the books of the
corporation after that date. The shareholders' vote may be by voice or by
ballot; provided, however, that any election for directors must be by ballot if
demanded by any shareholder before the voting has begun. If a quorum is present,
the affirmative vote of the majority of the shares represented at the meeting
and entitled to vote shall be the act of the shareholders.
At a shareholders' meeting at which directors are to be elected,
no shareholder shall be entitled to cumulate votes unless the notice
requirements of Section 708 of the California Corporations Code have been met.
If any one shareholder has given such notice, all shareholders may cumulate
their votes for candidates in nomination. To cumulate votes, the shareholder can
give one candidate a number of votes equal to the number of directors to be
elected multiplied by the number of votes to which the shareholder's shares are
entitled, or distribute the shareholder's votes on the same principle among as
many candidates as the shareholder thinks fit. The
2.
<PAGE> 4
candidates receiving the highest number of votes, up to the number of directors
to be elected, shall be elected.
Voting shall in all cases be subject to the provisions of Chapter
7 of the California General Corporation Law and to the following provisions:
(a) Subject to clause (g), shares held by an
administrator, executor, guardian, conservator or custodian may be voted
by such holder either in person or by proxy, without a transfer of such
shares into the holder's name; and shares standing in the name of a
trustee may be voted by the trustee, either in person or by proxy, but
no trustee shall be entitled to vote shares held by such trustee without
a transfer of such shares into the trustee's name.
(b) Shares standing in the name of a receiver may be voted
by such receiver; and shares held by or under the control of a receiver
may be voted by such receiver without the transfer thereof into the
receiver's name if authority to do so is contained in the order of the
court by which such receiver was appointed.
(c) Subject to the provisions of Section 705 of the
California General Corporation Law, and except where otherwise agreed in
writing between the parties, a shareholder whose shares are pledged
shall be entitled to vote such shares until the shares have been
transferred into the name of the pledgee, and thereafter the pledgee
shall be entitled to vote the shares so transferred.
(c) Shares standing in the name of a minor may be voted
and the corporation may treat all rights incident thereto as exercisable
by the minor, in person or by proxy, whether or not the corporation has
notice, actual or constructive, or the non-age, unless a guardian of the
minor's property has been appointed and written notice of such
appointment given to the corporation.
(e) Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent or proxyholder
as the bylaws of such other corporation may prescribe or, in the absence
of such provision, as the Board of Directors of such other corporation
may determine or, in the absence of such determination, by the chairman
of the board, president or any vice president of such other corporation,
or by any other person authorized to do so by the board, president or
any vice president of such other corporation. Shares which are purported
to be executed in the name of a corporation (whether or not any title of
the person signing is indicated) shall be presumed to be voted or the
proxy executed in accordance with the provisions of this subdivision,
unless the contrary is shown.
(f) Shares of the corporation owned by any subsidiary
shall not be entitled to vote on any matter.
(g) Shares held by the corporation in a fiduciary
capacity, and shares of the corporation held in a fiduciary capacity by
any subsidiary, shall not be entitled to vote on any matter, except to
the extent that the settlor or beneficial owner possesses and
3.
<PAGE> 5
exercises a right to vote or to give the corporation binding
instructions as to how to vote such shares.
(h) If shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by
the entirety, voting trustees, persons entitled to vote under a
shareholder voting agreement or otherwise, or if two or more persons
(including proxyholders) have the same fiduciary relationship respecting
the same shares, unless the secretary of the corporation is given
written notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship wherein
it is so provided, their acts with respect to voting shall have the
following effect:
(i) If only one votes, such act binds all;
(ii) If more than one vote, the act of the majority
so voting binds all;
(iii) If more than one vote, but the vote is evenly
split on any particular matter, each faction may vote the
securities in question proportionately.
If the instrument so filed or the registration of the shares shows that any such
tenancy is held in unequal interests, a majority or even split for the purpose
of this section shall be a majority or even split in interest.
SECTION 7. RECORD DATE. The Board may fix, in advance, a record
date for the determination of the shareholders entitled to notice of any meeting
or to vote or entitled to receive payment of any dividend or other distribution,
or any allotment of rights, or to exercise rights in respect of any other lawful
action. The record date so fixed shall be not more than sixty (60) nor less than
ten (10) days prior to the date of the meeting nor more than sixty (60) days
prior to any other action. When a record date is so fixed, only shareholders of
record on that date are entitled to notice of and to vote at the meeting or to
receive the dividend, distribution or allotment of rights, or to exercise of the
rights, as the case may be, notwithstanding any transfer of shares on the books
of the corporation after the record date. A determination of shareholders of
record entitled to notice of or to vote at a meeting of shareholders shall apply
to any adjournment of the meeting unless the Board fixes a new record date for
the adjourned meeting. The Board shall fix a new record date if the meeting is
adjourned for more than forty-five (45) days.
If no record date is fixed by the Board, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the business day next
preceding the day 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. The record date for determining shareholders for any purpose other than
set forth in this Section 8 or Section 10 of this Article shall be at the close
of business on the day on which the Board adopts the resolution relating
thereto, or the sixtieth day prior to the date of such other action, whichever
is later.
4.
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SECTION 8. WAIVER OF NOTICE. The transactions of any meeting of
shareholders, either annual or special, however called and noticed, and wherever
held, shall be as valid as though had at a meeting duly held after regular call
and notice, if a quorum is present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, who was
not present in person or by proxy, signs a written waiver of notice, or a
consent to the holding of such meeting, or an approval of the minutes thereof.
The waiver of notice or consent need not specify either the business to be
transacted or the purpose of any regular or special meeting of shareholders.
SECTION 9. ACTION WITHOUT MEETING. Any action which may be taken
at any annual or special meeting of shareholders may be taken without a meeting
and without prior notice, if a consent in writing, setting forth the action so
taken, is signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take that action
at a meeting at which all shares entitled to vote on that action were present
and voted. In the case of election of directors, such a consent shall be
effective only if signed by the holders of all outstanding shares entitled to
vote for the election of directors, provided, however, that a director may be
elected at any time to fill a vacancy on the Board of Directors that has not
been filled by the directors, by the written consent of the holders of a
majority of the outstanding shares entitled to vote for the election of
directors. All such consents shall be filed with the Secretary of the
Corporation and shall be maintained in the corporate records.
If the consents of all shareholders entitled to vote have not
been solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the secretary shall give prompt
notice of the corporate action approved by the shareholders without a meeting.
Such notice shall be given in the manner specified in Section 4 of this Article
II. In the case of approval of (i) contracts or transactions in which a director
has a direct or indirect financial interest, pursuant to Section 310 of the
Corporations Code of California, (ii) indemnification of agents of the
corporation, pursuant to Section 317 of such Code, (iii) a reorganization of the
corporation pursuant to Section 1201 of such Code, and (iv) a distribution to
preferred shareholders, pursuant to Section 2007 of such Code, such notice shall
be given at least ten (10) days before the consummation of any such action
authorized by any such approval.
SECTION 10. PROXIES. Every shareholder 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 shareholder
and filed with the Secretary of the Corporation. A validly executed proxy which
does not state that it is irrevocable shall continue in full force and effect
unless revoked by the person executing it, prior to the vote pursuant thereto,
by a writing delivered to the corporation stating that the proxy is revoked or
by a subsequent proxy executed by, or attendance at the meeting and voting in
person by the person executing the proxy; provided, however, that no such proxy
shall be valid after the expiration of eleven (11) months from the date of such
proxy, unless otherwise provided in the proxy. The revocability of a proxy that
states on its face that it is irrevocable shall be governed by the provisions of
Sections 705(e) and (f) of the Corporations Code of California.
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ARTICLE III
DIRECTORS
SECTION 1. POWERS. Subject to limitations of the Articles, of
these Bylaws and of the California General Corporation Law relating to action
required to be approved by the shareholders 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. The Board may
delegate the management of the day-to-day operation of the business of the
corporation to a management company or other person provided that the business
and affairs of the corporation shall be managed and all corporate powers shall
be exercised under the ultimate direction of the Board. Without prejudice to
such general powers, but subject to the same limitations, it is hereby expressly
declared that the Board shall have the following powers in addition to the other
powers enumerated in these Bylaws:
(a) Select and remove all officers, agents, and employees
of the corporation, prescribe such powers and duties for them as may not
be inconsistent with law, with the Articles of Incorporation or these
Bylaws, fix their compensation, and require from them security for
faithful service.
(b) Conduct, manage and control the affairs and business
of the corporation and to make such rules and regulations therefor not
inconsistent with law, or with the Articles or these Bylaws, as they may
deem best.
(c) Change the principal executive office or the principal
business office in the State from one location to another; cause the
corporation to be qualified to do business in any other state,
territory, dependency, or foreign country and conduct business within or
without the State; designate any place within or without the State for
the holding of any shareholders' meeting, or meetings, including annual
meetings; adopt, make and use a corporate seal, and prescribe the forms
of certificates of stock, and alter the form of such seal and of such
certificates from time to time as in their judgment they may deem best,
provided that such forms shall at all times comply with the provisions
of law.
(d) Authorize the issuance of shares of stock of the
corporation from time to time, upon such terms and for such
consideration as may be lawful.
(e) Borrow money and incur indebtedness for the purpose of
the corporation, and to cause to be executed and delivered therefor, in
the corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of debt and
securities therefor.
SECTION 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of directors shall be three (3) until changed by a duly adopted amendment
to the Articles of Incorporation or by an amendment to this Bylaw adopted by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote.
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SECTION 3. ELECTION AND TERM OF OFFICE. The directors shall be
elected at each annual meeting of the shareholders, but if any such annual
meeting is not held or the directors are not elected thereat, the directors may
be elected at any special meeting of shareholders held for that purpose. Each
director shall hold office until the next annual meeting and until a successor
has been elected and qualified.
SECTION 4. RESIGNATION AND REMOVAL OF DIRECTORS. Any director may
resign effective upon giving written notice to the Chairman of the Board, the
President, the Secretary or the Board of Directors of the corporation. If the
resignation specifies a later time for the effectiveness of the resignation, it
shall be effective at that later time. Unless such resignation specifies
otherwise, its acceptance by the corporation shall not be necessary to make it
effective. The Board of Directors may declare vacant the office of a director
who has been declared of unsound mind by an order of a court or convicted of a
felony. Any or all of the directors may be removed without cause if such removal
is approved by the affirmative vote of a majority of the outstanding shares
entitled to vote. Unless the entire Board is removed, no director may be removed
if the votes cast against removal (or, if such action is taken by written
consent, the shares held by persons not consenting in writing to such removal)
would be sufficient to elect such director if voted cumulatively at an election
at which the same total number of votes were cast (or, if such action is taken
by written consent, all shares entitled to vote were voted) and the entire
number of directors authorized at the time of the director's most recent
election were then being elected. No reduction of the authorized number of
directors shall have the effect of removing any director before his term of
office expires.
SECTION 5. VACANCIES. Vacancies on the Board of Directors may be
filled by a majority of the remaining directors, though less than a quorum, or
by a sole remaining director. Each director so elected shall hold office until
the next annual meeting of the shareholders and until a successor has been
elected and qualified.
The shareholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors, but any such election
by written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
SECTION 6. PLACE OF MEETINGS. Regular meetings of the Board of
Directors shall be held at any place within or without the State that has been
designated from time to time by resolution of the Board. In the absence of such
designation, regular meetings shall be held at the principal executive office of
the corporation. Special meetings of the Board shall be held at any place within
or without the State that has been designated in the notice of the meeting or,
if not stated in the notice or there is not notice, at the principal executive
office of the corporation. Any meeting, regular or special, may be held by
conference telephone or similar communication equipment, so long as all
directors participating in such meeting can hear one another, and all such
directors shall be deemed to be present in person at such meeting.
SECTION 7. ORGANIZATION MEETING. Immediately following each
annual meeting of shareholders, the Board of Directors shall hold a regular
meeting for the purpose of organization, election of officers and the
transaction of other business. Call and notice of such meetings are hereby
dispensed with.
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SECTION 8. OTHER REGULAR MEETINGS. Other regular meetings of the
Board of Directors shall be held without call at such time as shall from time to
time be fixed by the Board of Directors. Such regular meetings may be held
without notice, provided the notice of any change in the time of any such
meetings shall be given to all of the directors. Notice of a change in the
determination of the time shall be given to each director in the same manner as
notice for special meetings of the Board of Directors.
SECTION 9. SPECIAL MEETINGS. Special meetings of the Board of
Directors for any purpose or purposes may be called at any time by the
President, or if he is absent or unable or refuses to act, by any Secretary or
by any one (1) director.
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 or telegram, charges prepaid, addressed to each director at the director's
address as it is shown on the records of the corporation. In case such notice is
mailed, it shall be deposited in the United States mail at least four (4) days
prior to the time of the holding of the meeting. In case the notice is delivered
personally, or by telephone or telegram, it shall be delivered personally or by
telephone or to the telegraph company at least forty-eight (48) hours prior to
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated 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
of the meeting nor the place if the meeting is to be held at the principal
executive office of the corporation.
SECTION 10. QUORUM. A majority of the authorized number of
directors constitutes a quorum of the Board for the transaction of business,
except to adjourn as hereinafter provided. Every act or decision done or made by
a majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board, unless a greater number be
required by law or by the Articles. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
directors, if any action taken is approved by at least a majority of the
required quorum for such meeting.
SECTION 11. WAIVER OF NOTICE. The transactions of any meeting of
the Board of Directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice if a
quorum be present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, a consent to holding the
meeting or an approval of the minutes thereof. The waiver of notice of consent
need not specify the purpose of the meeting. All such waivers, consents and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Notice of a meeting shall also be deemed given to any
director who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director.
SECTION 12. ADJOURNMENT. A majority of the directors present,
whether or not constituting a quorum, may adjourn any meeting to another time
and place.
SECTION 13. NOTICE OF ADJOURNMENT. Notice of the time and place
of holding an adjourned meeting need not be given, unless the meeting is
adjourned for more than twenty-four (24) hours, in which case notice of such
time and place shall be given prior to the time of
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the adjourned meeting, in the manner specified in Section 9 of this Article III,
to the directors who were not present at the time of the adjournment.
SECTION 14. ACTION WITHOUT MEETING. Any action required or
permitted to be taken by the Board of Directors may be taken without a meeting,
if all members of the Board shall individually or collectively consent in
writing to such 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
or consents shall be filed with the minutes of the proceedings of the Board.
SECTION 15. FEES AND COMPENSATION OF DIRECTORS. Directors 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.
Nothing herein contained shall 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 such services.
SECTION 16. COMMITTEES OF DIRECTORS. The Board of Directors may,
by resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of two or more directors, to
serve at the pleasure of the Board. The Board may designate one or more
directors as alternate members of any committees, who may replace any absent
member at any meeting of the committee. Any such committee, to the extent
provided in the resolution of the Board, shall have all the authority of the
Board, except with regard to:
(a) the approval of any action which, under the General
Corporation Law of California, also requires shareholders' approval or
approval of the outstanding shares;
(b) the filing of vacancies on the Board of Directors or
in any committees;
(c) the fixing of compensation of the directors for
serving on the Board or on any committee;
(d) the amendment or repeal of Bylaws or the adoption of
new Bylaws;
(e) the amendment or repeal of any resolution of the Board
of Directors which by its express terms is not so amendable or
repealable;
(f) a distribution to the shareholders of the corporation,
except at a rate or in a periodic amount or within a price range
determined by the Board of Directors; or
(g) the appointment of any other committees of the Board
of Directors or the members thereof.
SECTION 17. MEETINGS AND ACTION BY COMMITTEES. Meetings and
action of committees shall be governed by, and held and taken in accordance
with, the provisions of
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Article III dealing with the place of meetings, regular meetings, special
meetings and notice, quorum, waiver of notice, adjournment, notice of
adjournment and action 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, except that the time or regular meetings
of committees may be determined by resolutions of the Board of Directors. 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
Directors or a committee may adopt rules for the government of such committee
not inconsistent with the provisions of these Bylaws.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a
President, a Secretary and a Treasurer (or 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, one or more Assistant
Secretaries or Assistant Treasurers. Any number of offices may be held by the
same person.
SECTION 2. ELECTION OF OFFICERS. The officers of the corporation,
except such officers as may be appointed in accordance with the provisions of
Section 3 or Section 5 of this Article IV, shall be chosen by the Board of
Directors, and each shall serve at the pleasure of the Board, subject to the
rights, if any, of an officer under any contract of employment.
SECTION 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may
appoint, and may empower the President to appoint, such other officers as the
business of the corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are provided in the
Bylaws or as the Board of Directors may from time to time determine.
SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause, by the Board of Directors, at any
regular or special meeting thereof, or, except in case of an officer chosen by
the Board of Directors, by any officer upon whom such power or removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to
the corporation. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. Any such resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
SECTION 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 such
office.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
such an officer be elected, shall, if present, preside at all meetings of the
Board of Directors and exercise
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and perform such other powers and duties as may be from time to time assigned to
him by the Board of Directors or prescribed by the Bylaws. If there is no
President, the Chairman of the Board shall in addition be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 7 of this Article IV.
SECTION 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 have, subject to the control of the Board of Directors,
general supervision, direction and control of the business and officers of the
corporation. The President shall preside at all meetings of the shareholders
and, in the absence of the Chairman of the Board, of if there be none, at all
meetings of the Board of Directors. The President has the general powers and
duties of management usually vested in the office of President and general
manager of a corporation and such other powers and duties as may be prescribed
by the Board.
SECTION 8. VICE PRESIDENTS. In the absence or disability of the
President, 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 or the Bylaws, the President or the Chairman of the Board.
SECTION 9. SECRETARY. The Secretary shall keep or cause to be
kept, at the principal executive office or such other place as the Board may
order, a book of minutes of all meetings of shareholders, the Board and its
committees, with the time and place of holding, whether regular or special, and,
if special, how authorized, the notice thereof given, the names of those present
at Board and committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof. The Secretary shall keep,
or cause to be kept, a copy of the Bylaws of the corporation at the principal
executive office or business office in accordance with Section 213 of the
California General Corporation Law.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, if one be appointed, a share register, or a duplicate share register,
showing the names of the shareholders and their addresses, the number and
classes of shares held by each, the number and date of certificates issued for
the same, 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 the
meetings of the shareholders and of the Board and of any committees thereof
required by these Bylaws or by law to be given, shall keep the seal of the
corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board.
SECTION 10. TREASURER. The Treasurer (which may also be known as
"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,
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capital, retained earnings and shares. The books of account shall at all
reasonable times be open to inspection by any director.
The Chief Financial Officer shall deposit all moneys 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 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 transactions as Chief Financial Officer and of the financial
condition of the corporation, and shall have other powers and perform such other
duties as may be prescribed by the Board of Directors or the Bylaws.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
SECTION 1. AGENTS, PROCEEDINGS, AND EXPENSES. For the purposes of
this Article, "agent" means any person who is or was a director, officer,
employee, or other agent of this corporation, or is or was serving at the
request of this corporation as a director, officer, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a director, officer, employee, or agent of a foreign or
domestic corporation which was a predecessor corporation of this corporation or
of another enterprise at the request of such predecessor corporation;
"proceeding" means any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative, or investigative; and "expenses"
includes, without limitation, attorneys' fees and any expenses of establishing a
right to indemnification under Section 4 or Section 5(c) of this Article V.
SECTION 2. ACTIONS OTHER THAN BY THE CORPORATION. This
corporation shall have the power to indemnify any person who was or is a party,
or is threatened to be made a party, to any proceeding (other than an action by
or in the right of this corporation) by reason of the fact that such person is
or was an agent of this corporation, against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with such proceeding if that person acted in good faith and in a manner that
person reasonably believed to be in the best interests of this corporation and,
in the case of a criminal proceeding, had no reasonable cause to believe the
conduct of that person was unlawful. The termination of any proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in the best interests of this corporation or that the person had reasonable
cause to believe that the person's conduct was unlawful.
SECTION 3. ACTIONS BY THE CORPORATION. This corporation shall
indemnify any person who was or is a party, or is threatened to be made a party,
to any threatened, pending or completed action by or in the right of this
corporation to procure a judgment in its favor by reason of the fact that that
person is or was an agent of this corporation, against expenses actually and
reasonably incurred by that person in connection with the defense or settlement
of that action if that person acted in good faith, in a manner that person
believed to be in the best interests of this corporation and with such care,
including reasonable inquiry, as an ordinarily prudent person
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in a like position would use under similar circumstances. No indemnification
shall be made under this Section 3:
(a) In respect of any claim, issue or matter as to which
that person shall have been adjudged to be liable to this corporation in
the performance of that person's duty to this corporation, unless and
only to the extent that the court in which that action was brought shall
determine upon application that, in view of all the circumstances of the
case, that person is fairly and reasonably entitled to indemnity for the
expenses which the court shall determine;
(b) Of amounts paid in settling or otherwise disposing of
a threatened or pending action, with or without court approval; or
(c) Of expenses incurred in defending a threatened or
pending action which is settled or otherwise disposed of without court
approval.
SECTION 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an
agent of this corporation has been successful on the merits in defense of any
proceeding referred to in Sections 2 or 3 of this Article, or in defense of any
claim, issue, or matter therein, the agent shall be indemnified against expenses
actually and reasonably incurred by the agent in connection therewith.
SECTION 5. REQUIRED APPROVAL. Except as provided in Section 4 of
this Article, any indemnification under this Article shall be made by this
corporation only if authorized in the specific case, on a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of this
Article, by:
(a) A majority vote of a quorum consisting of directors
who are not parties to the proceeding;
(b) Approval by the affirmative vote of a majority of the
shares of this corporation entitled to vote represented at a duly held
meeting at which a quorum is present or by the written consent of
holders of a majority of the outstanding shares entitled to vote. For
this purpose, the shares owned by the person to be indemnified shall not
be considered outstanding or entitled to vote thereon; or
(c) The court in which the proceeding is or was pending,
on application made by this corporation or the agent or the attorney or
other person rendering services in connection with the defense, whether
or not such application by the agent, attorney, or other person is
opposed by this corporation.
SECTION 6. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this corporation before the final disposition of
the proceeding on receipt of an undertaking by or on behalf of the agent to
repay the amount of the advance unless it shall be determined ultimately that
the agent is entitled to be indemnified as authorized in this Article.
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SECTION 7. OTHER CONTRACTUAL RIGHTS. Nothing contained in this
Article shall affect any right to indemnification to which persons other than
directors and officers of this corporation or any subsidiary hereof may be
entitled by contract or otherwise.
SECTION 8. LIMITATIONS. No indemnification or advance shall be
made under this Article, except as provided in Section 4 or Section 5(c), in any
circumstances where it appears:
(a) That it would be inconsistent with a provision of the
articles, a resolution of the shareholders, or an agreement in effect at
the time of the accrual of the alleged cause of action asserted in the
proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
SECTION 9. INSURANCE. Upon and in the event of a determination
by the Board of Directors of this corporation to purchase such insurance, this
corporation shall purchase and maintain insurance on behalf of any agent of the
corporation against any liability asserted against or incurred by the agent in
such capacity or arising out of the agent's status as such whether or not this
corporation would have the power to indemnify the agent against that liability
under the provisions of this Section.
SECTION 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This
Article does not apply to any proceeding against any trustee, investment
manager, or other fiduciary of an employee benefit plan in that person's
capacity as such, even though that person may also be an agent of the
corporation as defined in Section 1 of this Article. Nothing contained in this
Article shall limit any right to indemnification to which such a trustee,
investment manager, or other fiduciary may be entitled by contract or otherwise,
which shall be enforceable to the extent permitted by applicable law other than
this Article.
ARTICLE VI
RECORDS AND REPORTS
SECTION 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The
corporation shall keep at its principal executive office a record of its
shareholders, giving the names and addresses of all shareholders and the number
and class of shares held by each shareholder. This record shall be open to
inspection by any shareholder who holds at least five percent (5%) in the
aggregate of the outstanding shares (or at least one percent (1%) of such voting
shares and has filed a Schedule 14B with the United States Securities and
Exchange Commission) upon five (5) days' prior written demand.
SECTION 2. MAINTENANCE AND INSPECTION OF BYLAWS. The corporation
shall keep at its principal executive office the original or a copy of the
Bylaws as amended to date, which shall be open to inspection by the shareholders
at all reasonable times during office hours.
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SECTION 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS.
The accounting books and records and minutes of proceedings of the shareholders
and the Board of Directors shall be kept at such place or places designated by
the Board of Directors, or, in the absence of such designation, at the principal
executive office of the corporation. The minutes and accounting books and
records shall be open to inspection upon the written demand of any shareholder
at any reasonable time during usual business hours, for a purpose reasonably
related to the holders interests as shareholder. A copy of any financial
statements and any income statements, including accompanying balance sheets,
prepared by the corporation shall be kept on file in the principal executive
office of the corporation for a period of twelve months.
SECTION 4. INSPECTION BY DIRECTORS. Every director shall have the
absolute right at any reasonable time to inspect all books, records and
documents of every kind and the physical properties of the corporation.
SECTION 5. ANNUAL REPORT TO SHAREHOLDERS. The annual report to
shareholders referred to in Section 1501 of the California Corporations Code is
expressly dispensed with, but nothing herein shall be interpreted as prohibiting
the Board of Directors from issuing such annual or other periodic reports to the
shareholders of the corporation as it considers appropriate or as provided by
Section 1501(c) of the California Corporations Code.
SECTION 6. ANNUAL STATEMENT OF GENERAL INFORMATION. The
corporation shall, with respect to each fiscal year, file with the Secretary of
State of the State of California, on the prescribed form, a Domestic Stock
Statement setting forth various information, including but not limited to the
authorized number of directors, the names and complete business or residence
addresses of all incumbent directors, the names and complete business or
residence addresses of the President, Secretary and Treasurer, the street
address of its principal executive office or principal business office in this
state and the general type of business constituting the principal business
activity of the corporation, together with a designation of the agent of the
corporation for the purpose of service of process, all in compliance with
Section 1502 of the Corporations Code of California.
ARTICLE VII
GENERAL MATTERS
SECTION 1. RECORD DATE. For purposes of determining the
shareholders entitled to notice of any meeting or to vote or entitled to receive
payment of any dividend or other distribution or allotment of any rights or
entitled to exercise any rights in respect of any other lawful action, the Board
of Directors may fix, in advance, a record date, which shall not be more than
sixty (60) days nor less than ten (10) days prior to the date of any such
meeting nor more than sixty (60) days prior to any other action. Only
shareholders of record on the date so fixed are entitled to notice and to vote
or to receive the dividend, distribution or allotment of rights or to exercise
the rights, as the case may be, notwithstanding any transfer of any shares on
the books of the corporation after the record date fixed as aforesaid, except as
otherwise provided in the California General Corporation Law.
15.
<PAGE> 17
If no record date is fixed by the Board, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the business day next
preceding the day 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. The record date for determining shareholders for any purpose other than
set forth in this Section 1 of this Article shall be at the close of business on
the day on which the Board adopts the resolution relating thereto, or the
sixtieth day prior to the date of such other action, whichever is later.
SECTION 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks,
drafts or other orders for payment of money, notes or other evidences of
indebtedness, issued in the name of or payable to the corporation, shall be
signed or endorsed by such person or persons and in such manner as, from time to
time, shall be determined by resolution of the Board of Directors.
SECTION 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The
Board of Directors, except as in the Bylaws otherwise provided, may authorize
any officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances; and, unless so
authorized or ratified by the Board of Directors or within the agency power to
authority to bind the corporation by any contract or engagement or to pledge its
credit or to tender it liable for any purpose or to any amount.
SECTION 4. CERTIFICATES OF STOCK. Every holder of shares of the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the Chairman of the Board, the President or a Vice President and
by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary, certifying the number of shares and the class or series of shares
owned by the shareholder. Any or all of the signatures on the certificate may be
facsimile. If any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have 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 such person were an
officer, transfer agent or registrar at the date of issue.
Certificates for shares may be issued prior to full payment under
such restrictions and for such purposes as the Board may provide; provided,
however, that on any certificate issued to represent any partly paid shares, the
total amount of the consideration to be paid therefor and the amount paid
thereon shall be stated.
Except as provided in this Section, no new certificate for shares
shall be issued in lieu of an old one unless the latter is surrendered and
cancelled at the same time. The Board may, however, in case any certificate for
shares is alleged to have been lost, stolen or destroyed, authorize the issuance
of a new certificate in lieu thereof and the corporation may require that the
corporation be given a bond or other adequate security sufficient to indemnify
it against any claim that may be made against it (including expense or
liability) on account of the alleged loss, theft or destruction of such
certificate or the issuance of such new certificate.
16.
<PAGE> 18
SECTION 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any other officer or officers authorized by the Board or the
President are each authorized to vote, represent and exercise on behalf of the
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of the corporation. The authority herein
granted may be exercised either by any such officer in person or by any other
person authorized so to do by proxy or power of attorney duly executed by said
officer.
SECTION 6. STOCK PURCHASE PLANS. The corporation may adopt and
carry out a stock purchase plan or agreement or stock option plan or agreement
providing for the issue and sale for such consideration as may be fixed of its
unissued shares, or of issued shares acquired or to be acquired, to one or more
of the employees or directors of the corporation or of a subsidiary or to a
trustee on their behalf and for the payment for such shares in installments or
at one time, and may provide for aiding any such persons in paying for such
shares by compensation for services rendered, promissory notes, or otherwise.
Any stock purchase plan or agreement or stock option plan or
agreement may include, among other features, the fixing of eligibility for
participation therein, the class and price of shares to be issued or sold under
the plan or agreement, the number of shares which may be subscribed for, the
method of payment therefor, the reservation of title until full payment
therefor, the effect of the termination of employment and option or obligation
on the part of the corporation to repurchase the shares, the time limits of and
termination of the plan and any other matters, not in violation of applicable
law, as may be included in the plan as approved or authorized by the Board or
any committee of the Board.
SECTION 7. CONSTRUCTION AND DEFINITIONS. Unless the context
requires otherwise, the general provisions, rules of construction and
definitions in the California General Corporation Law shall govern the
construction of these Bylaws. Without limiting the generality of this provision,
the singular number includes the plural, the plural number includes the
singular, and the term "person" includes both a corporation and a natural
person.
ARTICLE VIII
AMENDMENTS
SECTION 1. AMENDMENT BY SHAREHOLDERS. New Bylaws may be adopted
or these Bylaws may be amended or repealed by the affirmative vote of a majority
of the outstanding shares entitled to vote, or by the written assent of
shareholders entitled to vote such shares, except as otherwise provided by law
or by the articles of incorporation.
SECTION 2. AMENDMENT BY DIRECTORS. Subject to the rights of the
shareholders as provided in Section 1 of this Article, bylaws other than a bylaw
or an amendment thereof changing the authorized number of directors may be
adopted, amended or repealed by the Board of Directors.
17.
<PAGE> 1
EXHIBIT 3.5
BYLAWS
OF
CONTINUUS SOFTWARE CORPORATION
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I OFFICES........................................................ 1
Section 1. Registered Office1
Section 2. Other Offices.............................................. 1
ARTICLE II CORPORATE SEAL................................................. 1
Section 3. Corporate Seal............................................. 1
ARTICLE III STOCKHOLDERS' MEETINGS......................................... 1
Section 4. Place Of Meetings.......................................... 1
Section 5. Annual Meetings............................................ 1
Section 6. Special Meetings........................................... 4
Section 7. Notice Of Meetings......................................... 5
Section 8. Quorum..................................................... 5
Section 9. Adjournment And Notice Of Adjourned Meetings............... 5
Section 10. Voting Rights.............................................. 6
Section 11. Joint Owners Of Stock...................................... 6
Section 12. List Of Stockholders....................................... 6
Section 13. Action Without Meeting..................................... 6
Section 14. Organization............................................... 7
ARTICLE IV DIRECTORS...................................................... 8
Section 15. Number And Term Of Office.................................. 8
Section 16. Powers..................................................... 8
Section 17. Board of Directors......................................... 8
Section 18. Vacancies.................................................. 9
Section 19. Resignation................................................ 9
Section 20. Removal.................................................... 10
Section 21. Meetings................................................... 10
Section 22. Quorum And Voting.......................................... 11
Section 23. Action Without Meeting..................................... 11
Section 24. Fees And Compensation...................................... 11
Section 25. Committees................................................. 12
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 26. Organization............................................... 13
ARTICLE V OFFICERS....................................................... 13
Section 27. Officers Designated........................................ 13
Section 28. Tenure And Duties Of Officers.............................. 13
Section 29. Delegation Of Authority.................................... 15
Section 30. Resignations............................................... 15
Section 31. Removal.................................................... 15
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION....................................... 15
Section 32. Execution Of Corporate Instruments......................... 15
Section 33. Voting Of Securities Owned By The Corporation.............. 15
ARTICLE VII SHARES OF STOCK................................................ 16
Section 34. Form And Execution Of Certificates......................... 16
Section 35. Lost Certificates.......................................... 16
Section 36. Transfers.................................................. 17
Section 37. Fixing Record Dates........................................ 17
Section 38. Registered Stockholders.................................... 18
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION............................ 18
Section 39. Execution Of Other Securities.............................. 18
ARTICLE IX DIVIDENDS...................................................... 19
Section 40. Declaration Of Dividends................................... 19
Section 41. Dividend Reserve........................................... 19
ARTICLE X FISCAL YEAR.................................................... 19
Section 42. Fiscal Year................................................ 19
ARTICLE XI INDEMNIFICATION................................................ 19
Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents....................... 19
ARTICLE XII NOTICES........................................................ 22
Section 44. Notices.................................................... 22
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE XIII AMENDMENTS..................................................... 24
Section 45. Amendments................................................. 24
ARTICLE XIV LOANS TO OFFICERS.............................................. 24
Section 46. Loans To Officers.......................................... 24
</TABLE>
iii
<PAGE> 5
BYLAWS
OF
CONTINUUS SOFTWARE CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETINGS.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
1.
<PAGE> 6
Nominations of persons for election to the Board of Directors of the corporation
and the proposal of business to be considered by the stockholders may be made at
an annual meeting of stockholders: (i) pursuant to the corporation's notice of
meeting of stockholders; (ii) by or at the direction of the Board of Directors;
or (iii) by any stockholder of the corporation who was a stockholder of record
at the time of giving of notice provided for in the following paragraph, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in Section 5.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (c) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the General Corporation Law of Delaware, (iii) if the
stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business
2.
<PAGE> 7
that the stockholder proposes to bring before the meeting, a brief description
of the business desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (C) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made (i)
the name and address of such stockholder, as they appear on the corporation's
books, and of such beneficial owner, (ii) the class and number of shares of the
corporation which are owned beneficially and of record by such stockholder and
such beneficial owner, and (iii) whether either such stockholder or beneficial
owner intends to deliver a proxy statement and form of proxy to holders of, in
the case of the proposal, at least the percentage of the corporation's voting
shares required under applicable law to carry the proposal or, in the case of a
nomination or nominations, a sufficient number of holders of the corporation's
voting shares to elect such nominee or nominees (an affirmative statement of
such intent, a "Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Section 5(b)
of these Bylaws to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the corporation at least one
hundred (100) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 5 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
3.
<PAGE> 8
(f) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption) or (iv) by the holders of shares entitled to cast not
less than fifty percent (50%) of the votes at the meeting, and shall be held at
such place, on such date, and at such time as the Board of Directors shall fix.
At any time or times that the corporation is subject to Section 2115(b) of the
California General Corporation Law ("CGCL"), stockholders holding five percent
(5%) or more of the outstanding shares shall have the right to call a special
meeting of stockholders as set forth in Section 18(c) herein.
(b) If a special meeting is properly called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors may
be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for
4.
<PAGE> 9
election to such position(s) as specified in the corporation's notice of
meeting, if the stockholder's notice required by Section 5(b) of these Bylaws
shall be delivered to the Secretary at the principal executive offices of the
corporation not earlier than the close of business on the one hundred twentieth
(120th) day prior to such special meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such meeting or the
tenth (10th) day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time period
for the giving of a stockholder's notice as described above.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these Bylaws,
the presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. In the absence of a quorum, any meeting
of stockholders may be adjourned, from time to time, either by the chairman of
the meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of
5.
<PAGE> 10
Incorporation or these Bylaws, the affirmative vote of the majority (plurality,
in the case of the election of directors) of the votes cast by the holders of
shares of such class or classes or series shall be the act of such class or
classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, 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 which 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.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with Delaware law. An agent so appointed need not be a stockholder. No proxy
shall be voted after three (3) years from its date of creation unless the proxy
provides for a longer period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the Delaware General Corporation Law, Section 217(b). If
the instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
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 specified, at the place where
the meeting is to be held. The list shall be
6.
<PAGE> 11
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the Delaware General Corporation Law if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written consent has been given in accordance with
Section 228 of the Delaware General Corporation Law.
(d) Notwithstanding the foregoing, no such action by written consent
may be taken following the closing of the initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), covering the offer and sale of Common Stock of the corporation
(the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
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(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient.
SECTION 16. POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
SECTION 17. BOARD OF DIRECTORS.
(a) Directors shall be elected at each annual meeting of stockholders
to hold office until the next annual meeting. Each director shall hold office
either until the expiration of the term for which elected or appointed and until
a successor has been elected and qualified, or until such director's death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
(b) No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation is subject to Section 2115(b) of the CGCL. During such
time or times that the corporation is subject to Section 2115(b) of the CGCL,
every stockholder entitled to vote at an election for directors may cumulate
such stockholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
such stockholder's shares are otherwise entitled, or distribute the
stockholder's votes on the same principle among as many candidates as
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such stockholder thinks fit. No stockholder, however, shall be entitled to so
cumulate such stockholder's votes unless (i) the names of such candidate or
candidates have been placed in nomination prior to the voting and (ii) the
stockholder has given notice at the meeting, prior to the voting, of such
stockholder's intention to cumulate such stockholder's votes. If any stockholder
has given proper notice to cumulate votes, all stockholders may cumulate their
votes for any candidates who have been properly placed in nomination. Under
cumulative voting, the candidates receiving the highest number of votes, up to
the number of directors to be elected, are elected.
SECTION 18. VACANCIES.
(a) Unless otherwise provided in the Certificate of Incorporation,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this Bylaw in the case of the death,
removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) 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 offices as aforesaid, which election shall be governed by Section 211 of the
Delaware General Corporation Law.
(c) At any time or times that the corporation is subject to Section
2115(b) of the CGCL, if, after the filling of any vacancy, the directors then in
office who have been elected by stockholders shall constitute less than a
majority of the directors then in office, then
(1) Any holder or holders of an aggregate of five percent (5%) or
more of the total number of shares at the time outstanding having the right to
vote for those directors may call a special meeting of stockholders; or
(2) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
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SECTION 19. RESIGNATION. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
SECTION 20. REMOVAL.
(a) During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
(b) At any time or times that the corporation is not subject to
Section 2115(b) of the CGCL and subject to any limitations imposed by law,
Section 20(a) above shall no longer apply and the Board of Directors or any
director may be removed from office at any time (i) with cause by the
affirmative vote of the holders of a majority of the voting power of all
then-outstanding shares of voting stock of the corporation, entitled to vote at
an election of directors or (ii) without cause by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3 %) of the voting
power of all then-outstanding shares of voting stock of the corporation entitled
to vote at an election of directors.
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) REGULAR MEETINGS. Unless otherwise restricted by the Certificate
of Incorporation, regular meetings of the Board of Directors may be held at any
time or date and at any place within or without the State of Delaware which has
been designated by the Board of
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Directors and publicized among all directors. No formal notice shall be
required for regular meetings of the Board of Directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; provided, however, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting.
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(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
Delaware General Corporation Law to be submitted to stockholders for approval,
or (ii) adopting, amending or repealing any bylaw of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership
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of a committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President (if a director), or if the President is absent, the most
senior Vice President (if a director), or, in the absence of any such person, a
chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual
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organizational meeting of the Board of Directors. The Board of Directors may
also appoint one or more Assistant Secretaries, Assistant Treasurers, Assistant
Controllers and such other officers and agents with such powers and duties as it
shall deem necessary. The Board of Directors may assign such additional titles
to one or more of the officers as it shall deem appropriate. Any one person may
hold any number of offices of the corporation at any one time unless
specifically prohibited therefrom by law. The salaries and other compensation of
the officers of the corporation shall be fixed by or in the manner designated by
the Board of Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
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 officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers, as the Board of
Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other
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duties and have such other powers, as the Board of Directors shall designate
from time to time. The President may direct any Assistant Secretary to assume
and perform the duties of the Secretary in the absence or disability of the
Secretary, and each Assistant Secretary shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
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ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless 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.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the shares
of stock of the corporation shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the Chairman of the Board of Directors, or the President or
any Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back
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a statement that the corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and 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. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and 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. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
SECTION 36. TRANSFERS.
(a Transfers of record of shares of stock of the corporation shall
be made only upon its books by the holders thereof, in person or by attorney
duly authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the Delaware General Corporation Law.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, 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 day next preceding the day on
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which notice is given, or if notice is waived, at the close of business on the
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; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has been
fixed by the Board of Directors within ten (10) days of the date on which such a
request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine 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
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, 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 resolution relating
thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
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ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
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ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall indemnify
its directors and executive officers (for the purposes of this Article XI,
"executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law or any other applicable law; provided, however, that the
corporation may modify the extent of such indemnification by individual
contracts with its directors and executive officers; and, provided, further,
that the corporation shall not be required to indemnify any director or
executive officer in connection with any proceeding (or part thereof) initiated
by such person unless (i) such indemnification is expressly required to be made
by law, (ii) the proceeding was authorized by the Board of Directors of the
corporation, (iii) such indemnification is provided by the corporation, in its
sole discretion, pursuant to the powers vested in the corporation under the
Delaware General Corporation Law or any other applicable law or (iv) such
indemnification is required to be made under subsection (d).
(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation shall
have power to indemnify its other officers, employees and other agents as set
forth in the Delaware General Corporation Law or any other applicable law. The
Board of Directors shall have the power to delegate the determination of whether
indemnification shall be given to any such person except executive officers to
such officers or other persons as the Board of Directors shall determine.
(c) EXPENSES. The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person
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to repay said amounts if it should be determined ultimately that such person is
not entitled to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
(d) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officer under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law or any other applicable law for the corporation
to indemnify the claimant for the amount claimed. In connection with any claim
by an executive officer of the corporation (except in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such executive officer is or was a director of the corporation)
for advances, the corporation shall be entitled to raise a defense as to any
such action clear and convincing evidence that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation, or with respect to any criminal action or
proceeding that such person acted without reasonable cause to believe that his
conduct was lawful. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law or any
other applicable law, nor an actual determination by the corporation (including
its Board of Directors, independent legal counsel or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that claimant has not met the applicable
standard of conduct.
21.
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(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any applicable statute, provision of the Certificate
of Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law, or by any
other applicable law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law or any other applicable law, the corporation, upon
approval by the Board of Directors, may purchase insurance on behalf of any
person required or permitted to be indemnified pursuant to this Bylaw.
(h) AMENDMENTS. Any repeal or modification of this Bylaw shall only
be prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law. If this Section
43 shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
executive officer to the full to the full extent under any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
22.
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(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
23.
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(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such
24.
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person shall deliver to the corporation a written notice setting forth his then
current address, the requirement that notice be given to such person shall be
reinstated. In the event that the action taken by the corporation is such as to
require the filing of a certificate under any provision of the Delaware General
Corporation Law, the certificate need not state that notice was not given to
persons to whom notice was not required to be given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. 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 of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee 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 in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
25.
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EXHIBIT 10.2
CONTINUUS SOFTWARE CORPORATION
EMPLOYEE STOCK OPTION PLAN
1. PURPOSE. The purpose of this Continuus Software Corporation Employee
Stock Option Plan ("Plan") is to further the growth and development of Continuus
Software Corporation ("Company") by providing through ownership of stock of the
Company, an incentive to officers and other key employees who are in a position
to contribute materially to the prosperity of the Company, to increase such
persons' interests in the Company's welfare, to encourage them to continue their
services to the Company or its subsidiaries, if any, and to attract individuals
of outstanding ability to enter the employment of the Company or its
subsidiaries.
2. INCENTIVE AND NON-QUALIFIED STOCK OPTIONS. Two types of options
(referred to herein as "options" without distinction between such two types) may
be granted under the Plan: Options intended to qualify as incentive stock
options ("incentive stock options") under Section 422 of the Internal Revenue
Code of 1986, as amended ("Code"), and any successor statutes; and other options
not specifically authorized or qualified for favorable income tax treatment by
the Code ("non-qualified stock options").
3. ADMINISTRATION
3.1 ADMINISTRATION BY BOARD. Subject to Section 3.2, the Plan shall be
administered by the Board of Directors of the Company ("Board"). Subject to the
provisions of the Plan, the Board shall have authority to construe and interpret
the Plan, to promulgate, amend, and rescind rules and regulations relating to
its administration, from time to time to select from among the eligible
employees (as determined pursuant to Section 4) of the Company and its
subsidiaries those employees to whom options will be granted, to determine the
timing and manner of the grant of the options, to determine the exercise price,
the number of shares covered by and all of the terms of the options, to
determine the duration and purpose of leaves of absence which may be granted to
optionees without constituting termination of their employment for purposes of
the Plan, and to make all of the determinations necessary or advisable for
administration of the Plan. The interpretation and construction by the Board of
any provision of the Plan, or of agreement issued and executed under the Plan,
shall be final and binding upon all parties. No member of the Board shall be
liable for any action or determination undertaken or made in good faith with
respect to the Plan or any agreement executed pursuant to the Plan.
3.2 ADMINISTRATION BY COMMITTEE. The Board may, in its sole discretion, delegate
any or all of its administrative duties to a committee (the "Committee") of not
less than three individuals, to be appointed by and serve at the pleasure of the
Board. From time to time, the Board may increase or decrease (to not less than
three members) the size of the Committee, and add additional members to, or
remove members from, the Committee. The Committee shall act pursuant to a
majority vote, or the written consent of a majority of its members, and minutes
shall be kept of all of its meetings and copies thereof shall be provided to the
Board. Subject to the provisions of the Plan and the directions of the Board,
the Committee may establish and follow such rules and regulations for the
conduct of its business as it may deem advisable. No member of the Committee
shall be liable for any action or determination undertaken or made in good faith
with respect to the Plan or any agreement executed pursuant to the Plan.
1.
<PAGE> 2
4. ELIGIBILITY. Any employee (including any officer who is an employee) of
the Company or any of its subsidiaries shall be eligible to receive an option
under the Plan; provided, however, that no person who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or any of its parent or subsidiary corporations shall be eligible to
receive an incentive stock option under the Plan unless at the time such option
is granted the option price (determined in the manner provided in Section 6.2)
is at least 110% of the fair market value of the shares subject to the option
and such option by its terms is not exercisable after the expiration of five
years from the date such option is granted. An employee may receive more than
one option under the Plan.
5. SHARES SUBJECT TO OPTIONS. The stock available for grant of options
under the Plan shall be shares of the Company's authorized but unissued, or
reacquired, common stock. The aggregate number of shares which may be issued
pursuant to exercise of options granted under the Plan, as amended, shall not
exceed 400,000 shares of common stock (subject to adjustment as provided in
Section 6.13), including shares previously issued under the Plan. In the event
that any outstanding option under the Plan for any reason expires or is
terminated, the shares of common stock allocable to the unexercised portion of
the option shall again be available for options under the Plan as if no option
had been granted with respect to such shares.
6. TERMS AND CONDITIONS OF OPTIONS. Options granted under the Plan shall
be evidenced by agreements (which need not be identical) in such form and
containing such provisions which are consistent with the Plan as the Board or
the Committee shall from time to time approve. Such agreements may incorporate
all or any of the terms hereof by reference and shall comply with and be subject
to the following terms and conditions:
6.1 NUMBER OF SHARES SUBJECT TO OPTION. Each option agreement shall
specify the number of shares subject to the option.
6.2 OPTION PRICE. The purchase price for the shares subject to any
option shall not be less than 100% of the fair market value of the shares of
common stock of the Company on the date the option is granted. In the case of an
incentive stock option granted to an employee who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or any of its parent or subsidiary corporations, the option price shall
not be less than 110% of the fair market value of the shares of common stock of
the Company on the date the option is granted. For purposes of the Plan, the
"fair market value" of any share of common stock of the Company at any date
shall be (a) if the common stock is listed on an established stock exchange or
exchanges, the last reported sale price per share on the day prior to such date
on the principal exchange on which it is traded, or if no sale was made on such
day on such principal exchange, at the closing reported bid price on such day on
such exchange, or (b) if the common stock is not then listed on an exchange, the
average of the closing bid and asked prices per share for the common stock in
the over-the-counter market as quoted on NASDAQ on the day prior to such date,
or (c) if the common stock is not then listed on an exchange or quoted NASDAQ,
an amount determined in good faith by the Board or the Committee.
6.3 MEDIUM AND TIME OF PAYMENT. The purchase price for any shares
purchased pursuant to exercise of an option granted under the Plan shall be paid
in full upon exercise of the option in cash or by check.
2.
<PAGE> 3
6.4 TERM OF OPTION. No option shall be exercisable after the expiration
of the earliest of (a) ten (10) years after the date of option is granted, (b)
three (3) months after the date of the optionee's employment with the Company
and its subsidiaries terminates if such termination is for any reason other than
permanent disability or death, or (c) one (1) year after the date the optionee's
employment with the Company and its subsidiaries terminates if such termination
is a result of death or permanent disability or if such termination is for any
reason other than death or permanent disability, and optionee dies within three
(3) months after the date of such termination; provided, however, that the
option agreement for any option may provide for shorter periods in each of the
foregoing instances. In the case of an incentive stock option granted to an
employee who owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any of its parent or subsidiary
corporations, the term set forth in (a), above, shall not be more than five
years after the date the option is granted. For the purposes of this Section
6.2, "permanent disability" shall mean a disability of the type defined in
Section 22(e)(3) of the Code.
6.5 EXERCISE OF OPTION. No option shall be exercisable during the
lifetime of an optionee by any person other than the optionee or at any time
prior to one year from the date the option is granted. Subject to the foregoing,
the Board or the Committee shall have the power to set the time or times within
which each option shall be exercisable and to accelerate the time or times of
exercise. The extent that an optionee has the right to exercise an option and
purchase shares pursuant thereto, the option may be exercised from time to time
by written notice to the Company, stating the number of shares being purchased
and accompanied by payment in full of the purchase price for such shares.
6.6 NO TRANSFER OF OPTION. No option shall be transferable by an
optionee otherwise than by will or the laws of descent and distribution.
6.7 LIMIT ON INCENTIVE STOCK OPTIONS. The aggregate fair market value
(determined at the time the option is granted) of the stock with respect to
which incentive stock options are exercisable for the first time by an optionee
during any calendar year (under all incentive stock option plans of the Company
and its subsidiaries) shall not exceed $100,000.
6.8 RESTRICTION ON ISSUANCE OF SHARES. The issuance of options and
shares shall be subject to compliance with all of the applicable requirements of
law with respect to the issuance and sale of securities, including, without
limitation, any required qualification under the California Corporate Securities
Law of 1968, as amended.
6.9 INVESTMENT REPRESENTATION. Any optionee may be required, as a
condition of issuance of shares covered by his or her option, to represent that
the shares to be acquired pursuant to exercise of the option will be acquired
for investment and without a view to distribution thereof, and in such case, the
Company may place a legend on the certificate evidencing the shares reflecting
the fact that they were acquired for investment and cannot be sold or
transferred unless registered under the Securities Act of 1933, as amended, or
unless counsel for the Company is satisfied that the circumstances of the
proposed transfer do not require such registration.
3.
<PAGE> 4
6.10 RIGHTS AS A SHAREHOLDER OR EMPLOYEE. An optionee or transferee of
an option shall have no right as a shareholder of the Company with respect to
any shares covered by any option until the date of the issuance of a share
certificate for such shares. No adjustment shall be made for dividends (ordinary
or extraordinary, whether cash, securities, or other property) or distributions
or other rights for which the record date is prior to the date such share
certificate is issued, except as provided in Section 6.13. Nothing in the Plan
or in any option agreement shall confer upon any employee any right to continue
in the employ of the Company or any of its subsidiaries or interfere in any way
with any right of the Company or any subsidiary to terminate the optionee's
employment at any time.
6.11 NO FRACTIONAL SHARES. In no event shall the Company be required to
issue fractional shares upon the exercise of an option.
6.12 EXERCISABILITY IN THE EVENT OF DEATH. In the event of the death of
the optionee, any option or unexercised portion thereof granted to the optionee,
to the extent exercisable by him or her on the date of death, may be exercised
by the optionee's personal representatives, heirs, or legatees subject to the
provisions of Section 6.4 hereof.
6.13 RECAPITALIZATION OR REORGANIZATION OF COMPANY. Except as otherwise
provided herein, appropriate and proportionate adjustments shall be made in the
number and class of shares subject to the Plan and to the option rights granted
under the Plan, and the exercise price of such option rights, in the event of a
stock dividend (but only on common stock), stock split, reverse stock split,
recapitalization, reorganization, merger, consolidation, separation, or like
change in the corporate or capital structure of the Company. In the event of a
complete liquidation of the Company or a merger, reorganization, or
consolidation of the Company with any other corporation in which the Company is
not the surviving corporation or the Company becomes a wholly-owned subsidiary
of another corporation, any unexercised options theretofore granted under the
Plan shall be deemed canceled unless the surviving corporation in any such
merger, reorganization, or consolidation elects to assume the options under the
Plan or to issue substitute options in place thereof; provided, however, that,
notwithstanding the foregoing, if such options would be canceled in accordance
with the foregoing, the optionee shall have the right, exercisable during a
ten-day period ending on the fifth day prior to such liquidation, merger, or
consolidation, to exercise the optionee's option in whole or in part without
regard to any installment exercise provisions in the optionee's option
agreement. To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board or the
Committee, the determination of which in that respect shall be final, binding,
and conclusive, provided that each incentive stock option granted pursuant to
the Plan shall not be adjusted in a manner that causes its it to fail to
continue to qualify as an incentive stock option within the meaning of Section
422A of the Code.
6.14 MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Board or
Committee may modify, extend, or renew outstanding options granted under the
Plan, accept the surrender of outstanding options (to the extent not theretofore
exercised). The Board or Committee shall not, however, modify any outstanding
incentive stock option in any manner which would cause the option not to qualify
as an incentive stock option within the meaning of Section 422A of the Code.
4.
<PAGE> 5
Notwithstanding the foregoing, no modification of an option shall, without the
consent of the optionee, alter or impair any rights of the optionee under the
option.
6.15 OTHER PROVISIONS. Each option may contain such other terms,
provisions, and conditions not inconsistent with the Plan as may be determined
by the Board or Committee.
7. TERMINATION OR AMENDMENT OF THE PLAN. The Board may at any time
terminate or amend the plan; provided that, without approval of the shareholders
of the Company, there shall be, except by operation of the provisions of Section
6.13, no increase in the total number of shares covered by the Plan, no change
in the class of persons eligible to receive options granted under the Plan, no
reduction in the exercise price of options granted under the Plan and no
extension of the latest date upon which options may be exercised; and provided
further that, without the consent of the optionee, no amendment may adversely
affect any then outstanding option or any unexercised portion thereof.
8. INDEMNIFICATION. In addition to such other rights of indemnification as
they may have as members of the Board or the Committee, the members of the Board
or the Committee administering the Plan shall be indemnified by the Company
against reasonable expense, including attorney's fees, actually and necessarily
incurred in connection with the defense of any action, suit, or proceeding, or
in connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with the Plan or any option granted thereunder, and against all amounts paid by
them in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any action, suit, or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit, or proceeding that such member
is liable for negligence or misconduct in the performance of his duties,
provided that within 60 days after institution of any such action, suit, or
proceeding, the member shall in writing offer the Company the opportunity, at
its own expense, to handle and defend the same.
9. TERM OF PLAN. The Plan was adopted by the Board and approved by the
shareholders of the Company on November 7, 1991. Unless sooner terminated by the
Board in its sole discretion, the Plan will expire on November 7, 2001.
Continuus Software Corporation
By: /s/ Fred B. Cox
-----------------------------------
Name: /s/ Fred B. Cox
---------------------------------
Title: President
---------------------------------
5.
<PAGE> 1
EXHIBIT 10.3
INCENTIVE STOCK OPTION AGREEMENT
This Agreement is made by and between CONTINUUS SOFTWARE CORPORATION, a
California corporation ("Company") and ______________ ("Optionee") as of the
____ day of _____________ ("Grant Date") with respect to the following facts:
A. The Company has adopted and the shareholders of the Company have
approved the Continuus Software Corporation Employee Stock Option
Plan ("Plan") pursuant to which the Company is authorized to
grant stock options to employees of the Company;
B. Optionee has received and reviewed a copy of the Plan; and
C. Optionee is an employee of the Company.
Now, therefore, in consideration of the premises and intending to be legally
bound, the parties agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, the Company hereby grants to Optionee an incentive stock
option ("Option") to purchase from the Company, at the price of
_______________ ($____) per share, _______________(_______)
shares of the Company's authorized and unissued or reacquired
shares of common stock (the "Total Number of Shares").
2. INCENTIVE STOCK OPTION. The Option granted to Optionee pursuant
to this Agreement is intended to qualify as an "Incentive Stock
Option" under Section 422 of the Internal Revenue Code of 1986,
as amended ("Code").
3. ADMINISTRATION. The Plan provides that it shall be administered
by the Board of Directors of the Company ("Board"), or, in the
board's sole discretion, by a committee ("Committee") consisting
of not less than three (3) individuals appointed by the Board.
Subject to the provisions of the Plan, the Board or the Committee
shall have authority to construe and interpret the Plan and this
Agreement, to promulgate, amend, and rescind rules and
regulations relating to the administration of the Plan and this
Agreement, and to make all of the determinations necessary or
advisable for administration of the Plan and this Agreement. The
interpretation and construction by the Board of the Committee of
any provision of this Agreement, shall be final and binding upon
all parties. No member of the Board or the Committee shall be
liable for any action or determination undertaken or made in good
faith with respect to the Plan or this Agreement.
4. TERM OF OPTION. Unless earlier exercised pursuant to Section 5
below, the Option shall terminate on, and shall not be
exercisable after, the expiration of the earliest of (a) ten (10)
years after the Grant Date, (b) three (3) months after the date
Optionee's employment with the Company and its subsidiaries
terminates, if
1.
<PAGE> 2
such termination is for any reason other than permanent
disability or death, or (c) one (1) year after the date
Optionee's employment with the Company and its subsidiaries
terminates, if such termination is a result of death or permanent
disability (as defined in the Plan), or if such termination is
for any reason other than permanent disability of death and
Optionee dies within three (3) months after the date Optionee's
employment with the Company and its subsidiaries terminates.
5. EXERCISE.
5.1 EXERCISABILITY. Subject to the terms and conditions of this
Agreement, the Option shall become exercisable with respect to
such whole number of shares of common stock of the Company as
shall equal not less than twenty-five percent (25%) of the Total
Number of Shares one (1) year after the Grant Date and with
respect to an additional whole number of shares of common stock
of the Company as shall equal not less than six and one-fourth
percent (6 1/4%) of the total Number of Shares at the end of each
consecutive three-month period thereafter, if Optionee is still
employed by the Company or one of its subsidiaries on such dates,
until the Option has become exercisable with respect to the Total
Number of Shares. The Option may be exercised by Optionee with
respect to any shares of common stock of the Company covered by
the Option at any time on or after the date on which the Option
becomes exercisable with respect to such shares.
Anything set forth in this Agreement to the contrary
notwithstanding, the Option may not be exercised after the tie
Optionee ceases to be an employee of the Company and its
subsidiaries (irrespective of the cause) except to the extent it
would have been exercisable by the Optionee at such time; and the
aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which incentive stock
options are exercisable for the first time by Optionee during any
calendar year (under all incentive stock option plans of the
Company and its subsidiaries) shall not exceed $100,000.
5.2 NOTICE OF EXERCISE. Optionee shall exercise the Option by
delivering to the Company either in person or by certified or
registered mail, written notice of election to exercise and
payment in full of the purchase price as provided in Subsection
5.3 below. The written notice shall set forth the whole number of
shares with respect to which the Option is being exercised.
5.3 PAYMENT OF PURCHASE PRICE. The purchase price for any shares of
common stock of the Company with respect to which Optionee
exercises this Option shall be paid in full at the time Optionee
delivers to the Company the written notice of election to
exercise. The purchase price shall be paid in cash or by check.
2.
<PAGE> 3
6. ISSUANCE OF SHARES. Promptly after the Company's receipt of the written
notice of election provided for in Subsection 5.2 above and Optionee's
payment in fully of the purchase price, the Company shall deliver, or
cause to be delivered to Optionee, certificates for the whole number of
shares with respect to which the Option is being exercised by Optionee.
Shares shall be registered in the name of Optionee. If any law or
regulation of the Securities and Exchange Commission or of any other
federal law or regulation of the Securities and Exchange Commission or
of any other federal or sate governmental body having jurisdiction shall
require the Company or Optionee to take any action prior to issuance to
Optionee of the shares of common stock of the Company specified in the
written notice of election to exercise, or if any listing agreement
between the Company and any national securities exchange requires such
shares to be listed prior to issuance, the date for the delivery of such
shares shall be adjourned until the completion of such action and/or
such listing.
7. FRACTIONAL SHARES. In no event shall the Company be required to issue
fractional shares upon the exercise of any portion of the Option.
8. RIGHTS AS A SHAREHOLDER. Optionee shall have no rights as a shareholder
of the Company with respect any shares covered by the Option until the
date of the issuance of a share certificate for such shares. No
adjustment shall be made for any dividends (ordinary or extraordinary,
whether cash, securities, or other property) or distributions or other
rights for which the record date is prior to the date such share
certificate is issued, except as provided in Section 9 below.
9. RECAPITALIZATION OR REORGANIZATION OF COMPANY. Except as otherwise
provided herein, appropriate and proportionate adjustments shall be made
in the number and class of shares subject to the Option and the purchase
price of such shares in the even of a stock dividend (but only on common
stock), stock split reverse stock split, recapitalization,
reorganization, merger, consolidation, separation, or like change in the
capital structure of the Company. In the event of a liquidation of the
Company or a merger, reorganization, or consolidation of the Company
with any other corporation in which the Company is not the surviving
corporation or the Company becomes a wholly-owned subsidiary of another
corporation, any unexercised portion of the Option shall be deemed
canceled unless the surviving corporation in any such merger,
reorganization, or consolidation elects to assume the Option or issue
substitute options in place thereof. Notwithstanding the foregoing, if
the Option otherwise would be canceled in accordance with the preceding
sentence, Optionee shall have the right, exercisable during a ten-day
period ending on the fifth day prior to such liquidation, merger, or
consolidation, to exercise the option in whole or in part without regard
to the installment exercise provisions or restrictions on exercise set
forth in Subsection 5.1 hereof. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such
adjustments shall be made by the Board or the Committee, the
determination of which shall be final, biding, and conclusive, provided
that the Option shall not be adjusted in a manner that causes it to fail
to continue to
3.
<PAGE> 4
qualify as an incentive stock option within the meaning of Section 422
of the Code.
10. NO TRANSFER OF OPTION. Optionee may not transfer all or any part of the
Option except by will or the laws of descent and distribution, and the
Option shall not be exercisable during the lifetime of Optionee by any
person other than Optionee.
11. INVESTMENT REPRESENTATION. Optionee hereby represents and warrants to
the Company that he is acquiring the Option and the common stock subject
thereto for his own account for investment and not with a view to or for
sale in connection with any distribution thereof. Optionee hereby
further represents and warrants to, and agrees with, the Company that,
if he exercises the Option in whole or in part at a time when there is
not in effect under the Securities Act of Securities Act of 1933, as
amended, a registration statement covering the shares issuable upon
exercise of the Option and available for delivery a prospectus meeting
the requirements of Section 10(a)(3) of said Act, that Optionee may be
required, as a condition of issuance of the shares of common stock of
the Company covered by the Option, to represent to the Company that the
shares issued pursuant to the exercise of the Option are being acquired
for investment and without a view to distribution thereof; and that in
such case the Company may place a legend on the certificate(s)
evidencing the shares of the common stock of the Company issued upon
exercise of the Option reflecting the fact that the shares were acquired
for investment and cannot be sold or transferred unless registered under
said Act or unless counsel for the Company is satisfied that the
circumstances of the proposed transfer do not require such registration.
11.1 ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties with respect to the subject
matter hereof, and supersedes any and all prior written or oral
agreements between the parties with respect to the subject matter
hereof. There are no representations, agreements, arrangements,
or understandings, either written or oral, between or among the
parties with respect to the subject matter hereof which are not
set forth in this Agreement.
11.2 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California.
11.3 NOTICES. Any notice given pursuant to the Agreement may be served
personally on the party to be notified or may be mailed, with
postage thereon fully prepaid, by certified or registered mail,
with return receipt requested, addressed to the Company at its
principal office (to the attention of its president) and to
Optionee at his principal residence address on the Company's
records, or at such other address as either party may designate
in writing from time to time. Any notice given as provided in the
preceding sentence shall be deemed delivered when given if
personally served, or three (3) business days after mailing, if
mailed.
4.
<PAGE> 5
11.4 FURTHER ACTS. Each party to this Agreement agrees to perform such
further acts and to execute and deliver such other and additional
documents as may be reasonably necessary to carry out the
provisions of this Agreement.
11.5 SEVERABILITY. If any term, provision, covenant, or condition of
this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, or unenforceable for any reason, such
invalidity, illegality, or unenforceability shall not affect any
of the other terms, provisions, covenants, or conditions of this
Agreement, each of which shall be binding and enforceable.
11.6 ARBITRATION. All disputes concerning the terms and conditions of
this Agreement shall be subject to expedited and binding
arbitration outside of the American Arbitration Association
before an attorney or expert who is knowledgeable and experienced
in the computer hardware and software field and who is selected
by mutual agreement of the parties. A party shall commence
arbitration by delivering written notice to the other party. If
the parties fail to agree on an arbitrator within thirty (30)
days after notice of a commencement of arbitration is delivered,
each party shall select an independent individual, and the two
independent individuals shall select the arbitrator. Judgment
upon the award rendered in any arbitration may be entered in any
court having jurisdiction of the manner.
IN WITNESS WHEREOF, the parties have entered in to this Incentive Stock
Option Agreement as of the date first above written.
"COMPANY" "OPTIONEE"
CONTINUUS SOFTWARE CORPORATION ____________________________________
By: ___________________________ By _________________________________
Name: _________________________ Name: ______________________________
Title: ________________________ Title: _____________________________
5.
<PAGE> 1
EXHIBIT 10.4
FRONT
CONTINUUS
SOFTWARE CORPORATION
INCENTIVE STOCK OPTION
Number of Shares Date of Grant
Price per Share Expiration Date
This certifies that __________________________________ ("Optionee") has been
granted an incentive stock option (the "Option") to purchase the Number of
Shares (the "Shares") of Common Stock of Continuus Software Corporation (the
"Company") for the price per Share on or before the Expiration Date, all as set
forth above, on the terms set forth on the back of this certificate. The Option
shall become exercisable in accordance with the Vesting Schedule set forth in
Paragraph 2 on the back of this certificate.
Name of Optionee
Address
Social Security/National Identity No.
WITNESS the signatures of the Optionee and the
Company's duly authorized officer.
CONTINUUS SOFTWARE CORPORATION
INCORPORATED
CORPORATE SEAL
JAN. 12, 1984
CALIFORNIA
CONTINUUS SOFTWARE CORPORATION
[SIG] [SIG]
Signature of Optionee By:
President
BACK
1. Grant of Option Under Plan. The option is a "incentive stock option" under
Section 422 of the Internal Revenue Code of 1986, as amended, which has been
granted to Optionee under, and subject to all of the terms and conditions of,
the Company's Employee Stock Option Plan (the "Plan"). A copy of the Plan is
available to the Optionee on request to the Secretary of the Company.
<PAGE> 2
2. Vesting Schedule. The Option shall become exercisable as to 25% of the Number
of Shares on the Date of Grant and as to 6.25% percent of the Number of Shares
upon the completion of each three month period thereafter so that the Option
shall be fully exercisable on the third anniversary of the Date of Grant, all as
set forth on the face of this certificate if Optionee is still employed by the
Company or one of its subsidiaries on such anniversary. Upon termination of the
Optionee's employment with the Company (regardless of the cause), all vesting of
the Option shall cease and the Option shall only be exercisable for the number
of shares for which the Option could be exercised on the date of such
termination.
3. Term of Option. The Option shall terminate on, and shall not be exercisable
after, expiration at the earliest of (a) ten years after the Date of Grant set
forth on the face of this certificate, (b) three months after Optionee's
employment with the Company and its subsidiaries terminates, if such termination
is for any reason other than permanent disability or death, or (c) one year
after Optionee's employment with the Company and its subsidiaries terminates, if
such termination is a result of death or permanent disability (as defined in the
Plan), or if such termination is for any reason other than permanent disability
or death and Optionee dies within three months after termination of employment.
4. Exercise of Option. Optionee shall exercise the Option by delivering to the
Company written notice of election to exercise specifying the number of Shares
with respect to which the Option is being exercised and payment in full of the
purchase price of such Shares by check or other form of payment acceptable to
the Company. Thereafter, the Company will deliver to the Optionee a certificate
for the purchase Shares registered in the name of Optionee. The Company shall
not be required to issue fractional shares upon exercise of the Option.
5. Recapitalization or Reorganization. Except as otherwise provided herein,
appropriate and proportionate adjustments shall be made in the number and class
of shares subject to the Option and the purchase price of such shares in the
event of a stock dividend (but only on common stock), stock split, reverse stock
split, recapitalization, reorganization, merger, consolidation, separation, or
like change in the capital structure of the Company. In the event of a
liquidation of the Company or a merger, reorganization, or consolidation of the
Company with any other corporation in which the Company is not the surviving
corporation or the Company becomes a wholly-owned subsidiary of another
corporation, any unexercised portion of the Option shall be deemed canceled
unless the surviving corporation elects to assume the Option or issue a
substitute Option in place thereof; provided, however, that, if the option
otherwise would be canceled as aforesaid, Optionee shall have the right,
exercisable during a ten-day period ending on the fifth day prior to such
liquidation, merger, or consolidation, to exercise the Option in whole or in
part without regard to the installment exercise provisions or restrictions on
exercise set forth in Paragraph 2 above. Any such adjustment shall be made as
provided in the Plan.
6. Transferability of Option. The Option may not be transferred in whole or in
part except by will or the laws of descent and distribution and may not be
exercised during Optionee's life by anyone other than Optionee. In the event of
the death of Optionee before termination of the Option, the Option, to the
extent exercisable by Optionee on the date of death, may be exercised by
Optionee's personal representatives, heirs, or legatees subject to Paragraph 3
above.
<PAGE> 3
7. Investment Representation. Optionee represents and warrants to the Company
that Optionee is acquiring the Option and the Shares subject thereto for
Optionee's own account for investment and not with a view to or for sale in
connection with any distribution thereof. Optionee agrees that the Company may
restrict transfer of Shares and place transfer restriction legends on
certificates evidencing Shares issued upon exercise of the Option if the
Company, in its discretion, determines that such restrictions and legends are
advisable under federal or state securities laws.
8. Miscellaneous. This Option contains the entire understanding between the
Company and Optionee with respect to the Option and supersedes all prior written
or oral agreements between Optionee and the Company with respect thereto. The
Option shall be governed by and construed in accordance with the laws of
California. All disputes concerning the Option shall be subject to expedited and
binding arbitration outside of the American Arbitration Association before an
attorney or expert who is knowledgeable and experienced in the computer hardware
and software field and who is selected by mutual agreement of the Company and
Optionee as provided in the Plan. Administration, interpretation and
construction of the Option shall be determined by the board of directors of the
Company or a committee appointed by the board of directors, as provided in the
plan.
<PAGE> 1
EXHIBIT 10.5
CONTINUUS SOFTWARE CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
This Agreement is made by and between Continuus Software Corporation, a
California corporation ("Company"), and _________________ ("Optionee") as of the
___ of _________ ("Grant Date").
Now, therefore, in consideration of the premises and intending to be
legally bound, the parties agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, the Company hereby grants to Optionee a stock option ("Option") to
purchase from the Company, at the price of ____________ ($______) per share,
_____________ (__________) shares of the Company's authorized and unissued or
reacquired shares of common stock.
2. TERM OF OPTION. Unless earlier exercised pursuant to Section 3 below,
the Option shall terminate one, and shall not be exercisable after,
___________________.
3. EXERCISE.
3.1 EXERCISABILITY. Subject to the terms and conditions of this
Agreement, the Option will vest quarterly over a four year period.
3.2 NOTICE OF EXERCISE. Optionee shall exercise the Option by
delivering to the Company either in person or by certified or registered mail,
written notice of election to exercise and payment in full of the purchase price
as provided in Subsection 3.3 below. The written notice shall set forth the
whole number of shares with respect to which the Option is being exercised.
3.3 PAYMENT OF PURCHASE PRICE. The purchase price for any shares
of common stock of the Company with respect to which Optionee exercises this
Option shall be paid in full at the time Optionee delivers to the Company the
written notice of election to exercise. The purchase price shall be paid in cash
or by check.
4. ISSUANCE OF SHARES. Promptly after the Company's receipt of the
written notice of election provided for in Subsection 3.2 above an Optionee's
payment in full of the purchase price, the Company shall deliver, or cause to be
delivered to Optionee, certificates for the whole number of shares with respect
to which the Option is being exercised by Optionee. Shares shall be registered
in the name of Optionee. If any law or regulation of the Securities and Exchange
Commission or of any other federal or state governmental body having
jurisdiction shall require the Company or Optionee to take any action prior to
issuance to Optionee of the shares of common stock of the Company specified in
the written notice of election to exercise, or if any listing agreement between
the Company and any national securities exchange requires such shares to be
listed prior to issuance, the date for the delivery of such shares shall be
adjourned until the completion of such action and/or such listing.
1.
<PAGE> 2
5. FRACTIONAL SHARES. In no event shall the Company be required to issue
fractional shares upon the exercise of any portion of the Option.
6. RIGHTS AS A SHAREHOLDER. Optionee shall have no rights as a
shareholder of the Company with respect to any shares covered by the Option
until the date of the issuance of a share certificate for such shares. No
adjustment shall be made for any dividends (ordinary or extraordinary, whether
cash, securities, or other property) or distributions or other rights for which
the record date is prior to the date such share certificate is issued, except as
provided in Section 7 below.
7. RECAPITALIZATION OR REORGANIZATION OF COMPANY. Except as otherwise
provided herein, appropriate and proportionate adjustments shall be made in the
number and class of shares subject to the Option and the purchase price of such
shares in the event of a stock dividend (but only on common stock), stock split,
reverse stock split, recapitalization, reorganization, merger, consolidation,
separation, or like change in the capital structure of the Company. In the event
of a liquidation of the Company or a merger, reorganization, or consolidation of
the Company with any other corporation in which the Company is not the surviving
corporation or the Company becomes a wholly-owned subsidiary of another
corporation, any unexercised option of the Option shall be deemed canceled
unless the surviving corporation in any such merger, reorganization, or
consolidation elects to assume the Option or to issue substitute options in
place thereof. Notwithstanding the foregoing, if the Option otherwise would be
canceled in accordance with the preceding sentence, Optionee shall have the
right, exercisable during a ten-day period ending on the fifth day prior to such
liquidation, merger, or consolidation, to exercise the Option in whole in part.
To the extent that the foregoing adjustments relate to stock or securities of
the Company, such adjustments shall be made by the Board of Directors of the
Company, the determination of which shall be final, binding and conclusive.
8. NO TRANSFER OF OPTION. Optionee may not transfer all or any part of
the Option and the Option shall not be exercisable by anyone other than
Optionee.
9. INVESTMENT REPRESENTATION. Optionee hereby represents and warrants to
the Company that it is acquiring the Option and the common stock subject thereto
for its own account for investment and not with a view to or for sale in
connection with any distribution thereof. Optionee hereby further represents and
warrants to, and agrees with, the Company that, if it exercises the Option in
whole or in part at a time when there is not in effect under the Securities Act
of 1933, as amended, a registration statement covering the shares issuable upon
exercise of the Option and available for delivery a prospectus meeting the
requirements of Section 10(a)(3) and of said Act, that Option may be required,
as a condition of issuance of the shares of common stock of the Company covered
by the Option, to represent to the Company that the shares issued pursuant to
the exercise of the Option are being acquired for investment and without a view
to distribution thereof; and that in such case the Company may place a legend on
the certificate(s) evidencing the shares of the common stock of the Company
issued upon exercise of the Option reflecting the fact that the shares were
acquired for investment and cannot be sold or transferred unless registered
under said Act or unless counsel for the Company is satisfied that the
circumstances of the proposed transfer do not require such registration.
2.
<PAGE> 3
10. MISCELLANEOUS.
10.1 ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties with respect to the subject matter hereof, and
supersedes any and all prior written or oral agreements between the parties with
respect to the subject matter hereof. There are not representations, agreements,
arrangements, or understandings, either written or oral, between or among the
parties with respect to the subject matter hereof which are not set forth in
this Agreement. Optionee acknowledges and agrees that it has already received
the entire cash consulting fee payable to it by the Company pursuant to the
Prior Agreement; that grant of the Option pursuant to this Agreement fulfills
the entire obligation of the Company to grant options or equity interests in the
Company pursuant to the Prior Agreement; and that the Company has no obligation
pursuant to the Prior Agreement or otherwise grant any additional options or
equity interests to Optionee as a result of any issuance of stock or other
equity interests after the Grant Date.
10.2 GOVERNING LAW. This agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
10.3 NOTICES. Any notices given pursuant to this Agreement may be
served personally on the party to be notified or may be mailed, with postage
thereon fully prepaid, by certified or registered mail, with return receipt
requested, addressed to the Company at its principal office (to the attention of
its president) and to Optionee at its principal office address on the Company's
records, or at such other address as either party may designate in writing from
time to time. Any notice given as provided in the preceding sentence shall be
deemed delivered when given, if personally served, or three (3) business days
after mailing, if mailed.
10.4 FURTHER ACTS. Each party to this Agreement agrees to perform
such further acts and to execute and deliver such other and additional documents
as may be reasonably necessary to carry out the provisions of this Agreement.
10.5 SEVERABILITY. If any term, provision, covenant, or condition
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, or unenforceable for any reason, such invalidity, illegality, or
unenforceability shall not affect any of the other terms, provision, covenants,
or conditions of this Agreement, each of which shall be binding and enforceable.
10.6 ARBITRATION. All disputes concerning the terms and
conditions of this Agreement shall be subject to expedited and binding
arbitration outside of the American Arbitration Association before an attorney
or expert who is knowledgeable and experienced in the computer hardware and
software field and who is selected by mutual agreement of the parties. A party
shall commence arbitration by delivering written notice to the other party. If
the parties fail to agree on an arbitrator within thirty (30) days after notice
of a commencement of arbitration is delivered, each party shall select an
independent individual, and the two independent individuals shall select the
arbitrator. Judgment upon the award rendered in any arbitration may be entered
in any court having jurisdiction of the matter.
3.
<PAGE> 4
IN WITNESS WHEREOF, the parties have entered into this Stock
Option Agreement as of the date first above written.
"COMPANY" "OPTIONEE"
Continuus Software Corporation _______________________________
By:___________________________ By:____________________________
Name:_________________________ Name:__________________________
Title:________________________ Title:_________________________
4.
<PAGE> 1
FRONT EXHIBIT 10.6
CONTINUUS
SOFTWARE CORPORATION
NON-QUALIFIED STOCK OPTION
Number of Shares Date of Grant
Price per Share Expiration Date
This certifies that __________________________________ ("Optionee") has been
granted an incentive stock option (the "Option") to purchase the Number of
Shares (the "Shares") of Common Stock of Continuus Software Corporation (the
"Company") for the price per Share on or before the Expiration Date, all as set
forth above, on the terms set forth on the back of this certificate. The Option
shall become exercisable in accordance with the Vesting Schedule set forth in
Paragraph 2 on the back of this certificate.
Name of Optionee
Address
Social Security/National Identity No.
WITNESS the signatures of the Optionee and the
Company's duly authorized officer.
CONTINUUS SOFTWARE CORPORATION
INCORPORATED
CORPORATE SEAL
JAN. 12, 1984
CALIFORNIA
CONTINUUS SOFTWARE CORPORATION
/s/ [SIG] [SIG]
- --------------------------- By: -------------------------------
Signature of Optionee President
BACK
1. Grant of Option Under Plan. The Option is not an "incentive stock
option" under Section 422 of the Internal Revenue Code of 1986, as amended, and
has been granted to Optionee under, and subject to all of the terms and
conditions of, the Company's 1997 Equity Incentive Plan (the "Plan"). A copy of
the Plan is attached hereto.
2. Vesting Schedule. The Option shall become exercisable at the rate of
one-fourth of the Number of Shares on each anniversary of the Date of Grant and
shall be fully exercisable on the
<PAGE> 2
fourth anniversary of the Date of Grant, all as set forth on the face of this
certificate, if Optionee is still in Continuos Service to the Company or one of
its Affiliates on such anniversary. The Option may not be exercised after the
time Optionee ceases to be in Continuous Service to the Company and its
Affiliates (irrespective of the cause) except to the extent that it is
exercisable at such time.
3. Term of Option. The Option shall terminate on, and shall not be
exercisable after, expiration at the earliest of (a) the Expiration Date set
forth on the face of this certificate, (b) ten years after the Date of Grant set
forth on the face of this certificate, (c) three months after Optionee's
Continuous Service with the Company and its Affiliates terminates, if such
termination is for any reason other than disability or death, or (d) one year
after Optionee's Continuous Service with the Company and its Affiliates
terminates, if such termination is a result of death or disability, or if such
termination is for any reason other than disability or death and Optionee dies
within three months after such termination of Continuous Service.
4. Exercise of Option. Optionee shall exercise the Option by delivering to
the Company written notice of election to exercise specifying the number of
Shares with respect to which the Option is being exercised and payment in full
of the purchase price of such Shares by cash or check or pursuant to a "same-day
sale" program. Thereafter, the Company will deliver to the Optionee a
certificate for the purchased Shares registered in the name of Optionee. The
Company shall not be required to issue fractional shares upon exercise of the
Option. As a condition of exercise, you hereby agree to enter into an
arrangement for the payment of any tax withholding obligation arising from
exercise of this Option or sale of the Shares acquired upon exercise.
5. Transferability of Option. The Option may not be transferred in whole or
in part except by will or the laws of descent and distribution and may not be
exercised during Optionee's life by anyone other than Optionee. In the event of
the death of Optionee before termination of the Option, the Option, to the
extent exercisable by Optionee on the date of death, may be exercised by
Optionee's personal representatives, heirs, or legatees subject to Paragraph 3
above.
6. Investment Representation. Optionee represents and warrants to the
Company that Optionee is acquiring the Option and the Shares subject thereto for
Optionee's own account for investment and not with a view to or for sale in
connection with any distribution thereof. Optionee agrees that the Company may
restrict transfer of Shares and place transfer restriction legends on
certificates evidencing Shares issued upon exercise of the Option if the
Company, in its discretion, determines that such restrictions and legends are
advisable under federal or state securities laws.
7. Miscellaneous. This Option contains the entire understanding between the
Company and Optionee with respect to the Option and supersedes all prior written
or oral agreements between Optionee and the Company with respect thereto. The
Option shall be governed by and construed in accordance with the laws of
California. All disputes concerning the Option shall be subject to expedited and
binding arbitration outside of the American Arbitration Association before an
attorney or expert who is knowledgeable and experienced in the computer hardware
and software field and who is selected by mutual agreement of the Company and
Optionee. Administration, interpretation and construction of the Option shall be
determined by the board of directors of the
<PAGE> 3
Company or a committee appointed by the board of directors, as provided in the
plan. This Option is not an employment contract and nothing in this option
should be construed as altering any "at-will" employment arrangement.
<PAGE> 1
EXHIBIT 10.7
CONTINUUS SOFTWARE CORPORATION
1997 EQUITY INCENTIVE PLAN
ADOPTED DECEMBER 30, 1997
APPROVED BY SHAREHOLDERS DECEMBER 30, 1997
<PAGE> 2
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses, and (iv) rights to purchase
restricted stock, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and in such form as issued pursuant to Section 6,
and a separate certificate or certificates will be issued for shares purchased
on exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Continuus Software Corporation.
(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "CONTINUOUS SERVICE" means that the service of an individual to the
Company, whether as an Employee, Director or Consultant, is not interrupted or
terminated. The Board or the chief executive officer of the Company may
determine, in that party's sole discretion, whether Continuous Service shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board or the chief executive officer of the Company, including sick
1.
<PAGE> 3
leave, military leave, or any other personal leave; or (ii) transfers between
the Company, Affiliates or their successors.
(h) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(i) "DIRECTOR" means a member of the Board.
(j) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows (and in each case prior to the
Listing Date, in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations).
(i) If the common stock is listed on any established stock
exchange or traded on the Nasdaq National Market or The Nasdaq SmallCap Market,
the Fair Market Value of a share of common stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Company's common stock) on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable.
(ii) In the absence of such markets for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(o) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
2.
<PAGE> 4
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(q) "OFFICER" means (i) prior to the Listing Date, any person designated
by the Company as an officer and (ii) from and after the Listing Date, a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(t) "OPTIONEE" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(u) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(v) "PLAN" means this 1997 Equity Incentive Plan.
(w) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect with respect to the Company at the time discretion
is being exercised regarding the Plan.
(x) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(y) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(z) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
3.
<PAGE> 5
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
or a combination of the foregoing; the provisions of each Stock Award granted
(which need not be identical), including the time or times when a person shall
be permitted to receive stock pursuant to a Stock Award; and the number of
shares with respect to which a Stock Award shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section
13.
(iv) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee of
the Board composed of two (2) or more members (the "Committee"), all of the
members of which Committee may be, in the discretion of the Board, Non-Employee
Directors and/or Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Additionally, prior to the Listing Date, and
notwithstanding anything to the contrary contained herein, the Board may
delegate administration of the Plan to a committee of one or more members of the
Board and the term "Committee" shall apply to any person or persons to whom such
authority has been delegated. In addition, notwithstanding anything in this
Section 3 to the contrary, the Board or the Committee may delegate to a
committee of one or more members of the Board the authority to grant Stock
Awards to eligible persons who (x) are not then subject to Section 16 of the
Exchange Act and/or (y) are either (i) not then Covered Employees and are not
expected to be Covered Employees at the time of
4.
<PAGE> 6
recognition of income resulting from such Stock Award, or (ii) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate three million (3,000,000) shares of the Company's
common stock. If any Stock Award shall for any reason expire or otherwise
terminate, in whole or in part, without having been exercised in full, the stock
not acquired under such Stock Award shall revert to and again become available
for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Stock
Awards other than Incentive Stock Options may be granted only to Employees,
Directors or Consultants.
(b) Prior to the Listing Date, no person shall be eligible for the grant
of an Option or an award to purchase restricted stock if, at the time of grant,
such person owns (or is deemed to own pursuant to Section 424(d) of the Code)
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any of its Affiliates unless the
exercise price of such Option is at least one hundred ten percent (110%) of the
Fair Market Value of such stock at the date of grant and the Option is not
exercisable after the expiration of five (5) years from the date of grant, or in
the case of a restricted stock purchase award, the purchase price is at least
one hundred percent (100%) of the Fair Market Value of such stock at the date of
grant. From and after the Listing Date this provision shall apply only to
Incentive Stock Options.
(c) Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than one million (1,000,000) shares of the Company's common stock in any
calendar year. This subsection 5(c) shall not apply prior to the Listing Date
and, following the Listing Date, shall not apply until (i) the earliest of: (A)
the first material modification of the Plan (including any increase to the
number of shares reserved for issuance under the Plan in accordance with Section
4); (B) the issuance of all of the shares of common stock reserved for issuance
under the Plan; (C) the expiration of the Plan; or (D) the first meeting of
shareholders at which directors are to be elected that occurs after the close of
the third calendar year following the calendar year in which occurred the first
registration of an equity security under section 12 of the Exchange Act; or (ii)
such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option
5.
<PAGE> 7
shall include (through incorporation of provisions hereof by reference in the
Option or otherwise) the substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Incentive Stock Option on the date of grant; the exercise price
of each Nonstatutory Stock Option shall be not less than eighty-five percent
(85%) of the Fair Market Value of the stock subject to the Nonstatutory Stock
Option on the date of grant. Notwithstanding the foregoing, an Option (whether
an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment arrangement (however, in the event the Company
is then incorporated in the state of Delaware, then payment of the common
stock's "par value" as defined in the Delaware General Corporation Law shall not
be made by deferred payment), or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board. In the case of any deferred
payment arrangement, interest shall be compounded at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any amounts other than
amounts stated to be interest under the deferred payment arrangement.
(d) TRANSFERABILITY. Prior to the Listing Date, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Option is granted only
by such person. From and after the Listing Date, (i) an Incentive Stock Option
shall not be transferable except by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the person to whom
the Option is granted only by such person and (ii) a Nonstatutory Stock Option
may be transferable to the extent provided in the Option Agreement; provided,
however, that if the Option Agreement does not specifically provide for
transferability, then such Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution. Notwithstanding the
foregoing, the person to whom the Option is granted may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionee, shall thereafter be
entitled to exercise the Option.
6.
<PAGE> 8
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. Prior to the Listing Date,
the vesting provisions of individual Options may vary but in each case will
provide for vesting of at least twenty percent (20%) per year of the total
number of shares subject to the Option; provided, however, that an Option
granted to an Officer, Director or Consultant may become fully exercisable,
subject to reasonable conditions such as continued employment, at any time or
during any period established by the Company or of any of its Affiliates. The
provisions of this subsection 6(e) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(f) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's death or
disability), the Optionee may exercise the Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionee's Continuous Service (or such
longer period as specified in the Option Agreement), or (ii) the expiration of
the term of the Option as set forth in the Option Agreement; provided, however,
if the Optionee is terminated for cause, then the Option shall terminate on the
date Optionee's Continuous Service ceases. If, at the date of termination, the
Optionee is not entitled to exercise the entire Option, the shares covered by
the unexercisable portion of the Option shall revert to and again become
available for issuance under the Plan. If, after termination, the Optionee does
not exercise the Option within the time specified in the Option Agreement, the
Option shall terminate, and the shares covered by such Option shall revert to
and again become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or disability) would result in liability under
Section 16(b) of the Exchange Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the Option
Agreement, or (ii) the tenth (10th) day after the last date on which such
exercise would result in such liability under Section 16(b) of the Exchange Act.
Finally, an Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or disability) would be prohibited at any time
solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the first
paragraph of this subsection 6(f), or (ii) the expiration of a period of three
(3) months after the termination of the Optionee's Continuous Service during
which the exercise of the Option would not be in violation of such registration
requirements.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Service terminates as a result of the Optionee's disability, the Optionee may
exercise the Option (to the
7.
<PAGE> 9
extent that the Optionee was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period, which prior to the Listing Date shall not be less than six (6)
months, specified in the Option Agreement), or (ii) the expiration of the term
of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise the entire Option, the
shares covered by the unexercisable portion of the Option shall revert to and
again become available for issuance under the Plan. If, after termination, the
Optionee does not exercise the Option within the time specified herein, the
Option shall terminate, and the shares covered by such Option shall revert to
and again become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Service, the Option may be exercised (to the extent
the Optionee was entitled to exercise the Option as of the date of death) by the
Optionee's estate, by a person who acquired the right to exercise the Option by
bequest or inheritance or by a person designated to exercise the option upon the
Optionee's death pursuant to subsection 6(d), but only within the period ending
on the earlier of (i) the date eighteen (18) months following the date of death
(or such longer or shorter period, which prior to the Listing Date shall not be
less than six (6) months, specified in the Option Agreement), or (ii) the
expiration of the term of such Option as set forth in the Option Agreement. If,
at the time of death, the Optionee was not entitled to exercise the entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to and again become available for issuance under the Plan. If, after
death, the Option is not exercised within the time specified herein, the Option
shall terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate. Prior to the Listing
Date, however, any unvested shares so purchased shall be subject to a repurchase
right in favor of the Company, with the repurchase price to be equal to the
original purchase price of the stock, or to any other restriction the Board
determines to be appropriate; provided, however, that (i) the right to
repurchase at the original purchase price shall lapse at a minimum rate of
twenty percent (20%) per year over five (5) years from the date the Option was
granted, and (ii) such right shall be exercisable only within (A) the ninety
(90)-day period following the termination of employment or the relationship as a
Director or Consultant, or (B) such longer period as may be agreed to by the
Company and the Optionee (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code (regarding "qualified small
business stock")), and (iii) such right shall be exercisable only for cash or
cancellation of purchase money indebtedness for the shares. Notwithstanding the
foregoing, shares received on exercise of an Option by an Officer, Director or
Consultant may be subject to additional or greater restrictions.
(j) RIGHT OF REPURCHASE. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to
repurchase all or any part of the vested shares exercised pursuant to the
Option; provided, however, that (i) such repurchase right
8.
<PAGE> 10
shall be exercisable only within (A) the ninety (90)-day period following the
termination of employment or the relationship as a Director or Consultant (or in
the case of a post-termination exercise of the Option, the ninety (90)- day
period following such post-termination exercise), or (B) such longer period as
may be agreed to by the Company and the Optionee (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code (regarding
"qualified small business stock")), (ii) such repurchase right shall be
exercisable for less than all of the vested shares only with the Optionee's
consent, and (iii) such right shall be exercisable only for cash or cancellation
of purchase money indebtedness for the shares at a repurchase price equal to the
stock's Fair Market Value at the time of such termination. Notwithstanding the
foregoing, shares received on exercise of an Option by an Officer, Director or
Consultant may be subject to additional or greater restrictions specified in the
Option Agreement.
(k) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionee of the
intent to transfer all or any part of the shares exercised pursuant to the
Option. Such right of first refusal shall be exercised by the Company no more
than thirty (30) days following receipt of notice of the Optionee's intent to
transfer shares and must be exercised as to all the shares the Optionee intends
to transfer unless the Optionee consents to exercise for less than all the
shares offered. The purchase of the shares following exercise shall be completed
within thirty (30) days of the Company's receipt of notice of the Optionee's
intent to transfer shares, or such longer period of time as has been offered by
the person to whom the Optionee intends to transfer the shares, or as may be
agreed to by the Company and the Optionee (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code (regarding
"qualified small business stock").
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such Stock Award Agreement, but in no event shall the
purchase price be less than eighty-five percent (85%) of the stock's Fair Market
Value on the date such Stock Award is made, except as otherwise provided in
Section 5(b) of the Plan. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit.
(b) TRANSFERABILITY. Rights under a stock bonus or restricted stock
purchase agreement shall be transferable only by will or the laws of descent and
distribution, so long as
9.
<PAGE> 11
stock awarded under such Stock Award Agreement remains subject to the terms of
the agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment arrangement (however, in the event the Company is then
incorporated in the state of Delaware, then payment of the common stock's "par
value" as defined in the Delaware General Corporation Law shall not be made by
deferred payment), or other arrangement with the person to whom the stock is
sold; or (iii) in any other form of legal consideration that may be acceptable
to the Board or the Committee in its discretion. Notwithstanding the foregoing,
the Board or the Committee to which administration of the Plan has been
delegated may award stock pursuant to a stock bonus agreement in consideration
for past services actually rendered to the Company or for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee. Prior to the Listing Date, the applicable agreement shall provide (i)
that the right to repurchase at the original purchase price shall lapse at a
minimum rate of twenty percent (20%) per year over five (5) years from the date
the Stock Award was granted (except that a Stock Award granted to an Officer,
Director or Consultant may become fully vested, subject to reasonable conditions
such as continued employment, at any time or during any period established by
the Company or of any of its Affiliates), and (ii) such right shall be
exercisable only (A) within the ninety (90)-day period following the termination
of employment or the relationship as a Director or Consultant, or (B) such
longer period as may be agreed to by the Company and the holder of the Stock
Award (for example, for purposes of satisfying the requirements of Section
1202(c)(3) of the Code (regarding "qualified small business stock")), and (iii)
such right shall be exercisable only for cash or cancellation of purchase money
indebtedness for the shares.
(e) TERMINATION OF CONTINUOUS SERVICE. In the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise
reacquire, subject to the limitations described in subsection 7(d), any or all
of the shares of stock held by that person which have not vested as of the date
of termination under the terms of the stock bonus or restricted stock purchase
agreement between the Company and such person.
8. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of the affected holders of Options,
the cancellation of any outstanding Options under the Plan and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of stock, but having an exercise price per share not
less than eighty-five percent (85%) of the Fair Market Value (one hundred
percent (100%) of the Fair Market Value in the case of an Incentive Stock
Option) or, in the case of a 10% shareholder (as described in subsection 5(b))
receiving a new grant of an Incentive Stock Option (any Option if the
cancellation or repricing takes place prior to the Listing Date), not less than
one hundred ten percent (110%) of the Fair Market Value) per share of stock on
the new grant date.
10.
<PAGE> 12
Notwithstanding the foregoing, the Board or the Committee may grant an Option
with an exercise price lower than that set forth above if such Option is granted
as part of a transaction to which section 424(a) of the Code applies.
(b) Shares subject to an Option canceled under this Section 8 shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The repricing of an Option
under this Section 8, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and the grant of a substitute
Option; in the event of such repricing, both the original and the substituted
Options shall be counted against the maximum awards of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The provisions of this
subsection 8(b) shall be applicable only to the extent required by Section
162(m) of the Code.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act either the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
11. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest pursuant to subsection 6(e) or 7(d), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee, Director or Consultant nor any person to whom a
Stock Award is transferred under subsection 6(d) or 7(b) shall be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares subject to such Stock Award unless and until such person has satisfied
all requirements for exercise of the Stock Award pursuant to its terms.
(c) Throughout the term of any Stock Award, the Company shall deliver to
the holder of such Stock Award, not later than one hundred twenty (120) days
after the close of each of the
11.
<PAGE> 13
Company's fiscal years during the term of such Stock Award, a balance sheet and
an income statement. This subsection shall not apply (i) after the Listing Date,
or (ii) when issuance is limited to key employees whose duties in connection
with the Company assure them access to equivalent information.
(d) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant or
other holder of Stock Awards any right to continue in the employ of the Company
or any Affiliate (or to continue serving as a Director or Consultant) or shall
affect the right of the Company or any Affiliate to terminate the employment of
any Employee with or without cause, the right of the Company's Board of
Directors and/or the Company's shareholders to remove any Director as provided
in the Company's Bylaws and the provisions of the applicable laws of the
Company's state of incorporation, or the right to terminate the relationship of
any Consultant subject to the terms of such Consultant's agreement with the
Company or any Affiliate.
(e) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
the Plan and all other stock plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
(f) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred pursuant to subsection 6(d)
or 7(b), as a condition of exercising or acquiring stock under any Stock Award,
(1) to give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (iii) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(iv) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(g) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the
12.
<PAGE> 14
participant as a result of the exercise or acquisition of stock under the Stock
Award; or (3) delivering to the Company owned and unencumbered shares of Company
common stock.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the type(s) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person during any calendar year pursuant to subsection 5(c), and
the outstanding Stock Awards will be appropriately adjusted in the type(s) and
number of securities and price per share of stock subject to such outstanding
Stock Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company.")
(b) In the event of a Change in Control (as defined herein): (i) any
surviving corporation or acquiring corporation shall assume any Stock Awards
outstanding under the Plan or shall substitute similar stock awards (including
an award to acquire the same consideration paid to the shareholders in a Change
in Control) for those outstanding under the Plan, or (ii) in the event any
surviving corporation or acquiring corporation refuses to assume such Stock
Awards or to substitute similar stock awards for those outstanding under the
Plan, (A) with respect to Stock Awards held by persons then performing services
as Employees, Directors or Consultants (and subject to any applicable provisions
of the California Corporate Securities Law of 1968 and related regulations), the
vesting (and, if applicable, the exercisability) of such Stock Awards shall be
accelerated prior to such event and the Stock Awards terminated if not exercised
at or prior to such event, and (B) with respect to any other Stock Awards
outstanding under the Plan, such Stock Awards shall be terminated if not
exercised prior to such event.
(c) For purposes of the Plan, a "Change in Control" shall mean: (1) a
dissolution, liquidation or sale of all or substantially all of the assets of
the Company; (2) a merger or consolidation in which the Company is not the
surviving corporation; or (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's common stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise.
13. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company to the extent shareholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 under the
Exchange Act or any Nasdaq or securities exchange listing requirements.
13.
<PAGE> 15
(b) The Board may in its sole discretion submit any other amendment to
the Plan for shareholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible Employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on December 31, 2007, which is the
day prior to the tenth anniversary of the date the Plan was adopted by the Board
or approved by the shareholders of the Company, whichever is earlier. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the written consent of the person to whom the Stock Award was
granted.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Awards granted under the Plan shall be exercised unless and until the Plan has
been approved by the shareholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board,
and, if required, the Stock Awards have been qualified or exempted from
qualification under the laws of the State of California.
14.
<PAGE> 1
EXHIBIT 10.8
FRONT
CONTINUUS
SOFTWARE CORPORATION
INCENTIVE STOCK OPTION
Number of Shares Date of Grant
Price per Share Expiration Date
This certifies that __________________________________ ("Optionee") has been
granted an incentive stock option (the "Option") to purchase the Number of
Shares (the "Shares") of Common Stock of Continuus Software Corporation (the
"Company") for the price per Share on or before the Expiration Date, all as set
forth above, on the terms set forth on the back of this certificate. The Option
shall become exercisable in accordance with the Vesting Schedule set forth in
Paragraph 2 on the back of this certificate.
Name of Optionee
Address
Social Security/National Identity No.
WITNESS the signatures of the Optionee and the
Company's duly authorized officer.
CONTINUUS SOFTWARE CORPORATION
INCORPORATED
CORPORATE SEAL
JAN. 12, 1984
CALIFORNIA
CONTINUUS SOFTWARE CORPORATION
[SIG] [SIG]
Signature of Optionee By:
President
BACK
1. Grant of Option Under Plan. The Option is a "incentive stock option" under
Section 422 of the Internal Revenue Code of 1986, as amended, which has been
granted to Optionee under, and subject to all of the terms and conditions of,
the Company's 1997 Equity Incentive Plan (the "Plan"). A copy of the Plan is
attached hereto.
<PAGE> 2
2. Vesting Schedule. The Option shall become exercisable at the rate of
one-fourth of the Number of Shares on each anniversary of the Date of Grant and
shall be fully exercisable on the fourth anniversary of the Date of Grant, all
as set forth on the face of this certificate, if Optionee is still in Continuus
Service to the Company or one of its Affiliates on such anniversary. The Option
may not be exercised after the time Optionee ceases to be in Continuous Service
to the Company and its Affiliates (irrespective of the cause) except to the
extent that it is exercisable at such time. The aggregate fair market value
(determined at the time the Option is granted) of stock with respect to which
incentive stock options are exercisable for the first time by Optionee during
any calendar year under all incentive stock option plans of the Company shall
not exceed $100,000.
3. Term of Option. The Option shall terminate on, and shall not be exercisable
after, expiration at the earliest of (a) the Expiration Date set forth on the
face of this certificate, (b) ten years after the Date of Grant set forth on the
fact of this certificate, (c) three months after Optionee's Continuous Service
with the Company and its Affiliates terminates, if such termination is for any
reason other than disability or death, or (d) one year after Optionee's
Continuous Service with the Company and its Affiliates terminates, if such
termination is a result of death or disability, or if such termination is for
any reason other than disability or death and Optionee dies within three months
after such termination of Continuous Service.
4. Exercise of Option. Optionee shall exercise the Option by delivering to the
Company written notice of election to exercise specifying the number of Shares
with respect to which the Option is being exercised and payment in full of the
purchase price of such Shares by cash or check or pursuant to a "same-day sale"
program. Thereafter, the Company will deliver to the Optionee a certificate for
the purchased Shares registered in the name of Optionee. The Company shall not
be required to issue fractional shares upon exercise of the Option. As a
condition of exercise, you hereby agree to enter into an arrangement for the
payment of any tax withholding obligation arising from exercise of this Option
or sale of the Shares acquired upon exercise.
5. Transferability of Option. The Option may not be transferred in whole or in
part except by will or the laws of descent and distribution and may not be
exercised during Optionee's life by anyone other than Optionee. In the event of
the death of Optionee before termination of the Option, the Option, to the
extent exercisable by Optionee on the date of death, may be exercised by
Optionee's personal representatives, heirs, or legatees subject to Paragraph 3
above.
6. Investment Representation. Optionee represents and warrants to the Company
that Optionee is acquiring the Option and the Shares subject thereto for
Optionee's own account for investment and not with a view to or for sale in
connection with any distribution thereof. Optionee agrees that the Company may
restrict transfer of Shares and place transfer restriction legends on
certificates evidencing Shares issued upon exercise of the Option if the
Company, in its discretion, determines that such restrictions and legends are
advisable under federal or state securities laws.
7. Miscellaneous. This Option contains the entire understanding between the
Company and Optionee with respect to the Option and supersedes all prior written
or oral agreements between Optionee and the Company with respect thereto. The
Option shall be governed by and construed
<PAGE> 3
in accordance with the laws of California. All disputes concerning the Option
shall be subject to expedited and binding arbitration outside of the American
Arbitration Association before an attorney or expert who is knowledgeable and
experienced in the computer hardware and software field and who is selected by
mutual agreement of the Company and Optionee. Administration, interpretation and
construction of the Option shall be determined by the board of directors of the
Company or a committee appointed by the board of directors, as provided in the
plan. This Option is not an employment contract and nothing in this option
should be construed as altering any "at-will" employment arrangement.
<PAGE> 1
EXHIBIT 10.9
CONTINUUS SOFTWARE CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED BY THE BOARD OF DIRECTORS ON APRIL 20, 1999
APPROVED BY THE STOCKHOLDERS ______________, 1999
1. PURPOSE.
(a) The purpose of the 1999 Employee Stock Purchase Plan (the "Plan") is
to provide a means by which employees of Continuus Software Corporation, a
Delaware corporation (the "Company"), and its Affiliates, as defined in
subparagraph 1(b), which are designated as provided in subparagraph 2(b), may be
given an opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
1.
<PAGE> 2
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be treated
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of two (2) or more members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate two hundred fifty thousand
(250,000) shares (after giving effect to any reverse stock split, by way of
reincorporation or otherwise, effected on or prior to the Effective Date (as
defined in Section 16) and following adoption hereof) of the Company's common
stock (the "Common Stock"). If any right granted under the Plan shall for any
reason terminate without having been exercised, the Common Stock not purchased
under such right shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(a) The Board or the Committee may from time to time grant or provide
for the grant of rights to purchase Common Stock of the Company under the Plan
to eligible employees (an "Offering") on a date or dates (the "Offering
Date(s)") selected by the Board or the Committee. Each Offering shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all employees granted rights to purchase stock under
the Plan shall have the same rights and privileges. The terms and conditions of
an Offering shall be incorporated by reference into the Plan and treated as part
of the Plan. The provisions of separate Offerings need not be identical, but
each Offering shall include (through incorporation of the provisions of this
Plan by reference in the document comprising the Offering or otherwise) the
period during which the Offering shall be effective, which period shall not
exceed twenty-seven (27) months beginning with the Offering Date, and the
substance of the provisions contained in paragraphs 5 through 8, inclusive.
(b) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the
2.
<PAGE> 3
Plan, and (2) a right with a lower exercise price (or an earlier-granted right,
if two rights have identical exercise prices), will be exercised to the fullest
possible extent before a right with a higher exercise price (or a later-granted
right, if two rights have identical exercise prices) will be exercised.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
(ii) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company
3.
<PAGE> 4
and any Affiliates, as specified by Section 423(b)(8) of the Code, do not permit
such employee's rights to purchase stock of the Company or any Affiliate to
accrue at a rate which exceeds twenty-five thousand dollars ($25,000) of fair
market value of such stock (determined at the time such rights are granted) for
each calendar year in which such rights are outstanding at any time.
(e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen percent (15%) of
such employee's Earnings (as defined in subparagraph 7(a)) during the period
which begins on the Offering Date (or such later date as the Board or the
Committee determines for a particular Offering) and ends on the date stated in
the Offering, which date shall be no later than the end of the Offering. The
Board or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or
the Committee may specify a maximum number of shares that may be purchased by
any employee as well as a maximum aggregate number of shares that may be
purchased by all eligible employees pursuant to such Offering. In addition, in
connection with each Offering that contains more than one Purchase Date, the
Board or the Committee may specify a maximum aggregate number of shares which
may be purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant
to an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll
4.
<PAGE> 5
deductions of up to the maximum percentage specified by the Board or the
Committee of such employee's Earnings during the Offering. "Earnings" is defined
as an employee's regular salary or wages (including amounts thereof elected to
be deferred by the employee, that would otherwise have been paid, under any
arrangement established by the Company intended to comply with Section 401(k),
Section 402(e)(3), Section 125, Section 402(h), or Section 403(b) of the Code,
and also including any deferrals under a non-qualified deferred compensation
plan or arrangement established by the Company), any may also include or exclude
(as provided for each Offering) the following items of compensation: bonuses,
commissions, overtime pay, incentive pay, profit sharing, other remuneration
paid directly to the employee, the cost of employee benefits paid for by the
Company or an Affiliate, education or tuition reimbursements, imputed income
arising under any group insurance or benefit program, traveling expenses,
business and moving expense reimbursements, income received in connection with
stock options, contributions made by the Company or an Affiliate under any
employee benefit plan, and similar items of compensation, as determined by the
Board or Committee. The payroll deductions made for each participant shall be
credited to an account for such participant under the Plan and shall be
deposited with the general funds of the Company. A participant may reduce
(including to zero) or increase such payroll deductions, and an eligible
employee may begin such payroll deductions, after the beginning of any Offering
only as provided for in the Offering. A participant may make additional payments
into his or her account only if specifically provided for in the Offering and
only if the participant has not had the maximum amount withheld during the
Offering.
(b) At any time during an Offering, a participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board or the Committee in the Offering. Upon
such withdrawal from the Offering by a participant, the Company shall distribute
to such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of a participant's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), under the Offering, without
interest.
(d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
5.
<PAGE> 6
8. EXERCISE.
(a) On each Purchase Date specified in the relevant Offering, each
participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan, unless the Offering document specifically provides otherwise. The amount,
if any, of accumulated payroll deductions remaining in each participant's
account after the purchase of shares which is less than the amount required to
purchase one share of stock on the final Purchase Date of an Offering shall be
held in each such participant's account for the purchase of shares under the
next Offering under the Plan, unless such participant withdraws from such next
Offering, as provided in subparagraph 7(b), or is no longer eligible to be
granted rights under the Plan, as provided in paragraph 5, in which case such
amount shall be distributed to the participant after such final Purchase Date,
without interest. The amount, if any, of accumulated payroll deductions
remaining in any participant's account after the purchase of shares which is
equal to the amount required to purchase whole shares of stock on the final
Purchase Date of an Offering shall be distributed in full to the participant
after such Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent
unless the shares to be issued upon such exercise under the Plan (including
rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act of 1933, as amended (the "Securities Act") and
the Plan is in material compliance with all applicable state, foreign and other
securities and other laws applicable to the Plan. If on a Purchase Date in any
Offering hereunder the Plan is not so registered or in such compliance, no
rights granted under the Plan or any Offering shall be exercised on such
Purchase Date, and the Purchase Date shall be delayed until the Plan is subject
to such an effective registration statement and such compliance, except that the
Purchase Date shall not be delayed more than twelve (12) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If on the Purchase Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered and in such compliance,
no rights granted under the Plan or any Offering shall be exercised and all
payroll deductions accumulated during the Offering (reduced to the extent, if
any, such deductions have been used to acquire stock) shall be distributed to
the participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign
or other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance
6.
<PAGE> 7
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such rights
unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shares acquired upon exercise
of rights hereunder are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) the acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or any Affiliate of the Company)
of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then, as determined by the Board in its
sole discretion (i) any surviving or acquiring corporation may assume
outstanding rights or substitute similar rights for those under the Plan, (ii)
such rights may continue in full force and effect, or (iii) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing Offering terminated.
7.
<PAGE> 8
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment if such amendment requires stockholder approval in order for the Plan
to obtain employee stock purchase plan treatment under Section 423 of the Code
or to comply with the requirements of Rule 16b-3 promulgated under the Exchange
Act or any Nasdaq or securities exchange requirements.
(b) The Board may amend the Plan in any respect the Board deems
necessary or advisable to provide eligible employees with the maximum benefits
provided or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to employee stock purchase plans and/or to bring
the Plan and/or rights granted under it into compliance therewith.
(c) Rights and obligations under any rights granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan, except
with the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations, or except as
necessary to ensure that the Plan and/or rights granted under the Plan comply
with the requirements of Section 423 of the Code.
14. 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 the end of an
Offering but prior to delivery to the 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 during an Offering.
(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 sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more 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.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion, may suspend or terminate the Plan at
any time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided
8.
<PAGE> 9
in the Plan or with the consent of the person to whom such rights were granted,
or except as necessary to comply with any laws or governmental regulation, or
except as necessary to ensure that the Plan and/or rights granted under the Plan
comply with the requirements of Section 423 of the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon the Company's initial public
offering of shares of common stock (the "Effective Date"), but no rights granted
under the Plan shall be exercised unless and until the Plan has been approved by
the stockholders of the Company within twelve (12) months before or after the
date the Plan is adopted by the Board or the Committee, which date may be prior
to the Effective Date.
9.
<PAGE> 10
CONTINUUS SOFTWARE CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN OFFERING
ADOPTED BY THE BOARD OF DIRECTORS ON APRIL 20, 1999
1. GRANT; OFFERING DATE.
(a) The Board of Directors (the "Board") of Continuus Software
Corporation (the "Company"), pursuant to the Company's 1999 Employee Stock
Purchase Plan (the "Plan"), hereby authorizes the grant of rights to purchase
shares of the common stock of the Company ("Common Stock") to all Eligible
Employees (an "Offering"). The first Offering shall begin on the effective date
of the initial public offering of the Company's Common Stock and end on January
31, 2000 (the "Initial Offering"). Thereafter, an Offering shall begin on
February 1 and August 1 each year, and shall end on July 31 and January 31,
respectively. The first day of an Offering is that Offering's "Offering Date."
(b) Prior to the commencement of any Offering, the Board (or the
Committee described in subparagraph 2(c) of the Plan, if any) may change any or
all terms of such Offering and any subsequent Offerings. The granting of rights
pursuant to each Offering hereunder shall occur on each respective Offering Date
unless, prior to such date (a) the Board (or such Committee) determines that
such Offering shall not occur, or (b) no shares remain available for issuance
under the Plan in connection with the Offering.
2. ELIGIBLE EMPLOYEES.
(a) All employees of the Company and each of its Affiliates (as defined
in the Plan) incorporated in the United States shall be granted rights to
purchase Common Stock under each Offering on the Offering Date of such Offering,
provided that each such employee otherwise meets the employment requirements of
subparagraph 5(a) of the Plan (an "Eligible Employee"). Notwithstanding the
foregoing, the following employees shall not be Eligible Employees or be granted
rights under an Offering: (i) part-time or seasonal employees whose customary
employment is less than twenty (20) hours per week or five (5) months per
calendar year or (ii) 5% stockholders (including ownership through unexercised
and/or unvested stock options) described in subparagraph 5(c) of the Plan.
3. RIGHTS.
(a) Subject to the limitations contained herein and in the Plan, on each
Offering Date each Eligible Employee shall be granted the right to purchase the
number of shares of Common Stock purchasable with up to fifteen percent (15%) of
such employee's Earnings paid during the period of such Offering beginning after
such Eligible Employee first commences participation; provided, however, that no
employee may purchase Common Stock on a particular Purchase Date that would
result in more than fifteen percent (15%) of such employee's Earnings in the
period from the Offering Date to such Purchase Date having been applied to
purchase shares under all ongoing Offerings under the Plan and all other plans
of the Company intended to qualify as "employee stock purchase plans" under
Section 423 of the Internal Revenue Code of
1.
<PAGE> 11
1986, as amended (the "Code"). For this Offering, "Earnings" means the base
salary or wages paid to an employee (including all amounts elected to be
deferred by the employee, that would otherwise have been paid, under any cash or
deferred arrangement established by the Company), but does not include overtime
pay, commissions, bonuses, and other remuneration paid directly to the employee,
profit sharing, the cost of employee benefits paid for by the Company, education
or tuition reimbursements, imputed income arising under any Company group
insurance or benefit program, traveling expenses, business and moving expense
reimbursements, income received in connection with stock options, contributions
made by the Company under any employee benefit plan, and similar items of
compensation.
(b) Notwithstanding the foregoing, the maximum number of shares of
Common Stock an Eligible Employee may purchase on any Purchase Date in an
Offering shall be the lesser of 2,000 shares and such number of shares as has a
fair market value (determined as of the Offering Date for such Offering) equal
to (x) $25,000 multiplied by the number of calendar years in which the right
under such Offering has been outstanding at any time, minus (y) the fair market
value of any other shares of Common Stock (determined as of the relevant
Offering Date with respect to such shares) which, for purposes of the limitation
of Section 423(b)(8) of the Code, are attributed to any of such calendar years
in which the right is outstanding. The amount in clause (y) of the previous
sentence shall be determined in accordance with regulations applicable under
Section 423(b)(8) of the Code based on (i) the number of shares previously
purchased with respect to such calendar years pursuant to such Offering or any
other Offering under the Plan, or pursuant to any other Company plans intended
to qualify as "employee stock purchase plans" under Section 423 of the Code, and
(ii) the number of shares subject to other rights outstanding on the Offering
Date for such Offering pursuant to the Plan or any other such Company plan.
(c) The maximum aggregate number of shares available to be purchased by
all Eligible Employees under an Offering shall be the lesser of 100,000 shares
and the number of shares remaining available under the Plan on the Offering
Date. If the aggregate purchase of shares of Common Stock upon exercise of
rights granted under the Offering would exceed the maximum aggregate number of
shares available, the Board shall make a pro rata allocation of the shares
available in a uniform and equitable manner.
4. PURCHASE PRICE.
The purchase price of the Common Stock under the Offering shall be the
lesser of: (i) eighty-five percent (85%) of the fair market value of the Common
Stock on the Offering Date or (ii) or eighty-five percent (85%) of the fair
market value of the Common Stock on the Purchase Date, in each case rounded up
to the nearest whole cent per share. For the Initial Offering, the fair market
value of the Common Stock at the time when the Offering commences shall be the
price per share at which shares of Common Stock are first sold to the public in
the Company's initial public offering as specified in the final prospectus with
respect to that public offering.
5. PARTICIPATION.
(a) An Eligible Employee may elect to participate in an Offering only at
the beginning of the Offering. An Eligible Employee shall become a participant
in an Offering by delivering an agreement authorizing payroll deductions. Such
deductions must be in whole
2.
<PAGE> 12
percentages of Earnings, with a minimum percentage of one percent (1%) and a
maximum percentage of fifteen percent (15%). A participant may not make
additional payments into his or her account. The agreement shall be made on such
enrollment form as the Company provides, and must be delivered to the Company
prior to the date participation is to be effective, unless a later time for
filing the enrollment form is set by the Company for all Eligible Employees with
respect to a given participation date. For the Initial Offering, the time for
filing an enrollment form and commencing participation for individuals who are
Eligible Employees on the Offering Date for the Initial Offering shall be
determined by the Company and communicated to such Eligible Employees.
(b) A participant may decrease his or her participation level during an
Offering one (1) time, and only by delivering notice to the Company at least ten
(10) days in advance of the Purchase Date in such form as the Company
prescribes; provided that a participant may (i) reduce his or her deductions to
zero percent (0%) upon ten (10) days' prior notice by delivering a notice in
such form as the Company provides, (ii) may increase or decrease his or her
participation level at any time to become effective on the day following the
next subsequent Purchase Date or (iii) may withdraw from an Offering and receive
his or her accumulated payroll deductions from the Offering (reduced to the
extent, if any, such deductions have been used to acquire Common Stock for the
participant on any prior Purchase Dates) without interest, at any time prior to
the end of the Offering, excluding only each ten (10)-day period immediately
preceding a Purchase Date, by delivering a withdrawal notice to the Company in
such form as the Company provides. A participant who has withdrawn from an
Offering shall not again participate in such Offering, but may participant in
subsequent Offerings under the Plan in accordance with the terms thereof.
6. PURCHASES.
Subject to the limitations contained herein, on each Purchase Date, each
participant's accumulated payroll deductions (without any increase for interest)
shall be applied to the purchase of whole shares of Common Stock, up to the
maximum number of shares permitted under the Plan and the Offering. "Purchase
Date" shall be defined as each July 31 and January 31, except that the first
Purchase Date under this Offering shall be January 31, 2000.
7. NOTICES AND AGREEMENTS.
Any notices or agreements provided for in an Offering or the Plan shall
be given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering, shall be deemed effectively given
upon receipt or, in the case of notices and agreements delivered by the Company,
five (5) days after deposit in the United States mail, postage prepaid.
8. EXERCISE CONTINGENT ON STOCKHOLDER APPROVAL.
The rights granted under an Offering are subject to the approval of the
Plan by the stockholders as required for the Plan to obtain treatment as a
tax-qualified employee stock purchase plan under Section 423 of the Code and to
comply with the requirements of exemption
3.
<PAGE> 13
from potential liability under Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") set forth in Rule 16b-3 promulgated under
the Exchange Act.
9. OFFERING SUBJECT TO PLAN.
Each Offering is subject to all the provisions of the Plan, and its
provisions are hereby made a part of the Offering, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any conflict
between the provisions of an Offering and those of the Plan (including
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan), the provisions of the Plan
shall control.
4.
<PAGE> 14
CONTINUUS SOFTWARE CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN ("ESPP")
ENROLLMENT/CHANGE FORM
<TABLE>
<CAPTION>
SECTION 1: Action Complete Sections:
- ---------- ------ ------------------
<S> <C> <C>
ACTIONS [ ] New Enrollment 2, 3, 6, 7
[ ] Payroll Deduction Change 2, 4, 7
[ ] Withdrawal 2, 5, 7
[ ] Beneficiary 2, 6, 7
================================================================================
SECTION 2:
- ----------
EMPLOYEE DATA Name___________________________________________________________
Last First MI
Home Address___________________________________________________
Street
_______________________________________________________________
City State Zip Code
Social Security#/Employee I.D.# ________--______--__________
================================================================================
SECTION 3:
- ----------
NEW Effective: Payroll Deduction Amount: ___%
ENROLLMENT [ ] ________________, 199__ of Earnings (Whole percentage
up to a maximum of 15%)
[ ] Initial Offering Period
================================================================================
SECTION 4:
- ----------
PAYROLL Effective with pay period beginning _________________________,
DEDUCTION [insert month, day and year], I authorize the following new
CHANGE level of payroll deduction: _______% of Earnings (Whole
percentage up to a maximum of 15%).
NOTE: You may reduce your rate of payroll deductions
(including to zero) once during the six (6)-month
Offering to become effective as soon as possible
following the filing of this Enrollment/Change Form.
In addition, you may reduce your deductions to zero
notwithstanding a prior reduction. If you reduce your
payroll deductions to zero, you are still considered
a participant in the ESPP and your previously-
collected payroll deductions will be applied toward
the purchase of shares on the next purchase date. If
you wish to withdraw from the ESPP and receive a
refund of your payroll deductions, complete Section
5. You may also increase or reduce your rate of
payroll deductions to become effective as of the
start date of the next six (6)-month Offering.
================================================================================
SECTION 5:
- ----------
WITHDRAWAL Effective with the Pay Period beginning: _________________,
I withdraw from the ESPP.
Your election to withdraw from the Offering cannot be changed,
and you may not rejoin the Offering at a later date. You will
not be able to resume participation in the ESPP prior to the
commencement of the next Offering. In connection with your
withdrawal, your payroll deductions will be refunded to you as
soon as practical.
NOTE: If your employment terminates for any reason or your
eligibility status changes (i.e. you work less than
20 hours/week or 5 months/year), your participation
in the ESPP will immediately cease, and any payroll
deductions collected and not previously used to
purchase stock will automatically be refunded to you
as soon as reasonably possible.
================================================================================
SECTION 6: Beneficiary Relationship of Beneficiary
- ---------- ----------- ---------------------------
BENEFICIARY
DESIGNATION ___________________________ ___________________________
================================================================================
SECTION 7:
- ----------
AUTHORIZATION
I hereby authorize Continuus Software Corporation to enroll me in the ESPP, to
make regular deductions in the amount indicated above, and to purchase shares
for me on the respective Purchase Dates. If I elect to withdraw from the ESPP, I
authorize Continuus Software Corporation to distribute my accumulated deductions
to me. Any authorization for payroll deductions will continue until canceled or
changed by me in accordance with the terms of the ESPP. Deductions will cease
upon termination of my employment, loss of eligibility status, termination of
the ESPP or my election to withdraw from the ESPP. I agree to be bound by the
terms and provisions of the ESPP, as described in the official text of the ESPP,
and any applicable offering document.
Date: ____________________________ Signature: _________________________________
</TABLE>
<PAGE> 1
EXHIBIT 10.10
CASEWARE, INC.
INVESTORS RIGHTS AGREEMENT
MARCH 4, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS..................................... 1.
1.1 Restrictions on Transferability................................................... 1.
1.2 Certain Definitions............................................................... 1.
1.3 Restrictive Legend................................................................ 2.
1.4 Notice of Proposed Transfers...................................................... 2.
1.5 Demand Registration Rights........................................................ 3.
1.6 Company Registration.............................................................. 5.
1.7 Form S-3 Registration Rights...................................................... 6.
1.8 Expenses of Registration.......................................................... 7.
1.9 Registration Procedures........................................................... 7.
1.10 Indemnification................................................................... 8.
1.11 Information by Holder.............................................................10.
1.12 Rule 144 Reporting................................................................10.
1.13 Transfer of Registration Rights...................................................11.
1.14 Termination of Registration Rights................................................11.
1.15 Limitations on Subsequent Registration Rights.....................................11.
1.16 Inclusion of Stock Held by Founders...............................................11.
SECTION 2. AFFIRMATIVE COVENANTS OF THE COMPANY..............................................12.
2.1 Financial Information.............................................................12.
2.2 Inspection........................................................................12.
2.3 Assignment of Rights to Financial Information.....................................13.
2.4 Termination of Covenants..........................................................13.
SECTION 3. AFFIRMATIVE COVENANTS OF SHAREHOLDERS; RIGHT OF FIRST REFUSAL.....................13.
3.1 Confidential Information, etc.....................................................13.
3.2 Right of First Refusal............................................................13.
SECTION 4. MISCELLANEOUS.....................................................................15.
4.1 Governing Law.....................................................................15.
4.2 Successors and Assigns............................................................15.
4.3 Entire Agreement..................................................................15.
4.4 Notices, etc......................................................................15.
4.5 Counterparts......................................................................15.
4.6 Severability......................................................................15.
4.7 Separability......................................................................16.
4.8 Approval of Amendments and Waivers................................................16.
</TABLE>
<PAGE> 3
CASEWARE, INC.
INVESTORS RIGHTS AGREEMENT
This Investors Rights Agreement (the "Agreement") is entered into as of
March 4, 1994 among CaseWare, Inc., a California corporation (the "Company"),
with its principal office located at 108 Pacifica, 2nd Floor, Irvine, California
92718-3332, the Purchasers listed on the Schedule of Purchasers attached as
Exhibit A hereto (the "Shareholders") and Fred Cox, Co-Trustee, and Sol Zechter,
Trustee, (the "Founders"). This Agreement is being entered into pursuant to
Section 4.7 of that certain Stock Purchase Agreement of even date herewith (the
"Purchase Agreement") among the Company and the Purchasers listed therein.
In consideration of the mutual agreements, covenants and conditions
contained herein, the Company and the Shareholders hereby agree as follows
(unless otherwise defined herein, capitalized terms used herein shall have the
meanings assigned in the Purchase Agreement):
SECTION 1
RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS
1.1 RESTRICTIONS ON TRANSFERABILITY. Neither the Shares nor the
Registrable Securities (as defined below) shall be transferable except upon the
conditions specified in this Agreement, which conditions are intended to insure
compliance with the provisions of the Securities Act (as defined below), or upon
such other terms as are in the opinion of counsel to the Company satisfactory to
comply with the provisions of the Securities Act. Except for transfers made
pursuant to Rule 144 of the Securities Act, the Shareholders will cause any
proposed transferee of Shares or Registrable Securities held by any Shareholder
to agree to take and hold such securities subject to the provisions and upon the
conditions specified in this Agreement and it will be a condition precedent to
the effectiveness of any such transfer that the Company shall have secured a
written agreement in form and substance satisfactory to the Company to that
effect, if so requested by the Company.
1.2 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"FORM S-3" shall mean Form S-3 under the Securities Act (as defined
below) as in effect on the date of this Agreement, or any substantially similar,
equivalent or successor form under the Securities Act.
"HOLDER" shall mean a Shareholder or any transferee of registration
rights under Section 1.13 hereof who then holds any outstanding Registrable
Securities.
1.
<PAGE> 4
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRABLE SECURITIES" means shares of the Company's Common Stock
issued or issuable pursuant to the conversion of the Shares which have not been
sold to the public.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company
in complying with Sections 1.5, 1.6 and 1.7 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel, blue sky fees and expenses, and
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear the legend set forth in Section 1.3 hereof or a legend
substantially similar thereto and all shares of Common Stock outstanding on the
date of this Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the applicable sale.
1.3 RESTRICTIVE LEGEND. Each certificate representing the Shares and
the Registrable Securities shall (unless otherwise permitted by the provisions
of Section 1.4 below) be stamped or otherwise imprinted with a legend in the
following form (in addition to any legend required under applicable California
or other state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION.
1.4 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing the Restricted Securities, by acceptance thereof, agrees to comply
in all respects with the provisions of this Section 1.4. Prior to any proposed
transfer of any Restricted Securities, unless there is in effect a registration
statement under the Securities Act covering the proposed transfer, the holder
thereof shall give written notice to the Company of such holder's intention to
effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail, and shall be
accompanied (except in transactions in compliance with Rule 144) by either (i) a
written opinion of legal counsel who shall be reasonably satisfactory to the
2.
<PAGE> 5
Company addressed to the Company and reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed transfer of
the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission, a copy of any
holder's request (together with all supplements or amendments thereto) for which
shall have been provided to the Company, at or prior to the time of first
delivery to the Commission's staff, to the effect that the transfer of such
securities without registration will not result in a recommendation by such
staff that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
provided for above shall bear the appropriate restrictive legend set forth in
Section 1.3 above, except that such certificate shall not bear such restrictive
legend if, in the opinion of counsel for the Company or counsel for such holder,
such legend is not required in order to establish compliance with any provisions
of the Securities Act.
Notwithstanding the provisions above, no such opinion of counsel or "no
action letter" shall be necessary for a transfer by a Shareholder which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner or the transfer by gift, will or intestate succession
of any partner to his spouse or to the siblings, lineal descendants or ancestors
of such partner or his spouse, if the transferee agrees in writing to be subject
to the terms hereof to the same extent as if he were an original Shareholder
hereunder.
1.5 DEMAND REGISTRATION RIGHTS.
(a) Commencing on the earlier of (i) six months after the effective
date of the first registration statement filed by the Company covering an
underwritten offering of any of its securities to the general public and (ii)
November 1, 1996, if the Company shall receive a written request (specifying
that it is being made pursuant to this Section 1.5) from the Holders of at least
forty percent (40%) of the Registrable Securities (the "Initiating Holders")
that the Company file a registration statement or similar document under the
Securities Act covering the registration of the greater of (i) at least twenty
percent (20%) of the then outstanding Registrable Securities and (ii)
Registrable Securities the expected price to the public of which is at least
$5,000,000, then the Company shall promptly notify all other Holders of such
request and shall use its best efforts to cause all Registrable Securities that
such Holders have requested, within 15 days after receipt of such written
notice, be registered in accordance with this Section 1.5 to be registered under
the Securities Act.
Notwithstanding the foregoing, (i) the Company shall not be obligated
to effect a registration pursuant to this Section 1.5 during the period starting
with the date sixty (60) days prior to the Company's estimated date of filing
of, and ending on a date sixty (60) days following the effective date of, a
registration statement pertaining to an underwritten public offering of the
Company's securities, provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective and that the Company's estimate of the date of filing such
registration statement is made in good faith; and (ii) if the Company shall
furnish to such Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously
3.
<PAGE> 6
detrimental to the Company or its shareholders for a registration statement to
be filed in the near future, then the Company's obligation to use its best
efforts to file a registration statement shall be deferred for a period not to
exceed six (6) months; provided, however, that the Company shall not obtain such
a deferral more than once in any 12-month period.
The Company shall be obligated to effect not more than two
registrations pursuant to this Section 1.5.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their demand by means of an underwriting, they shall so
advise the Company as part of their demand made pursuant to this Section 1.5,
and the Company shall include such information in the notice referred to in
Section 1.5(a). In such event, the right of any Holder to registration pursuant
to this Section 1.5 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder) to the extent provided herein.
The Company shall, together with all Holders proposing to distribute
their securities through such underwriting, enter into an underwriting agreement
in customary form with the underwriter or underwriters selected by a majority of
interest of the Initiating Holders and reasonably satisfactory to the Company.
Notwithstanding any other provision of this Section 1.5, if the underwriter
shall advise the Company in writing that marketing factors (including, without
limitation, an adverse effect on the per share offering price) require a
limitation of the number of shares to be underwritten, then the Company shall so
advise all Holders of Registrable Securities that would otherwise be registered
and underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated pro rata among such Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration.
If any Holder disapproves of the terms of the underwriting, such Holder
may elect to withdraw therefrom by written notice to the Company, the
underwriter, and the Initiating Holders. The Registrable Securities so withdrawn
shall also be withdrawn from registration. If by the withdrawal of such
Registrable Securities a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the maximum of any
limitation imposed by the underwriters), then the Company shall offer to all
Holders who have included Registrable Securities in the registration the right
to include additional Registrable Securities in the same proportion used in
determining the underwriter limitation in this Section 1.5.
If the underwriter has not limited the number of Registrable Securities
to be underwritten, the Company may include securities for its own account (or
for the account of other stockholders) in such registration if the underwriter
so agrees and if the number of Registrable Securities that would otherwise have
been included in such registration and underwriting will not thereby be limited.
4.
<PAGE> 7
1.6 COMPANY REGISTRATION.
(a) If, at any time or from time to time, the Company shall
determine to register any of its securities, either for its own account or the
account of a security holder or holders exercising their respective demand
registration rights, other than a registration relating solely to employee
benefit plans on Form S-8 or similar forms which may be promulgated in the
future or a registration on Form S-4 or similar forms which may be promulgated
in the future relating solely to a Securities and Exchange Commission Rule 145
or similar transaction, the Company will (i) promptly give to each Holder
written notice thereof and (ii) include in such registration (and any related
qualification under Blue Sky laws or other compliance), and in any underwriting
involved therein, all Registrable Securities of such Holders as specified in a
written request or requests made within 15 days after receipt of such written
notice from the Company.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so indicate in the notice given pursuant to Section 1.6(a). In
such event the right of any Holder to registration pursuant to this Section 1.6
shall be conditioned upon such Holder's agreeing to participate in such
underwriting and in the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company or by other holders
exercising any demand registration rights. Notwithstanding any other provision
of this Section 1.6, if the underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the underwriter
may exclude some or all Registrable Securities or other securities from such
registration and underwriting (hereinafter an "Underwriter Cutback"). In the
event of an Underwriter Cutback, the Company shall so advise all Holders and the
other holders distributing their securities through such underwriting, and the
number of Registrable Securities and other securities that may be included in
the registration and underwriting shall be allocated among all holders thereof
(other than those holders who are exercising their demand registration rights)
on the basis that the holders who are not Holders shall be cut back before any
cutback of Holders. If the limitation determined by the underwriter requires a
cut-back of the Holders, the cut-back shall be in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
1.7 FORM S-3 REGISTRATION RIGHTS. After the Company's initial
registered underwritten public offering, the Company shall use its best efforts
to qualify for registration on Form S-3, and to that end the Company shall use
its best efforts to comply with the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Securities Exchange Act"), within twelve
(12) months following the effective date of the first registration of any
securities of the Company for an underwritten registered public offering. After
the Company has qualified for the use of Form S-3, and subject to the provisions
of Section 1.14, each Holder shall have the right to request registrations on
Form S-3 (such requests shall be in writing and shall
5.
<PAGE> 8
state the number of shares of Registrable Securities to be disposed of and the
intended method of disposition of such shares by each such Holder), subject only
to the following limitations:
(a) The Company shall not be obligated to cause a registration on
Form S-3 to become effective prior to one hundred eighty (180) days following
the effective date of a Company initiated registration (other than a
registration effected solely to qualify an employee benefit plan or to effect a
business combination pursuant to Rule 145);
(b) The Company shall not be required to effect a registration
pursuant to this Section 1.7 unless the Holder or Holders requesting such a
registration propose to dispose of shares of Registrable Securities having an
aggregate disposition price (before deduction of underwriting discounts and
expenses of sale) of at least $500,000;
(c) The Company shall not be required to effect a registration
pursuant to this Section 1.7 if the Company shall furnish to the requesting
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company it would be
seriously detrimental to the Company or its shareholders for the registration
statement to be filed at the date filing would be required, in which case the
Company shall have an additional period of not more than 120 days within which
to file such registration statement; provided however, that the Company shall
not use this right more than once in any twelve (12) month period;
(d) The Company shall not be required to maintain and keep any such
registration on Form S-3 effective for a period exceeding one hundred and twenty
(120) days from the effective date thereof; and
(e) The Company shall not be obligated to cause a registration on
Form S-3 if in the prior six-month period the Company has caused a registration
on Form S-3 to become effective.
The Company shall give notice to all Holders of the receipt of a
request for registration pursuant to this Section 1.7 and shall use its best
efforts to cause all Registrable Securities that such Holders have requested,
within 15 days after receipt of such written notice, be registered in accordance
with this Section 1.7 to be registered under the Securities Act. Subject to the
foregoing, the Company will use its best efforts to effect promptly any
registration pursuant to this Section 1.7. The provisions of Section 1.5(b)
shall apply to any registration effected pursuant to this Section 1.7
1.8 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.5, 1.6 and 1.7 (exclusive of Selling Expenses but inclusive of the
reasonable fees and expenses of any special counsel to the selling Holders),
shall be borne by the Company. Notwithstanding anything to the contrary herein,
the Company shall not be required to pay for any expenses of any registration
proceeding under Section 1.5 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to have been registered, unless such Holders agree to forfeit their
right to a demand registration pursuant to Section 1.5 (in which event such
right shall be forfeited by all Holders). In the absence of such an agreement to
forfeit, the
6.
<PAGE> 9
Holders of Registrable Securities to have been registered shall bear all such
expenses pro rata on the basis of the Registrable Securities to have been
registered. Notwithstanding the foregoing, however, if at the time of the
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the Holders
at the time of their request, of which the Company had knowledge at the time of
the request, then the Holders shall not be required to pay any of said expenses
and shall retain their rights pursuant to Section 1.5.
1.9 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Keep such registration, qualification or compliance effective
for a period of 120 days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them;
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions;
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement; and
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
Notwithstanding any provision to the contrary in this Agreement, the
Company shall not be required in connection with any registration pursuant to
Sections 1.5, 1.6 or 1.7 to qualify
7.
<PAGE> 10
shares in any state or jurisdiction which requires the Company to qualify to do
business or to file a general consent to service of process.
1.10 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers
and directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse each such Holder, each of its officers and
directors and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder or underwriter and stated
to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and partners and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
and liabilities (or actions in respect thereof) including any of the foregoing
incurred in settlement of any litigation commenced or threatened, arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification, or compliance,
and will reimburse the Company, such Holders, such directors,
8.
<PAGE> 11
officers, partners, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred in connection with investigation,
preparing or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder and stated to be specifically for use therein; provided, however, that
the obligations of such Holders hereunder shall be limited to an amount equal to
the proceeds to each such Holder of Registrable Securities sold as contemplated
herein.
(c) Each party entitled to indemnification under this Section 1.10
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own
expense, and provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 1 unless such failure resulted in actual
detriment to the Indemnifying Party. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party a release from all liability in respect of
such claim or litigation.
(d) If the indemnification provided for in this Section 1.10 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1 and otherwise.
1.11 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such
9.
<PAGE> 12
Holder or Holders and the distribution proposed by such Holder or Holders as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 1.
1.12 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to:
(a) Use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act at all times after the effective date of the first registration
under the Securities Act filed by the Company for an offering of its securities
to the general public;
(b) Use its best efforts to then file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Exchange Act at any time after it has become subject to such
reporting requirements;
(c) So long as the Shareholder owns any Restricted Securities, to
furnish to the Shareholder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public) and of the Securities Act and the Securities Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company as a Shareholder may reasonably request in availing
itself of any rule or regulation of the Commission allowing a Shareholder to
sell any such securities without registration.
1.13 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company
to register securities granted under Sections 1.5, 1.6 and 1.7 may be assigned
or otherwise conveyed to a transferee or assignee of Registrable Securities, who
shall be considered a "Holder" for purposes of this Section 1, provided that (a)
the Company is given written notice by such Holder at the time of or within a
reasonable time after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned and (b) the transferee acquires
Registrable Securities in a private transaction.
1.14 TERMINATION OF REGISTRATION RIGHTS. The registration rights
granted pursuant to this Section 1 shall terminate (i) upon the fifth
anniversary of the effective date of the first registration statement filed by
the Company covering an underwritten offering of its securities to the general
public or (ii) as to any individual Holder, at such time after the Company's
initial registered public offering as all Registrable Securities held by such
Holder can be sold without compliance with the registration requirements of the
Securities Act pursuant to Rule 144 (including Rule 144(k)) promulgated
thereunder.
1.15 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of Holders holding more than fifty percent (50%) of the Registrable Securities,
enter into any agreement with any holder
10.
<PAGE> 13
or prospective holder of any securities of the Company which would allow such
holder or prospective holder to (i) require the Company to effect a registration
or (ii) include any securities in any registration filed under Sections 1.5, 1.6
or 1.7 hereof unless, under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of such securities will not diminish the amount of
Registrable Securities which are included in such registration.
1.16 INCLUSION OF STOCK HELD BY FOUNDERS. In connection with any
registration effected pursuant to section 1.6 hereof, each of the Founders, with
respect to all securities of the Company held by such Founders that are not
"Registrable Securities" for purposes of this Agreement, shall be entitled to
participate in such registration, on the same terms and conditions as Holders
selling their Registrable Securities in such registration and, for purposes of
Section 1.6, (i) each such Founder shall be entitled to all of the rights and
shall be subject to all of the obligations applicable to a Holders in connection
with such registration, including without limitation the provisions of Section
1.10 of this Agreement, (ii) all such securities, and any shares of Common stock
issued in respect thereof upon any stock split, stock dividend, recapitalization
or similar event, shall be deemed to be "Registrable Securities" and (iii) all
references to "Holder" in this Agreement shall be deemed to include such Founder
for purposes of such registration; provided, however, that any Underwriter
Cutback shall apply to the Founders participating in such registration (pro rata
among the Founders based on the number of shares to be so included by the
Founders in such registration) first prior to any application thereof to the
other Holders participating in such registration.
SECTION 2.
AFFIRMATIVE COVENANTS OF THE COMPANY
2.1 FINANCIAL INFORMATION. The Company will furnish the following
reports to the Shareholders for so long as the Shareholders are holders of (or
are entitled to purchase under this Agreement) any Registrable Securities:
(a) As soon as practicable after the end of each fiscal year, and
in any event within 90 days thereafter, audited consolidated balance sheets of
the Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and surplus and consolidated statements of
changes in financial position of the Company and its subsidiaries, if any, for
such year, prepared in accordance with generally accepted accounting principles
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and certified by independent public
accountants of recognized national standing selected by the Company;
(b) As soon as practicable after the end of every fiscal quarter
and in any event within 45 days thereafter, an unaudited consolidated balance
sheet of the Company and its subsidiaries, if any, as of the end of each such
quarter, and consolidated statements of income and consolidated statements of
changes in financial condition of the Company and its subsidiaries for such
period, all in reasonable detail and signed, subject to changes resulting from
year-end audit adjustments, by the principal financial or accounting officer of
the Company; and
11.
<PAGE> 14
(c) As soon as practicable after the end of every monthly
accounting period in each fiscal year of the Company and in any event within 45
days thereafter, an unaudited consolidated balance sheet of the Company and its
subsidiaries, if any, as of the end of each such monthly period, and
consolidated statements of income and consolidated statements of changes in
financial condition of the Company and its subsidiaries for such period, subject
to changes resulting from year-end audit adjustments.
2.2 INSPECTION. The Company shall permit each Shareholder to visit and
inspect the Company's properties, to examine its books of account and records
and to discuss the Company's affairs, finances and accounts with its officers,
all at such reasonable times as may be requested by the Shareholder provided,
however, that the Company shall not be obligated pursuant to this Section 2.2 to
provide access to any information which it reasonably considers to be a trade
secret or similar confidential information.
2.3 ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights granted
pursuant to Section 2.1 may be assigned by the Shareholders (or by any permitted
transferee of any such rights) so long as (i) the Company is given notice of any
such assignment within a reasonable time after the date the same is effected and
(ii) the transferee shall have acquired Registrable Securities in a private
transaction.
2.4 TERMINATION OF COVENANTS. The covenants set forth in Section 2.1
shall terminate and be of no further force or effect after the earlier of (a)
the date upon which the first registration statement filed by the Company under
the Securities Act in connection with the firm commitment underwritten public
offering of its securities becomes effective, or (b) the date when none of the
Registrable Securities is outstanding.
SECTION 3
AFFIRMATIVE COVENANTS OF SHAREHOLDERS; RIGHT OF FIRST REFUSAL
3.1 CONFIDENTIAL INFORMATION, ETC. Each Shareholder agrees that all
information received by it pursuant to Section 2, and any other information
relating to the Company's technology, processes or formulas that is disclosed by
the Company to any Shareholder in writing and is marked "Confidential," shall be
considered confidential information. Each Shareholder further agrees that it
shall hold all such confidential information in confidence and shall not
disclose any such confidential information to any third party other than its
counsel or accountants nor shall such Shareholder use such confidential
information for any purpose other than evaluation of such Shareholder's
investment in the Company; provided, however, that the foregoing obligation to
hold in confidence and not to disclose confidential information shall not apply
to any such information that (a) was known to the public prior to disclosure by
the Company, (b) becomes known to the public through no fault of such
Shareholder, (c) is disclosed to such Shareholder on a non-confidential basis by
a third party having a legal right to make such disclosure or (d) is
independently developed by such Shareholder.
3.2 RIGHT OF FIRST REFUSAL. The Company hereby grants to each
Shareholder the right of first refusal to purchase its Pro Rata Share (defined
below) of all (or any part) of New Securities (defined below) that the Company
may from time to time propose to sell and issue.
12.
<PAGE> 15
Such Shareholder's "Pro Rata Share," for purposes of this right of first
refusal, is the ratio of the number of shares of Common Stock (assuming
conversion of all shares of Preferred Stock) then held by such Shareholder to
the total number of shares of Common Stock then outstanding (assuming conversion
of all outstanding shares of shares of the Company's Preferred Stock). This
right of first refusal shall be subject to the following provisions:
(a) "New Securities" shall mean any Common Stock or Preferred Stock
of the Company, whether now authorized or not, and rights, options, or warrants
to purchase said Common Stock or Preferred Stock, and securities of any type
whatsoever that are, or may become, convertible into or exchangeable for said
Common Stock or Preferred Stock; provided, however, that "New Securities" does
not include (i) securities issuable upon conversion of or with respect to Series
A Preferred Stock or any future series of preferred stock; (ii) securities
issued pursuant to the acquisition of another corporation by the Company by
merger, purchase of substantially all of the assets, or other reorganization;
(iii) up to 1,920,000 shares of the Company's Common Stock (or related options)
issued pursuant to stock option plans or agreements as designated and approved
by the Company's Board of Directors (of which 547,375 shares subject to options
outstanding as of January 3, 1994 and an additional 1,372,625 shares remain
available for issuance after January 3, 1994, provided that shares subject to
options that expire pursuant to the terms thereof or that are repurchased by the
Company at a price equal to the cost thereof to the holder pursuant to the terms
of the agreement by which such shares were purchased from the Company shall
again become available for issuance under this clause; (iv) shares of the
Company's Common Stock or Preferred Stock issued in connection with any stock
split, stock dividend, or recapitalization by the Company; and (v) Shares issued
at the Second Closing.
(b) In the event that the Company proposes to undertake an issuance
of New Securities, it shall give each Shareholder written notice of its
intention, describing the type of New Securities, the price, and the general
terms upon which the Company proposes to issue the same. Each Shareholder shall
have twenty (20) business days from the date of receipt of any such notice to
agree to purchase his pro rata share of such New Securities for the price and
upon the general terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased. Each
Shareholder shall have a right of over-allotment such that if any Shareholder
fails to exercise his right hereunder to purchase his pro rata portion of New
Securities, the other Shareholders may purchase the non-purchasing Shareholder's
portion on a pro rata basis, within fifteen (15) business days from the date
such non-purchasing Shareholder fails to exercise his right hereunder to
purchase his pro rata share of New Securities.
(c) In the event that the Shareholders fail to exercise in full the
right of first refusal within said twenty (20) plus fifteen (15) business day
period, the Company shall have one hundred twenty (120) days thereafter to sell
(or enter into an agreement pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within one hundred twenty (120) days from
the date of said agreement) the New Securities respecting which the
Shareholders' rights were not exercised, at a price and upon general terms no
more favorable to the purchasers thereof than specified in the Company's notice.
In the event the Company has not sold the New Securities within said one hundred
twenty (120) day period (or sold and issued new Securities in accordance with
the foregoing within one hundred twenty (120) days from the date of said
13.
<PAGE> 16
agreement), the Company shall not thereafter issue or sell any New Securities,
without first offering such securities to the Shareholders in the manner
provided above.
(d) The right of first refusal granted under this Agreement shall
expire following the closing of the Company's first underwritten public offering
of Common Stock at an aggregate offering price of not less than $12,000,000 and
at a public offering price equal to or exceeding $4.25 per share (as adjusted
for any stock dividends, combinations, or splits with respect to such shares)
pursuant to a registration statement declared effective under the Securities
Act.
(e) This right of first refusal shall be assignable in whole or in
part to any transferee of any Registrable Securities in a private transaction.
SECTION 4
MISCELLANEOUS
4.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California by California residents.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
4.3 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
4.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by facsimile or by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger, addressed (c) if to the Shareholders, to the Shareholders
addresses set forth on the Schedule of Purchasers or to such other address as
such Shareholders shall have furnished to the Company in writing, (d) if to any
other holder of Registrable Securities, at such address as such holder shall
have furnished the Company in writing or (e) if to the Company, to its address
set forth above and addressed to the attention of the President or at such other
addresses as the Company shall have furnished to the Shareholders. All notices
and other communications mailed pursuant to the provisions of this Section 4.4
shall be deemed delivered when mailed or sent by facsimile.
4.5 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
4.6 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
14.
<PAGE> 17
4.7 SEPARABILITY. Any invalidity, illegality, or limitation of the
enforceability with respect to any Shareholder of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason of
the law of any such Shareholder's domicile or otherwise, shall in no way affect
or impair the validity, legality, or enforceability of this Agreement with
respect to other Shareholders. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired.
4.8 APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement may
be amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the holders of at
least a majority of the then outstanding shares of Registrable Securities,
excluding from the determination of such a majority (both in determining the
total number of such shares outstanding and the number of such shares consenting
or not consenting) all shares previously disposed of by such holders pursuant to
one or more registration statements under the Securities Act or pursuant to Rule
144 thereunder. Any amendment, termination or waiver effected in accordance with
this section shall be binding upon the Shareholders, each of their transferees
and the Company. Each Shareholder acknowledges that by the operation of this
Section the holders of a majority of the outstanding Registrable Securities may
have the right and power to diminish or eliminate all rights of such
Shareholders under this Agreement.
The foregoing Agreement is hereby executed as of the date first above
written.
THE COMPANY:
CASEWARE, INC.
By /s/ Sol Zechter
------------------------------------
Title Chief Executive Officer
---------------------------------
THE SHAREHOLDERS:
NORWEST EQUITY PARTNERS, IV,
A MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners, General Partner
By /s/ George J. Still
------------------------------------
George J. Still, General Partner
15.
<PAGE> 18
BRENTWOOD ASSOCIATES VI, L.P.
By: Brentwood VI Ventures L.P.,
its General Partner
By /s/ G. Bradford Jones
------------------------------------
G. Bradford Jones, General Partner
ADVANCED TECHNOLOGY VENTURES III
By /s/ Jos C. Henkens
------------------------------------
Jos C. Henkens, General Partner
/s/ P. Andrews McLane
- ---------------------------------------
P. Andrews McLane
/s/ Fred Cox
- ---------------------------------------
Fred Cox
16.
<PAGE> 19
CONTINUUS SOFTWARE CORPORATION
FIRST AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
This First Amendment to Investors' Rights Agreement ("Amendment") is
entered into as of December 29, 1994, by and among Continuus Software
Corporation, a California corporation and formerly known as CaseWare, Inc. (the
"Company"), the undersigned parties to that certain Investors' Rights Agreement
dated as of March 4, 1994 (the "Agreement"), Capitalized terms contained herein
shall have the meanings set forth in the Agreement.
WHEREAS, the Company, the Shareholders and the Founders have entered
into that certain Stock Purchase Agreement dated December 29, 1994 (the "Stock
Purchase Agreement"); and
WHEREAS, the execution of this Amendment by the parties is a condition
to the Financing as set forth in Section 4.7 of the Stock Purchase Agreement.
NOW, THEREFORE, In consideration of the foregoing premises and the
mutual promises set forth below, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties to this Amendment agree
as follows:
1. The definition of "Shareholders" set forth in the preamble to the
Agreement is hereby amended to mean each of the purchasers listed on the
Schedule of Purchasers attached as Exhibit A to the Stock Purchase Agreement.
2. The definition of "Registrable Securities" set forth in Section 1.2
of the Agreement is hereby amended to read in its entirety as follows:
"REGISTRABLE SECURITIES" means (i) shares of the Company's Common Stock
issued upon conversion of the Company's Series A, which have not been sold to
the public, (ii) shares of the Company's Common Stock issued upon the exercise
of those certain warrants issued to the Shareholders pursuant to that certain
Stock Purchase Agreement, dated December 29, 1993, by and among the Company and
the Shareholders (the "Warrants") and (iii) shares of the Company's Common Stock
issued in respect of shares of the Company's Common Stock issued upon conversion
of the Company's Series A Preferred Stock or upon exercise of the Warrants upon
any stock split, stock dividend, recapitalization, or similar event, which have
not been sold to the public.
3. This Amendment shall be deemed an amendment to the Agreement and
shall become effective when executed by the Company and the holders of at least
a majority of the outstanding shares of Registrable Securities as provided for
under Section 4.8 of the Agreement. Except as expressly amended pursuant to this
Amendment, the Agreement shall continue in full force and effect.
4. This Amendment shall be governed by the laws of the State of
California as applicable to contracts entered into and performed entirely within
the State of California.
5. This Amendment may be executed in counterparts, each of which shall
be enforceable against the party actually executing such counterpart, and which
together shall constitute one instrument.
1.
<PAGE> 20
This Amendment is hereby executed as of the date first above written.
THE COMPANY:
CONTINUUS SOFTWARE CORPORATION
By /s/ John Wark
------------------------------------------
Title President and Chief Executive Officer
---------------------------------------
THE SHAREHOLDERS:
NORWEST EQUITY PARTNERS, IV,
A MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners, General Partner
By /s/ Kevin G. Hall.
------------------------------------------
Kevin G. Hall, General Partner
BRENTWOOD ASSOCIATES VI, L.P.
By: Brentwood VI Ventures L.P.,
its General Partner
By /s/ G. Bradford Jones
------------------------------------------
G. Bradford Jones, General Partner
ADVANCED TECHNOLOGY VENTURES III
By /s/ Jos C. Henkens
------------------------------------------
Jos C. Henkens, General Partner
/s/ P. Andrews McLane
- ---------------------------------------------
P. Andrews McLane
/s/ Fred B. Cox...
- ---------------------------------------------
Fred B. Cox, Co-Trustee,
The Cox Living Trust dtd 5/26/88
[Signature page to First Amendment to Investors Rights Agreement]
2.
<PAGE> 21
NEW SHAREHOLDER:
/s/ Sol Zechter
- ---------------------------------------------
Sol Zechter, Trustee,
The Zechter Family Trust
dated July 18, 1985
THE FOUNDERS:
/s/ Fred Cox
- ---------------------------------------------
Fred Cox, Co-Trustee,
The Cox Living Trust dtd 5/26/88
/s/ Sol Zechter
- ---------------------------------------------
Sol Zechter, Trustee,
The Zechter Family Trust
dated July 18, 1985
[Signature page to First Amendment to Investors Rights Agreement]
3.
<PAGE> 22
CONTINUUS SOFTWARE CORPORATION
SECOND AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
This Second Amendment to Investors' Rights Agreement ("Second
Amendment") is entered into as of May 25, 1995, by and among Continuus Software
Corporation, a California corporation and formerly known as CaseWare, Inc. (the
"Company"), the undersigned parties (the "Existing Investors") to that certain
Investors' Rights Agreement dated as of March 4, 1994, as amended by that
certain First Amendment to Investors' Rights Agreement dated December 29, 1994
(as so amended, the "Agreement") and the undersigned parties (the "New
Investors") to that certain Stock Purchase Agreement of even date herewith
providing for the issuance and sale of shares of Series B Preferred Stock of the
Company (the "Stock Purchase Agreement"). Capitalized terms contained herein
shall have the meanings set forth in the Agreement.
WHEREAS, the Company, and the Existing Investors desire to amend the
Agreement as set forth below; and
WHEREAS, the execution of this Second Amendment by the parties is a
condition to the Financing as set forth in Section 4.7 of the Stock Purchase
Agreement.
NOW, THEREFORE, In consideration of the foregoing premises and the
mutual promises set forth below, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties to this Second
Amendment agree as follows:
6. The definition of "Shareholders" set forth in the preamble to the
Agreement is hereby amended to mean the Existing Investors and the New Investors
listed in the attached Schedule A.
7. The definition of "Registrable Securities" set forth in Section 1.2
of the Agreement is hereby amended to read in its entirety as follows:
"REGISTRABLE SECURITIES" means (i) shares of the Company's Common Stock
issued or issuable upon conversion of the Company's Series A and Series
B Preferred Stock (hereinafter collectively referred to as the
"Preferred"), which have not been sold to the public, (ii) shares of
the Company's Common Stock issued upon the exercise of those certain
warrants dated December 29, 1994 to purchase up to an aggregate of
1,908,394 shares of Common Stock (the "Warrants") and (iii) shares of
the Company's Common Stock issued in respect of shares of the Company's
Common Stock issued upon conversion of the Preferred or upon exercise
of the Warrants upon any stock split, stock dividend, recapitalization,
or similar event, which have not been sold to the public.
8. This Second Amendment shall be deemed an amendment to the Agreement
and shall become effective when executed by the Company and the holders of at
least a majority of the outstanding shares of Registrable Securities as provided
for under Section 4.8 of the Agreement. Except as expressly amended pursuant to
this Amendment, the Agreement shall continue in full force and effect.
9. This Second Amendment shall be governed by the laws of the State of
California as applicable to contracts entered into and performed entirely within
the State of California.
1.
<PAGE> 23
10. This Second Amendment may be executed in counterparts, each of
which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
This Amendment is hereby executed as of the date first above written.
THE COMPANY:
CONTINUUS SOFTWARE CORPORATION
By /s/ John Wark
------------------------------------------
Title President and Chief Executive Officer
---------------------------------------
THE EXISTING INVESTORS:
NORWEST EQUITY PARTNERS, V,
A MINNESOTA LIMITED LIABILITY PARTNERSHIP
By: Itasca Partners II
General Partner
By /s/ Kevin G. Hall
------------------------------------------
Kevin G. Hall, General Partner
BRENTWOOD ASSOCIATES VI, L.P.
By: Brentwood VI Ventures L.P.,
its General Partner
By /s/ David W. Chonette
------------------------------------------
David W. Chonette, General Partner
ADVANCED TECHNOLOGY VENTURES III
By /s/ Jos C. Henkens
------------------------------------------
Jos C. Henkens, General Partner
[Signature page to Second Amendment to Investors Rights Agreement]
2.
<PAGE> 24
/s/ P. Andrews McLane
- ---------------------------------------------
P. Andrews McLane
/s/ Fred Cox......
- ---------------------------------------------
Fred Cox, Co-Trustee,
The Cox Living Trust dtd 5/26/88
/s/ Harriett Frost Cox
- ---------------------------------------------
Harriet Frost Cox, Co-Trustee,
The Cox Living Trust dtd 5/26/88
/s/ Sol Zechter...
- ---------------------------------------------
Sol Zechter, Trustee,
The Zechter Family Trust
dated July 18, 1995
NEW INVESTORS:
COMDISCO, INC.
By /s/ Jill Hanses...
------------------------------------------
Jill Hanses, Assistant V.P.
[Signature page to Second Amendment to Investors Rights Agreement]
3.
<PAGE> 25
CONTINUUS SOFTWARE CORPORATION
THIRD AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
THIS THIRD AMENDMENT TO INVESTORS' RIGHTS AGREEMENT ("Third Amendment")
is entered into as of November 6, 1995, by and among CONTINUUS SOFTWARE
CORPORATION, a California corporation (the "Company"), the undersigned parties
(the "Existing Investors") to that certain Investors' Rights Agreement dated as
of March 4, 1994, as amended by that certain First Amendment to Investors'
Rights Agreement dated as of December 29, 1994 and that certain Second Amendment
to Investors' Rights Agreement dated as of May 25, 1995 (as so amended, the
"Agreement") and the undersigned parties (the "New Investors") to that certain
Stock Purchase Agreement of even date herewith (the "Stock Purchase Agreement")
providing for the issuance and sale of shares of Series C Preferred Stock of the
Company (the "Financing"). Capitalized terms contained herein shall have the
meanings set forth in the Agreement.
WHEREAS, the Company and the Existing Investors desire to amend the
Agreement as set forth below;
WHEREAS, the execution of this Third Amendment by the parties is a
condition to the Financing as set forth in Section 4.7 of the Stock Purchase
Agreement; and
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises set forth below, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties to this Third Amendment
agree as follows:
1. The definition of "Shareholders" set forth in the preamble to the
Agreement is hereby amended to mean the parties listed on the attached Schedule
A.
2. The definition of "Registrable Securities" set forth in Section 1.2
of the Agreement is hereby amended to read in its entirety as follows:
"REGISTRABLE SECURITIES" means (i) shares of the Company's Common Stock
issued or issuable upon conversion of the Company's Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock (hereinafter collectively
referred to as the "Preferred"), which have not been sold to the public, (ii)
shares of the Company's Common Stock issued or issuable upon the exercise of
those certain warrants dated December 29, 1994 to purchase up to an aggregate of
1,908,394 shares of the Company's Common Stock (the "Existing Warrants"), and
(iii) shares of the Company's Common Stock issued or issuable upon conversion of
the Preferred or upon any stock split, stock dividend, recapitalization, or
similar event, which have not been sold to the public.
3. Section 1.14 of the Agreement is hereby amended to read in its
entirety as follows:
"1.14 TERMINATION OF REGISTRATION RIGHTS. The registration rights
granted pursuant to this Section 1 shall terminate (i) upon the fifth
anniversary of the effective date of the registration statement filed
by the Company covering an underwritten offering of its securities to
the general public at a per share price of not less than $5.25 per
share and for a total offering of not less than $15,000,000
1.
<PAGE> 26
(before deduction of underwriter's commissions and expenses) (the
"Qualifying IPO") or (ii) as to any individual Holder, at such time
after Qualifying IPO as all Registrable Securities held by such Holder
can be sold without compliance with the registration requirements of
the Securities Act pursuant to Rule 144 (including Rule 144(k))
promulgated thereunder."
4. Section 3.2(a) of the Agreement is hereby amended to read in its
entirety as follows:
"(a) "New Securities" shall mean any Common Stock or Preferred Stock of
the Company, whether now authorized or not, and rights, options, or
warrants to purchase said Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible
into or exchangeable for said Common Stock or Preferred Stock;
provided, however, that "New Securities" does not include (i)
securities issuable upon conversion of or with respect to any series of
preferred stock; (ii) securities issued pursuant to the acquisition of
another corporation by the Company by merger, purchase of substantially
all of the assets, or other reorganization; (iii) up to 3,400,000
shares of the Company's Common Stock (or related options) issued
pursuant to stock option plans or agreements as designated and approved
by the Company's Board of Directors (of which 2,503,462 shares are
subject to options outstanding as of October 11, 1995, and an
additional 896,538 shares remain available for issuance after October
11, 1995), provided that shares subject to options that expire pursuant
to the terms thereof or that are repurchased by the Company at a price
equal to the cost thereof to the holder pursuant to the terms of the
agreement by which such shares were purchased from the Company shall
again become available for issuance under this clause; and (iv) shares
of the Company's Common Stock or Preferred Stock issued in connection
with any stock split, stock dividend, or recapitalization by the
Company."
5. Each of the undersigned Existing Investors hereby waives his, her or
its right to receive notice of the Financing and Warrant Issuance and to
purchase a certain portion of the shares or other securities to be sold by the
Company in the Financing and Warrant Issuance as set forth in Section 3.2 of the
Agreement.
6. This Third Amendment shall be deemed an amendment to the Agreement
and shall become effective when executed by the Company and the holders of at
least a majority of the outstanding shares of Registrable Securities as provided
for under Section 4.8 of the Agreement. Except as expressly amended pursuant to
this Amendment, the Agreement shall continue in full force and effect.
7. This Third Amendment shall be governed by the laws of the State of
California as applicable to contracts entered into and performed entirely within
the State of California.
8. This Third Amendment may be executed in counterparts, each of which
shall be enforceable against the party actually executing such counterpart, and
which together shall constitute one instrument.
2.
<PAGE> 27
[Remainder of Page Intentionally Left Blank]
<PAGE> 28
This Amendment is hereby executed as of the date first above written.
THE COMPANY:
CONTINUUS SOFTWARE CORPORATION
By: /s/ John Wark
------------------------------------------
Title: President and Chief Executive Officer
---------------------------------------
EXISTING INVESTORS:
NORWEST EQUITY PARTNERS, IV,
a Minnesota Limited Partnership
By: Itasca Partners
General Partner
By: /s/ Kevin G. Hall
------------------------------------------
Kevin G. Hall, Partner
ADVANCED TECHNOLOGY VENTURES III
By: /s/ Jos C. Henkens
------------------------------------------
Jos C. Henkens, General Partner
/s/ P. Andrews McLane
- ----------------------------------------------
P. Andrews McLane
[Signature Page to Third Amendment to Investors' Rights Agreement]
<PAGE> 29
COMDISCO, INC.
By: /s/ Jill Hanses
------------------------------------------
Jill Hanses, Assistant V.P.
/s/ Fred B. Cox
- ----------------------------------------------
Fred Cox, Co-Trustee
The Cox Living Trust dated 5/26/88
/s/ Harriet Frost-Cox
- ----------------------------------------------
Harriet Frost-Cox, Co-Trustee,
The Cox Living Trust dated 5/26/88
/s/ Sol Zechter
- ----------------------------------------------
Sol Zechter, Trustee
The Zechter Family Trust
dated July 18, 1995
NEW INVESTORS:
ACCEL IV L.P.
By: Accel IV Associates L.P.
Its General Partner
By: /s/ Arthur C. Patterson
------------------------------------------
General Partner
[Signature Page to Third Amendment to Investors' Rights Agreement]
<PAGE> 30
ACCEL KEIRETSU L.P.
By: Accel Partners & Co., Inc.
Its General Partners
By: /s/ Arthur C. Patterson
------------------------------------------
Its: General Partner
-----------------------------------------
ACCEL INVESTORS `95 L.P.
By: /s/ Arthur C. Patterson
------------------------------------------
General Partner
ELLMORE C. PATTERSON PARTNERS
By: /s/ Arthur C. Patterson
------------------------------------------
General Partner
NORWEST EQUITY PARTNERS, V,
a Minnesota Limited Liability Partnership
By: Itasca Partners V, L.L.P.
General Partner
By: /s/ Kevin G. Hall
------------------------------------------
Kevin G. Hall, Partner
BRENTWOOD ASSOCIATES VI, L.P.
By: Brentwood VI Ventures, L.P.
Its General Partner
By: /s/ G. Bradford Jones
------------------------------------------
G. Bradford Jones, General Partner
[Signature Page to Third Amendment to Investors' Rights Agreement]
<PAGE> 31
SCHEDULE A
LIST OF SHAREHOLDERS
Norwest Equity Partners, IV,
a Minnesota Limited Partnership
Brentwood Associates, VI, L.P.
Advanced Technology Ventures III
P. Andrews McLane
Fred Cox, Co-Trustee,
Harriet Frost Cox, Co-Trustee,
The Cox Living Trust dated 5/26/88
Sol Zechter, Trustee,
The Zechter Family Trust
dated July 18, 1995
Comdisco, Inc.
Accel IV L.P.
Accel Keiretsu L.P.
Accel Investors `95 L.P.
Ellmore C. Patterson Partners
Norwest Equity Partners, V,
a Minnesota Limited Liability Partnership
<PAGE> 32
CONTINUUS SOFTWARE CORPORATION
FOURTH AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
THIS FOURTH AMENDMENT TO INVESTORS' RIGHTS AGREEMENT ("Fourth
Amendment") is entered into as of May 30, 1996, by and among CONTINUUS SOFTWARE
CORPORATION, a California corporation (the "Company"), the parties (the
"Existing Investors") to that certain Investors' Rights Agreement dated as of
March 4, 1994, as amended by that certain First Amendment to Investors' Rights
Agreement dated as of December 29, 1994 and that certain Second Amendment to
Investors' Rights Agreement dated as of May 25, 1995 and that certain Fourth
Amendment to Investors' Rights Agreement dated as of November 6, 1995 (as so
amended, the "Agreement") and the undersigned parties (the "New Investors") to
that certain Stock Purchase Agreement of even date herewith (the "Stock Purchase
Agreement") providing for the issuance and sale of shares of Series D Preferred
Stock of the Company and Warrants to purchase shares of Common Stock of the
Company (the "Financing"). Capitalized terms contained herein shall have the
meanings set forth in the Agreement.
WHEREAS, the Company, the Existing Investors and the New Investors
desire to amend the Agreement as set forth below; and
WHEREAS, the execution of this Fourth Amendment by the parties is a
condition to the Financing as set forth in Section 4.7 of the Stock Purchase
Agreement.
NOW, THEREFORE, In consideration of the foregoing premises and the
mutual promises set forth below, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties to this Fourth
Amendment agree as follows:
1. The definition of "Shareholders" set forth in the preamble to the
Agreement is hereby amended to mean the parties listed on the attached Schedule
A.
2. The definition of "Registrable Securities" set forth in Section 1.2
of the Agreement is hereby amended to read in its entirety as follows:
"REGISTRABLE SECURITIES" means (i) shares of the Company's Common Stock
issued or issuable upon conversion of the Company's Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
(hereinafter collectively referred to as the "Preferred"), which have not been
sold to the public, (ii) shares of the Company's Common Stock issued upon the
exercise of those certain warrants dated December 29, 1994 to purchase up to an
aggregate of 1,908,397 shares of the Company's Common Stock (the "Existing
Warrants"), (iii) shares of the Company's Common Stock issued upon the exercise
of those certain warrants dated May 30, 1996 to purchase up to an aggregate of
587,618 shares of the Company's Common Stock (the "New Warrants"), and (iv)
shares of the Company's Common Stock issued in respect of shares of the
Company's Common Stock issued upon conversion of the Preferred or upon exercise
of the Existing Warrants or New Warrants upon any stock split, stock dividend,
recapitalization, or similar event, which have not been sold to the public.
3. Section 3.2(a) of the Agreement is hereby amended to read in its
entirety as follows:
1.
<PAGE> 33
"(a) "New Securities" shall mean any Common Stock or Preferred Stock of
the Company, whether now authorized or not, and rights, options, or
warrants to purchase said Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible
into or exchangeable for said Common Stock or Preferred Stock;
provided, however, that "New Securities" does not include (i)
securities issuable upon conversion of or with respect to any series of
preferred stock; (ii) securities issued pursuant to the acquisition of
another corporation by the Company by merger, purchase of substantially
all of the assets, or other reorganization; (iii) up to 4,150,000
shares of the Company's Common Stock (or related options) issued
pursuant to stock option plans or agreements as designated and approved
by the Company's Board of Directors (of which 3,038,938 shares are
subject to options outstanding as of May 20, 1996, and an additional
973,793 shares remain available for issuance after May 20, 1996),
provided that shares subject to options that expire pursuant to the
terms thereof or that are repurchased by the Company at a price equal
to the cost thereof to the holder pursuant to the terms of the
agreement by which such shares were purchased from the Company shall
again become available for issuance under this clause; and (iv) shares
of the Company's Common Stock or Preferred Stock issued in connection
with any stock split, stock dividend, or recapitalization by the
Company."
4. This Fourth Amendment shall be deemed an amendment to the Agreement
and shall become effective when executed by the Company and the holders of at
least a majority of the outstanding shares of Registrable Securities as provided
for under Section 4.8 of the Agreement. The rights of first refusal of each
party to the Agreement pursuant to Section 3.2 of the Agreement are hereby
waived with respect to the Financing and each issuance of Series A, B, C and D
Preferred Stock issued concurrently herewith or prior to the date hereof, as
applicable. Except as expressly amended pursuant to this Amendment, the
Agreement shall continue in full force and effect.
5. This Fourth Amendment shall be governed by the laws of the State of
California as applicable to contracts entered into and performed entirely within
the State of California.
6. This Fourth Amendment may be executed in counterparts, each of which
shall be enforceable against the party actually executing such counterpart, and
which together shall constitute one instrument.
[The Remainder of this Page is Intentionally Left Blank.]
2.
<PAGE> 34
This Amendment is hereby executed as of the date first above written.
THE COMPANY:
CONTINUUS SOFTWARE CORPORATION
By: /s/ John Wark
-------------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
SHAREHOLDERS:
NORWEST EQUITY PARTNERS, IV,
a Minnesota Limited Partnership
By: Itasca Partners
General Partner
By: /s/ Kevin G. Hall
-------------------------------------------
Kevin G. Hall, Partner
NORWEST EQUITY PARTNERS, V,
a Minnesota Limited Partnership
By: Itasca Partners IV, L.L.P.
General Partner
By: /s/ Kevin G. Hall
-------------------------------------------
Kevin G. Hall, Partner
BRENTWOOD ASSOCIATES VI, L.P.
By: BRENTWOOD VI VENTURES L.P.
its General Partner
By: /s/ G. Bradford Jones
-------------------------------------------
G. Bradford Jones, General Partner
[Signature Page to Investors' Rights Agreement]
<PAGE> 35
ADVANCED TECHNOLOGY VENTURES III
By: /s/ Jos C. Henkens
-------------------------------------------
Jos C. Henkens, General Partner
/s/ P. Andrews McLane
- -----------------------------------------------
P. ANDREWS MCLANE
COMDISCO, INC.
By: /s/ Jill C. Hanses
-------------------------------------------
Jill Hanses, Assistant Vice President
/s/ Kevin J. McQuillan
- -----------------------------------------------
KEVIN J. MCQUILLAN
THE COX LIVING TRUST DATED MAY 26, 1988
By: /s/ Fred B. Cox
-------------------------------------------
Fred Cox, Co-Trustee
By: /s/ Harriet Frost Cox
-------------------------------------------
Harriet Frost Cox, Co-Trustee
THE ZECHTER FAMILY TRUST
DATED MARCH 6, 1996
By: /s/ Sol Zechter
-------------------------------------------
Sol Zechter, Trustee
[Signature Page to Investors' Rights Agreement]
<PAGE> 36
ACCEL IV L.P.
By: Accel IV Associates L.P.
Its General Partner
By: /s/ G. Carter Sednaoui
-------------------------------------------
General Partner
ACCEL KEIRETSU L.P.
By: Accel Partners & Co., Inc.
Its General Partners
By: /s/ G. Carter Sednaoui
-------------------------------------------
Its: General Partner
------------------------------------------
ACCEL INVESTORS `95 L.P.
By: /s/ G. Carther Sednaoui
-------------------------------------------
General Partner
ELLMORE C. PATTERSON PARTNERS
By: /s/ Arthur C. Patterson
-------------------------------------------
General Partner
[Signature Page to Investors' Rights Agreement]
<PAGE> 37
SCHEDULE A
LIST OF SHAREHOLDERS
Norwest Equity Partners, IV,
a Minnesota Limited Partnership
Norwest Equity Partners, V,
a Minnesota Limited Liability Partnership
Brentwood Associates, VI, L.P.
Advanced Technology Ventures III
P. Andrews McLane
The Cox Living Trust dated May 26, 1988
Fred Cox, Co-Trustee,
Harriet Frost Cox, Co-Trustee
The Zechter Family Trust
dated March 6, 1996
Sol Zechter, Trustee
Accel IV L.P.
Accel Keiretsu L.P.
Accel Investors `95 L.P.
Ellmore C. Patterson Partners
Comdisco, Inc.
Kevin J. McQuillan
<PAGE> 38
CONTINUUS SOFTWARE CORPORATION
FIFTH AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
THIS FIFTH AMENDMENT TO INVESTORS' RIGHTS AGREEMENT ("Fifth Amendment")
is entered into as of May 19, 1997, by and among CONTINUUS SOFTWARE CORPORATION,
a California corporation (the "Company"), and the undersigned parties (the
"Investors") to that certain Investors' Rights Agreement dated as of March 4,
1994, as amended by that certain First Amendment to Investors' Rights Agreement
dated as of December 29, 1994, that certain Second Amendment to Investors'
Rights Agreement dated as of May 25, 1995, that certain Third Amendment to
Investors' Rights Agreement dated as of November 6, 1995 and that certain Fourth
Amendment to Investors' Rights Agreement dated as of May 30, 1996 (as so
amended, the "Agreement") in connection with that certain Stock Purchase
Agreement of even date herewith (the "Stock Purchase Agreement") providing for
the issuance and sale of shares of Series E Preferred Stock of the Company and
Warrants to purchase shares of Series E Preferred Stock of the Company (the
"Financing"). Capitalized terms contained herein shall have the meanings set
forth in the Agreement.
WHEREAS, the Company and the Investors desire to amend the Agreement as
set forth below; and
WHEREAS, the execution of this Fifth Amendment by the parties is a
condition to the Financing as set forth in Section 4.7 of the Stock Purchase
Agreement.
NOW, THEREFORE, In consideration of the foregoing premises and the
mutual promises set forth below, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties to this Fifth Amendment
agree as follows:
7. The definition of "Shareholders" set forth in the preamble to the
Agreement is hereby amended to mean the parties listed on the attached Schedule
A.
8. The definition of "Registrable Securities" set forth in Section 1.2
of the Agreement is hereby amended to read in its entirety as follows:
"REGISTRABLE SECURITIES" means (i) shares of the Company's Common Stock
issued or issuable upon conversion of the Company's Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock (hereinafter collectively referred to as the
"Preferred"), which have not been sold to the public, (ii) shares of the
Company's Common Stock issued upon the exercise of those certain warrants dated
December 29, 1994 to purchase up to an aggregate of 1,908,397 shares of the
Company's Common Stock (the "1994 Warrants"), (iii) shares of the Company's
Common Stock issued or issuable upon the exercise of those certain warrants
dated May 30, 1996 to purchase up to an aggregate of 587,618 shares of the
Company's Common Stock (the "1996 Warrants"), (iv) shares of the Company's
Common Stock issued or issuable upon conversion of the Series E Preferred Stock
issued or issuable upon exercise of warrants outstanding or issued as of the
date of this Fifth Amendment ("Preferred Warrants") and (v) shares of the
Company's Common Stock issued in respect of shares of the Company's Common Stock
issued upon conversion of
1.
<PAGE> 39
the Preferred or upon exercise of the 1994 Warrants, the 1996 Warrants or the
Preferred Warrants upon any stock split, stock dividend, recapitalization, or
similar event, which have not been sold to the public."
9. Section 3.2(a) of the Agreement is hereby amended to read in its
entirety as follows:
"(a) "New Securities" shall mean any Common Stock or Preferred Stock of
the Company, whether now authorized or not, and rights, options, or
warrants to purchase said Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible
into or exchangeable for said Common Stock or Preferred Stock;
provided, however, that "New Securities" does not include (i)
securities issuable upon conversion of or with respect to any series of
preferred stock; (ii) securities issued pursuant to the acquisition of
another corporation by the Company by merger, purchase of substantially
all of the assets, or other reorganization; (iii) up to 4,650,000
shares of the Company's Common Stock (or related options) issued
pursuant to stock option plans or agreements as designated and approved
by the Company's Board of Directors (of which 3,584,858 shares are
subject to options outstanding as of May 15, 1997, and an additional
836,142 shares remain available for issuance after May 15, 1996),
provided that shares subject to options that expire pursuant to the
terms thereof or that are repurchased by the Company at a price equal
to the cost thereof to the holder pursuant to the terms of the
agreement by which such shares were purchased from the Company shall
again become available for issuance under this clause; (iv) Preferred
Stock and/or Common Stock issued upon exercise of warrants outstanding
or issued as of the date of this Fifth Amendment; and (v) shares of the
Company's Common Stock or Preferred Stock issued in connection with any
stock split, stock dividend, or recapitalization by the Company."
10. This Fifth Amendment shall be deemed an amendment to the Agreement
and shall become effective when executed by the Company and the holders of at
least a majority of the outstanding shares of Registrable Securities as provided
for under Section 4.8 of the Agreement. The rights of first refusal of each
party to the Agreement pursuant to Section 3.2 of the Agreement are hereby
waived with respect to the Financing and each issuance of Series A, B, C, D and
E Preferred Stock and warrants to purchase Common Stock of Preferred Stock
issued concurrently herewith or prior to the date hereof, as applicable. Except
as expressly amended pursuant to this Amendment, the Agreement shall continue in
full force and effect.
11. This Fifth Amendment shall be governed by the laws of the State of
California as applicable to contracts entered into and performed entirely within
the State of California.
12. This Fifth Amendment may be executed in counterparts, each of which
shall be enforceable against the party actually executing such counterpart, and
which together shall constitute one instrument.
[The Remainder of this Page is Intentionally Left Blank.]
2.
<PAGE> 40
This Fifth Amendment is hereby executed as of the date first above
written.
THE COMPANY:
CONTINUUS SOFTWARE CORPORATION
By: /s/ John Laskey
----------------------------------------
Title: Vice President, Finance
-------------------------------------
SHAREHOLDERS:
NORWEST EQUITY PARTNERS, IV,
a Minnesota Limited Partnership
By: Itasca Partners
General Partner
By: /s/ Kevin G. Hall
----------------------------------------
Kevin G. Hall, Partner
NORWEST EQUITY PARTNERS, V,
a Minnesota Limited Partnership
By: Itasca Partners IV, L.L.P.
General Partner
By: /s/ Kevin G. Hall
----------------------------------------
Kevin G. Hall, Partner
BRENTWOOD ASSOCIATES VI, L.P.
By: BRENTWOOD VI VENTURES L.P.
its General Partner
By: /s/ G. Bradford Jones
----------------------------------------
G. Bradford Jones, General Partner
<PAGE> 41
ADVANCED TECHNOLOGY VENTURES III
By: /s/ Jos C. Henkens
----------------------------------------
Jos C. Henkens, General Partner
/s/ P. Andrews McLane
- --------------------------------------------
P. ANDREWS MCLANE
COMDISCO, INC.
By: /s/ Jill C. Hanses
----------------------------------------
Jill Hanses, Assistant Vice President
/s/ Kevin J. McQuillan
- --------------------------------------------
KEVIN J. MCQUILLAN
THE COX LIVING TRUST DATED MAY 26, 1988
By: /s/ Fred B. Cox
----------------------------------------
Fred Cox, Co-Trustee
By: /s/ Harriet Frost Cox
----------------------------------------
Harriet Frost Cox, Co-Trustee
THE ZECHTER FAMILY TRUST
DATED MARCH 6, 1996
By: /s/ Sol Zechter
----------------------------------------
Sol Zechter, Trustee
ACCEL IV L.P.
By: Accel IV Associates L.P.
Its General Partner
[Signature Page to Fifth Amendment to Investors' Rights Agreement]
<PAGE> 42
By: /s/ G. Carter Sednaoui
----------------------------------------
General Partner
ACCEL KEIRETSU L.P.
By: Accel Partners & Co., Inc.
Its General Partners
By: /s/ G. Carter Sednaoui
----------------------------------------
Its: Chief Financial Officer
---------------------------------------
ACCEL INVESTORS `95 L.P.
By: /s/ G. Carter Sednaoui
----------------------------------------
General Partner
ELLMORE C. PATTERSON PARTNERS
By: /s/ Arthur C. Patterson
----------------------------------------
General Partner
[Signature Page to Fifth Amendment to Investors' Rights Agreement]
<PAGE> 43
/s/ Sol Zechter
- --------------------------------------------
THE SHEILA CLAIRE ZECHTER ANNUITY TRUST
SOL ZECHTER, AS TRUSTEE
/s/ Sol Zechter
- --------------------------------------------
THE SOL ZECHTER ANNUITY TRUST
SOL ZECHTER, AS TRUSTEE
[Signature Page to Fifth Amendment to Investors' Rights Agreement]
<PAGE> 44
SCHEDULE A
LIST OF SHAREHOLDERS
Norwest Equity Partners, IV,
a Minnesota Limited Partnership
Norwest Equity Partners, V,
a Minnesota Limited Liability Partnership
Brentwood Associates, VI, L.P.
Advanced Technology Ventures III
P. Andrews McLane
The Cox Living Trust dated May 26, 1988
Fred Cox, Co-Trustee,
Harriet Frost Cox, Co-Trustee
The Sheila Claire Zechter Annuity Trust
Sol Zechter, Trustee
The Sol Zechter Annuity Trust
Sol Zechter, Trustee
Accel IV L.P.
Accel Keiretsu L.P.
Accel Investors `95 L.P.
Ellmore C. Patterson Partners
Comdisco, Inc.
Kevin J. McQuillan
[Signature Page to Fifth Amendment to Investors' Rights Agreement]
<PAGE> 45
CONTINUUS SOFTWARE CORPORATION
SIXTH AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
THIS SIXTH AMENDMENT TO INVESTORS' RIGHTS AGREEMENT ("Sixth Amendment")
is entered into as of September 23, 1997, by and among CONTINUUS SOFTWARE
CORPORATION, a California corporation (the "Company"), and the undersigned
parties (the "Investors") to that certain Investors' Rights Agreement dated as
of March 4, 1994, as amended by that certain First Amendment to Investors'
Rights Agreement dated as of December 29, 1994, that certain Second Amendment to
Investors' Rights Agreement dated as of May 25, 1995, that certain Third
Amendment to Investors' Rights Agreement dated as of November 6, 1995, that
certain Fourth Amendment to Investors' Rights Agreement dated as of May 30, 1996
and that certain Fifth Amendment to Investors' Rights Agreement dated as of May
19, 1997 (as so amended, the "Agreement") in connection with that certain Senior
Secured Convertible Debenture Purchase Agreement of even date herewith (the
"Debenture Purchase Agreement") providing for the issuance and sale of a Senior
Secured Convertible Debenture (the "Debenture") convertible into shares of
Common Stock of the Company (the "Financing"). Capitalized terms contained
herein shall have the meanings set forth in the Agreement.
WHEREAS, the Company and the Investors desire to amend the Agreement as
set forth below; and
WHEREAS, the execution of this Sixth Amendment by the parties is a
condition to the Financing as set forth in Section 4.8 of the Senior Secured
Convertible Agreement.
NOW, THEREFORE, In consideration of the foregoing premises and the
mutual promises set forth below, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties to this Sixth Amendment
agree as follows:
13. The definition of "Shareholders" set forth in the preamble to the
Agreement is hereby amended to mean the parties listed on the attached Schedule
A, except that for purposes of Section 3.2 of the Agreement, London Pacific Life
& Annuity Company shall not be included in the definition of "Shareholders,
until such time, and to the extent of, the conversion of the Debenture into
Common Stock."
14. The definition of "Registrable Securities" set forth in Section 1.2
of the Agreement is hereby amended to read in its entirety as follows:
"REGISTRABLE SECURITIES" means (i) shares of the Company's Common Stock
issued or issuable upon conversion of the Company's Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock (hereinafter collectively referred to as the
"Preferred"), which have not been sold to the public, (ii) shares of the
Company's Common Stock issued upon the exercise of those certain warrants dated
December 29, 1994 to purchase up to an aggregate of 1,908,397 shares of the
Company's Common Stock (the "1994 Warrants"), (iii) shares of the Company's
Common Stock issued or issuable upon the exercise of those certain warrants
dated May 30, 1996 to purchase up to an aggregate of 587,618 shares of the
Company's Common Stock (the "1996 Warrants"), (iv)
1.
<PAGE> 46
shares of the Company's Common Stock issued or issuable upon conversion of the
Series E Preferred Stock issued or issuable upon exercise of warrants
outstanding or issued as of May 19, 1997 ("Preferred Warrants"), (v) shares of
the Company's Common Stock issued or issuable upon the conversion of the
Debenture and (vi) shares of the Company's Common Stock issued in respect of
shares of the Company's Common Stock issued upon conversion of the Preferred or
upon exercise of the 1994 Warrants, the 1996 Warrants or the Preferred Warrants
or upon conversion of the Debenture upon any stock split, stock dividend,
recapitalization, or similar event, which have not been sold to the public."
15. Section 3.2(a) of the Agreement is hereby amended to read in its
entirety as follows:
"(a) "New Securities" shall mean any Common Stock or Preferred Stock of
the Company, whether now authorized or not, and rights, options, or
warrants to purchase said Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible
into or exchangeable for said Common Stock or Preferred Stock;
provided, however, that "New Securities" does not include (i)
securities issuable upon conversion of or with respect to any series of
preferred stock; (ii) securities issued pursuant to the acquisition of
another corporation by the Company by merger, purchase of substantially
all of the assets, or other reorganization; (iii) up to 4,650,000
shares of the Company's Common Stock (or related options) issued
pursuant to stock option plans or agreements as designated and approved
by the Company's Board of Directors (of which 3,547,595 shares are
subject to options outstanding as of September 2, 1997, and an
additional 301,064 shares remain available for issuance after September
2, 1996), provided that shares subject to options that expire pursuant
to the terms thereof or that are repurchased by the Company at a price
equal to the cost thereof to the holder pursuant to the terms of the
agreement by which such shares were purchased from the Company shall
again become available for issuance under this clause; (iv) Preferred
Stock and/or Common Stock issued upon exercise of warrants outstanding
or issued as of the date of May 19, 1997; (v) the Debenture or Common
Stock issuable upon conversion of the Debenture; and (vi) shares of the
Company's Common Stock or Preferred Stock issued in connection with any
stock split, stock dividend, or recapitalization by the Company."
16. This Sixth Amendment shall be deemed an amendment to the Agreement
and shall become effective when executed by the Company and the holders of at
least a majority of the outstanding shares of Registrable Securities as provided
for under Section 4.8 of the Agreement. The rights of first refusal of each
party to the Agreement pursuant to Section 3.2 of the Agreement are hereby
waived with respect to the Financing. Except as expressly amended pursuant to
this Amendment, the Agreement shall continue in full force and effect.
17. This Sixth Amendment shall be governed by the laws of the State of
California as applicable to contracts entered into and performed entirely within
the State of California by residents of California.
2.
<PAGE> 47
18. This Sixth Amendment may be executed in counterparts, each of which
shall be enforceable against the party actually executing such counterpart, and
which together shall constitute one instrument.
[The Remainder of this Page is Intentionally Left Blank.]
3.
<PAGE> 48
This Sixth Amendment is hereby executed as of the date first above
written.
THE COMPANY:
CONTINUUS SOFTWARE CORPORATION
By: /s/ John Wark
--------------------------------------------
Title: President and Chief Executive Officer
-----------------------------------------
SHAREHOLDERS:
NORWEST EQUITY PARTNERS, IV,
a Minnesota Limited Partnership
By: Itasca Partners
General Partner
By: /s/ Kevin G. Hall
--------------------------------------------
Kevin G. Hall, Partner
NORWEST EQUITY PARTNERS, V,
a Minnesota Limited Partnership
By: Itasca Partners IV, L.L.P.
General Partner
By: /s/ Kevin G. Hall
--------------------------------------------
Kevin G. Hall, Partner
BRENTWOOD ASSOCIATES VI, L.P.
By: BRENTWOOD VI VENTURES L.P.
its General Partner
By: /s/ G. Bradford Jones
--------------------------------------------
G. Bradford Jones, General Partner
ADVANCED TECHNOLOGY VENTURES III
[Signature Page to Sixth Amendment to Investors' Rights Agreement]
<PAGE> 49
By: /s/ Jos C. Henkens
--------------------------------------------
Jos C. Henkens, General Partner
/s/ P. Andrews McLane
- ------------------------------------------------
P. ANDREWS MCLANE
COMDISCO, INC.
By: /s/ Jill Hanses
--------------------------------------------
Jill Hanses, Assistant Vice President
/s/ Kevin J. McQuillan
- ------------------------------------------------
KEVIN J. MCQUILLAN
THE COX LIVING TRUST DATED MAY 26, 1988
By: /s/ Fred B. Cox
--------------------------------------------
Fred Cox, Co-Trustee
By: /s/ Harriet Frost Cox
--------------------------------------------
Harriet Frost Cox, Co-Trustee
THE ZECHTER FAMILY TRUST
DATED MARCH 6, 1996
By: /s/ Sol Zechter
--------------------------------------------
Sol Zechter, Trustee
[Signature Page to Sixth Amendment to Investors' Rights Agreement]
<PAGE> 50
ACCEL IV L.P.
By: Accel IV Associates L.P.
Its General Partner
By: /s/ G. Carter Sednaoui
--------------------------------------------
General Partner
ACCEL KEIRETSU L.P.
By: Accel Partners & Co., Inc.
Its General Partners
By: /s/ G. Carter Sednaoui
--------------------------------------------
Its: Chief Financial Officer
------------------------------------------
ACCEL INVESTORS `95 L.P.
By: /s/ G. Carter Sednaoui
--------------------------------------------
General Partner
ELLMORE C. PATTERSON PARTNERS
By: /s/ Arthur C. Patterson
--------------------------------------------
General Partner
[Signature Page to Sixth Amendment to Investors' Rights Agreement]
<PAGE> 51
/s/ Sol Zechter
- ------------------------------------------------
THE SHEILA CLAIRE ZECHTER ANNUITY TRUST
SOL ZECHTER, AS TRUSTEE
/s/ Sol Zechter
- ------------------------------------------------
THE SOL ZECHTER ANNUITY TRUST
SOL ZECHTER, AS TRUSTEE
LONDON PACIFIC LIFE & ANNUITY COMPANY
By: /s/ Susan Y. Gressel
--------------------------------------------
Name: Susan Y. Gressel
------------------------------------------
Its: Vice President and Treasurer
------------------------------------------
[Signature Page to Sixth Amendment to Investors' Rights Agreement]
<PAGE> 52
SCHEDULE A
LIST OF SHAREHOLDERS
Norwest Equity Partners, IV,
a Minnesota Limited Partnership
Norwest Equity Partners, V,
a Minnesota Limited Liability Partnership
Brentwood Associates, VI, L.P.
Advanced Technology Ventures III
P. Andrews McLane
The Cox Living Trust dated May 26, 1988
Fred Cox, Co-Trustee,
Harriet Frost Cox, Co-Trustee
The Sheila Claire Zechter Annuity Trust
Sol Zechter, Trustee
The Sol Zechter Annuity Trust
Sol Zechter, Trustee
Accel IV L.P.
Accel Keiretsu L.P.
Accel Investors `95 L.P.
Ellmore C. Patterson Partners
Comdisco, Inc.
Kevin J. McQuillan
London Pacific Life & Annuity Company
<PAGE> 53
CONTINUUS SOFTWARE CORPORATION
SEVENTH AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
THIS SEVENTH AMENDMENT TO INVESTORS' RIGHTS AGREEMENT ("Seventh
Amendment") is entered into as of December 30, 1997, by and among CONTINUUS
SOFTWARE CORPORATION, a California corporation (the "Company"), and the
undersigned parties (the "Investors") to that certain Investors' Rights
Agreement dated as of March 4, 1994, as amended by that certain First Amendment
to Investors' Rights Agreement dated as of December 29, 1994, that certain
Second Amendment to Investors' Rights Agreement dated as of May 25, 1995, that
certain Third Amendment to Investors' Rights Agreement dated as of November 6,
1995, that certain Fourth Amendment to Investors' Rights Agreement dated as of
May 30, 1996, that certain Fifth Amendment to Investors' Rights Agreement dated
as of May 19, 1997, and that certain Sixth Amendment to Investors' Rights
Agreement dated as of September 23, 1997 (as so amended, the "Agreement") in
connection with the adoption of the Company's 1997 Equity Incentive Plan (the
"1997 Plan"). Capitalized terms contained herein shall have the meanings set
forth in the Agreement.
WHEREAS, the Company and the Investors desire to amend the Agreement as
set forth below.
NOW, THEREFORE, In consideration of the foregoing premise and the
mutual promises set forth below, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties to this Seventh
Amendment agree as follows:
19. Section 3.2(a) of the Agreement is hereby amended to read in its
entirety as follows:
"(a) "New Securities" shall mean any Common Stock or Preferred Stock of
the Company, whether now authorized or not, and rights, options, or
warrants to purchase said Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible
into or exchangeable for said Common Stock or Preferred Stock;
provided, however, that "New Securities" does not include (i)
securities issuable upon conversion of or with respect to any series of
preferred stock; (ii) securities issued pursuant to the acquisition of
another corporation by the Company by merger, purchase of substantially
all of the assets, or other reorganization; (iii) up to 7,650,000
shares of the Company's Common Stock (or related options) issued
pursuant to stock option plans or agreements as designated and approved
by the Company's Board of Directors (of which 4,237,563 shares are
subject to options outstanding as of December 30, 1997, and an
additional 3,412,437 shares remain available for issuance after
December 30, 1997), provided that shares subject to options that expire
pursuant to the terms thereof or that are repurchased by the Company at
a price equal to the cost thereof to the holder pursuant to the terms
of the agreement by which such shares were purchased from the Company
shall again become available for issuance under this clause; (iv)
Preferred Stock and/or Common Stock issued upon exercise of warrants
outstanding or issued as of the date of May 19, 1997; (v) the Senior
Secured Convertible Debenture issued on September 23, 1997 (the
1.
<PAGE> 54
"Debenture") or Common Stock issuable upon conversion of the
Debenture; and (vi) shares of the Company's Common Stock or Preferred
Stock issued in connection with any stock split, stock dividend, or
recapitalization by the Company."
20. This Seventh Amendment shall be deemed an amendment to the
Agreement and shall become effective when executed by the Company and the
holders of at least a majority of the outstanding shares of Registrable
Securities as provided for under Section 4.8 of the Agreement. The rights of
first refusal of each party to the Agreement pursuant to Section 3.2 of the
Agreement are hereby waived with respect to the issuance of 3,000,000 shares of
Common Stock pursuant to the 1997 Plan. Except as expressly amended pursuant to
this Amendment, the Agreement shall continue in full force and effect.
21. This Seventh Amendment shall be governed by the laws of the State
of California as applicable to contracts entered into and performed entirely
within the State of California by residents of California.
22. This Seventh Amendment may be executed in counterparts, each of
which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
[The Remainder of this Page is Intentionally Left Blank.]
2.
<PAGE> 55
This Seventh Amendment is hereby executed as of the date first above
written.
THE COMPANY:
CONTINUUS SOFTWARE CORPORATION
By: /s/ John Wark
-------------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
SHAREHOLDERS:
NORWEST EQUITY PARTNERS, IV,
a Minnesota Limited Partnership
By: Itasca Partners
-------------------------------------------
General Partner
By: /s/ Kevin G. Hall
-------------------------------------------
Kevin G. Hall, Partner
NORWEST EQUITY PARTNERS, V,
a Minnesota Limited Partnership
By: Itasca Partners IV, L.L.P.
-------------------------------------------
General Partner
By: /s/ Kevin G. Hall
-------------------------------------------
Kevin G. Hall, Partner
BRENTWOOD ASSOCIATES VI, L.P.
By: BRENTWOOD VI VENTURES L.P.
-------------------------------------------
its General Partner
By: /s/ Stewart Schuster
-------------------------------------------
Stewart Schuster, Special Limited Partner
THE COX LIVING TRUST DATED MAY 26, 1988
<PAGE> 56
By: /s/ Fred B. Cox
-------------------------------------------
Fred Cox, Co-Trustee
By: /s/ Harriet Frost Cox
-------------------------------------------
Harriet Frost Cox, Co-Trustee
THE ZECHTER FAMILY TRUST
DATED MARCH 6, 1996
By: /s/ Sol Zechter
-------------------------------------------
Sol Zechter, Trustee
/s/ Sol Zechter
-------------------------------------------
THE SHEILA CLAIRE ZECHTER ANNUITY TRUST
SOL ZECHTER, AS TRUSTEE
/s/ Sol Zechter
-------------------------------------------
THE SOL ZECHTER ANNUITY TRUST
SOL ZECHTER, AS TRUSTEE
4.
<PAGE> 1
EXHIBIT 10.11
CASEWARE, INC.
CO-SALE AGREEMENT
March 4, 1994
<PAGE> 2
CASEWARE, INC.
Co-Sale Agreement
This Co-Sale Agreement is made as of the 4th day of March, 1994 by and
among CaseWare, Inc., a California corporation (the "Company"), Norwest Equity
Partners, IV, A Minnesota Limited Partnership, Brentwood Associates VI, L.P.,
Advanced Technology Ventures III and P. Andrews McLane (hereinafter referred to
collectively as the "Shareholders") and Fred Cox, Co-Trustee, and Sol Zechter,
Trustee (each individually a "Founder" and collectively the "Founders").
In consideration of the mutual covenants set forth herein, the parties
agree as follows:
1. Definitions.
(a) "Shares" shall mean shares of the Company's Common Stock, Series A
Preferred Stock and other securities of the Company now owned or subsequently
acquired by the Founders.
(b) "Preferred Stock" shall mean the Company's outstanding Series A
Preferred Stock.
(c) "Common Stock" shall mean the Company's Common Stock and shares of
Common Stock issued or issuable upon conversion of the Company's Preferred
Stock.
2. Sales by a Founder.
(a) If any Founder proposes to sell, assign or otherwise transfer any
Shares in any transaction or series of related transactions that will result in
the transfer of 50,000 or more Shares, then such Founder shall promptly give
written notice (the "Notice") to the Company, which will in turn give written
notice to each Shareholder, at least 20 business days prior to the closing of
such sale or transfer. The Notice shall describe in reasonable detail the terms
and conditions of the proposed sale or transfer including, without limitation,
the type and number of Shares to be sold, assigned or otherwise transferred, the
nature of such sale, assignment or transfer, the consideration to be paid, and
the name and address of each prospective purchaser, assignee or transferee. In
the event that the sale, assignment or transfer is being made pursuant to the
provisions of paragraphs 3(a) or 3(b) hereof, the Notice shall state under which
paragraph the sale, assignment or transfer is being made.
(b) Subject to the terms of this Agreement, each Shareholder shall have
the right, severally, exercisable upon written notice to such Founder within 15
business days after receipt of the Notice, to participate in such sale,
assignment or transfer of Shares on the same terms and conditions as stated in
the Notice. To the extent the Shareholders exercise such right of participation
in accordance with the terms and conditions set forth below, the number of
Shares that the Founder may sell in the transaction shall be correspondingly
reduced.
<PAGE> 3
(c) Each Shareholder may sell all or any part of that number of shares
of Common Stock (on an as-converted basis) then held by it equal to the product
obtained by multiplying (i) the aggregate number of shares of Common Stock (on
an as-converted basis) covered by the Notice by (ii) a fraction the numerator of
which is the number of shares of Common Stock (on an as-converted basis) owned
by such Shareholder at the time of the sale, assignment or transfer and the
denominator of which is the sum of the number of shares of Common Stock (on an
as-converted basis) owned by the Founder and all Shareholders at the time of the
sale, assignment or transfer.
(d) If any Shareholder fails to elect to fully participate in such
Founder's sale pursuant to this paragraph 2, such Shareholder shall give notice
of such failure to the Founder and the Company. The Company shall in turn give
notice to each of the Shareholders who did so elect (the "Participants"). Such
notice may be made by telephone if confirmed in writing within two days. The
Participants shall have five days from the date such notice was given to agree
to sell their pro rata share of the unsold portion. For purposes of this
paragraph, a Participant's pro rata share shall be (on an as-converted basis)
the ratio of (x) the number of shares of Common Stock held by such Participant
to (y) the total number of shares of Common Stock held by the Participants.
(e) Each Participant shall effect its participation in the sale by
promptly delivering to the Founder for transfer to the prospective purchaser one
or more certificates, properly endorsed for transfer, that represent:
(i) the type and number of shares of Common Stock that such
Participant elects to sell; or
(ii) that number of shares of Preferred Stock that is at such
time convertible into the number of shares of Common Stock which such
Participant elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Preferred Stock in lieu of Common Stock, such
Participant shall convert such Preferred Stock into Common Stock in accordance
with the Company's Articles of Incorporation and deliver Common Stock as
provided in subparagraph 2(e)(i) above. The Company agrees to make any such
conversion concurrent with the actual transfer of such shares to the transferee.
(f) The stock certificate or certificates that each Participant delivers
to the Founder pursuant to paragraph 2(e) shall be transferred to the
prospective purchaser in consummation of the sale of the Shares pursuant to the
terms and conditions specified in the Notice, and the Founder shall concurrently
therewith remit to such Participant that portion of the sale proceeds to which
such Participant is entitled by reason of its participation in such sale. To the
extent that any prospective purchaser or purchasers prohibits such assignment or
otherwise refuses to purchase shares or other securities from a Participant
exercising its rights of co-sale hereunder, the Founder shall not sell to such
prospective purchaser or purchasers any Shares unless and until, simultaneously
with such sale, the Founder shall purchase such shares or other securities from
such Participant.
<PAGE> 4
(g) The exercise or non-exercise of the rights of the Participants
hereunder to participate in one or more sales of Shares made by the Founder
shall not adversely affect their rights to participate in subsequent sales of
Shares subject to paragraph 2(a).
3. Exempt Transfers.
(a) Notwithstanding the foregoing, the co-sale rights of the
Shareholders shall not apply to (i) any pledge of Shares made pursuant to a bona
fide loan transaction that creates a security interest in such Shares, (ii) any
transfer to another Founder or to the ancestors, descendants or spouse of a
Founder or to trusts for the benefit of such persons or a Founder; or (iii) any
bona fide gift; provided that (A) the transferring Founder shall inform the
Shareholders of such pledge, transfer or gift prior to effecting it and (B) the
pledgee, transferee or donee shall agree in writing to be bound by and comply
with all provisions of this Agreement. Such transferred Shares shall remain
"Shares" hereunder, and such pledgee, transferee or donee shall be treated as a
"Founder" for purposes of this Agreement.
(b) Notwithstanding the foregoing, the provisions of paragraph 2 shall
not apply to the sale of any Shares (i) to the public pursuant to a registration
statement filed with, and declared effective by, the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act")
or (ii) to the Company.
4. Prohibited Transfers.
(a) In the event a Founder should sell, assign or otherwise transfer any
Shares in contravention of the co-sale rights of the Shareholders under
paragraph 2 of this Agreement (a "Prohibited Transfer"), the Shareholders shall
have the put option provided below, and the Founder shall be bound by the
applicable provisions of such option.
(b) In the event of a Prohibited Transfer, each Shareholder, severally,
shall have the right to sell to the Founder the type and number of shares of
Common Stock (on an as-converted basis) equal to the number of shares such
Shareholder would have been entitled to sell to the purchaser had the Prohibited
Transfer been effected pursuant to and in compliance with the terms of paragraph
2 hereof. Such sale shall be made on the following terms and conditions:
(i) The price per share at which such shares are to be sold to the
Founder shall be equal to the price per share paid by the purchaser to the
Founder in the Prohibited Transfer.
(ii) Within 30 days after the later of the dates on which the
Shareholders desiring to sell (the "Selling Shareholders") (A) received notice
of the Prohibited Transfer or (B) otherwise became aware of the Prohibited
Transfer, the Selling Shareholders shall, if exercising the option created
hereby, deliver to the Founder the certificate or certificates representing
shares to be sold under this paragraph 4(b), each certificate to be properly
endorsed for transfer.
<PAGE> 5
(iii) The Founder shall, upon receipt of the certificate or
certificates for such shares, pay the aggregate purchase price therefor in cash
or by other means acceptable to the Selling Shareholder.
5. Miscellaneous.
5.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents made and to be performed entirely within the State of
California.
5.2 Amendment. Any provision may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by the written consent of (i) as to the
Company, only by the Company, (ii) as to the Shareholders, seventy-five percent
(75%) in interest of the Shares held by the Shareholders and their assignees,
pursuant to paragraph 5.3 hereof, and (iii) as to the Founders, fifty percent
(50%) in interest of the Common Stock held by the Founders, provided that any
Shareholder or any Founder may waive any of its rights hereunder without
obtaining the consent of any other Shareholder or Founder, respectively. Any
amendment or waiver effected in accordance with clauses (i), (ii) and (iii) of
this paragraph shall be binding upon the Shareholders, the Company and the
Founder in question and their respective successors and assigns.
5.3 Transfer of Co-Sale Rights. The Shareholders' rights of co-sale
under this Agreement may be assigned or otherwise conveyed to a transferee or
assignee of shares of Common Stock held by a Shareholder, who shall be
considered a "Shareholder" for purposes of this Agreement, provided that (a) the
Company is given written notice by such Shareholder at the time of or within a
reasonable time after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
co-sale rights are being assigned and (b) the transferee acquires Common Stock
in a private transaction.
5.4 Term. This Co-Sale Agreement shall terminate upon the earlier of (i)
the closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of the Company's Common Stock, (ii) the closing of
the Company's sale of all or substantially all of its assets or the acquisition
of the Company by another entity by means of merger or consolidation resulting
in the exchange of the outstanding shares of the Company's capital stock for
securities or consideration issued, or caused to be issued, by the acquiring
entity or its subsidiary and (iii) five (5) years from the date hereof.
5.5 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed effectively given upon
personal delivery or upon confirmed delivery by facsimile or telecopy, or on the
fifth day (or the tenth day if to a party with a foreign address) following
mailing by registered or certified mail, return receipt requested, postage
prepaid, addressed to the party to be notified as set forth on the signature
page hereof or at such other address as such party may designate by advance
written notice to the other parties hereto. Notwithstanding the foregoing, the
telephone notice permitted by paragraph 2(d) shall be effective at the time it
is given.
<PAGE> 6
5.6 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
5.7 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
5.8 Separability. Any invalidity, illegality, or limitation of the
enforceability with respect to any Shareholder of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason of
the law of any such Shareholder's domicile or otherwise, shall in no way affect
or impair the validity, legality, or enforceability of this Agreement with
respect to other Shareholders. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired.
5.9 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.
5.10 Legends. The Founders and the Shareholders agree that any shares of
Common Stock now or hereafter held by it may be stamped with appropriate legends
evidencing the terms of this Agreement.
5.11 Injunctive Relief. The parties to this Agreement acknowledge that
the remedy at law for the breach of the respective obligations hereunder is
inadequate and agree to be subject to injunctive and other equitable relief in
addition to any other remedies that may be available.
<PAGE> 7
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties as of the date first above written.
THE COMPANY:
CASEWARE, INC.
108 Pacifica, 2nd Floor
Irvine, California 92718-3332
Attn: President
By: /s/ Fred B. Cox
------------------------------------
Title: President
---------------------------------
THE SHAREHOLDERS:
NORWEST EQUITY PARTNERS, IV,
A MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners, General Partner
------------------------------------
By /s/ George J. Still
------------------------------------
George J. Still, General Partner
BRENTWOOD ASSOCIATES VI, L.P.
By: Brentwood VI Ventures L.P.,
------------------------------------
its General Partner
By /s/ G. Bradford Jones
------------------------------------
G. Bradford Jones, General Partner
ADVANCED TECHNOLOGY VENTURES III
By /s/ Jos C. Henkens
------------------------------------
Jos C. Henkens, General Partner
/s/ P. Andrews McLane
- ----------------------------------------
P. Andrews McLane
<PAGE> 8
THE FOUNDERS:
/s/ Fred Cox
- -----------------------------------------
Fred Cox, Co-Trustee, The Cox Living
Trust dated May 26, 1988
108 Pacifica, 2nd Floor
Irvine, California 92718-3332
/s/ Sol Zechter
- -----------------------------------------
Sol Zechter, Trustee, The Zechter
Family Trust dated July 18, 1985
108 Pacifica, 2nd Floor
Irvine, California 92718-3332
<PAGE> 9
Consent of Spouse:
I acknowledge that I have read the foregoing Agreement and that I know
its contents. I am aware that by its provisions if I and/or my spouse agree to
sell all or part of the shares of the Company held of record by either or both
of us, including my community interest in such shares, if any, co-sale rights
(as described in the Agreement) must be granted to the Shareholders by the
seller. I hereby agree that those shares and my interest in them, if any, are
subject to the provisions of the Agreement and that I will take no action at any
time to hinder operation of, or violate, the Agreement. I understand that the
parties to the foregoing Agreement relied on my promise herein when entering
into such Agreement.
/s/ Harriet Frost Cox
---------------------------------------
(Signature)
/s/ Sheila Zechter
---------------------------------------
(Signature)
<PAGE> 10
CONTINUUS SOFTWARE CORPORATION
AMENDMENT TO CO-SALE AGREEMENT
This Amendment to Co-Sale Agreement ("Amendment") is entered into as of
November 6, 1995, by and among Continuus Software Corporation, a California
corporation and formerly known as CaseWare, Inc. (the "Company"), Norwest Equity
Partners, IV, a Minnesota Limited Liability Company, Brentwood Associates VI,
L.P., Advanced Technology Ventures III and P. Andrews McLane (collectively, the
"Existing Shareholders"), Fred Cox, Trustee, and Sol Zechter, Trustee (each a
"Founder") and Accel IV L.P., Accel Keiretsu L.P., Accel Investors `95 L.P.,
Ellmore C. Patterson Partners and Norwest Equity Partners, V, a Minnesota
Limited Liability Company (each a "New Shareholder"). The Amendment amends that
certain Co-Sale Agreement dated as of March 4, 1994 (the "Agreement").
Capitalized terms contained herein shall have the meanings set forth in the
Agreement.
WHEREAS, the Company has entered into a Stock Purchase Agreement of even
date herewith (the "Stock Purchase Agreement") providing for the issuance and
sale of shares of Series C Preferred Stock of the Company (the "Financing").
WHEREAS, the Company and the Existing Shareholders desire to amend the
Agreement as set forth below; and
WHEREAS, the execution of this Amendment by the parties is a condition
to the Financing as set forth in Section 4.7 of the Stock Purchase Agreement.
NOW, THEREFORE, In consideration of the foregoing premises and the
mutual promises set forth below, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties to this Amendment agree
as follows:
1. The definition of "Shareholders" set forth in the preamble to the
Agreement is hereby amended to mean the parties listed on the attached Schedule
A.
2. The definition of "Shares" set forth in Section 1(a) of the Agreement
is hereby amended to read in its entirety as follows:
"(a) "Shares" shall mean shares of the Company's Common Stock, Series A
Preferred Stock, Series B Preferred Stock and other securities of the
Company now owned or subsequently acquired by the Founders."
3. The definition of "Preferred Stock" set forth in Section 1(b) of the
Agreement is hereby amended to read in its entirety as follows:
"(b) "Preferred Stock" shall mean the Company's outstanding Series A,
Series B and Series C Preferred Stock."
4. "Shares" appearing therein with the phrase "Common and Preferred
Stock."
<PAGE> 11
5. Section 5.3 of the Agreement is hereby amended by replacing all
references to "Common Stock" appearing therein with the phrase "Common and
Preferred Stock."
6. This Amendment shall be deemed an amendment to the Agreement and
shall become effective when executed by the Company, the undersigned Existing
Shareholders and New Shareholders. Except as expressly amended pursuant to this
Amendment, the Agreement shall continue in full force and effect.
7. This Amendment shall be governed by the laws of the State of
California as applicable to contracts entered into and performed entirely within
the State of California.
8. This Amendment may be executed in counterparts, each of which shall
be enforceable against the party actually executing such counterpart, and which
together shall constitute one instrument.
[The Remainder of this Page is Intentionally Left Blank]
<PAGE> 12
This Amendment is hereby executed as of the date first above written.
THE COMPANY:
CONTINUUS SOFTWARE CORPORATION
By: /s/ John Wark
-------------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
THE EXISTING SHAREHOLDERS:
NORWEST EQUITY PARTNERS, IV,
A MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners
-------------------------------------------
General Partner
By: /s/ Kevin G. Hall
-------------------------------------------
Kevin G. Hall, Partner
BRENTWOOD ASSOCIATES VI, L.P.
By: Brentwood VI Ventures L.P.,
-------------------------------------------
its General Partner
By: /s/ G. Bradford Jones
-------------------------------------------
G. Bradford Jones, General Partner
ADVANCED TECHNOLOGY VENTURES III
By: /s/ Jos C. Henkens
-------------------------------------------
Jos C. Henkens, General Partner
/s/ P. Andrews McLane
- -----------------------------------------------
P. Andrews McLane
<PAGE> 13
THE FOUNDERS:
/s/ Fred B. Cox
- -----------------------------------------------
Fred Cox, Co-Trustee,
The Cox Living Trust dated 5/26/88
/s/ Harriet Frost Cox
- -----------------------------------------------
Harriet Frost Cox, Co-Trustee,
The Cox Living Trust dated 5/26/88
/s/ Sol Zechter
- -----------------------------------------------
Sol Zechter, Trustee,
The Zechter Family Trust
dated July 18, 1995
NEW INVESTORS:
ACCEL IV L.P.
By: Accel IV Associates L.P.
-------------------------------------------
Its General Partner
By: /s/ Arthur C. Patterson
-------------------------------------------
General Partner
ACCEL KEIRETSU L.P.
By: Accel Partners & Co., Inc.
-------------------------------------------
Its General Partners
By: /s/ Arthur C. Patterson
-------------------------------------------
Its:
-------------------------------------------
13
<PAGE> 14
ACCEL INVESTORS `95 L.P.
By: /s/ Arthur C. Patterson
-------------------------------------------
General Partner
ELLMORE C. PATTERSON PARTNERS
By: /s/ Arthur C. Patterson
-------------------------------------------
General Partner
NORWEST EQUITY PARTNERS, V,
A MINNESOTA LIMITED LIABILITY PARTNERSHIP
By: Itasca Partners IV, L.L.P.
-------------------------------------------
General Partner
By: /s/ Kevin G. Hall
-------------------------------------------
Kevin G. Hall, Partner
14
<PAGE> 15
SCHEDULE A
List of Shareholders
Norwest Equity Partners, IV,
a Minnesota Limited Liability Partnership
Brentwood Associates, VI, L.P.
Advanced Technology Ventures III
P. Andrews McLane
Fred Cox, Co-Trustee,
Harriet Frost Cox, Co-Trustee,
The Cox Living Trust dated 5/26/88
Sol Zechter, Trustee,
The Zechter Family Trust
dated July 18, 1995
Norwest Equity Partners, V,
a Minnesota Limited Liability Partnership
Accel IV L.P.
Accel Keiretsu L.P.
Accel Investors `95 L.P.
Ellmore C. Patterson Partners
<PAGE> 16
CONTINUUS SOFTWARE CORPORATION
SECOND AMENDMENT TO CO-SALE AGREEMENT
This Second Amendment to Co-Sale Agreement ("Second Amendment") is
entered into as of May 30, 1996, by and among Continuus Software Corporation, a
California corporation (the "Company"), Norwest Equity Partners, IV, a Minnesota
Limited Partnership, Norwest Equity Partners, V, a Minnesota Limited
Partnership, Brentwood Associates VI, L.P., Advanced Technology Ventures III,
Accel IV L.P., Accel Keiretsu L.P., Accel Investors `95 L.P., Ellmore C.
Patterson Partners, P. Andrews McLane, Comdisco, Inc. and Kevin J. McQuillan
(each a "Shareholder") and The Cox Living Trust dated May 26, 1988 and The
Zechter Family Trust dated March 6, 1996 (each a "Founder"). The Second
Amendment amends that certain Co-Sale Agreement dated as of March 4, 1994, as
subsequently amended by that certain Amendment to Co-Sale Agreement dated as of
November 16, 1995 between the Company and the parties set forth therein (the
Co-Sale Agreement, as amended, is referred to herein as the "Agreement").
WHEREAS, the Company has entered into a Stock Purchase Agreement of even
date herewith (the "Stock Purchase Agreement") providing for the issuance and
sale of shares of Series D Preferred Stock of the Company and Warrants to
purchase shares of Common Stock of the Company (the "Financing").
WHEREAS, the Company and the Shareholders desire to amend the Agreement
as set forth below; and
WHEREAS, the execution of this Amendment by the parties is a condition
to the Financing as set forth in Section 4.8 of the Stock Purchase Agreement.
NOW, THEREFORE, In consideration of the foregoing premises and the
mutual promises set forth below, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties to this Amendment agree
as follows:
1. The definition of "Shareholders" set forth in the preamble to the
Agreement is hereby amended to mean the parties listed on the attached Schedule
A.
2. The definition of "Shares" set forth in Section 1(a) of the Agreement
is hereby amended to read in its entirety as follows:
"(a) "Shares" shall mean shares of the Company's Common Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock and other securities of the Company now owned
or subsequently acquired by the Founders."
<PAGE> 17
3. The definition of "Preferred Stock" set forth in Section 1(b) of the
Agreement is hereby amended to read in its entirety as follows:
"(b) "Preferred Stock" shall mean the Company's outstanding Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock."
4. This Second Amendment shall be deemed an amendment to the Agreement
and shall become effective when executed by the Company and the undersigned
Shareholders. Except as expressly amended pursuant to this Second Amendment, the
Agreement shall continue in full force and effect.
5. This Second Amendment shall be governed by the laws of the State of
California as applicable to contracts entered into and performed entirely within
the State of California.
6. This Second Amendment may be executed in two or more counterparts,
each of which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
[The Remainder of this Page is Intentionally Left Blank]
This Amendment is hereby executed as of the date first above written.
THE COMPANY:
CONTINUUS SOFTWARE CORPORATION
By: /s/ John Wark
-------------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
SHAREHOLDERS:
NORWEST EQUITY PARTNERS, IV,
A MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners
-------------------------------------------
General Partner
<PAGE> 18
By: /s/ Kevin G. Hall
-------------------------------------------
Kevin G. Hall, Partner
NORWEST EQUITY PARTNERS, V,
A MINNESOTA LIMITED PARTNERSHIP
BY: ITASCA PARTNERS IV, L.L.P.
-------------------------------------------
GENERAL PARTNER
By: /s/ Kevin G. Hall
-------------------------------------------
Kevin G. Hall, Partner
BRENTWOOD ASSOCIATES VI, L.P.
By: Brentwood VI Ventures L.P.,
-------------------------------------------
its General Partner
By: /s/ G. Bradford Jones
-------------------------------------------
G. Bradford Jones, General Partner
ADVANCED TECHNOLOGY VENTURES III
By: /s/ Jos C. Henkens
-------------------------------------------
Jos C. Henkens, General Partner
/s/ P. Andrews McLane
- -----------------------------------------------
P. ANDREWS MCLANE
ACCEL IV L.P.
By: Accel IV Associates L.P.
-------------------------------------------
Its General Partner
By: /s/ G. Carter Sednaoui
-------------------------------------------
General Partner
<PAGE> 19
ACCEL KEIRETSU L.P.
By: Accel Partners & Co., Inc.
-------------------------------------------
Its General Partners
By: /s/ G. Carter Sednaoui
-------------------------------------------
Its:
------------------------------------------
ACCEL INVESTORS `95 L.P.
By: /s/ G. Carter Sednaoui
-------------------------------------------
General Partner
ELLMORE C. PATTERSON PARTNERS
By: /s/ Ellmore C. Patterson
-------------------------------------------
General Partner
COMDISCO, INC.
By: /s/ Jill C. Hanses
-------------------------------------------
Its: Assistant Vice President
------------------------------------------
/s/ Kevin J. McQuillan
- -----------------------------------------------
KEVIN J. MCQUILLAN
<PAGE> 20
THE FOUNDERS:
THE COX LIVING TRUST DATED MAY 26, 1988
/s/ Fred B. Cox
- -----------------------------------------------
Fred Cox, Co-Trustee
/s/ Harriet Frost Cox
- -----------------------------------------------
Harriet Frost Cox, Co-Trustee
THE ZECHTER FAMILY TRUST DATED MARCH 6, 1996
/s/ Sol Zechter
- -----------------------------------------------
Sol Zechter, Trustee
<PAGE> 21
SCHEDULE A
List of Shareholders
Norwest Equity Partners, IV,
a Minnesota Limited Partnership
Norwest Equity Partners, V,
A Minnesota Limited Liability Partnership
Brentwood Associates VI, L.P.
Advanced Technology Ventures III
P. Andrews McLane
The Cox Living Trust dated May 26, 1988
Fred Cox, Co-Trustee,
Harriet Frost Cox, Co-Trustee,
The Zechter Family Trust dated March 6, 1996
Sol Zechter, Trustee
Accel IV L.P.
Accel Keiretsu L.P.
Accel Investors `95 L.P.
Ellmore C. Patterson Partners
Comdisco, Inc.
Kevin J. McQuillan
<PAGE> 22
CONTINUUS SOFTWARE CORPORATION
THIRD AMENDMENT TO CO-SALE AGREEMENT
This Third Amendment to Co-Sale Agreement ("Third Amendment") is entered
into as of May 19, 1997, by and among Continuus Software Corporation, a
California corporation (the "Company"), Norwest Equity Partners, IV, a Minnesota
Limited Partnership, Norwest Equity Partners, V, a Minnesota Limited
Partnership, Brentwood Associates VI, L.P., Advanced Technology Ventures III,
Accel IV L.P., Accel Keiretsu L.P., Accel Investors `95 L.P., Ellmore C.
Patterson Partners, P. Andrews McLane, Comdisco, Inc. and Kevin J. McQuillan
(each a "Shareholder") and The Cox Living Trust dated May 26, 1988 and The
Zechter Family Trust dated March 6, 1996 (each a "Founder"). The Third Amendment
amends that certain Co-Sale Agreement dated as of March 4, 1994, as subsequently
amended by that certain Amendment to Co-Sale Agreement dated as of November 16,
1995 between the Company and the parties set forth therein and by that certain
Second Amendment to Co-Sale Agreement dated as of May 30, 1996 between the
Company and the parties set forth therein (the Co-Sale Agreement, as amended, is
referred to herein as the "Agreement").
WHEREAS, the Company has entered into a Stock Purchase Agreement of even
date herewith (the "Stock Purchase Agreement") providing for the issuance and
sale of shares of Series E Preferred Stock of the Company and Warrants to
purchase shares of Series E Preferred Stock of the Company (the "Financing").
WHEREAS, the Company and the Shareholders desire to amend the Agreement
as set forth below; and
WHEREAS, the execution of this Amendment by the parties is a condition
to the Financing as set forth in Section 4.8 of the Stock Purchase Agreement.
NOW, THEREFORE, In consideration of the foregoing premises and the
mutual promises set forth below, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties to this Amendment agree
as follows:
1. The definition of "Shareholders" set forth in the preamble to the
Agreement is hereby amended to mean the parties listed on the attached Schedule
A.
2. The definition of "Shares" set forth in Section 1(a) of the Agreement
is hereby amended to read in its entirety as follows:
"(a) "Shares" shall mean shares of the Company's Common Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock and other
securities of the Company now owned or subsequently acquired by the
Founders."
<PAGE> 23
3. The definition of "Preferred Stock" set forth in Section 1(b) of the
Agreement is hereby amended to read in its entirety as follows:
"(b) "Preferred Stock" shall mean the Company's outstanding Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock."
4. This Third Amendment shall be deemed an amendment to the Agreement
and shall become effective when executed by the Company and the undersigned
Shareholders. Except as expressly amended pursuant to this Third Amendment, the
Agreement shall continue in full force and effect.
5. This Third Amendment shall be governed by the laws of the State of
California as applicable to contracts entered into and performed entirely within
the State of California by California residents.
6. This Third Amendment may be executed in two or more counterparts,
each of which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
[The Remainder of this Page is Intentionally Left Blank]
This Third Amendment is hereby executed as of the date first above
written.
THE COMPANY:
CONTINUUS SOFTWARE CORPORATION
By: /s/ John Laskey
-------------------------------------------
Title: Vice President, Finance
----------------------------------------
SHAREHOLDERS:
NORWEST EQUITY PARTNERS, IV,
A MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners
-------------------------------------------
General Partner
<PAGE> 24
By: /s/ Kevin G. Hall
-------------------------------------------
Kevin G. Hall, Partner
NORWEST EQUITY PARTNERS, V,
A MINNESOTA LIMITED PARTNERSHIP
BY: ITASCA PARTNERS IV, L.L.P.
-------------------------------------------
GENERAL PARTNER
By: /s/ Kevin G. Hall
-------------------------------------------
Kevin G. Hall, Partner
BRENTWOOD ASSOCIATES VI, L.P.
By: Brentwood VI Ventures L.P.,
-------------------------------------------
its General Partner
By: /s/ G. Bradford Jones
-------------------------------------------
G. Bradford Jones, General Partner
ADVANCED TECHNOLOGY VENTURES III
By: /s/ Jos C. Henkens
-------------------------------------------
Jos C. Henkens, General Partner
ACCEL IV L.P.
By: Accel IV Associates L.P.
-------------------------------------------
Its General Partner
By: /s/ G. Carter Sednaoui
-------------------------------------------
General Partner
ACCEL KEIRETSU L.P.
By: Accel Partners & Co., Inc.
-------------------------------------------
Its General Partners
<PAGE> 25
By: /s/ G. Carter Sednaoui
-------------------------------------------
Its: Chief Financial Officer
------------------------------------------
ACCEL INVESTORS `95 L.P.
By: /s/ G. Carter Sednaoui
-------------------------------------------
General Partner
ELLMORE C. PATTERSON PARTNERS
By: /s/ Arthur C. Patterson
-------------------------------------------
General Partner
COMDISCO, INC.
By: /s/ Jill C. Hanses
-------------------------------------------
Its: Assistant Vice President
-----------------------------------------
<PAGE> 26
/s/ P. Andrews McLane
- -----------------------------------------------
P. ANDREWS MCLANE
/s/ Kevin J. McQuillan
- -----------------------------------------------
KEVIN J. MCQUILLAN
- -----------------------------------------------
GLEN HOWARD
THE FOUNDERS:
THE COX LIVING TRUST DATED MAY 26, 1988
/s/ Fred B. Cox
- -----------------------------------------------
Fred Cox, Co-Trustee
/s/ Harriet Frost Cox
- -----------------------------------------------
Harriet Frost Cox, Co-Trustee
THE ZECHTER FAMILY TRUST DATED MARCH 6, 1996
/s/ Sol Zechter
- -----------------------------------------------
Sol Zechter, Trustee
<PAGE> 27
/s/ Sol Zechter
- -----------------------------------------------
THE SOL ZECHTER ANNUITY TRUST,
Sol Zechter, Trustee
/s/ Sol Zechter
- -----------------------------------------------
THE SHEILA CLAIRE ZECHTER
ANNUITY TRUST
Sol Zechter, Trustee
<PAGE> 28
SCHEDULE A
List of Shareholders
Norwest Equity Partners, IV,
a Minnesota Limited Partnership
Norwest Equity Partners, V,
A Minnesota Limited Liability Partnership
Brentwood Associates VI, L.P.
Advanced Technology Ventures III
P. Andrews McLane
The Cox Living Trust dated May 26, 1988
Fred Cox, Co-Trustee,
Harriet Frost Cox, Co-Trustee,
The Sol Zechter Annuity Trust,
Sol Zechter, Trustee
The Sheila Claire Zechter Annuity Trust,
Sol Zechter, Trustee
Accel IV L.P.
Accel Keiretsu L.P.
Accel Investors `95 L.P.
Ellmore C. Patterson Partners
Comdisco, Inc.
Kevin J. McQuillan
<PAGE> 1
EXHIBIT 10.12
PRESIDENT/CHIEF EXECUTIVE OFFICER
CHANGE IN CONTROL
SEVERANCE BENEFITS AGREEMENT
THIS PRESIDENT/CHIEF EXECUTIVE OFFICER CHANGE IN CONTROL SEVERANCE
BENEFITS AGREEMENT (the "AGREEMENT") is entered into this 31st day of May, 1997
between John Wark ("EXECUTIVE") and CONTINUUS SOFTWARE CORPORATION, a California
corporation (the "COMPANY"). This Agreement is intended to provide Executive
with the compensation and benefits described herein upon the occurrence of
specific events. Certain capitalized terms used in this Agreement are defined in
Article V.
The Company and Executive hereby agree as follows:
ARTICLE I
EMPLOYMENT BY THE COMPANY
1.1 Executive is currently employed by the Company as the President
and/or Chief Executive Officer.
1.2 The Company and Executive wish to set forth the compensation and
benefits which Executive shall be entitled to receive in the event Executive's
employment with the Company is terminated in connection with a Change in Control
of the Company under the circumstances described herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall remain in full force and effect so long as
Executive is employed by the Company; provided, however, that Executive's rights
to payments and benefits under Article II shall continue until the Company's
obligation to provide such payments and benefits is satisfied.
1.5 This Agreement shall supersede any other agreement relating to
Executive's employment or severance in connection with a Change in Control of
the Company.
ARTICLE II
SEVERANCE BENEFITS UPON CHANGE IN CONTROL
2.1 SEVERANCE BENEFITS. If Executive's employment terminates due to an
Involuntary Termination Without Cause or a Constructive Termination at any time
after the date of execution of this Agreement and within thirteen (13) months of
a Change in Control of the Company, such termination of employment will be
deemed a Covered Termination. A Covered Termination
1.
<PAGE> 2
entitles Executive to receive the following benefits set forth in Sections 2.2
through 2.5 inclusive.
2.2 BASE SALARY CONTINUATION. Executive shall receive continuation of
Base Salary for twelve (12) months following the date of a Covered Termination.
Such salary continuation payments shall be made in accordance with standard
Company payroll practices or such shorter period as determined by the Company in
its sole discretion.
2.3 TARGET BONUS. Within thirty (30) following Executive's Covered
Termination, Executive shall be paid his or her target annual bonus for the year
in which the Covered Termination occurred, determined with reference to any
bonus plan of the Company then in effect, or, if no bonus plan is then in
effect, with reference to Executive's offer letter to join the Company.
2.4 ACCELERATION OF STOCK OPTION VESTING. Notwithstanding the language
in Executive's option agreement(s) or any other language to the contrary, the
vesting of Executive's stock option(s) shall accelerate and immediately become
vested and exercisable with respect to those option shares which would have
vested if Executive had continued to render services to the Company for
twenty-four (24) months following the date of Executive's Covered Termination.
2.5 COBRA CONTINUATION. Executive and Executive's covered dependents
will be eligible to continue their health care benefit coverage as permitted by
COBRA (Internal Revenue Code Section 4980B) at no cost to Executive for the
twelve (12)-month period following the Covered Termination; provided, however,
that payment of such COBRA premiums by the Company shall cease upon Executive
commencing employment with a new employer which provides comparable benefits to
Executive and Executive's covered dependents. Nothing in this Section is
intended to limit the availability of COBRA to Executive (subject to Executive
paying all associated premiums and costs) beyond the twelve (12)-month period
following Executive's Covered Termination.
2.6 MITIGATION. Except as otherwise specifically provided herein,
Executive shall not be required to mitigate damages or the amount of any payment
provided under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for under this Agreement be reduced by
any compensation earned by Executive as a result of employment by another
employer or by any retirement benefits received by Executive after the date of
the Covered Termination, or otherwise.
ARTICLE III
LIMITATIONS AND CONDITIONS ON BENEFITS
3.1 WITHHOLDING OF TAXES. The Company shall withhold appropriate
federal, state, local (and foreign, if applicable) income and employment taxes
from any payments hereunder.
3.2 EMPLOYEE AGREEMENT AND RELEASE PRIOR TO RECEIPT OF BENEFITS. Upon
the occurrence of a Covered Termination, and prior to the receipt of any
benefits under this Agreement on account of such Covered Termination, Executive
shall execute the Employee Agreement and Release (the "Release") in the form
attached hereto as Exhibit A. Such Release
2.
<PAGE> 3
shall specifically relate to all of Executive's rights and claims in existence
at the time of such execution and shall confirm Executive's obligations under
the Company's standard form of proprietary information and inventions agreement.
It is understood that Executive has twenty-one (21) days to consider whether to
execute such Release, and Executive may revoke such Release within seven (7)
business days after execution. In the event Executive does not execute such
Release within the twenty-one (21)-day period, or if Executive revokes such
Release within the subsequent seven (7)-business day period, no benefits shall
be payable under this Agreement and this Agreement shall be null and void.
ARTICLE IV
OTHER RIGHTS AND BENEFITS
4.1 NONEXCLUSIVITY. Nothing in the Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination shall be payable in accordance with such plan, policy,
practice or program.
4.2 PARACHUTE PAYMENTS. In the event that any amount or benefit received
or to be received by Executive pursuant to this Agreement would constitute an
"excess parachute payment" subject to excise tax under Internal Revenue Code
Section 4999, such amount or benefit may be reduced, in the order of priority
set forth below, so that after such reduction, if any, Executive receives the
largest after-tax payment:
(a) first, the Target Bonus (as set forth in Section 2.3 of this
Agreement), shall be reduced;
(b) then, the continuation of Base Salary (as set forth in
Section 2.2 of this Agreement) shall next be reduced; and
(c) finally, the acceleration of stock options (as set forth in
Section 2.4 of this Agreement) shall be reduced.
ARTICLE V
DEFINITIONS
For purposes of the Agreement, the following terms are defined as
follows:
5.1 "BASE SALARY" means Executive's annual base salary in effect during
the last regularly scheduled payroll period immediately preceding any
termination of Executive's employment.
3.
<PAGE> 4
5.2 "CAUSE" means termination of Executive's employment with the Company for any
of the following reasons as determined in good faith by a majority of the
members of the Company's Board of Directors (the "Board") which is not cured
within fifteen (15) days following delivery of written notice of such infraction
to Executive:
(a) an intentional act which materially injures the Company;
(b) an intentional refusal or failure to follow lawful and
reasonable directions of the Board or an individual to whom participant reports
(as appropriate);
(c) a willful and habitual neglect of duties; or
(d) a conviction of a felony involving moral turpitude which is
reasonably likely to inflict or has inflicted material injury on the Company.
5.3 "CHANGE IN CONTROL" (1) a sale of all or substantially all of the
assets of the Company; (2) a merger or consolidation in which the Company is not
the surviving corporation; (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's common stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or (4) the
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any comparable successor provisions (excluding any employee benefit
plan, or related trust, sponsored or maintained by the Company or any Affiliate
of the Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of directors.
5.4 "COVERED TERMINATION" means an Involuntary Termination Without Cause
or a Constructive Termination within thirteen (13) months of a Change in
Control.
5.5 "INVOLUNTARY TERMINATION WITHOUT CAUSE" means Executive's dismissal
or discharge other than for Cause. The termination of Executive's employment as
a result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
5.6 "CONSTRUCTIVE TERMINATION" means that Executive voluntarily
terminates employment after any of the following are undertaken without
Executive's express written consent:
(a) the assignment to Executive of any duties or responsibilities
which result in a diminution or adverse change of Executive's position, status
or circumstances of employment; provided, however, that a mere change in
Executive's title or reporting relationship shall not constitute a Constructive
Termination;
(b) a reduction by the Company in Executive's Base Salary;
4.
<PAGE> 5
(c) any failure by the Company to continue in effect any benefit
plan or arrangement, including incentive plans or plans to receive securities of
the Company, in which Executive is participating (hereinafter referred to as
"Benefit Plans"), or the taking of any action by the Company which would
adversely affect Executive's participation in or reduce Executive's benefits
under any Benefit Plans or deprive Executive of any fringe benefit then enjoyed
by Executive, provided, however, that Executive's termination is not deemed a
Constructive Termination if the Company offers a range of benefit plans and
programs which, taken as a whole, are comparable to the Benefit Plans, as
determined in good faith by the Executive;
(d) a relocation of Executive or the Company's principal business
offices to a location more than thirty (30) miles from the location at which
Executive performs duties, except for required travel by Executive on the
Company's business to an extent substantially consistent with Executive's
business travel obligations;
(e) any breach by the Company of any provision of this Agreement
or any other material agreement between Executive and the Company concerning
Executive's employment; or
(f) any failure by the Company to obtain the assumption of this
Agreement or any other material agreement between Executive and the Company
concerning Executive's employment by any successor or assign of the Company.
ARTICLE VI
GENERAL PROVISIONS
6.1 EMPLOYMENT STATUS. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
6.2 NOTICES. Any notices provided hereunder must be in writing and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
6.3 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
5.
<PAGE> 6
6.4 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
6.5 ARBITRATION. Unless otherwise prohibited by law or specified below,
all disputes, claims and causes of action, in law or equity, arising from or
relating to this Agreement or its enforcement, performance, breach, or
interpretation shall be resolved solely and exclusively by final and binding
arbitration held in Santa Ana, California through Judicial Arbitration &
Mediation Services/Endispute ("JAMS") under the then existing JAMS arbitration
rules. However, nothing in this section is intended to prevent either party from
obtaining injunctive relief in court to prevent irreparable harm pending the
conclusion of any such arbitration. Each party in any such arbitration shall be
responsible for its own attorneys fees, costs and necessary disbursement;
provided, however, that in the event one party refuses to arbitrate and the
other party seeks to compel arbitration by court order, if such other party
prevails, it shall be entitled to recover reasonable attorneys fees, costs and
necessary disbursements. Pursuant to California Civil Code Section 1717, each
party warrants that it was represented by counsel in the negotiation and
execution of this Agreement, including the attorneys fees provision herein.
6.6 COMPLETE AGREEMENT. This Agreement, including Exhibit A, constitutes
the entire agreement between Executive and the Company and it is the complete,
final, and exclusive embodiment of their agreement with regard to this subject
matter. It is entered into without reliance on any promise or representation
other than those expressly contained herein.
6.7 AMENDMENT OR TERMINATION OF AGREEMENT. This Agreement may be changed
or terminated only upon the mutual written consent of the Company and Executive.
The written consent of the Company to a change or termination of this Agreement
must be signed by a member of the Compensation Committee of the Board after such
change or termination has been approved by the Board.
6.8 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
6.9 HEADINGS. The headings of the Articles and Sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
hereof nor to affect the meaning thereof.
6.10 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors, assigns, heirs, executors and administrators,
except that Executive may not assign any duties hereunder and may not assign any
rights hereunder without the written consent of the Company, which consent shall
not be withheld unreasonably.
6.11 ATTORNEY FEES. If Executive brings any action to enforce his rights
hereunder, Executive shall be entitled to recover reasonable attorneys' fees and
costs incurred in connection with such action, regardless of the outcome of such
action.
6.
<PAGE> 7
6.12 CHOICE OF LAW. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
6.13 NON-PUBLICATION. The parties mutually agree not to disclose
publicly the terms of this Agreement except to the extent that disclosure is
mandated by applicable law or to respective advisors (e.g., attorneys,
accountants).
6.14 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the
text of the Agreement and any summary, description or other information
regarding the Agreement, the text of the Agreement shall control.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year written above.
CONTINUUS SOFTWARE CORPORATION EXECUTIVE
By: /s/ John Laskey /s/ John Wark
------------------------------------- ---------------------------------
Name: John J. Laskey
-----------------------------------
Title: Vice President, Finance
----------------------------------
Exhibit A: Employee Agreement and Release
7.
<PAGE> 8
EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the
foregoing agreement.
I hereby confirm my obligations under the Company's proprietary
information and inventions agreement.
I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.
Except as otherwise set forth in this Agreement, I hereby release,
acquit and forever discharge the Company, its parents and subsidiaries, and
their officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys fees, damages, indemnities
and obligations of every kind and nature, in law, equity, or otherwise, known
and unknown, suspected and unsuspected, disclosed and undisclosed (other than
any claim for indemnification I may have as a result of any third party action
against me based on my employment with the Company), arising out of or in any
way related to agreements, events, acts or conduct at any time prior to and
including the date seven (7) days preceding the Effective Date of this
Agreement, including but not limited to: all such claims and demands directly or
indirectly arising out of or in any way connected with my employment with the
Company or the termination of that employment, including but not limited to,
claims of intentional and negligent infliction of emotional distress, any and
all tort claims for personal injury, claims or demands related to salary,
bonuses, commissions, stock, stock options, or any other ownership interests in
the Company, vacation pay, fringe benefits, expense reimbursements, severance
pay, or any other form of compensation; claims pursuant to any federal, state or
local law or cause of action including, but not limited to, the federal Civil
Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act
of 1967, as amended ("ADEA"); the federal Americans with Disabilities Act of
1990; the California Fair Employment and Housing Act, as amended; tort law;
contract law; wrongful discharge; discrimination; fraud; defamation; emotional
distress; and breach of the implied covenant of good faith and fair dealing;
provided, however, that nothing in this paragraph shall be construed in any way
to release the Company from its obligation to indemnify me pursuant to the
Company's Indemnification Agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under ADEA. I also acknowledge that the consideration
given for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the ADEA,
that: (A) my waiver and release do not apply to any rights or claims that may
arise after the Effective Date of this Agreement; (B) I have the right to
consult with an attorney prior to executing this Agreement; (C) I have
twenty-one (21) days to consider this Agreement (although I may choose to
voluntarily execute this Agreement earlier); (D) I have seven (7) days following
the execution of this Agreement by the parties to revoke the Agreement; and (E)
this Agreement shall not be effective until the date upon which the revocation
period has expired, which shall be the eighth day after this Agreement is
executed by me, provided that the Company has also executed this Agreement by
that date (the "Effective Date").
CONTINUUS SOFTWARE CORPORATION EXECUTIVE
By: /s/ John Laskey /s/ John Wark
------------------------------------- ---------------------------------
Title: Vice President, Finance Date: May 31, 1997
---------------------------------- ---------------------------
1.
<PAGE> 1
EXHIBIT 10.13
EXECUTIVE CHANGE IN CONTROL
SEVERANCE BENEFITS AGREEMENT
THIS EXECUTIVE CHANGE IN CONTROL SEVERANCE BENEFITS AGREEMENT (the
"AGREEMENT") is entered into this ____ day of _____________, 19___ between
_____________________ ("EXECUTIVE") and CONTINUUS SOFTWARE CORPORATION, a
California corporation (the "COMPANY"). This Agreement is intended to provide
Executive with the compensation and benefits described herein upon the
occurrence of specific events. Certain capitalized terms used in this Agreement
are defined in Article V.
The Company and Executive hereby agree as follows:
ARTICLE I
Employment by the Company
1.1 Executive is currently employed by the Company.
1.2 The Company and Executive wish to set forth the compensation and
benefits which Executive shall be entitled to receive in the event Executive's
employment with the Company is terminated in connection with a Change in Control
of the Company under the circumstances described herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall remain in full force and effect so long as
Executive is employed by the Company; provided, however, that Executive's rights
to payments and benefits under Article II shall continue until the Company's
obligation to provide such payments and benefits is satisfied.
1.5 This Agreement shall supersede any other agreement relating to
Executive's employment or severance in connection with a Change in Control of
the Company.
ARTICLE II
SEVERANCE BENEFITS UPON CHANGE IN CONTROL
2.1 SEVERANCE BENEFITS. If Executive's employment terminates due to an
Involuntary Termination Without Cause or a Constructive Termination at any time
after the date of execution of this Agreement and within thirteen (13) months of
a Change in Control of the Company, such termination of employment will be
deemed a Covered Termination. A Covered Termination entitles Executive to
receive the following benefits set forth in Sections 2.2 through 2.5 inclusive.
1.
<PAGE> 2
2.2 BASE SALARY CONTINUATION. In the sole discretion of Executive,
Executive shall receive continuation of his or her Base Salary for either six
(6) months or nine (9) months following the date of a Covered Termination. If
Executive elects to receive six (6) months Base Salary continuation, then (A)
Executive's target bonus payment shall be determined in accordance with Section
2.3(b) of this Agreement and (B) Executive's stock options shall accelerate in
accordance with the provisions of Section 2.4(b) of this Agreement; whereas if
Executive elects to receive nine (9) months Base Salary continuation, then (X)
Executive's target bonus payment shall be determined in accordance with Section
2.3(a) of this Agreement and (Y) Executive's stock options shall accelerate in
accordance with the provisions of Section 2.4(a) of this Agreement. Without
regard to the length of such Base Salary continuation, such salary continuation
payments shall be made in accordance with standard Company payroll practices or
such shorter period as determined by the Company in its sole discretion.
2.3 TARGET BONUS. Payment shall be made within thirty (30) days
following the Covered Termination in accordance with the following:
(a) In the event Executive elects to receive nine (9) months Base
Salary continuation in accordance with the provision of Section 2.2 of this
Agreement, then Executive shall receive nine-twelfths (9/12) of his or her
annual bonus, determined with reference to any bonus plan of the Company then in
effect, or, if no bonus plan is then in effect, with reference to Executive's
offer letter to join the Company.
(b) In the event Executive elects to receive six (6) months Base
Salary continuation in accordance with the provision of Section 2.2 of this
Agreement, then Executive shall receive six-twelfths (6/12) of his or her annual
bonus, determined with reference to any bonus plan of the Company then in
effect, or, if no bonus plan is then in effect, with reference to Executive's
offer letter to join the Company.
2.4 ACCELERATION OF STOCK OPTION VESTING.
(a) In the event Executive elects to receive nine (9) months Base
Salary continuation in accordance with the provision of Section 2.2 of this
Agreement, then notwithstanding the language in Executive's option agreement(s)
or any other language to the contrary, the vesting of Executive's stock
option(s) shall accelerate and immediately become vested and exercisable with
respect to those option shares which would have vested if Executive had
continued to render services to the Company for eighteen (18) months following
the date of Executive's Covered Termination.
(b) In the event Executive elects to receive six (6) months Base
Salary continuation in accordance with the provision of Section 2.2 of this
Agreement, then notwithstanding the language in Executive's option agreement(s)
or any other language to the contrary, the vesting of Executive's stock
option(s) shall accelerate and immediately become vested and exercisable with
respect to those option shares which would have vested if Executive had
continued to render services to the Company for twenty-four (24) months
following the date of Executive's Covered Termination.
2.
<PAGE> 3
2.5 COBRA CONTINUATION. Executive and Executive's covered dependents
will be eligible to continue their health care benefit coverage as permitted by
COBRA (Internal Revenue Code Section 4980B) at no cost to Executive for the six
(6) or nine (9)-month period in which Executive elected to receive Base Salary
continuation; provided, however, that payment of such COBRA premiums by the
Company shall cease upon Executive commencing employment with a new employer
which provides comparable benefits to Executive and Executive's covered
dependents. Nothing in this Section is intended to limit the availability of
COBRA to Executive (subject to Executive paying all associated premiums and
costs) beyond the six (6) or nine (9)-month period, respectively, following
Executive's Covered Termination.
2.6 MITIGATION. Except as otherwise specifically provided herein,
Executive shall not be required to mitigate damages or the amount of any payment
provided under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for under this Agreement be reduced by
any compensation earned by Executive as a result of employment by another
employer or by any retirement benefits received by Executive after the date of
the Covered Termination, or otherwise.
ARTICLE III
LIMITATIONS AND CONDITIONS ON BENEFITS
3.1 WITHHOLDING OF TAXES. The Company shall withhold appropriate
federal, state, local (and foreign, if applicable) income and employment taxes
from any payments hereunder.
3.2 EMPLOYEE AGREEMENT AND RELEASE PRIOR TO RECEIPT OF BENEFITS. Upon
the occurrence of a Covered Termination, and prior to the receipt of any
benefits under this Agreement on account of such Covered Termination, Executive
shall execute the Employee Agreement and Release (the "Release") in the form
attached hereto as Exhibit A. Such Release shall specifically relate to all of
Executive's rights and claims in existence at the time of such execution and
shall confirm Executive's obligations under the Company's standard form of
proprietary information and inventions agreement. It is understood that
Executive has twenty-one (21) days to consider whether to execute such Release,
and Executive may revoke such Release within seven (7) business days after
execution. In the event Executive does not execute such Release within the
twenty-one (21)-day period, or if Executive revokes such Release within the
subsequent seven (7)-business day period, no benefits shall be payable under
this Agreement and this Agreement shall be null and void.
ARTICLE IV
OTHER RIGHTS AND BENEFITS
4.1 NONEXCLUSIVITY. Nothing in the Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy,
3.
<PAGE> 4
practice or program of the Company at or subsequent to the date of a Covered
Termination shall be payable in accordance with such plan, policy, practice or
program.
4.2 PARACHUTE PAYMENTS. In the event that any amount or benefit received
or to be received by Executive pursuant to this Agreement would constitute an
"excess parachute payment" subject to excise tax under Internal Revenue Code
Section 4999, such amount or benefit may be reduced, in the order of priority
set forth below, so that after such reduction, if any, Executive receives the
largest after-tax payment:
(a) first, the Target Bonus (as set forth in Section 2.3 of this
Agreement), shall be reduced;
(b) then, the continuation of Base Salary (as set forth in
Section 2.2 of this Agreement) shall next be reduced; and
(c) finally, the acceleration of stock options (as set forth in
Section 2.4 of this Agreement) shall be reduced.
ARTICLE V
DEFINITIONS
For purposes of the Agreement, the following terms are defined as
follows:
5.1 "BASE SALARY" means Executive's annual base salary in effect during
the last regularly scheduled payroll period immediately preceding any
termination of Executive's employment.
5.2 "CAUSE" means termination of Executive's employment with the Company
for any of the following reasons as determined in good faith by the Company (or
in the case of the CEO, a majority of the Board) which is not cured within
fifteen (15) days following delivery of written notice of such infraction to
Executive:
(a) an intentional act which materially injures the Company;
(b) an intentional refusal or failure to follow lawful and
reasonable directions of the Board or an individual to whom participant reports
(as appropriate);
(c) a willful and habitual neglect of duties; or
(d) a conviction of a felony involving moral turpitude which is
reasonably likely to inflict or has inflicted material injury on the Company.
5.3 "CHANGE IN CONTROL" (1) a sale of all or substantially all of the
assets of the Company; (2) a merger or consolidation in which the Company is not
the surviving corporation; (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's common stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or
4.
<PAGE> 5
(4) the acquisition by any person, entity or group within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any comparable successor provisions (excluding any employee benefit
plan, or related trust, sponsored or maintained by the Company or any Affiliate
of the Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of directors.
5.4 "COVERED TERMINATION" means an Involuntary Termination Without Cause
or a Constructive Termination within thirteen (13) months of a Change in
Control.
5.5 "INVOLUNTARY TERMINATION WITHOUT CAUSE" means Executive's dismissal
or discharge other than for Cause. The termination of Executive's employment as
a result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
5.6 "CONSTRUCTIVE TERMINATION" means that Executive voluntarily
terminates employment after any of the following are undertaken without
Executive's express written consent:
(a) the assignment to Executive of any duties or responsibilities
which result in a diminution or adverse change of Executive's position, status
or circumstances of employment; provided, however, that a mere change in
Executive's title or reporting relationship shall not constitute a Constructive
Termination;
(b) a reduction by the Company in Executive's Base Salary;
(c) any failure by the Company to continue in effect any benefit
plan or arrangement, including incentive plans or plans to receive securities of
the Company, in which Executive is participating (hereinafter referred to as
"Benefit Plans"), or the taking of any action by the Company which would
adversely affect Executive's participation in or reduce Executive's benefits
under any Benefit Plans or deprive Executive of any fringe benefit then enjoyed
by Executive, provided, however, that Executive's termination is not deemed a
Constructive Termination if the Company offers a range of benefit plans and
programs which, taken as a whole, are comparable to the Benefit Plans, as
determined in good faith by the Executive;
(d) a relocation of Executive or the Company's principal business
offices to a location more than thirty (30) miles from the location at which
Executive performs duties, except for required travel by Executive on the
Company's business to an extent substantially consistent with Executive's
business travel obligations;
(e) any breach by the Company of any provision of this Agreement
or any other material agreement between Executive and the Company concerning
Executive's employment; or
(f) any failure by the Company to obtain the assumption of this
Agreement or any other material agreement between Executive and the Company
concerning Executive's employment by any successor or assign of the Company.
5.
<PAGE> 6
ARTICLE VI
GENERAL PROVISIONS
6.1 EMPLOYMENT STATUS. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
6.2 NOTICES. Any notices provided hereunder must be in writing and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
6.3 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
6.4 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
6.5 ARBITRATION. Unless otherwise prohibited by law or specified below,
all disputes, claims and causes of action, in law or equity, arising from or
relating to this Agreement or its enforcement, performance, breach, or
interpretation shall be resolved solely and exclusively by final and binding
arbitration held in Santa Ana, California through Judicial Arbitration &
Mediation Services/Endispute ("JAMS") under the then existing JAMS arbitration
rules. However, nothing in this section is intended to prevent either party from
obtaining injunctive relief in court to prevent irreparable harm pending the
conclusion of any such arbitration. Each party in any such arbitration shall be
responsible for its own attorneys fees, costs and necessary disbursement;
provided, however, that in the event one party refuses to arbitrate and the
other party seeks to compel arbitration by court order, if such other party
prevails, it shall be entitled to recover reasonable attorneys fees, costs and
necessary disbursements. Pursuant to California Civil Code Section 1717, each
party warrants that it was represented by counsel in the negotiation and
execution of this Agreement, including the attorneys fees provision herein.
6.6 COMPLETE AGREEMENT. This Agreement, including Exhibit A, constitutes
the entire agreement between Executive and the Company and it is the complete,
final, and exclusive
6.
<PAGE> 7
embodiment of their agreement with regard to this subject matter. It is entered
into without reliance on any promise or representation other than those
expressly contained herein.
6.7 AMENDMENT OR TERMINATION OF AGREEMENT. This Agreement may be changed
or terminated only upon the mutual written consent of the Company and Executive.
The written consent of the Company to a change or termination of this Agreement
must be signed by an executive officer of the Company after such change or
termination has been approved by the Company's Board of Directors.
6.8 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
6.9 HEADINGS. The headings of the Articles and Sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
hereof nor to affect the meaning thereof.
6.10 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors, assigns, heirs, executors and administrators,
except that Executive may not assign any duties hereunder and may not assign any
rights hereunder without the written consent of the Company, which consent shall
not be withheld unreasonably.
6.11 ATTORNEY FEES. If Executive brings any action to enforce his rights
hereunder, Executive shall be entitled to recover reasonable attorneys' fees and
costs incurred in connection with such action, regardless of the outcome of such
action.
6.12 CHOICE OF LAW. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
6.13 NON-PUBLICATION. The parties mutually agree not to disclose
publicly the terms of this Agreement except to the extent that disclosure is
mandated by applicable law or to respective advisors (e.g., attorneys,
accountants).
6.14 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the
text of the Agreement and any summary, description or other information
regarding the Agreement, the text of the Agreement shall control.
7.
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year written above.
CONTINUUS SOFTWARE CORPORATION EXECUTIVE
By:____________________________ ____________________________
Name:__________________________
Title:_________________________
Exhibit A: Employee Agreement and Release
8.
<PAGE> 9
EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the
foregoing agreement.
I hereby confirm my obligations under the Company's proprietary
information and inventions agreement.
I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.
Except as otherwise set forth in this Agreement, I hereby release,
acquit and forever discharge the Company, its parents and subsidiaries, and
their officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys fees, damages, indemnities
and obligations of every kind and nature, in law, equity, or otherwise, known
and unknown, suspected and unsuspected, disclosed and undisclosed (other than
any claim for indemnification I may have as a result of any third party action
against me based on my employment with the Company), arising out of or in any
way related to agreements, events, acts or conduct at any time prior to and
including the date seven (7) days preceding the Effective Date of this
Agreement, including but not limited to: all such claims and demands directly or
indirectly arising out of or in any way connected with my employment with the
Company or the termination of that employment, including but not limited to,
claims of intentional and negligent infliction of emotional distress, any and
all tort claims for personal injury, claims or demands related to salary,
bonuses, commissions, stock, stock options, or any other ownership interests in
the Company, vacation pay, fringe benefits, expense reimbursements, severance
pay, or any other form of compensation; claims pursuant to any federal, state or
local law or cause of action including, but not limited to, the federal Civil
Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act
of 1967, as amended ("ADEA"); the federal Americans with Disabilities Act of
1990; the California Fair Employment and Housing Act, as amended; tort law;
contract law; wrongful discharge; discrimination; fraud; defamation; emotional
distress; and breach of the implied covenant of good faith and fair dealing;
provided, however, that nothing in this paragraph shall be construed in any way
to release the Company from its obligation to indemnify me pursuant to the
Company's Indemnification Agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under ADEA. I also acknowledge that the consideration
given for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the ADEA,
that: (A) my waiver and release do not apply to any rights or claims that may
arise after the Effective Date of this Agreement; (B) I have the right to
consult with an attorney prior to executing this Agreement; (C) I have
twenty-one (21) days to consider this Agreement (although I may choose to
voluntarily execute this Agreement earlier); (D) I have seven (7) days following
the execution of this Agreement by the parties to revoke the Agreement; and (E)
this Agreement shall not be effective until the date upon which the revocation
period has expired, which shall be the eighth day after this Agreement is
executed by me, provided that the Company has also executed this Agreement by
that date (the "Effective Date").
CONTINUUS SOFTWARE CORPORATION EXECUTIVE
By: ___________________________ ___________________________
Title: ________________________ Date: _____________________
1.
<PAGE> 10
<PAGE> 1
EXHIBIT 10.14
CONTINUUS SOFTWARE CORPORATION
--------------------------------
STOCK PURCHASE AGREEMENT
--------------------------------
MAY 30, 1996
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
SECTION 1 - SALE OF STOCK....................................................................1
1.1 Sale of Stock..................................................................1
1.2 Closing Date...................................................................1
1.3 Delivery.......................................................................2
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................2
2.1 Organization and Standing......................................................2
2.2 Corporate Power................................................................2
2.3 Subsidiaries...................................................................2
2.4 Capitalization.................................................................2
2.5 Authorization..................................................................3
2.6 Contracts and Other Commitments................................................4
2.7 Compliance with Other Instruments, etc.........................................4
2.8 Related-Party Transactions.....................................................4
2.9 Litigation, etc................................................................5
2.10 Registration Rights...........................................................5
2.11 Permits.......................................................................5
2.12 Governmental Consent, etc.....................................................5
2.13 Returns and Complaints........................................................6
2.14 Disclosure....................................................................6
2.15 Offering......................................................................6
2.16 Financial Statements..........................................................6
2.17 Business Plan.................................................................6
2.18 Liabilities...................................................................7
2.19 Changes.......................................................................7
2.20 Title to Properties and Assets; Liens, etc....................................8
2.21 Patents and Trademarks........................................................8
2.22 Distribution and Marketing Rights.............................................9
2.23 Tax Returns...................................................................9
2.24 Employees.....................................................................9
2.25 Proprietary Information and Inventions Agreement.............................10
2.26 No Defaults..................................................................10
2.27 Insurance....................................................................10
2.28 Brokers or Finders...........................................................11
2.29 Environmental and Safety Laws................................................11
2.30 Minute Books.................................................................11
2.31 Real Property Holding Corporation............................................11
2.32 No Dividends.................................................................11
</TABLE>
i.
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
SECTION 3 - INVESTMENT REPRESENTATIONS......................................................11
3.1 Accredited Investor...........................................................11
3.2 Experience....................................................................11
3.3 Investment....................................................................12
3.4 Rule 144......................................................................12
3.5 No Public Market..............................................................12
SECTION 4 - CONDITIONS TO CLOSING OF PURCHASERS.............................................13
4.1 Representations and Warranties................................................13
4.2 Covenants.....................................................................13
4.3 No Material Adverse Change....................................................13
4.4 Securities Laws...............................................................13
4.5 Compliance Certificate........................................................13
4.6 Opinion of Counsel............................................................13
4.7 Amendment to Investors' Rights Agreement......................................13
4.8 Amendment to the Co-Sale Agreement............................................14
4.9 Board of Directors............................................................13
4.10 Proceedings and Documents....................................................14
SECTION 5 - CONDITIONS TO CLOSING OF COMPANY................................................14
5.1 Representations and Warranties................................................14
5.2 Covenants.....................................................................14
5.3 Securities Laws...............................................................14
5.4 Promissory Notes................................................................
SECTION 6 - AFFIRMATIVE COVENANTS OF THE COMPANY............................................14
6.1 Proprietary Information Agreement.............................................14
SECTION 7 - MISCELLANEOUS...................................................................15
7.1 Governing Law.................................................................15
7.2 Survival......................................................................15
7.3 Successors and Assigns........................................................15
7.4 Entire Agreement..............................................................15
7.5 Notices, etc..................................................................15
7.6 Expenses......................................................................15
7.7 Counterparts..................................................................15
</TABLE>
ii.
<PAGE> 4
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
7.8 Severability..................................................................16
7.9 Separability..................................................................16
7.10 California Corporate Securities Law..........................................16
7.11 Approval of Amendments and Waivers...........................................16
</TABLE>
iii.
<PAGE> 5
CONTINUUS SOFTWARE CORPORATION
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of May 30, 1996, by and between
Continuus Software Corporation, a California corporation (the "COMPANY"), with
its principal office at 108 Pacifica, 2nd Floor, Irvine, California, 92718-3332
and the Purchasers (the "PURCHASERS") listed on the Schedule of Purchasers
attached hereto as Exhibit A (the "SCHEDULE OF PURCHASERS").
WHEREAS, the Company has authorized the issuance and sale of (i) up to
957,144 shares of its Series D Preferred Stock (the "SHARES") pursuant to this
Agreement having the rights, preferences, privileges and restrictions set forth
in the Amended and Restated Articles of Incorporation of the Company in the form
attached to this Agreement as Exhibit B (the "RESTATED ARTICLES") and (ii)
Warrants (the "WARRANTS") to purchase up to 587,618 shares of Common Stock of
the Company (the "WARRANT SHARES") in the form attached as Exhibit C hereto.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions set forth below, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties to this
Agreement agree as follows:
1. SALE OF STOCK
1.1. SALE OF STOCK. Subject to the terms and conditions hereof, each
Purchaser agrees, severally, to purchase from the Company and the Company agrees
to sell and issue to each Purchaser (i) the number of Shares set forth opposite
such Purchaser's name on the Schedule of Purchasers at a purchase price of $2.10
per Share and (ii) a Warrant to purchase the number of Warrant Shares set forth
opposite each Purchaser's name on the Schedule of Purchasers at a purchase price
of $0.01 per Warrant Share.
1.2. CLOSING DATE. The purchase and sale of the Shares hereunder
shall take place at the law offices of Cooley Godward Castro Huddleson & Tatum,
4365 Executive Drive, Suite 1100, San Diego, California 92121. The closing of
such purchase and sale hereunder (the "Closing") shall be held on the date of
this Agreement or at such other time upon which the Company and a majority of
the Purchasers shall agree.
1
<PAGE> 6
1.3. DELIVERY. At the Closing, the Company will deliver to each
Purchaser a certificate representing the Shares being purchased at the Closing
by such Purchaser and a Warrant to purchase the number of Warrant Shares as set
forth opposite such Purchaser's name in the Schedule of Purchasers against
payment of the aggregate purchase price therefor by (i) check payable to the
order of the Company, (ii) wire transfer of immediately available funds and/or
(iii) cancellation of indebtedness, as indicated on the Schedule of Purchasers.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedule of Exceptions attached hereto as Exhibit D,
the Company hereby represents and warrants to each Purchaser as follows:
2.1. ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
California and is in good standing under such laws. The Company has all
requisite corporate power to own and operate its assets and to carry on its
business as presently conducted and as proposed to be conducted. The Company is
not required to qualify to do business as a foreign corporation in any
jurisdiction outside of the State of California.
2.2. CORPORATE POWER. The Company has all requisite legal and
corporate power to execute and deliver this Agreement, the Fourth Amendment to
the Investors' Rights Agreement and the Amendment to the Co-Sale Agreement in
substantially the forms attached hereto as Exhibits E and F (this Agreement, the
Fourth Amendment to the Investors' Rights Agreement and the Amendment to the
Co-Sale Agreement are hereinafter collectively referred to as the "AGREEMENTS"),
to sell and issue the Shares under this Agreement, to issue the Common Stock
issuable upon conversion of the Shares and to issue the Warrant Shares upon the
exercise of the Warrants and to carry out and perform its obligations under the
terms of the Agreements, including all exhibits and schedules hereto and
thereto.
2.3. SUBSIDIARIES. The Company does not own or control, directly or
indirectly, any interest in any other corporation, association or business
entity.
2.4. CAPITALIZATION. The authorized capital stock of the Company
consists of 39,642,156 shares of Common Stock, of which 3,922,346 shares will be
issued and outstanding immediately following the Closing, and 10,357,844 shares
of Preferred Stock, 6,072,523 which are designated Series A Preferred Stock, all
of which will be issued and outstanding immediately following the Closing,
1,195,809 of which are designated Series B Preferred Stock, all of which will be
issued and outstanding immediately following the Closing, 2,132,368 of which are
designated Series C Preferred Stock, 1,980,950 of which will be issued and
outstanding immediately following the
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Closing and 957,144 of which are designated Series D Preferred Stock, all of
which will be issued and outstanding immediately following the Closing. No other
shares of capital stock or other voting securities of the Company are
outstanding. All such issued and outstanding shares have been duly authorized
and validly issued and are fully paid and nonassessable. The Shares have the
rights, preferences and privileges set forth in the Restated Articles. The
Company has reserved: (i) 4,150,000 shares of its Common Stock for issuance
pursuant to the Company's Stock Option Plan (the "OPTION PLAN"), 2,809,938
shares of which are subject to outstanding Incentive Stock Options, 229,000
shares of which are subject to the Non-Qualified Stock Option Agreements dated
March 4, 1994, by and between the Company and Fred Cox and Sol Zechter, and
973,793 shares of which are available for future grants under the Option Plan,
(ii) 1,908,397 shares of Common Stock issuable upon exercise of outstanding
warrants dated December 29, 1994 and 587,618 shares of Common Stock issuable
upon exercise of the Warrants (collectively, the "COMMON STOCK WARRANTS") and
(iii) 42,000 shares of Series A Preferred Stock and 151,418 shares of Series C
Preferred Stock issuable upon exercise of outstanding warrants and such shares
of Common Stock issuable upon the conversion of such Series A Preferred Stock
and Series C Preferred Stock (the "PREFERRED STOCK WARRANT") (the shares
issuable pursuant to the Option Plan, the Common Stock Warrants, the Warrants
and the Preferred Stock Warrant are hereinafter referred to as the "RESERVED
SHARES"). Except for (i) the transactions contemplated in the Agreements (ii)
the conversion privileges of the Company's Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock specified
in the Restated Articles and (iii) rights to acquire the Reserved Shares, there
are no options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the Company's capital stock or other securities of the Company.
2.5. AUTHORIZATION. All corporate action on the part of the Company,
its directors and shareholders necessary for the authorization, execution,
delivery and performance of the Agreements by the Company, the authorization,
sale, issuance and delivery of the Shares and the Warrants (and the Common Stock
issuable upon conversion of the Shares or upon exercise of the Warrants) and the
performance of the Company's obligations under the Agreements has been taken or
will be taken prior to the Closing. The Agreements, when executed and delivered
by the Company, will constitute valid and binding obligations of the Company
enforceable in accordance with their terms, subject to laws of general
application relating to bankruptcy, insolvency, the relief of debtors, general
equity principles, and limitations upon rights to indemnity. The Shares, when
issued in compliance with the provisions of this Agreement, will be duly and
validly issued, fully paid and nonassessable. The Common Stock issuable upon
conversion of the Shares and upon exercise of the Warrants has been duly and
validly reserved and, when issued in compliance with the provisions of this
Agreement or the
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Warrants, as applicable, will be duly and validly issued, fully paid and
nonassessable; provided, however, that the Shares (and the Common Stock issuable
upon conversion of the Shares or upon the exercise of the Warrants) may be
subject to restrictions on transfer under state and/or federal securities laws.
Neither the Shares or the Warrants are subject to any preemptive rights, rights
of first refusal or similar rights that have not been waived.
2.6. CONTRACTS AND OTHER COMMITMENTS. The Company does not have any
contract, agreement, lease, commitment, or proposed transaction, written or
oral, absolute or contingent, other than contracts for the purchase of supplies
and services that were entered into in the ordinary course of business and that
do not involve more than $100,000. For the purpose of this paragraph, employment
and consulting contracts, license agreements and any other agreements relating
to the acquisition or disposition of the Company's technology shall not be
considered to be contracts entered into in the ordinary course of business.
2.7. COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not, and
will not by virtue of entering into and performing the Agreements and the
transactions contemplated thereunder be, in violation of any term of the
Restated Articles or Bylaws or any term or provision of any material mortgage,
indenture, contract, agreement, instrument, judgment or decree to which it is a
party or by which it is bound, and is not, and will not by virtue of entering
into and performing the Agreements and the transactions contemplated thereunder
be, in violation of any order addressed specifically to the Company nor, to the
best of the Company's knowledge, any material order, statute, rule or regulation
applicable to the Company, other than any of the foregoing such violations that
do not, either individually or in the aggregate, have a material adverse effect
on the Company's business as presently conducted or planned to be conducted (a
"MATERIAL ADVERSE EFFECT").
2.8. RELATED-PARTY TRANSACTIONS. No employee, officer or director of
the Company, or any person that, within 12 months of the date of this Agreement
has been an employee, officer or director of the Company, or any member of the
immediate family of any of the foregoing, is indebted to the Company, nor is the
Company indebted (or committed to make loans or extend or guarantee credit) to
any of them. To the best of the Company's knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Company is affiliated or with which the Company has a business relationship,
or any firm or corporation that competes with the Company, except shares owned
by such persons constituting less than 2% of the voting securities of a publicly
traded company that competes with the Company. To the best of the Company's
knowledge, no officer or director or any member of their immediate families is,
directly or indirectly, interested in any material contract with the Company.
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2.9. LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or any of its officers or directors
before any court or governmental agency (nor, to the best of the Company's
knowledge, is there any threat thereof).
2.10. REGISTRATION RIGHTS. Except as set forth in the Fourth Amendment
to the Investors' Rights Agreement, the Company is not under any obligation to
register (as defined in the Fourth Amendment to the Investors' Rights Agreement)
any of its presently outstanding securities or any of its securities that may
hereafter be issued.
2.11. PERMITS. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default or violation in any material respect under any of such franchises,
permits, licenses, or other similar authority, and the execution and delivery of
the Agreements will not result in any such default or violation, with or without
the passage of time or giving of notice or both.
2.12. GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Shares or the
Warrants (and the Common Stock issuable upon conversion of the Shares or upon
the exercise of the Warrants) or the consummation of any other transaction
contemplated thereby, except the qualification (or taking such action as may be
necessary to secure an exemption from qualification, if available) of the offer
and sale of the Shares or Warrants (and the Common Stock issuable upon
conversion of the Shares or upon the exercise of the Warrants) under the
California Corporate Securities Law, which filing and qualification, if
required, will be accomplished in a timely manner prior to or promptly upon
completion of the Closing.
2.13. RETURNS AND COMPLAINTS. The Company has received no customer or
user complaints concerning alleged defects in its products or proposed products
(or the design thereof) that, if true, would materially adversely affect the
operations or financial condition of the Company.
2.14. DISCLOSURE. The Company has provided the Purchasers with all the
information reasonably available to it without undue expense that the Purchasers
have requested for deciding whether to purchase the Shares and the Warrants and
all information that the Company believes is reasonably necessary to enable the
Purchasers to make such decision. To the best of the Company's knowledge after
reasonable
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investigation, neither this Agreement nor any other written statements or
certificates made or delivered in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading.
2.15. OFFERING. Subject to the accuracy of the representations set
forth in Section 3 hereof, the offer, sale and issuance of the Shares and the
Warrants pursuant to this Agreement and the issuance of the Common Stock to be
issued upon conversion of the Shares and the shares of Common Stock to be issued
upon the exercise of the Warrants constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act of 1933 as amended
(the "SECURITIES ACT") and neither the Company nor any authorized agent acting
on its behalf will take any action hereafter that would cause the loss of such
exemption.
2.16. FINANCIAL STATEMENTS. The Company has delivered to the
Purchasers its audited balance sheet and statement of earnings dated as of
December 31, 1995 and its unaudited balance sheet dated as of April 30, 1996
(the "BALANCE SHEET DATE") and related unaudited statements of earnings for the
four month period then ended (the "FINANCIAL STATEMENTS"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis and are complete and correct in all
material respects and accurately describe the financial condition of the Company
as of the Balance Sheet Date and results of operations and cash flows for such
period; provided, however, that the Financial Statements are subject to normal
year-end audit adjustments and do not contain footnotes. The Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm, or
corporation. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles.
2.17. BUSINESS FORECAST. A copy of the Company's April 16, 1996
Business Forecast (the "BUSINESS FORECAST") has previously been delivered to the
Purchasers. The Business Forecast was prepared in good faith by the Company and
does not, to the best of the Company's knowledge after reasonable investigation,
contain any untrue statement of a material fact nor does it omit to state a
material fact necessary to make the statements therein not misleading, except
that with respect to projections and expressions of opinion or predictions
contained in the Business Forecast, the Company represents only that such
projections and expressions of opinion and predictions were made in good faith
and that the Company believes there is a reasonable basis therefor.
2.18. LIABILITIES. The Company has no indebtedness for borrowed money
that the Company has directly or indirectly created, incurred, assumed, or
guaranteed, or with respect to which the Company has otherwise become directly
or indirectly liable, other
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than as reflected in the Financial Statements. The Company has no material
liability or obligation, absolute or contingent, other than as reflected in the
Financial Statements.
2.19. CHANGES. Since the Balance Sheet Date, there has not been:
(a) any change in the assets, liabilities, financial condition,
or operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects, or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the business, properties,
prospects, or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(e) to the best of the Company's knowledge, any material change
to a material contract or arrangement by which the Company or any of its assets
is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(g) any sale, assignment, or transfer of any patents,
trademarks, copyrights, trade secrets, or other intangible assets;
(h) any resignation or termination of employment of any key
officer of the Company; and the Company, to the best of its knowledge, does not
know of the impending resignation or termination of employment of any such
officer;
(i) receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company;
(j) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
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(k) any loans or guarantees made by the Company to or for the
benefit of its employees, officers, or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(l) to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely affect the
business, properties, prospects, or financial condition of the Company (as such
business is presently conducted and as it is proposed to be conducted); or
(m) any agreement or commitment by the Company to do any of the
things described in this paragraph 2.19.
2.20. TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good
and marketable title to its properties and assets shown in the Balance Sheet,
and has good title to all of its leasehold interests, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than (i) the lien of
current taxes not yet due and payable, and (ii) possible minor liens and
encumbrances that do not in any case materially detract from the value of the
property subject thereto or materially impair the operations of the Company and
which have not arisen otherwise than in the ordinary course of business.
2.21. PATENTS AND TRADEMARKS. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes (collectively
"Proprietary Information"), or believes it has the ability to acquire valid
licenses to such Proprietary Information on reasonable terms, as necessary for
its business as now conducted and as proposed to be conducted without any
conflict with or infringement of the rights of others. The Schedule of
Exceptions contains a complete list of patents and pending patent applications
of the Company. There are no outstanding options, licenses, or agreements of any
kind relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
Company is not aware of any impropriety with regard to the granting of any
licenses of Proprietary Information to or from the Company. The Company has not
received any written communications alleging that the Company has violated or
infringed or that the Company would, by conducting its business as proposed,
violate or infringe any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person or
entity. The Company is not aware that any of its employees are obligated under
any contract (including licenses, covenants, or commitments of any nature) or
other agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interests of the Company or that would conflict with the
Company's business as proposed
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to be conducted. Except pursuant to the terms of the Employee Nondisclosure
Agreements entered into between the Company and its employees and/or consultants
in the form substantially as attached hereto as Exhibit G (the "PROPRIETARY
INFORMATION AND INVENTIONS AGREEMENT"), there are no agreements, understandings,
instruments, or contracts to which the Company is a party or by which it is
bound that involve the license of any patent, copyright, trade secret or other
similar proprietary right to or from the Company. The Company does not believe
it is or will be necessary to use any inventions of any of its employees (or
persons it currently intends to hire) made prior to their employment by the
Company.
2.22. DISTRIBUTION AND MARKETING RIGHTS. The Company has not granted
rights to develop, produce, distribute, license, market, or sell its products to
any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, produce, distribute, license, market or sell its
products.
2.23. TAX RETURNS. The Company has accurately prepared and timely
filed all federal, state and other tax returns which are required to be filed
and has timely paid all taxes covered by such returns which have become due and
payable. The Company has not been advised that any of its returns, federal,
state or other, have been or are being audited as of the date hereof. The
Company is not delinquent in taxes or assessments and has no tax deficiency
proposed or assessed and no waiver of the statute of limitations and assessment
or collections.
2.24. EMPLOYEES. None of the Company's employees belongs to any union
or collective bargaining unit. To the best of its knowledge, the Company has
complied in all material respects with all applicable state and federal equal
opportunity and other laws related to employment. To the best of the Company's
knowledge, no employee of the Company is or will be in violation of any
judgment, decree, or order, or any term of any employment contract, patent
disclosure agreement, or other contract or agreement relating to the
relationship of any such employee with the Company, or any other party because
of the nature of the business conducted or to be conducted by the Company or to
the use by the employee of his best efforts with respect to such business. The
Company is not a party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement, or other employee compensation agreement,
other than with respect to the Option Plan and options granted thereunder. The
Company is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
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2.25. PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. Each employee
and officer of and consultant to the Company has executed a Proprietary
Information and Inventions Agreement.
2.26. NO DEFAULTS. The Company has, in all material respects,
performed all material obligations required to be performed by it to date and is
not in default under any of the contracts, loans, notes, mortgages, indentures,
licenses, security agreements, agreements, leases, documents, commitments or
other arrangements to which it is a party or by which it is otherwise bound,
except for such defaults which in the aggregate would not have a Material
Adverse Effect, and no event or condition has occurred which, with the lapse of
time or the giving of notice, or both, would constitute such a default.
2.27. INSURANCE. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company has in full force and effect
products liability and errors and omissions insurance in amounts customary for
companies similarly situated.
2.28. BROKERS OR FINDERS. The Company has not incurred, and will not
incur, any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with the Agreements.
2.29. ENVIRONMENTAL AND SAFETY LAWS. To the best of its knowledge, the
Company is not in violation of any applicable statute, law, or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law, or regulation.
2.30. MINUTE BOOKS. The copy of the minute books of the Company
provided to the Purchaser's counsel contain minutes of all meetings of directors
and shareholders and all actions by written consent without a meeting by the
directors and shareholders since the date of incorporation and reflect all
actions by the directors (and any committee of directors) and shareholders with
respect to all transactions referred to in such minutes accurately in all
material respects.
2.31. REAL PROPERTY HOLDING CORPORATION. The Company is not a real
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
2.32. NO DIVIDENDS. The Company has never made any declaration,
setting aside for payment or other distribution in respect of any of the
Company's capital stock or any direct or indirect redemption, repurchase or
other acquisition of any of such stock.
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3. INVESTMENT REPRESENTATIONS
Each Purchaser hereby represents and warrants to the Company as follows:
3.1. ACCREDITED INVESTOR. Each Purchaser is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act.
3.2. EXPERIENCE. Such Purchaser has, from time to time, evaluated
investments in start-up companies and has, either individually or through the
personal experience of one or more of its current officers or partners,
experience in evaluating and investing in start-up companies. Such Purchaser was
not formed for the purpose of investing in the Company hereunder.
3.3. INVESTMENT. Such Purchaser is acquiring the Shares and the
Warrants (and any Common Stock issuable upon conversion of the Shares or upon
the exercise of the Warrants) for investment for its own account and not with
the view to, or for resale in connection with, any distribution thereof. Such
Purchaser understands that the Shares and the Warrants (and any Common Stock
issuable upon conversion of the Shares or upon the exercise of the Warrants) to
be purchased have not been registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
as expressed herein.
3.4. RULE 144. Such Purchaser acknowledges that the Shares, the
Common Stock into which such shares are convertible and the Common Stock
issuable upon the exercise of the Warrants must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available. Such Purchaser is aware of the provisions of Rule 144
promulgated under the Securities Act which permits limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than two years after a party has
purchased and paid for the securities to be sold, the sale being through a
"broker's transaction" or in transactions directly with a "market maker" (as
provided by Rule 144(f)) and the number of shares being sold during any
three-month period not exceeding specified limitations. Such Purchaser is aware
that the conditions for resale set forth in Rule 144 have not been satisfied and
that the Company has no plan to satisfy these conditions in the foreseeable
future.
3.5. NO PUBLIC MARKET. Such Purchaser understands that no public
market now exists for any of the securities of the Company and that it is
unlikely that a public
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market will ever exist for the Shares or the Warrants (and any Common Stock
issuable upon the conversion of the Shares or upon the exercise of the
Warrants).
4. CONDITIONS TO CLOSING OF PURCHASERS
The Purchasers' obligation to purchase Shares and Warrants at the
Closing is subject to the fulfillment on or prior to the Closing of the
following conditions:
4.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of the Closing.
4.2. COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing shall
have been performed or complied with in all material respects.
4.3. NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the Company's financial condition, affairs or prospects
between the date of this Agreement and the Closing Date.
4.4. SECURITIES LAWS. Subject to the completion of any post-closing
securities law filings, the Company shall have obtained all necessary permits
and qualifications, or secured exemptions therefrom, required under the
Securities Act or by any state for the offer and sale of the Shares and Warrants
and the Common Stock issuable upon the conversion of the Shares or upon the
exercise of the Warrants.
4.5. COMPLIANCE CERTIFICATE. The Company shall have delivered on the
Closing Date a certificate signed by an officer of the Company certifying that
the conditions specified in Sections 4.1, 4.2 and 4.3 have been fulfilled.
4.6. OPINION OF COUNSEL. The Purchasers shall have received from
Jeffer, Mangels, Butler and Marmaro, counsel for the Company, an opinion in
substantially the form attached hereto as Exhibit H.
4.7. AMENDMENT TO INVESTORS' RIGHTS AGREEMENT. The Company shall have
executed and delivered the Fourth Amendment to Investors' Rights Agreement in
the form attached as Exhibit E hereto.
4.8. AMENDMENT TO THE CO-SALE AGREEMENT. The Company shall have
executed and delivered the Second Amendment to Co-Sale Agreement in the form
attached as Exhibit F hereto.
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4.9. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchasers' counsel, which shall have received all such
counterpart original and certified or other copies of such documents as it may
reasonably request.
5. CONDITIONS TO CLOSING OF COMPANY
5.1. The Company's obligation to issue and sell Shares and Warrants
at the Closing is subject to the fulfillment of the following conditions:
5.2. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchasers contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the date of the Closing.
5.3. COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by Purchasers on or prior to the Closing shall
have been performed or complied with in all respects.
5.4. SECURITIES LAWS. The Company shall have obtained all necessary
permits and qualifications, or secured exemptions therefrom, required under the
Securities Act or by any state for the offer and sale of the Shares and Warrants
(and any Common Stock issuable upon the conversion of the Shares or upon the
exercise of the Warrants).
6. AFFIRMATIVE COVENANTS OF THE COMPANY
6.1. PROPRIETARY INFORMATION AGREEMENT. Each person employed by the
Company in a technical or management position either as an employee or a
consultant, shall, as a condition to the commencement and continuation of their
employment with the Company, execute a Proprietary Information and Inventions
Agreement.
7. MISCELLANEOUS
7.1. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of California as applicable to contracts entered into and performed
entirely within the State of California by California residents.
7.2. SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchasers
and the closing of the transactions contemplated hereby.
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7.3. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of Purchasers to purchase the Shares shall
not be assignable without the consent of the Company.
7.4. ENTIRE AGREEMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
7.5. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by facsimile or mailed
by registered or certified mail, postage prepaid, or otherwise delivered by hand
or by messenger, addressed (a) if to the Purchasers, one to each Purchaser at
the address set forth on the Schedule of Purchasers, or at such other address as
shall have been furnished to the Company in writing by the Purchasers or (b) if
to the Company, to the address set forth above and addressed to the attention of
the President, or at such other address or addresses as the Company shall have
furnished in writing to the Purchasers. All notices and other communications
mailed pursuant to the provisions of this Section 7.5 shall be deemed delivered
when mailed or sent by facsimile or delivered by hand or messenger.
7.6. EXPENSES. Each party to this Agreement shall bear its own
expenses and legal fees incurred by it with respect to this Agreement and all
related transactions and agreements; provided, however, that upon the Closing,
the Company will pay the reasonable fees and expenses of counsel to the
Purchasers incurred in connection with the financing described herein not to
exceed $12,000.
7.7. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
7.8. SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
7.9. SEPARABILITY. Any invalidity, illegality, or limitation of the
enforceability with respect to any Purchaser of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason of
the law of any such Purchaser's domicile or otherwise, shall in no way affect or
impair the validity, legality, or enforceability of this Agreement with respect
to other Purchasers. In case any provision of this Agreement
14
<PAGE> 19
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
7.10. CALIFORNIA CORPORATE SECURITIES LAW. The sale of the securities
which are the subject of this Agreement has not been qualified with the
Commissioner of corporations of the state of California, and the issuance of
such securities or the payment or receipt of any part of the consideration
therefor prior to such qualification, if required by law, is unlawful. The
rights of all parties to this agreement are expressly conditioned upon such
qualification being obtained, if required by law.
7.11. APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement
may be amended or terminated and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) with the written consent of the Company and the
holders of a majority of the outstanding Shares purchased and sold hereunder
(including the Common Stock issued upon conversion of the Shares), excluding
from the determination of such a majority (both in determining the total number
of such shares outstanding and the number of such shares consenting or not
consenting) all shares previously disposed of by the Purchasers or their
transferees pursuant to one or more registration statements under the Securities
Act or pursuant to Rule 144 thereunder. Any amendment, termination or waiver
effected in accordance with this section shall be binding upon each holder of
any securities issued pursuant to this Agreement (including securities into
which such securities have been converted or exchanged), each future holder of
any or all such securities and the Company.
15
<PAGE> 20
The foregoing Agreement is hereby executed as of the date first above
written.
THE COMPANY:
CONTINUUS SOFTWARE CORPORATION
By: /s/ John Wark
---------------------------------------------
Title: President and Chief Executive Officer
------------------------------------------
THE PURCHASERS:
NORWEST EQUITY PARTNERS, V,
A MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners II
General Partner
By: /s/ Kevin G. Hall
---------------------------------------------
Kevin G. Hall, Partner
ACCEL IV L.P.
By: Accel IV Associates L.P.
Its General Partner
By: /s/ G. Carter Sednaoui
----------------------------------------------
General Partner
ACCEL KEIRETSU L.P.
By: Accel Partners & Co., Inc.
Its General Partners
By: /s/ G. Carter Sednaoui
----------------------------------------------
Its:
---------------------------------------------
[Signature Page to Stock Purchase Agreement]
<PAGE> 21
ACCEL INVESTORS `95 L.P.
By: /s/ G. Carter Sednaoui
----------------------------------------------
General Partner
ELLMORE C. PATTERSON PARTNERS
By: /s/ Arthur C. Patterson
----------------------------------------------
General Partner
ADVANCED TECHNOLOGY VENTURES III
By: /s/ Jos C. Henkens
----------------------------------------------
Jos C. Henkens, General Partner
/s/ P. Andrews McLane
- ------------------------------------------------
P. ANDREWS MCLANE
BRENTWOOD ASSOCIATES VI, L.P.
By: BRENTWOOD VI VENTURES L.P.
its General Partner
By: /s/ G. Bradford Jones
----------------------------------------------
G. Bradford Jones, General Partner
COMDISCO, INC.
By:/s/ Jill C. Hanses
----------------------------------------------
Jill Hanses, Assistant Vice President
[Signature Page to Stock Purchase Agreement]
<PAGE> 22
/s/ Kevin J. McQuillan
- -------------------------------------------------
KEVIN J. MCQUILLAN
THE COX LIVING TRUST DATED MAY 26, 1988
By: /s/ Fred B. Cox
----------------------------------------------
Fred Cox, Co-Trustee
By:/s/ Harriet Frost Cox
----------------------------------------------
Harriet Frost Cox, Co-Trustee
THE ZECHTER FAMILY TRUST
DATED MARCH 6, 1996
By:/s/ Sol Zechter
----------------------------------------------
Sol Zechter, Trustee
[Signature Page to Stock Purchase Agreement]
<PAGE> 1
EXHIBIT 10.15
CONTINUUS SOFTWARE CORPORATION
-------------------------
STOCK PURCHASE AGREEMENT
-------------------------
MAY 19, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. SALE OF STOCK.......................................................................1
1.1 Sale of Stock................................................................1
1.2 Closing Date.................................................................1
1.3 Delivery.....................................................................1
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................2
2.1 Organization and Standing....................................................2
2.2 Corporate Power..............................................................2
2.3 Subsidiaries.................................................................2
2.4 Capitalization...............................................................2
2.5 Authorization................................................................3
2.6 Contracts and Other Commitments..............................................4
2.7 Compliance with Other Instruments, etc.......................................4
2.8 Related-Party Transactions...................................................4
2.9 Litigation, etc..............................................................5
2.10 Registration Rights..........................................................5
2.11 Permits......................................................................5
2.12 Governmental Consent, etc....................................................5
2.13 Returns and Complaints.......................................................5
2.14 Disclosure...................................................................5
2.15 Offering.....................................................................6
2.16 Financial Statements.........................................................6
2.17 Business Plan................................................................6
2.18 Liabilities..................................................................7
2.19 Changes......................................................................7
2.20 Title to Properties and Assets; Liens, etc...................................8
2.21 Patents and Trademarks.......................................................8
2.22 Distribution and Marketing Rights............................................9
2.23 Tax Returns..................................................................9
2.24 Employees....................................................................9
2.25 Proprietary Information and Inventions Agreement............................10
2.26 No Defaults.................................................................10
2.27 Insurance...................................................................10
2.28 Brokers or Finders..........................................................10
2.29 Environmental and Safety Laws...............................................10
2.30 Minute Books................................................................10
2.31 Real Property Holding Corporation...........................................10
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
2.32 No Dividends................................................................11
3. INVESTMENT REPRESENTATIONS.........................................................11
3.1 Accredited Investor.........................................................11
3.2 Experience..................................................................11
3.3 Investment..................................................................11
3.4 Rule 144....................................................................11
3.5 No Public Market............................................................12
4. CONDITIONS TO CLOSING OF PURCHASERS................................................12
4.1 Representations and Warranties..............................................12
4.2 Covenants...................................................................12
4.3 No Material Adverse Change..................................................12
4.4 Securities Laws.............................................................12
4.5 Compliance Certificate......................................................12
4.6 Opinion of Counsel..........................................................12
4.7 Amendment to Investors' Rights Agreement....................................12
4.8 Amendment to the Co-Sale Agreement..........................................13
4.9 Proceedings and Documents...................................................13
5. CONDITIONS TO CLOSING OF COMPANY...................................................13
5.1 Representations and Warranties..............................................13
5.2 Covenants...................................................................13
5.3 Securities Laws.............................................................13
6. AFFIRMATIVE COVENANTS OF THE COMPANY...............................................13
6.1 Proprietary Information Agreement...........................................13
7. MISCELLANEOUS......................................................................13
7.1 Governing Law...............................................................13
7.2 Survival....................................................................14
7.3 Successors and Assigns......................................................14
7.4 Entire Agreement............................................................14
7.5 Notices, etc................................................................14
7.6 Expenses....................................................................14
7.7 Counterparts................................................................14
7.8 Severability................................................................14
7.9 Separability................................................................14
</TABLE>
ii.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
7.10 California Corporate Securities Law.........................................15
7.11 Approval of Amendments and Waivers..........................................15
</TABLE>
iii.
<PAGE> 5
CONTINUUS SOFTWARE CORPORATION
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is made as of May 19,
1997, by and between Continuus Software Corporation, a California corporation
(the "COMPANY"), with its principal office at 108 Pacifica, 2nd Floor, Irvine,
California, 92718-3332 and the Purchasers (the "PURCHASERS") listed on the
Schedule of Purchasers attached hereto as Exhibit A (the "SCHEDULE OF
PURCHASERS").
WHEREAS, the Company has authorized the issuance and sale of (i) up to
1,277,981 shares of its Series E Preferred Stock (the "SHARES") pursuant to this
Agreement having the rights, preferences, privileges and restrictions set forth
in the Amended and Restated Articles of Incorporation of the Company in the form
attached to this Agreement as Exhibit B (the "RESTATED ARTICLES") and (ii)
Warrants (the "WARRANTS") to purchase up to 277,176 shares of Series E Preferred
Stock of the Company (the "WARRANT SHARES") in the form attached as Exhibit C
hereto.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions set forth below, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties to this
Agreement agree as follows:
1. SALE OF STOCK
1.1 SALE OF STOCK. Subject to the terms and conditions hereof, each
Purchaser agrees, severally, to purchase from the Company and the Company agrees
to sell and issue to each Purchaser (i) the number of Shares set forth opposite
such Purchaser's name on the Schedule of Purchasers at a purchase price of $2.10
per Share and (ii) a Warrant to purchase the number of Warrant Shares set forth
opposite each Purchaser's name on the Schedule of Purchasers at a purchase price
of $0.01 per Warrant Share.
1.2 CLOSING DATE. The purchase and sale of the Shares and Warrants
hereunder shall take place at the law offices of Cooley Godward LLP, 4365
Executive Drive, Suite 1100, San Diego, California 92121. The closing of such
purchase and sale hereunder (the "Closing") shall be held on the date of this
Agreement or at such other time upon which the Company and a majority of the
Purchasers shall agree.
1.3 DELIVERY. At the Closing, the Company will deliver to each Purchaser
a certificate representing the Shares being purchased at the Closing by such
Purchaser and a
1
<PAGE> 6
Warrant to purchase the number of Warrant Shares as set forth opposite such
Purchaser's name in the Schedule of Purchasers against payment of the aggregate
purchase price therefor by (i) check payable to the order of the Company, (ii)
wire transfer of immediately available funds and/or (iii) cancellation of
indebtedness, as indicated on the Schedule of Purchasers.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedule of Exceptions attached hereto as Exhibit D,
the Company hereby represents and warrants to each Purchaser as follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
California and is in good standing under such laws. The Company has all
requisite corporate power to own and operate its assets and to carry on its
business as presently conducted and as proposed to be conducted. The Company is
not required to qualify to do business as a foreign corporation in any
jurisdiction outside of the State of California.
2.2 CORPORATE POWER. The Company has all requisite legal and corporate
power to execute and deliver this Agreement, the Fifth Amendment to the
Investors' Rights Agreement and the Third Amendment to the Co-Sale Agreement in
substantially the forms attached hereto as Exhibits E and F (this Agreement, the
Fifth Amendment to the Investors' Rights Agreement and the Third Amendment to
the Co-Sale Agreement are hereinafter collectively referred to as the
"Agreements"), to sell and issue the Shares under this Agreement, to issue the
Common Stock issuable upon conversion of the Shares and to issue the Warrant
Shares upon the exercise of the Warrants and to carry out and perform its
obligations under the terms of the Agreements, including all exhibits and
schedules hereto and thereto.
2.3 SUBSIDIARIES. The Company does not own or control, directly or
indirectly, any interest in any other corporation, association or business
entity.
2.4 CAPITALIZATION. Immediately following the Closing, the authorized
capital stock of the Company consists of 40,000,000 shares of Common Stock, of
which 4,136,499 shares will be issued and outstanding immediately following the
Closing, and 20,000,000 shares of Preferred Stock, 6,072,523 which are
designated Series A Preferred Stock, all of which will be issued and outstanding
immediately following the Closing, 1,195,809 of which are designated Series B
Preferred Stock, all of which will be issued and outstanding immediately
following the Closing, 2,132,368 of which are designated Series C Preferred
Stock, 1,980,950 of which will be issued and outstanding immediately following
the Closing, 957,144 of which are designated Series D Preferred Stock, all of
which will be issued and outstanding immediately following the Closing and
2,075,000 of
2
<PAGE> 7
which are designated Series E Preferred Stock, 1,277,981 of which will be issued
and outstanding immediately following the Closing. No other shares of capital
stock or other voting securities of the Company are outstanding. All such issued
and outstanding shares have been duly authorized and validly issued and are
fully paid and nonassessable. The Shares have the rights, preferences and
privileges set forth in the Restated Articles. The Company has reserved: (i)
4,650,000 shares of its Common Stock for issuance pursuant to the Company's
Stock Option Plan (the "Option Plan"), 3,355,858 shares of which are subject to
outstanding Incentive Stock Options, 229,000 shares of which are subject to the
Non-Qualified Stock Option Agreements dated March 4, 1994, by and between the
Company and Fred Cox and Sol Zechter, and 836,142 shares of which are available
for future grants under the Option Plan, (ii) 1,908,397 shares of Common Stock
issuable upon exercise of outstanding warrants dated December 29, 1994 (the
"1994 Warrants"), and 587,618 shares of Common Stock issuable upon exercise of
outstanding warrants dated May 30, 1996 (the "1996 Warrants," and together with
the 1994 Warrants, the "Common Stock Warrants") and (iii) 42,000 shares of
Series A Preferred Stock, 151,418 shares of Series C Preferred Stock and 781,560
shares of Series E Preferred Stock issuable upon exercise of outstanding
warrants, the Warrant Shares for issuance upon exercise of the Warrants, and
such shares of Common Stock issuable upon the conversion of such Series A
Preferred Stock, Series C Preferred Stock and Series E Preferred Stock and
Warrant Shares (the "Preferred Stock Warrants") (the shares issuable pursuant to
the Option Plan, the Common Stock Warrants, the Warrants and the Preferred Stock
Warrants are hereinafter referred to as the "Reserved Shares"). Except for (i)
the transactions contemplated in the Agreements (ii) the conversion privileges
of the Company's Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock specified
in the Restated Articles and (iii) rights to acquire the Reserved Shares, there
are no options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the Company's capital stock or other securities of the Company.
2.5 AUTHORIZATION. All corporate action on the part of the Company, its
directors and shareholders necessary for the authorization, execution, delivery
and performance of the Agreements by the Company, the authorization, sale,
issuance and delivery of the Shares and the Warrants (and the Common Stock
issuable upon conversion of the Shares or upon exercise of the Warrants) and the
performance of the Company's obligations under the Agreements has been taken or
will be taken prior to the Closing. The Agreements, when executed and delivered
by the Company, will constitute valid and binding obligations of the Company
enforceable in accordance with their terms, subject to laws of general
application relating to bankruptcy, insolvency, the relief of debtors, general
equity principles, and limitations upon rights to indemnity. The Shares, when
issued in compliance with the provisions of this Agreement, will be duly and
3
<PAGE> 8
validly issued, fully paid and nonassessable. The Common Stock issuable upon
conversion of the Shares and upon exercise of the Warrants has been duly and
validly reserved and, when issued in compliance with the provisions of this
Agreement or the Warrants, as applicable, will be duly and validly issued, fully
paid and nonassessable; provided, however, that the Shares (and the Common Stock
issuable upon conversion of the Shares or upon the exercise of the Warrants) may
be subject to restrictions on transfer under state and/or federal securities
laws. Neither the Shares nor the Warrants are subject to any preemptive rights,
rights of first refusal or similar rights that have not been waived.
2.6 CONTRACTS AND OTHER COMMITMENTS. The Company does not have any
contract, agreement, lease, commitment, or proposed transaction, written or
oral, absolute or contingent, other than contracts for the purchase of supplies
and services that were entered into in the ordinary course of business and that
do not involve more than $100,000. For the purpose of this paragraph, employment
and consulting contracts, license agreements and any other agreements relating
to the acquisition or disposition of the Company's technology shall not be
considered to be contracts entered into in the ordinary course of business.
2.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not, and will
not by virtue of entering into and performing the Agreements and the
transactions contemplated thereunder be, in violation of any term of the
Restated Articles or Bylaws or any term or provision of any material mortgage,
indenture, contract, agreement, instrument, judgment or decree to which it is a
party or by which it is bound, and is not, and will not by virtue of entering
into and performing the Agreements and the transactions contemplated thereunder
be, in violation of any order addressed specifically to the Company nor, to the
best of the Company's knowledge, any material order, statute, rule or regulation
applicable to the Company, other than any of the foregoing such violations that
do not, either individually or in the aggregate, have a material adverse effect
on the Company's business as presently conducted or planned to be conducted (a
"Material Adverse Effect").
2.8 RELATED-PARTY TRANSACTIONS. No employee, officer or director of the
Company, or any person that, within 12 months of the date of this Agreement has
been an employee, officer or director of the Company, or any member of the
immediate family of any of the foregoing, is indebted to the Company, nor is the
Company indebted (or committed to make loans or extend or guarantee credit) to
any of them. To the best of the Company's knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Company is affiliated or with which the Company has a business relationship,
or any firm or corporation that competes with the Company, except shares owned
by such persons constituting less than 2% of the voting securities of a publicly
traded company that competes with the Company. To the best of
4
<PAGE> 9
the Company's knowledge, no officer or director or any member of their immediate
families is, directly or indirectly, interested in any material contract with
the Company.
2.9 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or any of its officers or directors
before any court or governmental agency (nor, to the best of the Company's
knowledge, is there any threat thereof).
2.10 REGISTRATION RIGHTS. Except as set forth in the Fifth Amendment to
the Investors' Rights Agreement, the Company is not under any obligation to
register (as defined in the Fifth Amendment to the Investors' Rights Agreement)
any of its presently outstanding securities or any of its securities that may
hereafter be issued.
2.11 PERMITS. The Company has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default or violation in any material respect under any of such franchises,
permits, licenses, or other similar authority, and the execution and delivery of
the Agreements will not result in any such default or violation, with or without
the passage of time or giving of notice or both.
2.12 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Shares or the
Warrants (and the Common Stock issuable upon conversion of the Shares or upon
the exercise of the Warrants) or the consummation of any other transaction
contemplated thereby, except the qualification (or taking such action as may be
necessary to secure an exemption from qualification, if available) of the offer
and sale of the Shares or Warrants (and the Common Stock issuable upon
conversion of the Shares or upon the exercise of the Warrants) under the
California Corporate Securities Law, which filing and qualification, if
required, will be accomplished in a timely manner prior to or promptly upon
completion of the Closing.
2.13 RETURNS AND COMPLAINTS. The Company has received no customer or
user complaints concerning alleged defects in its products or proposed products
(or the design thereof) that, if true, would materially adversely affect the
operations or financial condition of the Company.
2.14 DISCLOSURE. The Company has provided the Purchasers with all the
information reasonably available to it without undue expense that the Purchasers
have
5
<PAGE> 10
requested for deciding whether to purchase the Shares and the Warrants and
all information that the Company believes is reasonably necessary to enable the
Purchasers to make such decision. To the best of the Company's knowledge after
reasonable investigation, neither this Agreement nor any other written
statements or certificates made or delivered in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.
2.15 OFFERING. Subject to the accuracy of the representations set forth
in Section 3 hereof, the offer, sale and issuance of the Shares and the Warrants
pursuant to this Agreement and the issuance of the Common Stock to be issued
upon conversion of the Shares and the shares of Common Stock to be issued upon
the exercise of the Warrants constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as amended
(the "Securities Act") and neither the Company nor any authorized agent acting
on its behalf will take any action hereafter that would cause the loss of such
exemption.
2.16 FINANCIAL STATEMENTS. The Company has delivered to the Purchasers
its audited balance sheet and statement of earnings dated as of December 31,
1996 and its unaudited balance sheet dated as of March 31, 1997 (the "Balance
Sheet Date") and related unaudited statements of earnings for the three-month
period then ended (the "Financial Statements"). The Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis and are complete and correct in all material
respects and accurately describe the financial condition of the Company as of
the Balance Sheet Date and results of operations and cash flows for such period;
provided, however, that the Financial Statements are subject to normal year-end
audit adjustments and do not contain footnotes. The Company is not a guarantor
or indemnitor of any indebtedness of any other person, firm, or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
2.17 BUSINESS PLAN. A copy of the Company's March 21, 1997 Business Plan
(the "Business Plan") has previously been delivered to the Purchasers. The
Business Plan was prepared in good faith by the Company and does not, to the
best of the Company's knowledge after reasonable investigation, contain any
untrue statement of a material fact nor does it omit to state a material fact
necessary to make the statements therein not misleading, except that with
respect to projections and expressions of opinion or predictions contained in
the Business Plan, the Company represents only that such projections and
expressions of opinion and predictions were made in good faith and that the
Company believes there is a reasonable basis therefor.
6
<PAGE> 11
2.18 LIABILITIES. The Company has no indebtedness for borrowed money
that the Company has directly or indirectly created, incurred, assumed, or
guaranteed, or with respect to which the Company has otherwise become directly
or indirectly liable, other than as reflected in the Financial Statements. The
Company has no material liability or obligation, absolute or contingent, other
than as reflected in the Financial Statements.
2.19 CHANGES. Since the Balance Sheet Date, there has not been:
(a) any change in the assets, liabilities, financial condition,
or operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects, or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the business, properties,
prospects, or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(e) to the best of the Company's knowledge, any material change
to a material contract or arrangement by which the Company or any of its assets
is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(g) any sale, assignment, or transfer of any patents, trademarks,
copyrights, trade secrets, or other intangible assets;
(h) any resignation or termination of employment of any key
officer of the Company; and the Company, to the best of its knowledge, does not
know of the impending resignation or termination of employment of any such
officer;
(i) receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company;
7
<PAGE> 12
(j) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Company to or for the
benefit of its employees, officers, or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(l) to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely affect the
business, properties, prospects, or financial condition of the Company (as such
business is presently conducted and as it is proposed to be conducted); or
(m) any agreement or commitment by the Company to do any of the
things described in this paragraph 2.19.
2.20 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good
and marketable title to its properties and assets shown in the Balance Sheet,
and has good title to all of its leasehold interests, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than (i) the lien of
current taxes not yet due and payable, and (ii) possible minor liens and
encumbrances that do not in any case materially detract from the value of the
property subject thereto or materially impair the operations of the Company and
which have not arisen otherwise than in the ordinary course of business.
2.21 PATENTS AND TRADEMARKS. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes (collectively
"Proprietary Information"), or believes it has the ability to acquire valid
licenses to such Proprietary Information on reasonable terms, as necessary for
its business as now conducted and as proposed to be conducted without any
conflict with or infringement of the rights of others. The Schedule of
Exceptions contains a complete list of patents and pending patent applications
of the Company. There are no outstanding options, licenses, or agreements of any
kind relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
Company is not aware of any impropriety with regard to the granting of any
licenses of Proprietary Information to or from the Company. The Company has not
received any written communications alleging that the Company has violated or
infringed or that the Company would, by conducting its business as proposed,
violate or infringe any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person or
entity. The Company is not aware that any of its employees are obligated under
any
8
<PAGE> 13
contract (including licenses, covenants, or commitments of any nature) or
other agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted. Except pursuant to the terms of
the Employee Nondisclosure Agreements entered into between the Company and its
employees and/or consultants in the form substantially as attached hereto as
Exhibit G (the "Proprietary Information and Inventions Agreement"), there are no
agreements, understandings, instruments, or contracts to which the Company is a
party or by which it is bound that involve the license of any patent, copyright,
trade secret or other similar proprietary right to or from the Company. The
Company does not believe it is or will be necessary to use any inventions of any
of its employees (or persons it currently intends to hire) made prior to their
employment by the Company.
2.22 DISTRIBUTION AND MARKETING RIGHTS. The Company has not granted
rights to develop, produce, distribute, license, market, or sell its products to
any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, produce, distribute, license, market or sell its
products.
2.23 TAX RETURNS. The Company has accurately prepared and timely filed
all federal, state and other tax returns which are required to be filed and has
timely paid all taxes covered by such returns which have become due and payable.
The Company has not been advised that any of its returns, federal, state or
other, have been or are being audited as of the date hereof. The Company is not
delinquent in taxes or assessments and has no tax deficiency proposed or
assessed and no waiver of the statute of limitations and assessment or
collections.
2.24 EMPLOYEES. None of the Company's employees belongs to any union or
collective bargaining unit. To the best of its knowledge, the Company has
complied in all material respects with all applicable state and federal equal
opportunity and other laws related to employment. To the best of the Company's
knowledge, no employee of the Company is or will be in violation of any
judgment, decree, or order, or any term of any employment contract, patent
disclosure agreement, or other contract or agreement relating to the
relationship of any such employee with the Company, or any other party because
of the nature of the business conducted or to be conducted by the Company or to
the use by the employee of his best efforts with respect to such business. The
Company is not a party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement, or other employee compensation agreement,
other than with respect to the Option Plan and options granted thereunder. The
Company is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the
9
<PAGE> 14
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing. Subject to general principles related to
wrongful termination of employees, the employment of each officer and employee
of the Company is terminable at the will of the Company.
2.25 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. Each employee and
officer of and consultant to the Company has executed a Proprietary Information
and Inventions Agreement.
2.26 NO DEFAULTS. The Company has, in all material respects, performed
all material obligations required to be performed by it to date and is not in
default under any of the contracts, loans, notes, mortgages, indentures,
licenses, security agreements, agreements, leases, documents, commitments or
other arrangements to which it is a party or by which it is otherwise bound,
except for such defaults which in the aggregate would not have a Material
Adverse Effect, and no event or condition has occurred which, with the lapse of
time or the giving of notice, or both, would constitute such a default.
2.27 INSURANCE. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company has in full force and effect
products liability and errors and omissions insurance in amounts customary for
companies similarly situated.
2.28 BROKERS OR FINDERS. The Company has not incurred, and will not
incur, any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with the Agreements.
2.29 ENVIRONMENTAL AND SAFETY LAWS. To the best of its knowledge, the
Company is not in violation of any applicable statute, law, or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law, or regulation.
2.30 MINUTE BOOKS. The copy of the minute books of the Company provided
to the Purchaser's counsel contain minutes of all meetings of directors and
shareholders and all actions by written consent without a meeting by the
directors and shareholders since the date of incorporation and reflect all
actions by the directors (and any committee of directors) and shareholders with
respect to all transactions referred to in such minutes accurately in all
material respects.
10
<PAGE> 15
2.31 REAL PROPERTY HOLDING CORPORATION. The Company is not a real
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
2.32 NO DIVIDENDS. The Company has never made any declaration, setting
aside for payment or other distribution in respect of any of the Company's
capital stock or any direct or indirect redemption, repurchase or other
acquisition of any of such stock.
3. INVESTMENT REPRESENTATIONS
Each Purchaser hereby represents and warrants to the Company as follows:
3.1 ACCREDITED INVESTOR. Each Purchaser is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act.
3.2 EXPERIENCE. Such Purchaser has, from time to time, evaluated
investments in start-up companies and has, either individually or through the
personal experience of one or more of its current officers or partners,
experience in evaluating and investing in start-up companies. Such Purchaser was
not formed for the purpose of investing in the Company hereunder.
3.3 INVESTMENT. Such Purchaser is acquiring the Shares and the Warrants
(and any Common Stock issuable upon conversion of the Shares or upon the
exercise of the Warrants) for investment for its own account and not with the
view to, or for resale in connection with, any distribution thereof. Such
Purchaser understands that the Shares and the Warrants (and any Common Stock
issuable upon conversion of the Shares or upon the exercise of the Warrants) to
be purchased have not been registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
as expressed herein.
3.4 RULE 144. Such Purchaser acknowledges that the Shares, the Common
Stock into which such shares are convertible and the Common Stock issuable upon
the exercise of the Warrants must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available. Such Purchaser is aware of the provisions of Rule 144 promulgated
under the Securities Act which permits limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things the existence of a public market for the shares, the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
securities to be sold, the sale being through a "broker's transaction" or in
transactions directly with a "market maker" (as provided by Rule 144(f)) and the
number of shares
11
<PAGE> 16
being sold during any three-month period not exceeding specified limitations.
Such Purchaser is aware that the conditions for resale set forth in Rule 144
have not been satisfied and that the Company has no plan to satisfy these
conditions in the foreseeable future.
3.5 NO PUBLIC MARKET. Such Purchaser understands that no public market
now exists for any of the securities of the Company and that it is unlikely that
a public market will ever exist for the Shares or the Warrants (and any Common
Stock issuable upon the conversion of the Shares or upon the exercise of the
Warrants).
4. CONDITIONS TO CLOSING OF PURCHASERS
The Purchasers' obligation to purchase Shares and Warrants at the
Closing is subject to the fulfillment on or prior to the Closing of the
following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of the Closing.
4.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing shall
have been performed or complied with in all material respects.
4.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the Company's financial condition, affairs or prospects
between the date of this Agreement and the Closing Date.
4.4 SECURITIES LAWS. Subject to the completion of any post-closing
securities law filings, the Company shall have obtained all necessary permits
and qualifications, or secured exemptions therefrom, required under the
Securities Act or by any state for the offer and sale of the Shares and Warrants
and the Common Stock issuable upon the conversion of the Shares or upon the
exercise of the Warrants.
4.5 COMPLIANCE CERTIFICATE. The Company shall have delivered on the
Closing Date a certificate signed by an officer of the Company certifying that
the conditions specified in Sections 4.1, 4.2 and 4.3 have been fulfilled.
4.6 OPINION OF COUNSEL. The Purchasers shall have received from Jeffer,
Mangels, Butler & Marmaro LLP counsel for the Company, an opinion in
substantially the form attached hereto as Exhibit H.
12
<PAGE> 17
4.7 AMENDMENT TO INVESTORS' RIGHTS AGREEMENT. The Company shall have
executed and delivered the Fifth Amendment to Investors' Rights Agreement in the
form attached as Exhibit E hereto.
4.8 AMENDMENT TO THE CO-SALE AGREEMENT. Company shall have executed and
delivered the Third Amendment to Co-Sale Agreement in the form attached as
Exhibit F hereto.
4.9 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Purchasers' counsel, which shall have received all such counterpart original and
certified or other copies of such documents as it may reasonably request.
5. CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to issue and sell Shares and Warrants at the
Closing is subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchasers contained in Section 3 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of the Closing.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by Purchasers on or prior to the Closing shall
have been performed or complied with in all respects.
5.3 SECURITIES LAWS. The Company shall have obtained all necessary
permits and qualifications, or secured exemptions therefrom, required under the
Securities Act or by any state for the offer and sale of the Shares and Warrants
(and any Common Stock issuable upon the conversion of the Shares or upon the
exercise of the Warrants).
6. AFFIRMATIVE COVENANTS OF THE COMPANY
6.1 PROPRIETARY INFORMATION AGREEMENT. Each person employed by the
Company in a technical or management position either as an employee or a
consultant, shall, as a condition to the commencement and continuation of their
employment with the Company, execute a Proprietary Information and Inventions
Agreement.
7. MISCELLANEOUS
13
<PAGE> 18
7.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California by California residents.
7.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Purchasers and the
closing of the transactions contemplated hereby.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of Purchasers to purchase the Shares shall
not be assignable without the consent of the Company.
7.4 ENTIRE AGREEMENT. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
7.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by facsimile or mailed
by registered or certified mail, postage prepaid, or otherwise delivered by hand
or by messenger, addressed (a) if to the Purchasers, one to each Purchaser at
the address set forth on the Schedule of Purchasers, or at such other address as
shall have been furnished to the Company in writing by the Purchasers or (b) if
to the Company, to the address set forth above and addressed to the attention of
the President, or at such other address or addresses as the Company shall have
furnished in writing to the Purchasers. All notices and other communications
mailed pursuant to the provisions of this Section 7.5 shall be deemed delivered
when mailed or sent by facsimile or delivered by hand or messenger.
7.6 EXPENSES. Each party to this Agreement shall bear its own expenses
and legal fees incurred by it with respect to this Agreement and all related
transactions and agreements; provided, however, that upon the Closing, the
Company will pay the reasonable fees and expenses of counsel to the Purchasers
incurred in connection with the financing described herein not to exceed
$15,000.
7.7 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
7.8 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no
14
<PAGE> 19
such severability shall be effective if it materially changes the economic
benefit of this Agreement to any party.
7.9 SEPARABILITY. Any invalidity, illegality, or limitation of the
enforceability with respect to any Purchaser of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason of
the law of any such Purchaser's domicile or otherwise, shall in no way affect or
impair the validity, legality, or enforceability of this Agreement with respect
to other Purchasers. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired.
7.10 CALIFORNIA CORPORATE SECURITIES LAW. The sale of the securities
which are the subject of this Agreement has not been qualified with the
Commissioner of corporations of the state of California, and the issuance of
such securities or the payment or receipt of any part of the consideration
therefor prior to such qualification, if required by law, is unlawful. The
rights of all parties to this agreement are expressly conditioned upon such
qualification being obtained, if required by law.
7.11 APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement may
be amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the holders of a
majority of the outstanding Shares purchased and sold hereunder (including the
Common Stock issued upon conversion of the Shares), excluding from the
determination of such a majority (both in determining the total number of such
shares outstanding and the number of such shares consenting or not consenting)
all shares previously disposed of by the Purchasers or their transferees
pursuant to one or more registration statements under the Securities Act or
pursuant to Rule 144 thereunder. Any amendment, termination or waiver effected
in accordance with this section shall be binding upon each holder of any
securities issued pursuant to this Agreement (including securities into which
such securities have been converted or exchanged), each future holder of any or
all such securities and the Company.
15
<PAGE> 20
The foregoing Agreement is hereby executed as of the date first above
written.
THE COMPANY:
CONTINUUS SOFTWARE CORPORATION
By: /s/ John Laskey
-----------------------------
Title: Vice President, Finance
--------------------------
THE PURCHASERS:
NORWEST EQUITY PARTNERS V,
A MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners II
General Partner
By: /s/ Kevin G. Hall
------------------------------
Kevin G. Hall, Partner
ACCEL IV L.P.
By: Accel IV Associates L.P.
Its General Partner
By: /s/ G. Carter Sednaoui
----------------------------------
General Partner
ACCEL KEIRETSU L.P.
By: Accel Partners & Co., Inc.
Its General Partners
By: /s/ G. Carter Sednaoui
-------------------------------------
Its: Chief Financial Officer
-------------------------------------
[Signature Page to Stock Purchase Agreement]
<PAGE> 21
ACCEL INVESTORS `95 L.P.
By: /s/ G. Carter Sednaoui
--------------------------------------
General Partner
ELLMORE C. PATTERSON PARTNERS
By: /s/ Arthur C. Patterson
--------------------------------------
General Partner
ADVANCED TECHNOLOGY VENTURES III, L.P.
By: /s/ Jos C. Henkens
--------------------------------------
Jos C. Henkens, General Partner
BRENTWOOD ASSOCIATES VI, L.P.
By: BRENTWOOD VI VENTURES L.P.
its General Partner
By: /s/ G. Bradford Jones
--------------------------------------
G. Bradford Jones, General Partner
COMDISCO, INC.
By:/s/ Jill C. Hanses
--------------------------------------
Jill Hanses, Assistant Vice President
[Signature Page to Stock Purchase Agreement]
<PAGE> 22
/s/ P. Andrews McLane
- --------------------------------------
P. ANDREWS MCLANE
- --------------------------------------
GLEN HOWARD
[Signature Page to Stock Purchase Agreement]
<PAGE> 1
EXHIBIT 10.16
MASTER LEASE AGREEMENT
COMDISCO, INC. - LESSOR
MASTER LEASE AGREEMENT dated April 20, 1995 by and between COMDISCO,
INC. ("Lessor") and CONTINUUS SOFTWARE CORPORATION ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the
parties agree as follows (all capitalized terms are defined in Section 14.19):
1. PROPERTY LEASED.
Lessor leases to Lessee all of the Equipment described on each Schedule.
In the event of a conflict, the terms of a Schedule prevail over this Master
Lease.
2. TERM.
On the Commencement Date, Lessee will be deemed to accept the Equipment,
will be bound to its rental obligations for each item of Equipment and the term
of a Schedule will begin and continue through the Initial Term and thereafter
until terminated by either party upon prior written notice received during the
Notice Period. No termination may be effective prior to the expiration of the
Initial Term.
3. RENT AND PAYMENT.
Rent is due and payable in advance, in immediately available funds, on
the first day of each Rent Interval to the payee and at the location specified
in Lessor's invoice. Interim Rent is due and payable when invoiced. If any
payment is not made when due, Lessee will pay interest at the Overdue Rate. Upon
Lessee's execution of each Schedule, Lessee will pay Lessor the Advance
specified on the Schedule. The Advance will be credited towards the final Rent
payment if Lessee is not then in default. No interest will be paid on the
Advance.
4. SELECTION; WARRANTY AND DISCLAIMER OF WARRANTIES.
4.1 SELECTION. Lessee acknowledges that it has selected the
Equipment and disclaims any reliance upon statements made by the Lessor.
4.2 WARRANTY AND DISCLAIMER OF WARRANTIES. Lessor warrants to Lessee
that, so long as Lessee is not in default, Lessor will not disturb Lessee's
quiet and peaceful possession, and unrestricted use of the Equipment. To the
extent permitted by the manufacturer, Lessor assigns to Lessee during the term
of the Schedule any manufacturer's warranties for the Equipment. LESSOR MAKES NO
OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER, INCLUDING,
WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS FITNESS FOR A
PARTICULAR PURPOSE. Lessor is not responsible for any liability, claim, loss,
damage or expense of any kind (including strict liability in tort) caused by the
Equipment except for any loss or damage
<PAGE> 2
caused by the negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. TITLE; RELOCATION OR SUBLEASE; AND ASSIGNMENT.
5.1 TITLE. Lessee holds the Equipment subject and subordinate to the
rights of the Owner, Lessor, any Assignee and any Secured Party. Lessee
authorizes Lessor, as Lessee's agent, to prepare, execute and file in Lessee's
name precautionary Uniform Commercial Code financing statements showing the
interest of the Owner, Lessor, and any Assignee or Secured Party in the
Equipment and to insert serial numbers in Schedules as appropriate. Lessee will,
at its expense, keep the Equipment free and clear from any liens or encumbrances
of any kind (except any caused by Lessor) and will indemnify and hold Lessor,
Owner, any Assignee and Secured Party harmless from and against any loss caused
by Lessee's failure to do so.
5.2 RELOCATION OF SUBLEASE. Upon prior written consent, Lessee may
relocate Equipment to any location within the continental United States provided
(i) the Equipment will not be used by an entity exempt from federal income tax,
(ii) all additional costs (including any administrative fees, additional taxes
and insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the
Lessor and the Secured Party. Such consent to sublease will be granted if: (i)
Lessee meets the relocation requirements set out above, (ii) the sublease is
expressly subject and subordinate to the terms of the Schedule, (iii) Lessee
assigns its rights in the sublease to Lessor and the Secured Party as additional
collateral and security, (iv) Lessee's obligation to maintain and insure the
Equipment is not altered, (v) all financing statements required to continue the
Secured Party's prior perfected security interest are filed, and (vi) the
sublease is not to a leasing entity affiliated with the manufacturer of the
Equipment described on the Schedule. Lessor acknowledges Lessee's right to
sublease for a term which extends beyond the expiration of the Initial Term. If
Lessee subleases the Equipment for a term extending beyond the expiration of
such initial Term of the applicable Schedule, Lessee will remain obligated upon
the expiration of the Initial Term to return such Equipment, or, at Lessor's
sole discretion to (i) return Like Equipment or (ii) negotiate a mutually
acceptable lease extension or purchase. If the parties cannot mutually agree
upon the terms of an extension or purchase, the term of the Schedule will extend
upon the original terms and conditions until terminated pursuant to Section 2.
No relocation or sublease will relieve Lessee from any of its
obligations under this Master Lease and the relevant Schedule.
5.3 ASSIGNMENT BY LESSOR. The terms and conditions of each Schedule
have been fixed by Lessor in order to permit Lessor to sell and/or assign or
transfer its interest or grant a security interest in each Schedule and/or the
Equipment to a Secured Party or Assignee. In that event, the term Lessor will
mean the Assignee and any Secured Party. However, any assignment, sale, or other
transfer by Lessor will not relieve Lessor of its obligations to Lessee and will
not materially change Lessee's duties or materially increase the burdens or
risks imposed on Lessee. The Lessee consents to and will acknowledge such
assignments in a written notice given to Lessee. Lessee also agrees that:
2.
<PAGE> 3
(a) The Secured Party will be entitled to exercise all of
Lessor's rights, but will not be obligated to perform any of the obligations of
Lessor. The Secured Party will not disturb Lessee's quiet and peaceful
possession and unrestricted use of the Equipment so long as Lessee is not in
default and the Secured Party continues to receive all Rent payable under the
Schedule; and
(b) Lessee will pay all Rent and all other amounts payable
to the Secured Party, despite any defense or claim which it has against Lessor.
Lessee reserves its right to have recourse directly against Lessor for any
defense or claim;
(c) Subject to and without impairment of Lessee's leasehold
rights in the Equipment, Lessee holds the Equipment for the Secured Party to the
extent of the Secured Party's rights in that Equipment.
6. NET LEASE; TAXES AND FEES.
6.1 NET LEASE. Each Schedule constitutes a net Lease. Lessee's
obligation to pay Rent and all other amounts is absolute and unconditional and
is not subject to any abatement, reduction, set-off, defense, counterclaim,
interruption, deferment or recoupment for any reason whatsoever.
6.2 TAXES AND FEES. Lessee will pay when due or reimburse Lessor for
all taxes, fees or any other charges (together with any related interest or
penalties not arising from the negligence of Lessor) accrued for or arising
during the term of each Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state and Local taxes on the
capital or the net income of Lessor). Lessor will file all personal property tax
returns for the Equipment and pay all property taxes due. Lessee will reimburse
Lessor for property taxes within thirty (30) days of receipt of an invoice.
7. CARE, USE AND MAINTENANCE; ATTACHMENTS AND RECONFIGURATIONS; AND
INSPECTION BY LESSOR.
7.1 CARE, USE AND MAINTENANCE. Lessee will maintain the Equipment in
good operating order and appearance, protect the Equipment from deterioration,
other than normal wear and tear, and will not use the Equipment for any purpose
other than that for which it was designed. If commercially available, Lessee
will maintain in force a standard maintenance contract with the manufacturer of
the Equipment, or another party acceptable to Lessor, and will provide Lessor
with a complete copy of that contract. If Lessee has the Equipment maintained by
a party other than the manufacturer, Lessee agrees to pay any costs necessary
for the manufacturer to bring the Equipment to then current release, revision
and engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the Lease term. The Lease term
will continue upon the same terms and conditions until recertification has been
obtained.
7.2 ATTACHMENTS AND RECONFIGURATIONS. Upon receiving the prior
written consent of Lessor, Lessee may reconfigure and install Attachments on the
Equipment. In the event of such a Reconfiguration or Attachment, Lessee will,
upon return of the Equipment, at its expense, restore the Equipment to the
original configuration specified on the Schedule in accordance with
3.
<PAGE> 4
the manufacturer's specifications and in the same operating order, repair and
appearance as when installed (normal wear and tear excluded). If any parts of
the Equipment are removed during a Reconfiguration or Attachment, Lessor may
require Lessee to provide additional security, satisfactory to the Lessor, in
order to ensure performance of Lessee's obligations set forth in this
subsection. Neither Attachments nor parts installed on Equipment in the course
of Reconfiguration will be accessions to the Equipment.
7.3 INSPECTION BY LESSOR. Upon request, Lessee, during reasonable
business hours and subject to Lessee's security requirements, will make the
Equipment and its related log and maintenance records available to Lessor for
inspection.
8. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee hereby represents,
warrants and covenants that with respect to the Master Lease and each Schedule
executed hereunder:
(a) The Lessee is a corporation duly organized and validly
existing in good standing under the laws of the jurisdiction of its
incorporation, is duly qualified to do business in each jurisdiction (including
the jurisdiction where the Equipment is, or is to be, located) where its
ownership or lease of property or the conduct of its business requires such
qualification; and has full corporate power and authority to hold property under
the Master Lease and each Schedule and to enter into and perform its obligations
under such Lease.
(b) The execution and delivery by the Lessee of the Master
Lease and each Schedule and its performance thereunder have been duly authorized
by all necessary corporate action on the part of the Lessee, and the Master
Lease and each Schedule are not inconsistent with the Lessee's Certificate of
Incorporation or Bylaws, do not contravene any law or governmental rule,
regulation or order applicable to it, do not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and the
Master Lease and each Schedule constitute legal, valid and binding agreements of
the Lessee, enforceable in accordance with their terms.
(c) There are no actions, suits, proceedings or patent
claims pending or, to the knowledge of the Lessee, threatened against or
affecting the Lessee in any court or before any governmental commission, board
or authority which, if adversely determined, will have a material adverse effect
on the ability of the Lessee to perform its obligations under the Master Lease
and each Schedule.
(d) The Equipment is personal property and when subjected to
use by the Lessee will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations,
absolute or contingent (individually or in the aggregate), except the
liabilities and obligations of the Lessee as set forth in the Financial
Statements and liabilities and obligations which have occurred in the ordinary
course of business, and which have not been, in any case or in the aggregate,
materially adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns,
possesses, has access to, or can become licensed on reasonable terms under all
patents, patent applications, trademarks, trade names, inventions, franchises,
licenses, permits, computer software and
4.
<PAGE> 5
copyrights necessary for the operations of its business as now conducted, with
no known infringement of, or conflict with, the rights of others.
(g) All material contracts, agreements and instruments to
which the Lessee is a party are in full force and effect in all material
respects, and are valid, binding and enforceable by the Lessee in accordance
with their respective terms, subject to the effect of applicable bankruptcy and
other similar laws affecting the rights of creditors generally, and rules of law
concerning equitable remedies.
9. DELIVERY AND RETURN OF EQUIPMENT.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Schedule, Lessee shall,
pursuant to Lessor's instructions and at Lessee's full expense (including,
without limitation, expenses of transportation and in-transit insurance), return
the Equipment to Lessor in the same operating order, repair, condition and
appearance as when received, less normal depreciation and wear and tear. Lessee
shall return the Equipment to Lessor at its address set forth herein or at such
other address within the continental United States as directed by Lessor,
provided, however, that Lessee's expense shall be limited to the cost of
returning the equipment to Lessor's address as set forth herein. During the
period subsequent receipt of a notice under Section 2, Lessor may demonstrate
the Equipment's operation in place and Lessee will supply any of its personnel
as may reasonably be required to assist in the demonstrations.
10. LABELING.
Upon request, Lessee will mark the Equipment indicating Lessor's
interest. Lessee will keep all Equipment free from any other marking or labeling
which might be interpreted as a claim of ownership.
11. INDEMNITY.
Lessee will indemnify and hold Lessor, any Assignee and any Secured
Party harmless from and against any and all claims, costs, expenses, damages and
liabilities, including reasonable Attorneys' fees, arising out of the ownership
(for strict liability in tort only), selection, possession, leasing, operation,
control, use, maintenance, delivery, return or other disposition of the
Equipment. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. RISK OF LOSS.
Effective upon delivery and until the Equipment is returned, Lessee
relieves Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each item
of Equipment in an amount not less than the Casualty
5.
<PAGE> 6
Value. All policies for such insurance will name the Lessor and any Secured
Party as additional insured and as loss payee, and will provide for at least
thirty (30) days prior written notice to the Lessor of cancellation or
expiration, and will insure Lessor's interests regardless of any breach or
violation by Lessee of any representation, warranty or condition contained in
such policies and will be primary without right of contribution from any
insurance effected by Lessor. Upon the execution of any Schedule, the Lessee
will furnish appropriate evidence of such insurance acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such
Equipment has suffered a Casualty Loss. Within fifteen (15) days of a Casualty
Loss, Lessee will provide written notice of that loss to Lessor and Lessee will,
at Lessor's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing, Lessee's obligation to pay further Rent for the item of
Equipment will cease.
13. DEFAULT, REMEDIES AND MITIGATION.
13.1 DEFAULT. The occurrence of any one or more of the following
Events of Default constitutes a default under a Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by
Lessee when due if that failure continues for five (5) days after written
notice; or
(b) Lessee's failure to perform any other term or condition
of the Schedule or the material inaccuracy of any representation or warranty
made by the Lessee in the Schedule or in any document or certificate furnished
to the Lessor hereunder if that failure or inaccuracy continues for ten (10)
days after written notice; or
(c) An assignment by Lessee for the benefit of its
creditors, the failure by Lessee to pay its debts when due, the insolvency of
Lessee, the filing by Lessee or the filing against Lessee of any petition under
any bankruptcy or insolvency law or for the appointment of a trustee or other
officer with similar powers, the adjudication of Lessee as insolvent, the
liquidation of Lessee, or the taking of any action for the purpose of the
foregoing; or
(d) The occurrence of an Event of Default under any Schedule
or other agreement between Lessee and Lessor or its Assignee or Secured Party.
13.2 REMEDIES. Upon the occurrence of any of the above Events of
Default, Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the
applicable Schedule by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses,
including Default Costs;
6.
<PAGE> 7
(c) with notice and demand, recover all sums due and
accelerate and recover the present value of the remaining payment stream of all
Rent due under the defaulted Schedule (discounted at the same rate of interest
at which such defaulted Schedule was discounted with a Secured Party plus any
prepayment fees charged to Lessor by the Secured Party or, if there is no
Secured Party, then discounted at 6%) together with all Rent and other amounts
currently due as liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with
Lessee's security requirements, Lessor may enter on Lessee's premises to remove
and repossess the Equipment without being liable to Lessee for damages due to
the repossession, except those resulting from Lessor's, its assignees', agents'
or representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by
law, are cumulative and may be exercised successively or concurrently.
13.3 MITIGATION. Upon return of the Equipment pursuant to the terms
of Section 13.2, Lessor will use its best efforts in accordance with its normal
business procedures (and without obligation to give any priority to such
Equipment) to mitigate Lessor's damages as described below. EXCEPT AS SET FORTH
IN THIS SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY
STATUTE OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY
ANY OF LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or
otherwise dispose of all or any part of the Equipment at a public or private
sale for cash or credit with the privilege of purchasing the Equipment. The
proceeds from any sale, lease or other disposition of the Equipment are defined
as either:
(a) if sold or otherwise disposed of, the cash proceeds less
the Fair Market Value of the Equipment at the expiration of the Initial Term
less the Default Costs; or
(b) if leased, the present value (discounted at three points
over the prime rate as referenced in the Wall Street Journal at the time of the
mitigation) of the rentals for a term not to exceed the Initial Term, less the
Default Costs.
Any proceeds will be applied against Liquidated damages and any
other sums due to Lessor from Lessee. However, Lessee is liable to Lessor for,
and Lessor may recover, the amount by which the proceeds are less than the
liquidated damages and other sums due to Lessor from Lessee.
14. ADDITIONAL PROVISIONS.
14.1 BOARD ATTENDANCE. Lessor or its duly appointed representative
will have the right to attend Lessee's corporate Board of Directors meetings and
Lessee will give Lessor reasonable notice in advance of any special Board of
Directors meeting, which notice will provide an agenda of the subject matter to
be discussed at such board meeting. Lessee will provide Lessor with a certified
copy of the minutes of each Board of Directors meeting within thirty (30) days
following the date of such meeting held during the term of this Lease.
7.
<PAGE> 8
14.2 FINANCIAL STATEMENTS. Lessee will provide to Lessor the
financial statements specified in this Section, prepared in accordance with
generally accepted accounting principles, consistently applied (the "Financial
Statements"); provided, however, after the effective date of the initial
registration statement covering a public offering of Lessee's securities, the
term "Financial Statements" will be deemed to refer to only those statements
required by the Securities and Exchange Commission, to be provided no less
frequently than quarterly. Lessee will provide to Lessor (i) as soon as
practicable (within thirty (30) days) after the end of each month, the same
information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows, certified by Lessee's Chief Executive or Financial Officer to be
true and correct; and (ii) as soon as practicable (and in any event within
ninety (90) days) after the end of each fiscal year, audited balance sheets as
of the end of such year (consolidated if applicable), and related statements of
income or loss, retained earnings or deficit and changes in the financial
position and capital structure of Lessee for such year, setting forth in
comparative form the corresponding figures for the preceding fiscal year, and
accompanied by an audit report and opinion of the independent certified public
accountants selected by Lessee. Lessee will promptly furnish to Lessor any
additional information (including but not limited to tax returns, income
statements, balance sheets, and names of principal creditors) as Lessor
reasonably believes necessary to evaluate Lessee's continuing ability to meet
financial obligations.
14.3 OBLIGATION TO LEASE ADDITIONAL EQUIPMENT. Upon notice to Lessee,
Lessor will not be obligated to lease any Equipment which would have a
Commencement Date after said notice if: (i) Lessee is in default under this
Master Lease or any Schedule; (ii) Lessee is in default under any loan
agreement, the result of which would allow the lender or any secured party to
demand immediate payment of the indebtedness; (iii) there is a material adverse
change in Lessee's credit standing; or (iv) Lessor determines (in reasonable
good faith) that Lessee will be unable to perform its obligations under this
Master Lease.
14.4 MERGER AND SALE PROVISIONS. Lessee will notify Lessor of any
proposed Merger at least twenty (20) days prior to the closing date. Lessor may,
in its discretion, either (i) consent to the assignment of the Master Lease and
all relevant Schedules to the successor entity, or (ii) terminate the Master
Lease and all relevant Schedules. If Lessor elects to consent to the assignment,
Lessee and its successor will sign the assignment documentation provided by
Lessor. If Lessor elects to terminate the Master Lease and all relevant
Schedules, then Lessee will pay Lessor all amounts then due and owing and a
termination fee equal to the present value (discounted at 6%) of the remaining
Rent for the balance of the Initial Term(s) of all Schedules, and will return
the Equipment in accordance with Section 9.
14.5 ENTIRE AGREEMENT. This Master Lease and associated Schedules
supersede all other oral or written agreements or understandings between the
parties concerning the Equipment including, for example, purchase orders. ANY
AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY ONLY BE ACCOMPLISHED BY A
WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT IS SOUGHT TO BE ENFORCED.
14.6 NO WAIVER. No action taken by Lessor or Lessee will be deemed to
constitute a waiver of compliance with any representation, warranty or covenant
contained in this Master
8.
<PAGE> 9
Lease or a Schedule. The waiver by Lessor or Lessee of a breach of any provision
of this Master Lease or a Schedule will not operate or be construed as a waiver
of any subsequent breach.
14.7 BINDING NATURE. Each Schedule is binding upon, and inures to the
benefit of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR
OBLIGATIONS.
14.8 SURVIVAL OF OBLIGATIONS. All agreements, obligations including,
but not limited to those arising under Section 6.2, representations and
warranties contained in this Master Lease, any Schedule or in any document
delivered in connection with those agreements are for the benefit of Lessor and
any Assignee or Secured Party and survive the execution, delivery, expiration or
termination of this Master Lease.
14.9 NOTICES. Any notice, request or other communication to either
party by the other will be given in writing and deemed received upon the earlier
of actual receipt or three days after mailing if mailed postage prepaid by
regular or airmail to Lessor (to the attention of "Lease Administrator") or
Lessee, at the address set out in the Schedule or, one day after it is sent by
courier or on the same day as sent via facsimile transmission, provided that the
original is sent by personal delivery or mail by the receiving party.
14.10 APPLICABLE LAW. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE
WILL HAVE BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE
GOVERNED AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE
OF ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 SEVERABILITY. If any one or more of the provisions of this
Master Lease or any Schedule is for any reason held invalid, illegal or
unenforceable, the remaining provisions of this Master Lease and any such
Schedule will be unimpaired, and the invalid, illegal or unenforceable provision
replaced by a mutually acceptable valid, legal and enforceable provision that is
closest to the original intention of the parties.
14.12 COUNTERPARTS. This Master Lease and any Schedule may be executed
in any number of counterparts, each of which will be deemed an original, but all
such counterparts together constitute one and the same instrument. If Lessor
grants a security interest in all or any part of a Schedule, the Equipment or
sums payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate".
14.13 NONSPECIFIED FEATURES AND LICENSED PRODUCTS. If the Equipment is
supplied from Lessor's inventory and contains any features not specified in the
Schedule, Lessee grants Lessor the right to remove any such features. Any
removal will be performed by the manufacturer or another party acceptable to
Lessee, upon the request of Lessor, at a time convenient to Lessee, provided
that Lessee will not unreasonably delay the removal of such features.
9.
<PAGE> 10
Lessee will obtain no title to Licensed Products which will at all times
remain the property of the owner of the Licensed Products. License from the
owner may be required and it is Lessee's responsibility to obtain any required
License before the use of the Licensed Products. Lessee agrees to treat the
Licensed Products as confidential information of the owner, to observe all
copyright restrictions, and not to reproduce or sell the Licensed Products.
14.14 ADDITIONAL DOCUMENTS. Lessee will, upon execution of this Master
Lease and as may be requested thereafter, provide Lessor with a secretary's
certificate of incumbency and authority and any other documents reasonably
requested by Lessor. Upon the execution of each Schedule with a purchase price
in excess of $1,000,000, Lessee will provide Lessor with an opinion from
Lessee's counsel in a form acceptable to Lessor regarding the representations
and warranties in Section 8.
14.15 ELECTRONIC COMMUNICATIONS. Each of the parties may communicate
with the other by electronic means under mutually agreeable terms.
14.16 LESSOR'S RIGHT TO MATCH. Lessee's rights under Section 5.2 and
7.2 are subject to Lessor's right to match any sublease or upgrade proposed by a
third party. Lessee will provide Lessor with the terms of the third party offer
and Lessor will have three (3) business days to match the offer. Lessee will
obtain such upgrade from or sublease the Equipment to Lessor if Lessor has
timely matched the third party offer.
14.17 LANDLORD/MORTGAGEE WAIVER. Lessee agrees to provide Lessor with
a Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be
in a form satisfactory to Lessor.
14.18 EQUIPMENT PROCUREMENT CHARGES/PROGRESS PAYMENTS. Lessee hereby
agrees that Lessor shall not, by virtue of its entering into this Lease, be
required to remit any payments to any manufacturer or other third party until
Lessee accepts the Equipment subject to this Lease.
14.19 DEFINITIONS.
"ADVANCE" means the amount due to Lessor by Lessee upon Lessee's
execution of each Schedule.
"ASSIGNEE" means an entity to whom Lessor has sold or assigned its
rights as owner and Lessor of Equipment.
"ATTACHMENT" means any accessory, equipment or device and the
installation thereof that does not impair the original function or use of the
Equipment and is capable of being removed without causing material damage to the
Equipment and is not an accession to the Equipment.
"CASUALTY LOSS" means the irreparable loss or destruction of Equipment.
"CASUALTY VALUE" means the greater of the aggregate Rent remaining to be
paid for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
10.
<PAGE> 11
"COMMENCEMENT CERTIFICATE" means the Lessor provided certificate which
must be signed by Lessee within ten (10) days of the Commencement Date as
requested by Lessor.
"COMMENCEMENT DATE" is defined in each Schedule.
"DEFAULT COSTS" means reasonable attorney's fees and remarketing costs
resulting from a Lessee default or Lessor's enforcement of its remedies.
"EQUIPMENT" means the property described on a Schedule and any
replacement for that property required or permitted by this Master Lease or a
Schedule but not including any Attachment.
"EVENT OF DEFAULT" means the events described in Subsection 13.1.
"FAIR MARKET VALUE" means the aggregate amount which would be obtainable
in an arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
"INITIAL TERM" means the period of time beginning on the first day of
the first full Rent Interval following the Commencement Date for all items of
Equipment and continuing for the number of Rent Intervals indicated on a
Schedule.
"INSTALLATION DATE" means the day on which Equipment is installed and
qualified for a commercially available manufacturer's standard maintenance
contract or warranty coverage, if available.
"INTERIM RENT" means the pro-rata portion of Rent due for the period
from the Commencement Date through but not including the first day of the first
full Rent Interval included in the Initial Term.
"LICENSED PRODUCTS" means any software or other licensed products
attached to the Equipment.
"LIKE EQUIPMENT" means replacement Equipment which is lien free and of
the same model, type, configuration and manufacture as Equipment.
"LIKE PART" means a substituted part which is lien free and of the same
manufacturer and part number as the removed part, and which when installed on
the Equipment will be eligible for maintenance coverage with the manufacturer of
the Equipment.
"MERGER" means any consolidation or merger of the Lessee with or into
any other corporation or entity, any sale or conveyance of all or substantially
all of the assets of the Lessee to any other person or entity or any stock
acquisition of the Lessee by any other person or entity.
"NOTICE PERIOD" means the time period described in a Schedule during
which Lessee may give Lessor notice of the termination of the term of that
Schedule.
11.
<PAGE> 12
"OVERDUE RATE" means the lesser of five percent (5%) of the payment due
or the maximum rate permitted by the law of the state where the Equipment is
located.
"OWNER" means the owner of Equipment.
"RECONFIGURATION" means any change to Equipment that would upgrade or
downgrade the performance capabilities of the Equipment in any way.
"RENT" means the rent, including Interim Rent, Lessee will pay for each
item of Equipment expressed in a Schedule either as a specific amount or an
amount equal to the amount which Lessor pays for an item of Equipment multiplied
by a lease rate factor plus all other amounts due to Lessor under this Master
Lease or a Schedule.
"RENT INTERVAL" means a full calendar month or quarter as indicated on a
Schedule.
"SCHEDULE" means an Equipment Schedule which incorporates all of the
terms and conditions of this Master Lease and, for purposes of Section 14.12,
its associated Commencement Certificate(s).
"SECURED PARTY" means an entity to whom Lessor has granted a security
interest in a Schedule and related Equipment for the purpose of securing a loan.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease
on or as of the day and year first above written.
CONTINUUS SOFTWARE CORPORATION COMDISCO, INC.
as Lessee as Lessor
By: /s/ Kay Church By: /s/
--------------------------------- ----------------------------------
Title: Chief Financial Officer Title:
------------------------------ -------------------------------
04/20/93 05/25/95
12.
<PAGE> 13
ADDENDUM TO THE MASTER LEASE AGREEMENT
DATED AS OF APRIL 20, 1995
BETWEEN COMDISCO, INC., AS LESSOR, AND
CONTINUUS SOFTWARE CORPORATION, AS LESSEE
The undersigned hereby agree that the terms and conditions of the
above-referenced Master Lease Agreement are amended and modified as follows:
1. In the first paragraph after the words "MASTER LEASE AGREEMENT" insert
"(the "Master Lease")."
2. Section 1, "PROPERTY LEASED"
In the first sentence before the word "Schedule" insert the words
"Summary Equipment".
Second sentence, second line, replace "a Schedule" with "the applicable
Schedule".
3. Section 2, "TERM"
In the second line delete "a and insert "the applicable Summary
Equipment" before "Schedule".
4. Section 3, "RENT AND PAYMENT"
Second sentence, delete "when invoiced" and insert "within five (5) days
of receipt of an invoice therefor".
In the third sentence, delete the words, "interest at the Overdue Rate."
and replace with "a Late Charge on the overdue amount, provided,
however, no Late Charge shall be assessed on payments made within five
(5) days of the due date thereof."
Fifth sentence, line 2, delete "Lessee is not then in default" and
insert "no Event of Default has occurred thereunder which has not been
cured".
5. Section 5, "TITLE: RELOCATION OR SUBLEASE; AND ASSIGNMENT"
Subsection 5.1, line 4 before "Schedules" insert "Summary Equipment".
Subsection 5.2, second paragraph, first sentence, line 7, revise
"ffiliated" to read "affiliated".
In the second paragraph, fourth sentence, insert "Summary Equipment"
before "Schedule".
Subsection 5.3, paragraph (a), second sentence, line 2, delete "Lessee
is not in default" and insert "as no Event of Default has occurred which
has not been cured".
1.
<PAGE> 14
6. Section 7, "CARE. USE AND MAINTENANCE; ATTACHMENTS AND RECONFIGURATIONS;
AND INSPECTION BY LESSOR"
Subsection 7.1, line 3, after the words "commercially available", add
the words "and if customary in the industry".
Subsection 7.2, second sentence, line 3, after the words "specified on
the", insert "Summary Equipment". Fourth Sentence, line 1, delete "the"
and insert "such" between "accessions to" and "Equipment".
Subsection 7.3, line 1, insert "and reasonable notice" after the words
"upon request".
7. Section 8, "REPRESENTATIONS AND WARRANTIES OF LESSEE"
Paragraph (a), line 4, insert the clause "except where the failure to so
qualify would not have a material adverse effect on the Company's
business."
8. Section 9, third sentence, line 2, delete "its address set forth herein"
and insert "6111 N. River Road, Rosemont, IL 60018." Fourth sentence,
insert "to" after "subsequent".
9. Section 11, "INDEMNITY", second sentence, line 3, insert "or wilful
misconduct".
10. Section 13, "DEFAULT, REMEDIES AND MITIGATION"
Subsection 13.1
Introductory sentence, line 2, insert "Summary Equipment" after the word
"under".
Paragraph (b), line 1, insert "the applicable" before the word
"Schedule".
Paragraph (c), insert the following at the end of the paragraph:
", provided, however, that in case of a filing against Lessee of
any petition under any bankruptcy or insolvency law or for the
appointment of a trustee or other officer with similar powers,
if Lessee can obtain the dismissal of such proceeding within
sixty (60) days after the commencement of any such proceeding or
appointment, it shall not constitute an Event of Default".
Paragraph (d), line 1, insert the phrase "(after giving effect to the
applicable grace period)" after the words "Event of Default".
Subsection 13.2, first paragraph, after the words "Events of Default",
add the words "under any Schedule".
2.
<PAGE> 15
11. Section 14, "ADDITIONAL PROVISIONS"
Delete subsection 14.1 in its entirety and replace with the following:
"Lessee agrees to provide to Lessor on a monthly basis the
executive summary and minutes of the Board of Directors meetings
that are sent to all investors, including all attachments so
distributed."
Subsection 14.2, second sentence, line 5, delete "ninety (90)" and
insert "one hundred twenty (120)" before the word "(days)".
Subsection 14.3, clause (i) is amended in its entirety to read: "(i) an
Event of Default has occurred under this Master Lease or any Schedule
which has not been cured:".
Subsection 14.4, second sentence, line 2, insert "reasonably" after the
word "documentation". Third sentence, line 1, after the words "all
relevant Schedules" insert the phrase "pursuant to this Section".
Subsection 14.9, line 4, insert "applicable" before "Schedule".
Subsection 14.10, second sentence, line 2, insert "OR LESSOR" after the
words "ON LESSEE".
Subsection 14.13, first sentence, insert "Summary Equipment" before
"Schedule".
Subsection 14.17, first sentence, line 1, insert the phrase "upon the
reasonable request of Lessor." at the beginning thereof.
Definition "Commencement Certificate" delete this definition in its
entirety.
Add the following definition, "`Delivery Date' means the date of
delivery of inventory Equipment to Lessee's address."
Definition "Equipment" insert "Summary Equipment" before the word
"Schedule".
Definition "Installation Date" is deleted in its entirety.
Add the following definition: "'Lease' means a Summary Equipment
Schedule which incorporates all the terms and conditions of the related
Schedule and Master Lease."
Definition "Merger", line 3, insert "acquisition of all or substantially
all of the stock of" before "the Lessee" and delete "any stock
acquisition of".
Definition "Overdue Rate" is amended to read "Late Charge" and the word
"Late Charge" and the word "rate" is deleted and "amount" is inserted.
Definition "Rent", line 2, insert "Summary Equipment" before "Schedule."
Definition "Rent Interval" insert "Summary Equipment" before the word
"Schedule".
3.
<PAGE> 16
Definition "Schedule" delete this definition and replace with the
following:
"means, either an Equipment Schedule or a Licensed
Product Schedule which incorporates all of the terms and
conditions of this Master Lease."
Add the following definition: "`Summary Equipment Schedule'" means, a
Lessor provided certificate summarizing all of the Equipment for which
Lessor has received Lessee approved invoices, purchase documentation and
evidence of delivery, as applicable, during a calendar quarter which
will incorporate all of the terms and conditions of the related Schedule
and this Master Lease and will constitute a separate Lease."
CONTINUUS SOFTWARE CORPORATION COMDISCO, INC.
By: /s/ Kay Church By: /s/
------------------------------------- ------------------------------
Title: Chief Financial Officer Title:
---------------------------------- ---------------------------
Date: 4-21-95 Date: 5-30-95
----------------------------------- ----------------------------
4.
<PAGE> 1
EXHIBIT 10.17
COMDISCO, INC.
GLOBAL MASTER RENTAL AGREEMENT
GLOBAL MASTER RENTAL AGREEMENT (the "Agreement") dated as of September
1, 1995 by and between:
COMDISCO, INC. (HEREINAFTER REFERRED TO AS "COMDISCO"), 6111 NORTH RIVER
ROAD, ROSEMONT, ILLINOIS 60018, USA ACTING ON BEHALF OF ITSELF AND ITS
AFFILIATES AS HEREIN DESCRIBED
AND CONTINUUS SOFTWARE CORPORATION (HEREINAFTER REFERRED TO AS THE
"CUSTOMER"), ACTING ON BEHALF OF ITSELF AND ITS AFFILIATES AS HEREIN
DESCRIBED.
WHEREAS, Comdisco and its Affiliates are engaged in the rental of
equipment in various countries where Customer and its Affiliates may wish to
rent such equipment,
WHEREAS, to facilitate the transacting of rental operations between
Comdisco or an Affiliate of Comdisco and Customer or an Affiliate of the
Customer on an ongoing basis, Comdisco and the Customer wish to enter into the
present Agreement which, together with the Equipment Schedule under which each
individual rental operation is concluded, will establish the terms and
conditions applicable to such rental operation.
THEREFORE, it is agreed as follows:
1. GLOBAL MASTER RENTAL AGREEMENT
1.1 DEFINITIONS: "Affiliates of Comdisco" shall mean those
enterprises in which Comdisco owns and/or shall own at anytime after the date
hereof, directly or indirectly, the majority of the voting stock, including
without limitation all present Affiliates of Comdisco listed in Exhibit A
hereto.
"Affiliates of the Customer" shall mean those enterprises in which the
Customer, or its parent company owns and/or shall own at anytime after the date
hereof, directly or indirectly, the majority of the voting stock, or a
controlling interest, including without limitation all present Affiliates of the
Customer listed in Exhibit B hereto;
"Lessor" shall mean, with respect to any Equipment Schedule, the
Affiliate of Comdisco entering into such Equipment Schedule, or Comdisco, if
Comdisco enters into such Equipment Schedule.
"Lessee" shall mean, with respect to any Equipment Schedule, the
Affiliate of the Customer entering into such Equipment Schedule, or Customer, if
Customer enters into such Equipment Schedule.
"Rent Interval" shall mean the monthly, quarterly or such other billing
period set forth on an Equipment Schedule.
1.2 EQUIPMENT SCHEDULES: Lessor shall rent and Lessee shall take on
rent the equipment described in an Equipment Schedule executed hereunder
("Equipment") subject to the terms and conditions of this Agreement and such
Equipment Schedule. Each such Equipment Schedule shall be governed by all of the
terms and conditions of this Agreement and by such additional terms and
conditions as may be set forth in such Equipment Schedule.
Exhibit C hereto lists the countries for which Comdisco and Customer
have agreed upon the form of Equipment Schedule. Such Equipment Schedules shall
be substantially in the form attached to Exhibit C hereto. Further forms of
Equipment Schedules for use in transactions in other countries may be added by
agreement of Comdisco and Customer from time to time. The parties agree that
each local transaction will only be validly concluded if the relevant Equipment
Schedule is executed by signatories of Lessor and Lessee involved in such
transaction, and that any such Equipment Schedule may also be supplemented or
amended by special terms or conditions agreed upon by such Lessor or Lessee for
the particular transaction. The Customer shall, without notice, be jointly and
severally liable for the due performance of the obligations of its Affiliates
under all Equipment Schedules executed hereunder, including, without limitation,
all terms and conditions negotiated by its Affiliate.
2. TERM
2.1 The term of this Agreement shall commence on the date set forth
above and shall remain in force thereafter as long as any Equipment Schedule
entered into pursuant to this Agreement remains in effect.
2.2 The rental term and Lessee's rental obligations with respect to
each item of Equipment on an Equipment Schedule shall begin on the commencement
date ("Commencement Date"). The Commencement Date with respect to the type of
Equipment defined below and indicated on the applicable Equipment Schedule shall
be as follows:
a) Equipment installed and accepted by Lessee prior to the date of the
applicable Equipment Schedule ("Installed Equipment"), shall be the date Lessor
tenders payment of the Equipment purchase price;
b) Equipment supplied from Lessor's inventory ("Inventory Equipment")
shall be the date the Equipment is installed and approved for maintenance by the
manufacturer, (or an approved third party pursuant to Subsection 5.2 hereof) or
the seventh day after delivery if (i) Lessee delays the installation and
approval or (ii) the Equipment is not so approved due to defects in the
Equipment which are remediable by the manufacturer under a manufacturer's
maintenance contract but which are not remedied because Lessee has arranged for
third party maintenance pursuant to Subsection 5.2 hereof.
1 of 12
<PAGE> 2
c) Equipment on-order ("On-Order Equipment"), shall be the date Lessee
accepts the Equipment from the Equipment vendor, which date shall be confirmed
by Lessee to Lessor as evidenced by Lessee forwarding an Acceptance Certificate
in the form provided by Lessor, within ten (10) days following such acceptance
and which date shall in no event be later than the date the Equipment is placed
in service by Lessee.
The rental term shall continue, unless renewed in accordance with the
provisions hereof, for at least the full number of months, calendar quarters or
other Rent Interval set forth in the Equipment Schedule ("Initial Term"). The
Initial Term shall commence on the first day of the Rent Interval set forth in
the Equipment Schedule next following (i) the Commencement Date for all items of
Installed Equipment and Inventory Equipment to be rented thereunder or (ii)
Lessor's receipt of Acceptance Certificates for all items of On-Order Equipment
to be rented thereunder. On the Commencement Date the Lessee will execute and
deliver to the Lessor a letter, in a form to be specified by the Lessor, which
confirms such Commencement Date. The rental term for each Equipment Schedule
shall continue until the Equipment is returned and the Equipment Schedule is
terminated by either party upon not more than twelve (12) months nor less than
six (6) months prior written notice to the other party, provided that no such
termination shall be effective prior to the expiration of the Initial Term.
2.3 If the applicable Equipment Schedule has a single Initial Term
("Single Term"), Single Term shall be indicated on the applicable Equipment
Schedule and the terms of the following paragraph under this Subsection 2.3
shall apply to such Equipment Schedule:
All Rental Rate Factors set forth in the applicable Equipment Schedule
assume that Acceptance Certificates for all items of On-Order Equipment to be
rented thereunder will be received by Lessor no later than the outside date set
forth on the applicable Equipment Schedule ("Outside Date"). If any Acceptance
Certificates are received by Lessor after the Outside Date, Lessor may, on or
before the start of the Initial Term for all items of Equipment, adjust the
Rental Rate Factors (and, therefore, rental rates) to maintain an assumed
economic yield which Lessor would have required for a similar transaction at
such time.
2.4 If the applicable Equipment Schedule has multiple Initial Terms
("Multiple Term"), Multiple Term shall be indicated on the applicable Equipment
Schedule and the terms of the following paragraphs under this Subsection 2.4
shall apply to such Equipment Schedule:
a) Summary Equipment Schedule
Lessor shall summarize all items of Equipment for which Acceptance
Certificates have been received in the same calendar quarter into a Summary
Equipment Schedule in the form of Exhibit 1 hereto and, notwithstanding anything
to the contrary set forth in Subsection 2.2 of the Agreement, the Initial Term
shall begin the first day of the calendar quarter thereafter. Lessee agrees to
execute and return three copies of the Summary Equipment Schedules within 10
days of receipt. Each Summary Equipment Schedule shall incorporate the terms and
conditions of the Agreement and this Equipment Schedule with respect to those
items of Equipment listed in the Summary Equipment Schedule. Upon execution by
Lessor and Lessee, the Summary Equipment Schedule shall be referred to as an
Equipment Schedule and shall constitute a separate Equipment Schedule for
purposes of the Agreement, including without limitation, Section 11 thereof. The
Initial Term for Equipment listed in Acceptance Certificates received more than
10 days after the end of a calendar quarter and having an Acceptance Date in the
calendar quarter just ended, shall begin on the first day of the calendar
quarter following receipt of Acceptance Certificates.
b) If there is a default under the applicable Equipment Schedule or
there is an adverse change in Lessee's credit standing, Lessor, at its option
and upon prior written notice to Lessee, shall be relieved of its obligations to
lease Equipment under any Equipment Schedule with respect to Inventory Equipment
and Installed Equipment with a Commencement Date occurring after the date of
such notice and On-Order Equipment for which Lessor has not received an
Acceptance Certificate from Lessee prior to the date of such notice.
c) If prior to the Commencement Date for an item of Equipment the
manufacturer announces any change in comparable existing Equipment ("Comparable
Equipment") or announces the introduction of new or improved technology
("Replacement Technology Equipment"), Lessee may elect to lease the Replacement
Technology Equipment pursuant to the applicable Equipment Schedule in lieu of
the original Equipment described in such Equipment Schedule; provided, that
purchase documents with respect to the original Equipment and the Replacement
Technology Equipment are completed to Lessor's satisfaction. If Lessee elects
not to rent the Replacement Technology Equipment, then with respect to the
original Equipment with a Commencement Date occurring after the announced first
availability date stated in either of the aforementioned announcements, it is
agreed that Lessor may adjust the Rental Rate Factor in order to maintain an
assumed economic yield which Lessor would have expected had either such
announcement been made on the date of the applicable Equipment Schedule. This
paragraph 2.4(c) shall not apply to any Equipment having a Commencement Date
prior to the announced first availability date stated in either of the
aforementioned announcements.
3. RENT
3.1 Lessee shall pay to Lessor as rental for the Equipment the Rent
in an amount (i) as set forth in the applicable Equipment Schedule if the
Equipment is Inventory Equipment or (ii) equal to the Rental Rate Factor set
forth in the applicable Equipment Schedule multiplied by the "Lessor's Cost", as
hereinafter defined, if the Equipment is Installed Equipment or On-Order
Equipment. The Rent shall be paid in advance on the first day of the applicable
Rent Interval set forth in the applicable Equipment Schedule (in immediately
available funds in the local currency indicated on the Equipment Schedule) to
Lessor at its bank account, details of which are set forth in the Equipment
Schedule, or to such other person and/or at such other bank account as Lessor
may from time to time designate in writing. If the Commencement Date of any
Equipment Schedule shall be other than the first day of the applicable Rent
Interval, Lessee shall make rental payments equal to the daily prorata portion
of the Rent set forth in the Equipment Schedule for each day from and including
the Commencement Date through the last day of the applicable Rent Interval prior
to the beginning of the Initial Term ("Interim Rent"). The Rent, and Interim
Rent, if any, shall be payable without deduction or withholding on any account
whatsoever and regardless of whether an invoice has been supplied by Lessor. If
Lessee is required by law to make any such deduction or withholding, Lessee
shall pay to Lessor such additional amount as may be necessary to enable Lessor
to receive a net amount equal to the full amount which would otherwise have been
payable pursuant to any such Equipment Schedule, unless such deduction or
withholding is made by reference to Lessor's net income.
3.2 All Rental Rate Factors set forth in the applicable Equipment
Schedule shall be calculated using an interest rate based on the prevailing
rates for similar transactions with lessees of similar credit standing as of the
date of the applicable Equipment Schedule. If, on or before the start of
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the Initial Term for all items of Equipment to be leased under the applicable
Equipment Schedule, the comparable interest rate is greater, such Rental Rate
Factors may be adjusted accordingly.
3.3 Lessor's Cost shall be an amount equal to the purchase price
which Lessee would otherwise be responsible to pay for an item of Equipment if
not for this Agreement.
3.4 Lessee shall promptly pay and discharge all taxes or other
charges of whatever nature due with respect to the ownership or use of the
Equipment or the renting thereof by Lessee or the payment of Rent or other sums
payable hereunder but excluding any taxes payable by reference to Lessor's net
income.
3.5 Should Lessee fail to pay any Rent herein reserved or any sum
required to be paid by Lessee to Lessor upon the due date for payment thereof,
Lessee shall pay to Lessor additional Rent equivalent to interest thereon from
the due date until the date of payment at the rate of 3% per annum above the
then prevailing interbank offering rate provided that in no event shall such
additional Rent exceed any legal limitation.
3.6 Equipment Procurement Charges. If indicated on the applicable
Equipment Schedule, Lessor and Lessee agree that this Subsection shall apply. It
is acknowledged that certain portions of the Equipment will be delivered to
Lessee prior to the Commencement Date and that progress payments will be
required to be paid to the Equipment manufacturer prior to the Commencement Date
for any item of Equipment leased pursuant to the applicable Equipment Schedule
("Progress Payments"). Lessee agrees that with respect to the portions of the
Equipment delivered prior to the Commencement Date, all terms and conditions of
the applicable Equipment Schedule shall be applicable except the Lessee's rental
obligations, provided, however, that Lessee agrees to pay Lessor "Equipment
Procurement Charges" equal to the daily rental rate factor set forth on the
applicable Equipment Schedule multiplied by the aggregate of the Progress
Payments paid by Lessor to the manufacturer or the Lessee relating to the
Equipment for each day from the date Progress Payments are made by Lessor until
the Commencement Date. Accrued Equipment Procurement Charges shall be payable on
the first day of each applicable Rent Interval. If Lessee rejects the Equipment
prior to the Commencement Date in accordance with the terms of the purchase
agreement with the Equipment vendor and such purchase agreement is terminated as
a result of such rejection, then the applicable Equipment Schedule shall also
terminate. In such event or if Lessee is in default of the applicable Equipment
Schedule for failure to timely pay Equipment Procurement Charges, then Lessee
shall (i) reimburse Lessor for any and all amounts paid by Lessor to the
manufacturer or to the Lessee relating to the purchase of the Equipment and (ii)
pay all Equipment Procurement Charges due through the date of termination,
whereupon Lessor shall transfer to Lessee all of Lessor's interest in and to the
Equipment and under any purchase agreement relating to the applicable Equipment
Schedule.
4. USE
Lessee shall:
4.1 keep the Equipment for its sole use and in its possession
(except as provided in 11.4 below) at the address where the Equipment has been
installed or at such other address within the country of original installation
as Lessor may from time to time be notified in writing and shall use the
Equipment only for the purposes for which it was designed in a proper manner and
in accordance with any applicable statutory regulations which may from time to
time be in force and shall take such steps as are necessary to ensure that the
Equipment will be safe and without risk to health when properly used by Lessee,
its employees or other authorized users;
4.2 ensure that the Equipment is only used by trained personnel in
accordance with the recommendations of the supplier and/or manufacturer;
4.3 allow such persons as Lessor may authorize to have access to the
Equipment at reasonable times in order to inspect its state and condition and,
if required, allow Lessor to fix and/or keep affixed upon the Equipment such
name or other plates in such place and manner as Lessor shall require to
indicate the ownership of the Equipment;
4.4 protect the Equipment against seizure and indemnify Lessor
against all losses, charges, damages and expenses suffered or incurred by Lessor
by reason thereof; and
4.5 protect Lessor's title or interest in the Equipment against all
persons claiming against or through Lessee and for this purpose take any
necessary steps to prevent title in the Equipment from passing to any freeholder
or mortgagee of the premises at which the Equipment is located.
5. INSTALLATION, MAINTENANCE AND ADDITIONS
5.1 Responsibility for all costs and risks of delivery, in-transit
insurance and installation shall be as indicated in the relevant Equipment
Schedule. Notwithstanding such indication, Lessee shall be responsible for all
exceptional costs of delivery and installation including, without limitation,
the costs of special lifting and handling equipment and building alterations.
Lessee will, at the request of Lessor or its assignees, certify the date of
installation of any Equipment rented hereunder. If Lessee should have the
Equipment installed by a third party maintenance or engineering company, Lessee
assumes any and all liability for defects in the Equipment which are remediable
by manufacturer under a manufacturer's maintenance contract but which are not so
remedied because Lessee has elected to use a third party to install the
Equipment, Lessor's approval of such third party notwithstanding (see 5.2).
Lessee shall have the manufacturer or authorized third party remedy all such
defects at Lessee's expense.
5.2 Lessee shall at all times and at its own expense keep the
Equipment in good order, repair and condition (fair wear and tear excepted) and
shall enter into and maintain throughout the rental term, a contract for the
maintenance of the Equipment with the manufacturer of the Equipment, or with a
third party maintenance company as approved by Lessor provided that, if Lessee
uses a third party maintenance company, Lessee assumes any and all liability for
defects in the Equipment which are remediable by manufacturer under a
manufacturer's maintenance contract but which are not remedied because Lessee
has arranged for a third party to provide such maintenance. Upon termination of
the renting, Lessee shall provide Lessor with the manufacturer's maintenance
qualification letter and, if necessary, Lessee shall pay any costs necessary to
have the manufacturer re-certify the Equipment for maintenance eligibility.
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5.3 No additions, improvements, variations, modifications or
alterations of whatsoever kind or nature shall be made to the Equipment without
the consent in writing of Lessor (such consent not to be unreasonably withheld).
Subject to such consent, any additions to the Equipment shall first be offered
for renting by Lessor upon the terms and conditions of this Agreement and of the
relevant Equipment Schedule. If any such additions, improvements, variations,
modifications or alterations are made to the Equipment without Lessor's written
consent, then the same shall be deemed to be Lessor's property.
6. ACCEPTANCE AND WARRANTIES
6.1 Lessor will use its reasonable endeavors at the expense and
request of Lessee to extend to Lessee the benefit of any guarantees, conditions,
warranties or representations which may be given to Lessor by the manufacturer
or supplier of the Equipment or otherwise implied in favor of Lessor, provided
that such benefit shall only be extended if Lessee shall fully indemnify Lessor
against all costs, claims and expenses incurred in connection with any claim
relating to such guarantee, condition, warranty or representation.
6.2 The Equipment has been selected by Lessee with full knowledge of
the manufacturer's specifications and Lessee consequently assumes the entire
responsibility for its choice and Lessee's acceptance by certifying installation
shall be conclusive proof that the Equipment is satisfactory in every way to
Lessee.
7. LESSEE'S INDEMNITY
Throughout the rental term under any Equipment Schedule and until the
Equipment hereunder has been effectively re-delivered to Lessor, Lessee shall be
solely responsible for any loss, damage or injury to any party occasioned by the
use or possession of the Equipment or in any way relating to the Equipment.
Lessee shall indemnify and keep Lessor indemnified against all claims or
proceedings made or brought against Lessor, and all damages, losses, costs,
charges and expenses incurred by Lessor by reason of such claims or proceedings
arising out of the state, condition, presence or use of the Equipment or in any
way relating to the Equipment or arising out of the renting of the Equipment
hereunder provided that nothing in this clause shall restrict or exclude
Lessor's liability in respect of or shall entitle Lessor to be indemnified by
Lessee against any claims or proceedings in respect of any injury, death, loss
or damages caused by or resulting from the wilful default or gross negligence of
Lessor.
8. RISK OF LOSS AND INSURANCE
Throughout the rental term, unless otherwise indicated in the relevant
Equipment Schedule, the Lessee shall insure and at all times keep the Equipment
insured with reputable insurers. Lessor and Lessee agree as follows:
a) Effective upon delivery of the Equipment to Lessee and until the
Equipment is returned to Lessor, Lessee relieves Lessor of responsibility for
all risks of physical damage to or loss or destruction of the Equipment,
howsoever caused. During the continuance of the relevant Equipment Schedule,
Lessee shall, at its own expense, cause to be carried and maintained casualty
insurance with respect to each item of Equipment designated in this Equipment
Schedule in an amount at least equal at all times to the greater of (i) the
replacement value of the Equipment, or (ii) the aggregate unpaid Rent with
respect to the Equipment for the unexpired Initial Term. Lessee shall carry
public liability insurance, in each case in amounts and against risks
customarily insured against by the Lessee on similar equipment and, in any
event, in amounts and against risks comparable to those insured against by the
Lessee on equipment owned by it. All policies with respect to such insurance
shall name the Lessor as additional assured and (together with any Beneficiary)
as loss payee, and shall provide for at least 30 days' prior written notice by
the underwriter or insurance company to the Lessor in the event of cancellation
or expiration. Lessee shall furnish appropriate evidence of such insurance;
b) If any item of Equipment is lost or rendered unusable as a result of
any physical damage or destruction of such item of Equipment, Lessee shall give
to Lessor prompt notice thereof and the Agreement and the relevant Equipment
Schedule shall continue in effect without any abatement of Rent. Lessee shall
determine, within fifteen (15) days after the date of occurrence of such loss,
damage or destruction, whether such item of Equipment can be repaired. If Lessee
determines that such item of Equipment can be repaired, Lessee, at its expense,
shall cause such item of Equipment to be promptly repaired. If Lessee determines
that such item of Equipment is lost or cannot be repaired, Lessee shall promptly
notify Lessor and such Equipment shall be deemed to have suffered a "Casualty
Loss" for purposes of this Section as of the date of occurrence of such loss.
Within said 15 days, Lessee shall notify Lessor of the Equipment which has
suffered a Casualty Loss and Lessee shall, at the Lessor's option, either (i)
replace Equipment which has suffered a Casualty Loss with lien free equipment of
the same model, type and feature configuration in which case the replacement
equipment shall become the Equipment, the relevant Equipment Schedule shall
continue in full force and effect and marketable title in such Equipment shall
vest in Lessor or (ii) pay the aggregate unpaid Rent with respect to such
Equipment for the unexpired Initial Term for such Equipment ("Casualty Value").
If the Casualty Value is paid, any installment of Rent with respect to such
Equipment due prior to the date of the Casualty Loss shall remain due and
payable. After the payment of such Casualty Value and all other amounts due and
owing with respect to such Equipment, Lessee's obligation to pay further Rent
for such Equipment shall cease. Except in the case of loss or total destruction,
Lessor will be entitled to recover all Equipment for which a Casualty Value has
been paid; provided, however, that Lessee shall dispose of such Equipment for
the best price obtainable (on an "as-is, where-is," basis without representation
or warranty expressed or implied), and Lessee shall be entitled to retain all
amounts received for the Equipment up to the Casualty Value and Lessee's
reasonable costs of disposition attributable thereto, and shall remit the
excess, if any, to Lessor.
9. DEFAULT
9.1 If:
a) Lessee or Customer shall fail to pay any Rent or other sum payable
under this Agreement (and any Equipment Schedules entered into hereunder) within
fifteen (15) days of its becoming due or fail to observe or perform any of the
terms and conditions hereof or shall do or allow to be done any act or thing
which may jeopardize any of Lessor's rights in the Equipment;
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b) any distress, execution or other legal process shall be levied on or
against the Equipment or any part thereof or any premises where the same may be
or Lessee shall permit any judgment against it to remain unsatisfied for
fourteen days (14); or
c) Lessee or Customer shall enter into any liquidation, shall be
declared bankrupt or otherwise enter bankruptcy, shall call any meeting of its
creditors, or shall have any receiver or administrative receiver of all or any
of its undertakings or assets appointed, or shall be deemed unable to pay its
debts; then, in each and every such case, Lessor may at any time thereafter and
notwithstanding any subsequent acceptance by Lessor of any Rent (but without
prejudice to any other rights which Lessor may have against Lessee hereunder or
any pre-existing liability of Lessee to Lessor) by notice in writing to Lessee
forthwith and for all purposes terminate renting the Equipment hereunder and
under any Equipment Schedule executed by the Lessee and thereafter Lessee shall
no longer be in possession of the Equipment with Lessor's consent.
9.2 Upon such default, Lessee shall pay to Lessor:
a) all arrears then due by way of Rent or otherwise;
b) the costs of all repairs required as at the date of termination to
render the Equipment in good order and condition (fair wear and tear excepted);
c) all costs, charges and expenses incurred by Lessor in locating and
taking possession of the Equipment including all legal fees, costs and expenses;
and
d) as agreed compensation for Lessor's full financial loss, an amount
equal to the aggregate unpaid Rent with respect of the Equipment for the
unexpired balance of the Initial Term less a discount at the lower of the debt
rate of the Beneficiary (as defined in Subsection 11.1) at which the applicable
Equipment Schedule was financed or the rate of 2% per annum below the then
prevailing interbank offering rate, compounded quarterly, for accelerated
payment. Lessee confirms that the nature of the arrangement between it and
Lessor is such that, in computing the amount payable in such circumstances,
Lessor shall not be obliged to mitigate its loss by applying the sale proceeds
of the Equipment in reduction of such amount.
10. RETURN OF THE EQUIPMENT
At the end of the rental term of each Equipment Schedule executed
hereunder or upon the termination of the renting of the Equipment for whatever
reason, Lessee will at its own expense forthwith deinstall and deliver the
Equipment in good order and condition (fair wear and tear excepted) to Lessor at
such place as may be appointed by Lessor within the country in which it is then
installed if Comdisco has an affiliate in that country, or to the nearest
country with a Comdisco affiliate, and, upon the failure of Lessee to return the
Equipment as contemplated herein, Lessor may, without waiving Lessee's
obligations for the aforementioned expenses, repossess the Equipment at any time
and without notice and for this purpose shall be entitled freely to enter into
and upon any premises where the Equipment may be and whether the same is
occupied by or under the control of Lessee or otherwise.
11. ASSIGNMENT
11.1 Lessor shall be entitled to assign, sell or pledge in whole or
in part its rights related to any Equipment, to any Equipment Schedule and/or to
any amounts payable under any Equipment Schedule to one or more third parties
(collectively the "Beneficiary"). Lessee agrees that on receipt of written
notice from Lessor of such assignment, sale or pledge, if so instructed, Lessee
shall perform for the benefit of the Beneficiary those of its obligations under
any Equipment Schedule as are mentioned in such notice and, if so instructed,
Lessee shall pay all or part of the amounts payable under any Equipment Schedule
directly to the Beneficiary or its assignees. Lessee declares and certifies that
the Beneficiary shall be entitled to rely upon, and shall be considered a third
party beneficiary of, the following covenants and representations:
a) Lessee will not seek the performance by the Beneficiary of any of the
obligations of Lessor under this Agreement or any Equipment Schedule (unless
Lessor shall have assigned to the Beneficiary its obligations as lessor
hereunder or under any Equipment Schedule, in which case however Lessor shall
remain primarily liable for the performance of such obligations vis-a-vis
Lessee);
b) Lessee shall not agree to any modification or amendment of this
Agreement or of any Equipment Schedule assigned to the Beneficiary without the
prior written consent of the Beneficiary;
c) Lessee shall send to the Beneficiary a copy of any notice which is
required to be sent to Lessor; and
d) Lessee's obligations hereunder and under any assigned Equipment
Schedule shall not be subject to any abatement, reduction, defense, offset or
counterclaim available to Lessee for any reason whatsoever including, without
limitation, any defect in the Equipment or failure of Lessor to perform any of
its obligations hereunder or under any Equipment Schedule.
11.2 Upon receipt of notice of any assignment, sale or pledge, Lessee
agrees to execute and deliver to Lessor any document which may be required by a
Beneficiary in order to certify the rights and obligations of the parties under
this Agreement and any assigned Equipment Schedule and in order to perfect such
assignment, sale or pledge, including, without limitation:
a) an acknowledgement of receipt of, or a declaration of consent to,
such assignment, sale or pledge;
b) a certificate of Lessee's counsel in which he opines that Lessee is
validly bound by the terms of this Agreement and of any assigned Equipment
Schedule; and
c) a certificate of the delivery and acceptance of the related
Equipment.
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11.3 Lessee acknowledges that Lessor may not itself be the owner of
the Equipment rented under any Equipment Schedule and that Lessor may have
rented or leased such Equipment from a third party.
11.4 Lessee shall not sell, offer for sale, mortgage or charge the
Equipment or this Agreement or any Equipment Schedule executed hereunder nor
hold itself out as the owner of nor part with possession of the Equipment and
shall not create or allow to be created any lien or any encumbrance on the
Equipment and shall duly and punctually pay all rates and taxes, charges and
impositions payable in respect of the premises whereon any Equipment is
situated. Upon not less than sixty (60) days prior written notice to Lessor,
Lessee may subrent the Equipment to any party, or relocate the Equipment to any
location, within the country set forth in the respective Equipment Schedule,
provided that (i) any such sublessee's credit worthiness shall, in Lessor's
reasonable judgment, be equal to or better than Lessee's, and (ii) all costs of
any nature whatsoever resulting from such relocation or subrent shall be made
for the sole account of Lessee or its sublessee and any subrenting of the
Equipment shall be expressly subject and subordinate to the terms of this
Agreement and the respective Equipment Schedule. No subrenting of any Equipment
shall operate to relieve Lessee of its obligations hereunder. The Lessee hereby
grants to the Lessor the right and opportunity to submit or match the last
proposal for (i) the subrenting of the Equipment, and (ii) the financing of any
equipment which is replacing the Equipment leased pursuant to this Agreement and
any Equipment Schedule. Each of the foregoing shall be conducted in a
commercially reasonable time frame and manner.
11.5 Customer hereby agrees that its representations and obligations
under this Agreement may be assigned by Comdisco, without notice, to the Lessor
under any Equipment Schedule issued hereunder, and further assigned by such
Lessor, without notice, to the Beneficiary.
12. VALUE ADDED TAX ("VAT")
In addition to the Rent and other sums payable under this Agreement and
any Equipment Schedule, Lessee shall be responsible for and pay to Lessor any
value added tax, turnover tax, stamp tax, recording tax or similar tax thereon
at the rate in force on the due date of payment of any sums payable by Lessee
under this Agreement and any Equipment Schedule, and Lessee shall indemnify
Lessor and keep Lessor indemnified against any liability for such taxes which
may be incurred by Lessor in respect of the Equipment or its rental hereunder at
the location set forth in the Equipment Schedule. Lessee shall cooperate with
Lessor in obtaining any relevant documentation necessary to substantiate payment
of any such tax and in providing originals or certified copies thereof.
13. MISCELLANEOUS
13.1 Service of all notices under this Agreement or any Equipment
Schedule shall be sufficient if given personally or posted to the party to be
served at its address herein or in such Equipment Schedule or at such address as
the party to be served may from time to time by notice in writing inform the
other to be its address for service of notice hereunder or thereunder and, if
sent by first class post, shall be deemed to be delivered 48 hours after
posting.
13.2 It is acknowledged by the parties that the manufacturer or
supplier of the Equipment is not the agent and has no authority to act as the
agent of Lessor and that Lessor shall under no circumstances be responsible for
any warranty or representation made by any manufacturer or supplier except as
stated in this Agreement or such Equipment Schedule.
13.3 Lessor hereby excludes any conditions, warranties or
representations relating to the Equipment whether express or implied and whether
statutory or otherwise.
13.4 This Agreement shall be governed and construed for all purposes
in accordance with the law agreed upon in the applicable Equipment Schedule by
Lessor and Lessee. Comdisco and Customer hereby consent to such law.
13.5 Any payment hereunder or under any Equipment Schedule by Lessee
to Lessor shall be treated as paid on the date of its receipt by Lessor.
13.6 Neither this Agreement nor any Equipment Schedule executed
hereunder shall be varied in its terms by any oral agreement or representation
or otherwise than by an instrument in writing either of even date or subsequent
hereto or thereto executed by the respective parties or by their duly authorized
representatives.
13.7 The terms and conditions of any Equipment Schedule will
supersede those of all previous agreements either written or oral between Lessor
and Lessee relating to the Equipment.
13.8 No right or remedy herein conferred upon or reserved to Lessor
is exclusive of any other right or remedy herein or by law or equity provided or
permitted but each shall be cumulative of every right or remedy given hereunder
or hereafter existing and may be enforced currently therewith or from time to
time.
13.9 No forbearance or indulgence on the part of Lessor shown or
granted to Lessee shall in any way restrict or diminish the full rights and
powers of Lessor under this Agreement or any Equipment Schedule or shall operate
as a waiver of any breach by Lessee of any of the terms and conditions of this
Agreement.
13.10 No Equipment Schedule executed hereunder shall become binding
until accepted in writing by a representative authorized in writing on Lessor's
behalf.
13.11 The printed titles given to the clauses of this Agreement are
inserted for convenience only, do not form part of this Agreement and have no
effect upon its operation and interpretation.
13.12 Customer hereby submits to the jurisdiction of the court agreed
upon in the applicable Equipment Schedule by Lessor and Lessee regarding the
enforcement of Customer's representations and obligations hereunder with respect
to such Equipment Schedule and Customer hereby appoints the Lessee in the
applicable Equipment Schedule as the Customer's agent for service of process
with regard to the foregoing.
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13.13 In the event any one or more of the provisions of this Agreement
and/or any Equipment Schedule executed hereunder shall for any reason be held
invalid, illegal or unenforceable, the remaining provisions of this Agreement
and/or any such Equipment Schedule executed hereunder shall be unimpaired, and
the invalid, illegal or unenforceable provision shall be replaced by a mutually
acceptable valid, legal and enforceable provision, which comes closest to the
intention of the parties underlying the invalid, illegal or unenforceable
provision.
13.14 Lessee shall obtain no title to any software or other licensed
products ("Products") attached to the Equipment delivered to Lessee, and such
Products shall at all times remain the property of the owner thereof. Prior to
the legal use of any such Products, Lessee shall be responsible to obtain or
cause to be obtained a license to use such Products from the owner thereof.
13.15 Customer will, upon execution of this Agreement, and as may be
requested thereafter, provide Lessor and/or Comdisco with a secretary's
certificate of incumbency and authority and any other documents which may be
requested by Lessor and/or Comdisco.
Done in three copies this 29th day of Sept., 1995.
COMDISCO, INC. CONTINUUS SOFTWARE CORPORATION
By:_/s/ Stephen W. Hamilton By: /s/ John J. Laskey
Title: Executive Vice President International Title: Vice President Finance
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EXHIBIT A
To the Global Master Rental Agreement dated as of September 1, 1995 between
Comdisco, Inc. ("Comdisco") and Continuus Software Corporation ("Customer")
AFFILIATES OF COMDISCO, INC.
COMDISCO ASIA PTE LTD COMDISCO JAPAN, INC.
8 Shenton Way Hatchobori Building, 5th Floor
#44-01A 2-19-8, Hatchobori, Chuo-Ku
Treasury Building J-Tokyo 104
Singapore 0106 (Japan)
COMDISCO AUSTRALIA PTY LTD COMDISCO NEDERLAND B.V.
(ACN 002 997-453) Planetenbaan 15, Postbus 1681
Level 18, 111 Pacific Highway NL-3606 AK Maarssen
North Sydney (The Netherlands)
NSW-Australia 2060
COMPUTER DISCOUNT CORPORATION S.A.
COMDISCO HANDELSGESELLSCHAFT M.B.H. c/o Key Iberboard S.A.
Mahlerstrasse 7/22 Santiago Bernabeu 12
A-1010 Wien E-28036 Madrid
(Austria) (Spain)
COMDISCO BELGIUM S.A. COMDISCO SWEDEN AB
c/o KPMG c/o Advokatfirman Vinge
Rue Neerveld 101 - 103 Boite 3 Smalandsgatan 20, Box 1703
St Lambrechts - Woluwe S-11187 Stockholm
B-1200 Bruxelles (Sweden)
(Belgium)
COMDISCO (SWITZERLAND) S.A.
COMDISCO CANADA LTD. Postfach 4136
Royal Bank Plaza, North Tower Baarestrasse 20
200 Bay Street, Suite 2075 CH-6304 ZUG
P.O. Box 131 (Switzerland)
CDN-Toronto, Ontario M5J 2J3
(Canada) COMDISCO UNITED KINGDOM LIMITED
The Mondrian Building
COMDISCO FRANCE S.A. Herschel Street
176 avenue Charles de Gaulle GB-Slough, Berkshire SL1 1XS
F-92200 Neuilly sur Seine (Great Britain)
(France)
PROMODATA S.A.
COMDISCO DEUTSCHLAND GMBH 176 avenue Charles de Gaulle
Oskar-Messter-Strasse 24 F-92200 Neuilly sur Seine
D-85737 Ismaning/Munchen (France)
(Germany)
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<PAGE> 9
EXHIBIT B
To the Global Master Rental Agreement dated as of September 1, 1995 between
Comdisco, Inc. ("Comdisco") and Continuus Software Corporation ("Customer")
AFFILIATES OF CUSTOMER
Continuus Software Limited
Eagle House
The Ring
Bracknell, Berkshire
England RG 121 HB
Phone: 441-344-382118
Fax: 441-344-382158
Continuus Software France SARL
Immeuble Labrador
3, avenue de Quebec
91951 Courtaboeuf Cedex
France
Phone: 331-644--60303
Fax: 331-644-61321
Continuus Gmbh
Address pending
Employee: Bernd Volkmer
Phone: 49-89-3085779
Fax: 49-89-3085549
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<PAGE> 10
EXHIBIT C
To the Global Master Rental Agreement ("Agreement") dated as of September 1,
1995 between Comdisco, Inc. ("Comdisco") and ContinuusSoftware Corporation
("Customer").
Effective as of the date of the Agreement, Comdisco and
Customer hereby agree, pursuant to Subsection 1.2, "Equipment
Schedules" of the Agreement that Equipment Schedules
substantially in the forms attached hereto and identified by
country name shall be used in the countries listed below which
match the country name on the attached Equipment Schedules.
Australia Japan
Austria Netherlands
Belgium **Norway
Canada *Portugal
*Denmark Singapore
*Finland Spain
France Sweden
Germany Switzerland
Hong Kong United Kingdom
*Ireland United States
*Italy
Initialled: Comdisco /s/ SH
--------
Customer
--------
* Leases will be written with Comdisco United Kingdom, as Lessor
**Leases will be written with Comdisco Nederland B.V., as Lessor
10 of 12
<PAGE> 11
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
SUMMARY EQUIPMENT SCHEDULE NO. _______ for the Period beginning ________________
and ending ________________ to the Global Master Rental Agreement dated as of
___________________________ and Equipment Schedule No. _______ thereto between
Lessor and Lessee (the "Lease").
<TABLE>
<CAPTION>
LESSEE: LESSOR:
<S> <C> <C>
ADDRESS FOR NOTICES: ADDRESS FOR NOTICES: ADDRESS FOR REMITTANCES:
ATTENTION: ATTENTION: ATTENTION:
</TABLE>
1. EQUIPMENT: As set forth in the attached Acceptance Certificates which are a
part hereof (No. of Acceptance Certificates: _______)
2. INITIAL TERM START DATE:
3. INITIAL TERM:
4. LESSOR'S COST:
5. __________ RENT:
6. LESSEE REPRESENTATIONS: The Lessee hereby represents and warrants that:
(a) It has accepted all items of Equipment listed on the attached Acceptance
Certificates as of the date set forth therein.
(b) No default or event which with the giving of notice or lapse of time, or
both, would become a default has occurred or is continuing.
GLOBAL MASTER RENTAL AGREEMENT: This Summary Equipment Schedule is issued
pursuant to the Global Master Rental Agreement and Equipment Schedule identified
above. All of the terms, conditions, representations and warranties of the
Global Master Rental Agreement and Equipment Schedule are hereby incorporated
herein and made a part hereof as if they were expressly set forth in the Summary
Equipment Schedule and this Summary Equipment Schedule constitutes a separate
lease with respect to the Equipment described herein.
<TABLE>
<CAPTION>
CONTINUUS SOFTWARE CORPORATION COMDISCO, INC.
AS LESSEE AS LESSOR
<S> <C>
BY:_________________________________ BY:________________________________
TITLE:______________________________ TITLE:_____________________________
DATE:_______________________________ DATE:______________________________
</TABLE>
11 of 12
<PAGE> 12
ATTACHMENT TO
SUMMARY EQUIPMENT SCHEDULE_______
RENTAL BREAKDOWN BY LOCATION
<TABLE>
<CAPTION>
Location
Number Location Rent Tax on Rental Total Rent
- -------- -------- ---- ------------- ----------
<S> <C> <C> <C> <C>
</TABLE>
12 of 12
<PAGE> 1
EXHIBIT 10.18
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of the Preferred Stock of
Continuus Software Corporation
Dated as of April 20, 1995(the "Effective Date")
WHEREAS, Continuus Software Corporation, a California corporation (the
"Company") has entered into a Master Lease Agreement dated as of April 20, 1995,
Equipment Schedule No. VL-1 dated as of April 20, 1995, and related Summary
Equipment Schedules (the "Leases") with Comdisco, Inc., a Delaware corporation
(the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 42,000 fully paid and
non-assessable shares of the Company's Series A Preferred Stock ("Preferred
Stock") at a purchase price of $1.31 per share (the "Exercise Price"). The
number and purchase price of such shares are subject to adjustment as provided
in Section 8 hereof. Notwithstanding any provision(s) in this Warrant to the
contrary, in the event that the outstanding shares of the Company's Series A
Preferred Stock automatically covert into Common Stock pursuant to the
provisions of Article III B., Section 4(a) of the Company's Articles of
Incorporation, then this Warrant shall automatically convert into a warrant to
purchase the number of shares of Common Stock as would have been issuable to the
Warrantholder had this Warrant been exercised in full immediately prior to the
automatic conversion of Series A Preferred Stock into Common Stock.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i) ten
<PAGE> 2
(10) years or (ii) five (5) years from the effective date of the Company's
initial public offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form attached
hereto as Exhibit I (the "Notice of Exercise"), duly completed and executed.
Promptly upon receipt of the Notice of Exercise and the payment of the purchase
price in accordance with the terms set forth below, and in no event later than
twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a
certificate for the number of shares of Preferred Stock purchased and shall
execute the Notice of Exercise indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Common Stock.
B = the Exercise Price.
As used herein, current fair market value of Common Stock shall mean
with respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering,
and if the Company's Registration Statement relating to such public
offering has been declared effective by the SEC, then the initial "Price
to Public" specified in the final prospectus with respect to the
offering;
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the average of the closing prices over a
twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined;
or
2
<PAGE> 3
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the average of the closing bid and asked
prices quoted on the NASDAQ system (or similar system) over the
twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market,
the current fair market value of Common Stock shall be the highest price
per share which the Company could obtain from a willing buyer (not a
current employee or director) for shares of Common Stock sold by the
Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors, unless the Company shall become subject
to a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the fair market value
of Common Stock shall be deemed to be the value received by the holders
of the Company's Preferred Stock on a common equivalent basis pursuant
to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required
to be reserved hereunder require registration with or approval of any
governmental authority under any Federal or State law (other than any
registration under the 1933 Act, as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
3
<PAGE> 4
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock, other securities, or other assets or property of the
successor corporation resulting from such Merger Event, equivalent in value to
that which would have been payable if Warrantholder had exercised this Warrant
immediately prior to the Merger Event. In any such case, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant Agreement with respect to
the rights and interest of the Warrantholder after the Merger Event to the end
that the provisions of this Warrant Agreement (including adjustments of the
Exercise Price and number of shares of Preferred Stock purchasable) shall be
applicable to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
4
<PAGE> 5
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Right to Purchase Additional Stock. If, the Warrantholder's total
cost of equipment leased pursuant to the Leases exceeds $800,000, Warrantholder
shall have the right to purchase from the Company, at the Exercise Price
(adjusted as set forth herein), an additional number of shares, which number
shall be determined by (i) multiplying the amount by which the Warrantholder's
total equipment cost exceeds $800,000 by 6.878%, and (ii) dividing the product
thereof by the Exercise Price per share referenced above.
(f) Antidilution Rights. Additional antidilution rights applicable to
the Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit A (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prompt written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security was sold, (b) the
number of shares issued, and (c) such other information as necessary for
Warrantholder to determine if a dilutive event has occurred, provided, however,
no such notice will be required with respect to issues of stock resulting from
the exercise of options or warrants which are outstanding as of the date of this
Warrant Agreement.
(g) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be any voluntary or involuntary dissolution,
5
<PAGE> 6
liquidation or winding up of the Company; or (v) there shall be an underwritten
initial public offering of Company securities; then, in connection with each
such event, the Company shall send to the Warrantholder: (A) at least twenty
(20) days' prior written notice of the date on which the books of the Company
shall close or a record shall be taken for such dividend, distribution,
subscription rights (specifying the date on which the holders of Preferred Stock
shall be entitled thereto) or for determining rights to vote in respect of such
Merger Event, dissolution, liquidation or winding up; and (B) in the case of any
such Merger Event, dissolution, liquidation or winding up or public offering, at
least twenty (20) days' prior written notice of the date when the same shall
take place (and specifying the date on which the holders of Preferred Stock
shall be entitled to exchange their Preferred Stock for securities or other
property deliverable upon such Merger Event, dissolution, liquidation or winding
up).
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(h) Timely Notice. Failure to timely provide such notice required by
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
6
<PAGE> 7
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization
or other similar laws affecting the enforceability.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and Section 25102(f)of the California Corporate Securities
Law, which filings, if required, will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all applicable Federal and state securities
laws. In addition:
(i) The authorized capital of the Company consists of (A) 20,000,000
shares of Common Stock, of which 3,805,484 shares are issued and outstanding,
and (B) 6,072,523 shares of Preferred Stock, of which 6,040,523 are issued and
outstanding and convertible into 6,030,523 shares of Common Stock at a current
conversion price of $1.31 per share.
(ii) The Company has reserved (A) 1,920,000 shares of Common Stock for
issuance under its Stock Option Plan, under which options to purchase 1,109,925
shares of Common Stock are outstanding at an average exercise price of
approximately $.48 per share, and (B) 1,908,394 shares of Common Stock for
issuance upon exercise of outstanding Warrants to purchase Common Stock at a
price of $.25 per share, and (C) 6,030,523 shares of Common Stock for issuance
upon conversion of outstanding shares of the Company's Series A Preferred Stock.
There are no other options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities of the
Company other than any rights of Martin Cagan to purchase up to 30,000 shares of
Common Stock issuable pursuant to the terms of that certain Stock Purchase
Agreement, dated May 27, 1992, between the Company and Martin Cagan.
7
<PAGE> 8
(iii) In accordance with the Company's Articles of Incorporation, no
shareholder of the Company has preemptive rights to purchase new issuances of
the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the California
Corporate Securities Law, in reliance upon Section 25102(f)thereof.
(g) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time; provided, however, that the provisions of this Section 9(g) shall not
apply unless and until the Company is a reporting company under the Securities
Exchange Act of 1934, as amended.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder shall not sell or engage
in any public distribution of the same except pursuant to a registration or
exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
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<PAGE> 9
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
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<PAGE> 10
11. TRANSFERS. Subject to the terms and conditions contained in Section 10
hereof, this Warrant Agreement and all rights hereunder are transferable in
whole or in part by the Warrantholder and any successor transferee, provided,
however, in no event shall the number of transfers of the rights and interests
in all of the Warrants exceed three (3) transfers. The transfer shall be
recorded on the books of the Company upon receipt by the Company of a notice of
transfer in the form attached hereto as Exhibit II (the "Transfer Notice"), at
its principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or seven (7) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the Warrantholder
at Comdisco, Inc. 6111 North River Road, Rosemont, Illinois 60018, attention:
James Labe, , cc: Legal Department, (and/or, if by facsimile, (708) 518-5465 and
(708) 518-5088) and (ii) to the Company at Continuus Software Corporation, 108
Pacifica, Irvine, CA 92718 (and/or if by facsimile, (714) 453-2276) or at such
other address as any such party may subsequently designate by written notice to
the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
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<PAGE> 11
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended
by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions of the
Board of Directors of the Company approving this Warrant Agreement and the
transactions contemplated thereby. The Company shall also supply such other
documents as the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized as of the
Effective Date.
Company: CONTINUUS SOFTWARE CORPORATION
By: /s/ John Wark
---------------------------------
Title: President & Chief Executive Officer
-----------------------------------
Warrantholder: COMDISCO, INC.
----------------------
By: /s/ James P. Labe
---------------------------------
Title: President, Venture Lease Division
-----------------------------------
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<PAGE> 12
EXHIBIT I
NOTICE OF EXERCISE
To: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares
of the Preferred Stock of _________________, pursuant to the terms of
the Warrant Agreement dated the ______ day of ________________________,
19__ (the "Warrant Agreement") between
_____________________________________ and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock of
________________________________________, the undersigned hereby
confirms and acknowledges the investment representations and warranties
made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Preferred Stock in the name of the undersigned or in such other name as
is specified below.
(4) The undersigned warrantholder understands and agrees
that there will be placed on the certificate or certificates for
the Preferred Stock, or any substitutions therefor, a legend
stating in substance:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended
(the "Securities Act"), or any state securities laws.
These shares have been acquired for investment and may
not be sold or otherwise transferred in the absence of
an effective registration statement for these shares
under the Securities Act and applicable state securities
laws, or an opinion of counsel satisfactory to the
Company that registration is not required and that an
applicable exemption is available.
- --------------------------------
(Name)
- --------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:
----------------------------
Title:
---------------------------
Date:
----------------------------
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<PAGE> 13
ACKNOWLEDGEMENT OF EXERCISE
The undersigned ____________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares
of the Preferred Stock of _________________, pursuant to the terms of the
Warrant Agreement, and further acknowledges that ______ shares remain subject to
purchase under the terms of the Warrant Agreement.
Company: CONTINUUS SOFTWARE CORPORATION
By:
--------------------------------
Title:
-----------------------------
Date:
------------------------------
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<PAGE> 14
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute
this form and supply required information. Do not use this form
to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
- -----------------------------------------------------------------
(Please Print)
whose address is
-------------------------------------------------
- -----------------------------------------------------------------
Dated
--------------------------------------
Holder's Signature
-------------------------
Holder's Address
---------------------------
-------------------------------------------
Signature Guaranteed:
--------------------------------------------
NOTE: The signature to this Transfer Notice must correspond with
the name as it appears on the face of the Warrant
Agreement, without alteration or enlargement or any change
whatever. Officers of corporations and those acting in a
fiduciary or other representative capacity should file
proper evidence of authority to assign the foregoing
Warrant Agreement.
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<PAGE> 1
EXHIBIT 10.19
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
Continuus Software Corporation
Dated as of November 8, 1995(the "Effective Date")
WHEREAS, Continuus Software Corporation, a California corporation (the
"Company") has entered into a Master Lease Agreement dated as of April 20, 1995,
Equipment Schedule No. VL-2 dated as of September 15,1995, and related Summary
Equipment Schedules (the "Leases") with Comdisco, Inc., a Delaware corporation
(the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 19,268 fully paid and
non-assessable shares of the Company's Series C Preferred Stock ("Preferred
Stock") at a purchase price of $ $2.10 per share (the "Exercise Price"). The
number and purchase price of such shares are subject to adjustment as provided
in Section 8 hereof. Notwithstanding any provision(s) in this Warrant to the
contrary, in the event that the outstanding shares of the Company's Series C
Preferred Stock automatically covert into Common Stock pursuant to the
provisions of Article III B., Section 4(a) of the Company's Articles of
Incorporation, then this Warrant shall automatically convert into a warrant to
purchase the number of shares of Common Stock as would have been issuable to the
Warrantholder had this Warrant been exercised in full immediately prior to the
automatic conversion of Series C Preferred Stock into Common Stock.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i) ten
<PAGE> 2
(10) years or (ii) five (5) years from the effective date of the Company's
initial public offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form attached
hereto as Exhibit I (the "Notice of Exercise"), duly completed and executed.
Promptly upon receipt of the Notice of Exercise and the payment of the purchase
price in accordance with the terms set forth below, and in no event later than
twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a
certificate for the number of shares of Preferred Stock purchased and shall
execute the Notice of Exercise indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
-----
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Common Stock.
B = the Exercise Price.
As used herein, current fair market value of Common Stock shall mean
with respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering,
and if the Company's Registration Statement relating to such public
offering has been declared effective by the SEC, then the initial "Price
to Public" specified in the final prospectus with respect to the
offering;
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the average of the closing prices over a
twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined;
or
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<PAGE> 3
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the average of the closing bid and asked
prices quoted on the NASDAQ system (or similar system) over the
twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market,
the current fair market value of Common Stock shall be the highest price
per share which the Company could obtain from a willing buyer (not a
current employee or director) for shares of Common Stock sold by the
Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors, unless the Company shall become subject
to a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the fair market value
of Common Stock shall be deemed to be the value received by the holders
of the Company's Preferred Stock on a common equivalent basis pursuant
to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required
to be reserved hereunder require registration with or approval of any
governmental authority under any Federal or State law (other than any
registration under the 1933 Act, as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
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<PAGE> 4
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock, other securities, or other assets or property of the
successor corporation resulting from such Merger Event, equivalent in value to
that which would have been payable if Warrantholder had exercised this Warrant
immediately prior to the Merger Event. In any such case, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant Agreement with respect to
the rights and interest of the Warrantholder after the Merger Event to the end
that the provisions of this Warrant Agreement (including adjustments of the
Exercise Price and number of shares of Preferred Stock purchasable) shall be
applicable to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
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<PAGE> 5
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to
the Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit A (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prompt written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security was sold, (b) the
number of shares issued, and (c) such other information as necessary for
Warrantholder to determine if a dilutive event has occurred, provided, however,
no such notice will be required with respect to issues of stock resulting from
the exercise of options or warrants which are outstanding as of the date of this
Warrant Agreement.
(f) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be any voluntary or involuntary dissolution, liquidation
or winding up of the Company; or (v) there shall be an underwritten initial
public offering of Company securities; then, in connection with each such event,
the Company shall send to the Warrantholder: (A) at least twenty (20) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Preferred Stock shall be entitled
thereto) or for determining rights to vote in respect of such Merger Event,
dissolution, liquidation or winding up; and (B) in the
5
<PAGE> 6
case of any such Merger Event, dissolution, liquidation or winding up or public
offering, at least twenty (20) days' prior written notice of the date when the
same shall take place (and specifying the date on which the holders of Preferred
Stock shall be entitled to exchange their Preferred Stock for securities or
other property deliverable upon such Merger Event, dissolution, liquidation or
winding up).
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by
6
<PAGE> 7
which it is bound, and the Leases and this Warrant Agreement constitute legal,
valid and binding agreements of the Company, enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforceability.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and Section 25102(f)of the California Corporate Securities
Law, which filings, if required, will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all applicable Federal and state securities
laws. In addition:
(i) The authorized capital of the Company consists of (A) 20,000,000
shares of Common Stock, of which 3,820,825 shares are issued and outstanding,
and (B) 9,268,567 shares of Preferred Stock, of which 9,207,293 shares are
issued and outstanding 6,030,523 shares of preferred stock are convertible at
$1.31 per share, 1,195,809 shares at $1.50 per share and 1,980,950 shares are
convertible at $2.10 per share.
(ii) The Company has reserved (A) 3,400,000 shares of Common Stock for
issuance under its Stock Option Plan, under which options to purchase 1,583,419
shares of Common Stock are outstanding at an average exercise price of
approximately $.53 per share, and (B) 1,908,394 shares of Common Stock for
issuance upon exercise of outstanding warrants to purchase Common Stock at a
price of $.25 per share, outstanding warrants to purchase 42,000 shares at $1.31
per share and (C) 6,030,523 shares of Common Stock for issuance upon conversion
of outstanding shares of the Company's Series A Preferred Stock. There are no
other options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the Company's capital stock or other securities of the Company.
(iii) In accordance with the Company's Articles of Incorporation, no
shareholder of the Company has preemptive rights to purchase new issuances of
the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
7
<PAGE> 8
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the California
Corporate Securities Law, in reliance upon Section 25102(f)thereof.
(g) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time; provided, however, that the provisions of this Section 9(g) shall not
apply unless and until the Company is a reporting company under the Securities
Exchange Act of 1934, as amended.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder shall not sell or engage
in any public distribution of the same except pursuant to a registration or
exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act
8
<PAGE> 9
is available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
11. TRANSFERS. Subject to the terms and conditions contained in Section 10
hereof, this Warrant Agreement and all rights hereunder are transferable in
whole or in part by the Warrantholder and any successor transferee, provided,
however, in no event shall the number of transfers of the rights and interests
in all of the Warrants exceed three (3) transfers. The transfer shall be
recorded on the books of the Company upon receipt by the Company of a notice of
transfer in the form attached hereto as Exhibit II (the "Transfer Notice"), at
its principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.
9
<PAGE> 10
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or seven (7) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the Warrantholder
at Comdisco, Inc. 6111 North River Road, Rosemont, Illinois 60018, attention:
James Labe, , cc: Legal Department, (and/or, if by facsimile, (708) 518-5465 and
(708) 518-5088) and (ii) to the Company at Continuus Software Corporation, 108
Pacifica, Irvine, CA 92718 (and/or if by facsimile, (714) 453-2276) or at such
other address as any such party may subsequently designate by written notice to
the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
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<PAGE> 11
(h) Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended
by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions of the
Board of Directors of the Company approving this Warrant Agreement and the
transactions contemplated thereby. The Company shall also supply such other
documents as the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized as of the
Effective Date.
Company: CONTINUUS SOFTWARE CORPORATION
By: /s/ John J. Laskey
Title: Vice President Finance & CEO
Warrantholder: COMDISCO, INC.
By: /s/ James P. Labe
Title: President, Venture Lease Division
11
<PAGE> 12
EXHIBIT I
NOTICE OF EXERCISE
To: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares
of the Preferred Stock of _________________, pursuant to the terms of
the Warrant Agreement dated the ______ day of ________________________,
19__ (the "Warrant Agreement") between
_____________________________________ and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock of
________________________________________, the undersigned hereby
confirms and acknowledges the investment representations and warranties
made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Preferred Stock in the name of the undersigned or in such other name as
is specified below.
(4) The undersigned warrantholder understands and agrees that
there will be placed on the certificate or certificates for the
Preferred Stock, or any substitutions therefor, a legend stating
in substance:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended
(the "Securities Act"), or any state securities laws.
These shares have been acquired for investment and may not
be sold or otherwise transferred in the absence of an
effective registration statement for these shares under
the Securities Act and applicable state securities laws,
or an opinion of counsel satisfactory to the Company that
registration is not required and that an applicable
exemption is available.
- --------------------------------
(Name)
- ---------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By: _____________________________
Title: __________________________
Date: ___________________________
12
<PAGE> 13
ACKNOWLEDGEMENT OF EXERCISE
The undersigned ____________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares
of the Preferred Stock of _________________, pursuant to the terms of the
Warrant Agreement, and further acknowledges that ______ shares remain subject to
purchase under the terms of the Warrant Agreement.
Company: CONTINUUS SOFTWARE CORPORATION
By: _____________________________
Title: __________________________
Date: ___________________________
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<PAGE> 14
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form
and supply required information. Do not use this form to purchase
shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
_________________________________________________________________
(Please Print)
whose address is_________________________________________________
- -----------------------------------------------------------------
Dated __________________________________________
Holder's Signature ______________________________
Holder's Address ________________________________
-------------------------------------------------
Signature Guaranteed: ____________________________________________
NOTE: The signature to this Transfer Notice must correspond with
the name as it appears on the face of the Warrant
Agreement, without alteration or enlargement or any change
whatever. Officers of corporations and those acting in a
fiduciary or other representative capacity should file
proper evidence of authority to assign the foregoing
Warrant Agreement.
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<PAGE> 1
EXHIBIT 10.20
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
Continuus Software Corporation
Dated as of February 14, 1996(the "Effective Date")
WHEREAS, Continuus Software Corporation, a California corporation (the
"Company") has entered into a Master Lease Agreement dated as of April 20, 1995,
Equipment Schedule No. VL-3 dated as of February 14, 1996, and related Summary
Equipment Schedules (the "Leases") with Comdisco, Inc., a Delaware corporation
(the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 32,150 fully paid and
non-assessable shares of the Company's Series C Preferred Stock ("Preferred
Stock") at a purchase price of $ $2.10 per share (the "Exercise Price"). The
number and purchase price of such shares are subject to adjustment as provided
in Section 8 hereof. Notwithstanding any provision(s) in this Warrant to the
contrary, in the event that the outstanding shares of the Company's Series C
Preferred Stock automatically covert into Common Stock pursuant to the
provisions of Article III B., Section 4(a) of the Company's Articles of
Incorporation, then this Warrant shall automatically convert into a warrant to
purchase the number of shares of Common Stock as would have been issuable to the
Warrantholder had this Warrant been exercised in full immediately prior to the
automatic conversion of Series C Preferred Stock into Common Stock.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i) ten
<PAGE> 2
(10) years or (ii) five (5) years from the effective date of the Company's
initial public offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form attached
hereto as Exhibit I (the "Notice of Exercise"), duly completed and executed.
Promptly upon receipt of the Notice of Exercise and the payment of the purchase
price in accordance with the terms set forth below, and in no event later than
twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a
certificate for the number of shares of Preferred Stock purchased and shall
execute the Notice of Exercise indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Common Stock.
B = the Exercise Price.
As used herein, current fair market value of Common Stock shall mean
with respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering,
and if the Company's Registration Statement relating to such public
offering has been declared effective by the SEC, then the initial "Price
to Public" specified in the final prospectus with respect to the
offering;
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the average of the closing prices over a
twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined;
or
2
<PAGE> 3
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the average of the closing bid and asked
prices quoted on the NASDAQ system (or similar system) over the
twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market,
the current fair market value of Common Stock shall be the highest price
per share which the Company could obtain from a willing buyer (not a
current employee or director) for shares of Common Stock sold by the
Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors, unless the Company shall become subject
to a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the fair market value
of Common Stock shall be deemed to be the value received by the holders
of the Company's Preferred Stock on a common equivalent basis pursuant
to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required
to be reserved hereunder require registration with or approval of any
governmental authority under any Federal or State law (other than any
registration under the 1933 Act, as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
3
<PAGE> 4
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock, other securities, or other assets or property of the
successor corporation resulting from such Merger Event, equivalent in value to
that which would have been payable if Warrantholder had exercised this Warrant
immediately prior to the Merger Event. In any such case, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant Agreement with respect to
the rights and interest of the Warrantholder after the Merger Event to the end
that the provisions of this Warrant Agreement (including adjustments of the
Exercise Price and number of shares of Preferred Stock purchasable) shall be
applicable to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
4
<PAGE> 5
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to
the Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit A (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prompt written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security was sold, (b) the
number of shares issued, and (c) such other information as necessary for
Warrantholder to determine if a dilutive event has occurred, provided, however,
no such notice will be required with respect to issues of stock resulting from
the exercise of options or warrants which are outstanding as of the date of this
Warrant Agreement.
(f) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be any voluntary or involuntary dissolution, liquidation
or winding up of the Company; or (v) there shall be an underwritten initial
public offering of Company securities; then, in connection with each such event,
the Company shall send to the Warrantholder: (A) at least twenty (20) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Preferred Stock shall be entitled
thereto) or for determining rights to vote in respect of such Merger Event,
dissolution, liquidation or winding up; and (B) in the
5
<PAGE> 6
case of any such Merger Event, dissolution, liquidation or winding up or public
offering, at least twenty (20) days' prior written notice of the date when the
same shall take place (and specifying the date on which the holders of Preferred
Stock shall be entitled to exchange their Preferred Stock for securities or
other property deliverable upon such Merger Event, dissolution, liquidation or
winding up).
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by
6
<PAGE> 7
which it is bound, and the Leases and this Warrant Agreement constitute legal,
valid and binding agreements of the Company, enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforceability.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and Section 25102(f)of the California Corporate Securities
Law, which filings, if required, will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all applicable Federal and state securities
laws. In addition:
(i) The authorized capital of the Company consists of (A) 20,000,000
shares of Common Stock, of which 3,919,846 shares are issued and outstanding,
and (B) 9,268,567 shares of Preferred Stock, of which 9,207,293 shares are
issued and outstanding 6,030,523 shares of preferred stock are convertible at
$1.31 per share, 1,195,809 shares at $1.50 per share and 1,980,950 shares are
convertible at $2.10 per share.
(ii) The Company has reserved (A) 3,400,000 shares of Common Stock for
issuance under its Stock Option Plan, under which options to purchase 3,172,826
shares of Common Stock are outstanding at an average exercise price of
approximately $.53 per share, and (B) 1,969,682 shares of Common Stock for
issuance upon exercise of outstanding warrants to purchase Common Stock at a
price of $.25 per share, outstanding warrants to purchase 42,000 shares at $1.31
per share and (C) 6,030,523 shares of Common Stock for issuance upon conversion
of outstanding shares of the Company's Series A Preferred Stock. There are no
other options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the Company's capital stock or other securities of the Company.
(iii) In accordance with the Company's Articles of Incorporation, no
shareholder of the Company has preemptive rights to purchase new issuances of
the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
7
<PAGE> 8
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the California
Corporate Securities Law, in reliance upon Section 25102(f)thereof.
(g) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time; provided, however, that the provisions of this Section 9(g) shall not
apply unless and until the Company is a reporting company under the Securities
Exchange Act of 1934, as amended.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder shall not sell or engage
in any public distribution of the same except pursuant to a registration or
exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act
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<PAGE> 9
is available. Notwithstanding the foregoing, the restrictions imposed
upon the transferability of any of its rights to acquire Preferred Stock or
Preferred Stock issuable on the exercise of such rights do not apply to
transfers from the beneficial owner of any of the aforementioned securities to
its nominee or from such nominee to its beneficial owner, and shall terminate as
to any particular share of Preferred Stock when (1) such security shall have
been effectively registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or (2) such security shall have been sold
without registration in compliance with Rule 144 under the 1933 Act, or (3) a
letter shall have been issued to the Warrantholder at its request by the staff
of the Securities and Exchange Commission or a ruling shall have been issued to
the Warrantholder at its request by such Commission stating that no action shall
be recommended by such staff or taken by such Commission, as the case may be, if
such security is transferred without registration under the 1933 Act in
accordance with the conditions set forth in such letter or ruling and such
letter or ruling specifies that no subsequent restrictions on transfer are
required. Whenever the restrictions imposed hereunder shall terminate, as
hereinabove provided, the Warrantholder or holder of a share of Preferred Stock
then outstanding as to which such restrictions have terminated shall be entitled
to receive from the Company, without expense to such holder, one or more new
certificates for the Warrant or for such shares of Preferred Stock not bearing
any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
11. TRANSFERS. Subject to the terms and conditions contained in Section 10
hereof, this Warrant Agreement and all rights hereunder are transferable in
whole or in part by the Warrantholder and any successor transferee, provided,
however, in no event shall the number of transfers of the rights and interests
in all of the Warrants exceed three (3) transfers. The transfer shall be
recorded on the books of the Company upon receipt by the Company of a notice of
transfer in the form attached hereto as Exhibit II (the "Transfer Notice"), at
its principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.
9
<PAGE> 10
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or seven (7) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the Warrantholder
at Comdisco, Inc. 6111 North River Road, Rosemont, Illinois 60018, attention:
James Labe, , cc: Legal Department, (and/or, if by facsimile, (708) 518-5465 and
(708) 518-5088) and (ii) to the Company at Continuus Software Corporation, 108
Pacifica, Irvine, CA 92718 (and/or if by facsimile, (714) 453-2276) or at such
other address as any such party may subsequently designate by written notice to
the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
10
<PAGE> 11
(h) Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended
by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions of the
Board of Directors of the Company approving this Warrant Agreement and the
transactions contemplated thereby. The Company shall also supply such other
documents as the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized as of the
Effective Date.
Company: CONTINUUS SOFTWARE CORPORATION
By: /S/ John J. Laskey
Title: Vice President Finance
Warrantholder: COMDISCO, INC.
By: /S/ James P. Labe
Title: President, Venture Lease Division
11
<PAGE> 12
EXHIBIT I
NOTICE OF EXERCISE
To: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares
of the Preferred Stock of _________________, pursuant to the terms of
the Warrant Agreement dated the ______ day of ________________________,
19__ (the "Warrant Agreement") between
_____________________________________ and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock of
________________________________________, the undersigned hereby
confirms and acknowledges the investment representations and warranties
made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Preferred Stock in the name of the undersigned or in such other name as
is specified below.
(4) The undersigned warrantholder understands and agrees that
there will be placed on the certificate or certificates for the
Preferred Stock, or any substitutions therefor, a legend stating
in substance:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended
(the "Securities Act"), or any state securities laws.
These shares have been acquired for investment and may not
be sold or otherwise transferred in the absence of an
effective registration statement for these shares under
the Securities Act and applicable state securities laws,
or an opinion of counsel satisfactory to the Company that
registration is not required and that an applicable
exemption is available.
- --------------------------------
(Name)
- ---------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By: _____________________________
Title: __________________________
Date: ___________________________
12
<PAGE> 13
ACKNOWLEDGEMENT OF EXERCISE
The undersigned ____________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares
of the Preferred Stock of _________________, pursuant to the terms of the
Warrant Agreement, and further acknowledges that ______ shares remain subject to
purchase under the terms of the Warrant Agreement.
Company: CONTINUUS SOFTWARE CORPORATION
By: _____________________________
Title: __________________________
Date: ___________________________
13
<PAGE> 14
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form
and supply required information. Do not use this form to purchase
shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
_________________________________________________________________
(Please Print)
whose address is_________________________________________________
- -----------------------------------------------------------------
Dated __________________________________________
Holder's Signature ______________________________
Holder's Address ________________________________
-------------------------------------------------
Signature Guaranteed: ____________________________________________
NOTE: The signature to this Transfer Notice must correspond with
the name as it appears on the face of the Warrant
Agreement, without alteration or enlargement or any change
whatever. Officers of corporations and those acting in a
fiduciary or other representative capacity should file
proper evidence of authority to assign the foregoing
Warrant Agreement.
14
<PAGE> 1
EXHIBIT 10.21
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
------------------------------------------------------------
WARRANT TO PURCHASE STOCK
<TABLE>
<S> <C>
WARRANT TO PURCHASE 100,000 ISSUE DATE: JUNE 4, 1996
SHARES OF THE SERIES C PREFERRED EXPIRATION DATE: JUNE 4, 2001
STOCK OF CONTINUUS SOFTWARE CORPORATION INITIAL EXERCISE PRICE: $2.10 PER SHARE
</TABLE>
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other
good and valuable consideration, SILICON VALLEY BANK ("Holder") is entitled to
purchase the number of fully paid and non-assessable shares of the class of
securities (the "Shares") of the corporation (the "Company") at the initial
exercise price per Share (the "Warrant Price") all as set forth above and as
adjusted pursuant to Article 2 of this Warrant, subject to the provisions and
upon the terms and conditions set forth in this Warrant.
ARTICLE 1 EXERCISE.
1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by delivering
a duly executed Notice of Exercise in substantially the form attached as
Appendix 1 to the principal office of the Company. Unless Holder is exercising
the conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified
in Section 1.1, Holder may from time to time convert this Warrant, in whole or
in part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 ALTERNATIVE STOCK APPRECIATION RIGHT. At Holder's option, the
Company shall pay Holder the fair market value of the Shares issuable upon
conversion of this Warrant pursuant to Section 1.2 in cash in lieu of such
Shares.
1.4 FAIR MARKET VALUE. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.
1.5 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its
-1-
<PAGE> 2
WARRANT TO PURCHASE STOCK
- --------------------------------------------------------------------------------
expense shall execute and deliver, in lieu of this Warrant, a new warrant of
like tenor.
1.7 REPURCHASE ON SALE, MERGER OR CONSOLIDATION OF THE COMPANY.
1.7.1 "ACQUISITION". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2 ASSUMPTION OF WARRANT. If upon the closing of any Acquisition
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3 NONASSUMPTION. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
1.7.4 PURCHASE RIGHT. Notwithstanding the foregoing, at the
election of Holder, the Company shall purchase the unexercised portion of this
Warrant for cash upon the closing of any Acquisition for an amount equal to (a)
the fair market value of any consideration that would have been received by
Holder in consideration of the Shares had Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
shareholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.
ARTICLE 2 ADJUSTMENTS TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
-2-
<PAGE> 3
WARRANT TO PURCHASE STOCK
- --------------------------------------------------------------------------------
2.4 ADJUSTMENTS FOR DILUTING ISSUANCES. The Warrant Price and the
number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to adjustment, from time to time in the manner
set forth on Exhibit A in the event of Diluting Issuances (as defined on Exhibit
A).
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its Articles
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3 REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder as follows:
3.1.1 The initial Warrant Price referenced on the first page of
this Warrant is not greater than (i) the price per share at which the Shares
were last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
3.1.2 All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a)
to declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (- Can Partners
Investments IV, LLC) in the case of the
-3-
<PAGE> 4
WARRANT TO PURCHASE STOCK
- --------------------------------------------------------------------------------
matter referred to in (e) above, the same notice as is given to the holders of
such registration rights.
3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
3.4 REGISTRATION UNDER SECURITIES ACT OF SECURITIES ACT OF 1933, AS
AMENDED. The Company agrees that the Shares or, if the Shares are convertible
into common stock of the Company, such common stock, shall be subject to the
registration rights set forth on Exhibit B, if attached.
ARTICLE 4 MISCELLANEOUS.
4.1 TERM: NOTICE OF EXPIRATION. This Warrant is exercisable, in whole
or in part, at any time and from time to time on or before the Expiration Date
set forth above. The Company shall give Holder written notice of Holder's right
to exercise this Warrant in the form attached as Appendix 2 not more than 90
days and not less than 30 days before the Expiration Date. If the notice is not
so given, the Expiration Date shall automatically be extended until 30 days
after the date the Company delivers the notice to Holder.
4.2 LEGENDS. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
Securities Act of 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT
TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION
AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, if reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(C), Holder represents that iT has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holders notice of
proposed sale.
4.4 TRANSFER PROCEDURE. Subject to the provisions of Section 4.2,
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
Unless the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
4.5 NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and
-4-
<PAGE> 5
provisions of this Warrant, the party prevailing in such dispute shall be
entitled to collect from the other party all costs incurred in such dispute,
including reasonable attorneys' fees.
4.8 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
CONTINUUS SOFTWARE CORPORATION
By /s/John J. Laskey
----------------------------------
Chairman of the Board,
President or Vice President
By /s/Kay Church
----------------------------------
Secretary or Ass't Secretary
-5-
<PAGE> 6
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ____________ shares of the
Common/Series ____ Preferred [strike one] Stock of __________ pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
2. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to _______ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
3. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name as is specified below:
--------------------------
(Name)
==========================
(Address)
4. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
- -------------------------------------
(Signature)
- -------------------------------------
(Date)
APPENDIX 2
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
-------------, --
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear ____________:
This is to advise you that the Warrant issued to you described below
will expire on ________________, 19__.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.
(Name of Issuer)
By_____________________________
Its____________________________
-6-
<PAGE> 7
EXHIBIT A
ANTI-DILUTION PROVISIONS
In the event of the issuance (a "Diluting Issuance") by the Company,
after the Issue Date of the Warrant, of securities at a price per share less
than the Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares, shall be adjusted as a result of Diluting Issuances in
accordance with the Holder's standard form of Anti-Dilution Agreement in effect
on the Issue Date.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
EXHIBIT B
REGISTRATION RIGHTS
The Shares (if common stock), or the common stock issuable upon
conversion of the Shares, shall be deemed "registrable securities" or otherwise
entitled to "piggy back" registration rights in accordance with the terms of the
following agreement (the "Agreement") between the Company and its investor(s):
________________________________________________ [Identify Agreement by
date, title and parties. If no Agreement exists, indicate by "none".]
The Company agrees that no amendments will be made to the Agreement
which would have an adverse impact on Holder's registration rights thereunder
without the consent of Holder. By acceptance of the Warrant to which this
Exhibit B is attached, Holder shall be deemed to be a party to the Agreement.
If no Agreement exists, then the Company and the Holder shall enter
into Holder's standard form of Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
-7-
<PAGE> 1
EXHIBIT 10.22
SILICON VALLEY BANK REGISTRATION RIGHTS AGREEMENT
- -------------------------------------------------------------------------------
SILICON VALLEY BANK
REGISTRATION RIGHTS AGREEMENT
ISSUER: CONTINUUS SOFTWARE CORPORATION
ADDRESS: 108 PACIFICA, 2ND FLOOR
IRVINE, CALIFORNIA 92718
DATE: JUNE 4, 1996
THIS REGISTRATION RIGHTS AGREEMENT is entered into as of the above date by and
between Silicon Valley Bank ("Purchaser"), whose address is 3003 Tasman Drive,
Santa Clara, California 95054 and the above Company, whose address is set forth
above.
RECITALS
A. Concurrently with the execution of this Agreement, the Purchaser is
purchasing from the Company a Warrant to Purchase Stock (the "Warrant") pursuant
to which Purchaser has the right to acquire from the Company the Shares (as
defined in the Warrant).
B. By this Agreement, the Purchaser and the Company desire to set forth the
registration rights of the Shares all as provided herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
1. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Securities Act
of 1933, as amended (the "Securities Act"), and the declaration or ordering of
effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (i) the
Shares (if Common Stock) or all shares of Common Stock of the Company issuable
or issued upon conversion of the Shares and (ii) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, any stock referred to in (i).
(c) The terms "Holder" or "Holders" means the Purchaser
or qualifying transferees under subsection 1.8 hereof who hold Registrable
Securities.
(d) The term "SEC" means the Securities and Exchange
Commission.
1.2 COMPANY REGISTRATION.
(a) REGISTRATION. If at any time or from time to time,
the Company shall determine to register any of its securities, for its own
account or the account of any of its shareholders, other than a registration on
Form S-1 or S-8 relating solely to employee stock option or purchase plans, or a
registration on Form S-4 relating solely to an SEC Rule 145 transaction, or a
registration on any other form (other than Form S-1, S-2, S-3 or S-18, or their
successor forms) or any successor to such forms, which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(i) promptly give to each Holder written notice
thereof (which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(ii) include in such registration (and
compliance), ny underwriting involved therein, all the Registrable Securities
specified in a written request or requests,
-1-
<PAGE> 2
SILICON VALLEY BANK REGISTRATION RIGHTS AGREEMENT
- -------------------------------------------------------------------------------
made within 30 days after receipt of such written notice from the Company, by
any Holder or Holders, except as set forth in subsection 1.2(b) below.
(b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to subsection 1.2(a)(i). In such event the right of any Holder to
registration pursuant to this subsection 1.2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company.
1.3 EXPENSES OF REGISTRATION. All expenses incurred in connection
with any registration, qualification or compliance pursuant to this Section 1
including without limitation, all registration, filing and qualification fees,
printing expenses, fees and disbursements of counsel for the Company and
expenses of any special audits incidental to or required by such registration,
shall be borne by the Company except the Company shall not be required to pay
underwriters' fees, discounts or commissions relating to Registrable Securities.
All expenses of any registered offering not otherwise borne by the Company shall
be borne pro rata among the Holders participating in the offering and the
Company.
1.4 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Registration Rights Agreement, the Company will keep each Holder participating
therein advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. Except as
otherwise provided in subsection 1.3, at its expense the Company will:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to 120 days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act or the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
1.5 INDEMNIFICATION.
(a) The Company will indemnify each Holder of
Registrable Securities and each of its officers, directors and partners, and
each person controlling such Holder, with respect to which such registration,
qualification or compliance has been effected pursuant to this Rights Agreement,
and each underwriter, if any, and each person who controls any underwriter of
the Registrable Securities held by or
-2-
<PAGE> 3
SILICON VALLEY BANK REGISTRATION RIGHTS AGREEMENT
- -------------------------------------------------------------------------------
issuable to such Holder, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereto) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, or any violation or
alleged violation by the Company of the Securities Act, the Securities Exchange
Act of 1934, as amended ("Exchange Act"), or any state securities law applicable
to the Company or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any such state law and relating to action or inaction
required of the Company in connection with any such registration, qualification
of compliance, and will reimburse each such Holder, each of its officers,
directors and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, within a
reasonable amount of time after incurred for any reasonable legal and any other
expenses incurred in connection with investigating, defending or settling any
such claim, loss, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 1.5(a) shall not apply to
amounts paid in settlement of any such claim, loss, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld); and provided further, that the Company will
not be liable in any such case to the extent that any such claim, loss, damage
or liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by an instrument duly executed
by such Holder or underwriter specifically for use therein.
(b) Each Holder will, if Registrable Securities held by or
issuable to such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers, each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company within the meaning of the Securities Act, and each other
such Holder, each of its officers, directors and partners and each person
controlling such Holder, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such Holders, such directors,
officers, partners, persons or underwriters for any reasonable legal or any
other expenses incurred in connection with investigating, defending or settling
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder specifically for use therein; provided, however,
that the indemnity agreement contained in this subsection 1.5(b) shall not apply
to amounts paid in settlement of any such claim, loss, damage, liability or
action if such settlement is effected without the consent of the Holder (which
consent shall not be unreasonably withheld); and provided further, that the
total amount for which any Holder shall be liable under this subsection 1.5(b)
shall not in any event exceed the aggregate proceeds received by such Holder
from the sale of Registrable Securities held by such Holder in such
registration.
(c) Each party entitled to indemnification under this
subsection 1.5 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense; and provided further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations hereunder, unless such failure resulted in
prejudice to the Indemnifying Party; and provided further, that an Indemnified
Party (together with all other Indemnified Parties which may be represented
without conflict by one counsel) shall have the right to retain one separate
counsel, with the fees and expenses to be paid by the Indemnifying Party, if
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
-3-
<PAGE> 4
SILICON VALLEY BANK REGISTRATION RIGHTS AGREEMENT
- -------------------------------------------------------------------------------
interests between such Indemnified Party and any other party represented by such
counsel in such proceeding. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation.
1.6 INFORMATION BY HOLDER. Any Holder or Holders of Registrable
Securities included in any registration shall promptly furnish to the Company
such information regarding such Holder or Holders and the distribution proposed
by such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to herein.
1.7 RULE 144 REPORTING. With a view to making available to
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees at all times to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, after 90 days after the
effective date of the first registration filed by the Company for an offering of
its securities to the general public;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) so long as a Holder owns any Registrable Securities,
to furnish to such Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed by the Company as the Holder may reasonably request in complying with
any rule or regulation of the SEC allowing the Holder to sell any such
securities without registration.
1.8 TRANSFER OF REGISTRATION RIGHTS. Holders' rights to cause the
Company to register their securities and keep information available, granted to
them by the Company under subsections 1.2 and 1.7 may be assigned to a
transferee or assignee of a Holder's Registrable Securities not sold to the
public, provided, that the Company is given written notice by such Holder at the
time of or within a reasonable time after said transfer, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned. The Company may
prohibit the transfer of any Holders' rights under this subsection 1.8 to any
proposed transferee or assignee who the Company reasonably believes is a
competitor of the Company.
2. GENERAL.
2.1 WAIVERS AND AMENDMENTS. With the written consent of the
record or beneficial holders of at least a majority of the Registrable
Securities, the obligations of the Company and the rights of the Holders of the
Registrable Securities under this agreement may be waived (either generally or
in a particular instance, either retroactively or prospectively, and either for
a specified period of time or indefinitely), and with the same consent the
Company, when authorized by resolution of its Board of Directors, may enter into
a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement;
provided, however, that no such modification, amendment or waiver shall reduce
the aforesaid percentage of Registrable Securities. Upon the effectuation of
each such waiver, consent, agreement of amendment or modification, the Company
shall promptly give written notice thereof to the record holders of the
Registrable Securities who have not previously consented thereto in writing.
This Agreement or any provision hereof may be changed, waived, discharged or
terminated only by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought, except to
the extent provided in this subsection 2.1.
2.2 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
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<PAGE> 5
SILICON VALLEY BANK REGISTRATION RIGHTS AGREEMENT
- -------------------------------------------------------------------------------
2.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
2.4 ENTIRE AGREEMENT. Except as set forth below, this Agreement
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
2.5 NOTICES. ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by first class
mail, postage prepaid, certified or registered mail, return receipt requested,
addressed (a) if to Holder, at such Holder's address as set forth in the heading
to this Agreement, or at such other address as such Holder shall have furnished
to the Company in writing, or (b) if to the Company, at the Company's address
set forth in the heading to this Agreement, or at such other address as the
Company shall have furnished to the Holder in writing.
2.6 SEVERABILITY. In case any provision of this Agreement shall
be invalid, illegal, or unenforceable, the validity, legality and enforceability
of the remaining provisions of this Agreement or any provision of the other
Agreements shall not in any way be affected or impaired thereby.
2.7 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
2.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
COMPANY:
By /s/John J. Laskey
------------------------------
President or Vice President
By /s/Kay Church
------------------------------
Secretary or Ass't Secretary
PURCHASER:
SILICON VALLEY BANK
By /s/Jack DeGroat
------------------------------
Title Senior Vice President
------------------------------
-5-
<PAGE> 1
EXHIBIT 10.23
- -------------------------------------------------------------------------------
SILICON VALLEY BANK
ANTIDILUTION AGREEMENT
ISSUER: CONTINUUS SOFTWARE CORPORATION
ADDRESS: 108 PACIFICA, 2ND FLOOR
IRVINE, CALIFORNIA 92718
DATE: JUNE 4, 1996
THIS AGREEMENT is entered into as of the above date by and between Silicon
Valley Bank ("Purchaser"), whose address is 3003 Tasman Drive, Santa Clara,
California 95054, and the above Company, whose address is set forth above.
RECITALS
A. Concurrently with the execution of this Antidilution Agreement, the
Purchaser is purchasing from the Company a Warrant to Purchase Stock (the
"Warrant") pursuant to which Purchaser has the right to acquire from the Company
the Shares (as defined in the Warrant).
B. By this Antidilution Agreement, the Purchaser and the Company desire to set
forth the adjustment in the number of Shares issuable upon exercise of the
Warrant as a result of a Diluting Issuance (as defined in Exhibit A to the
Warrant).
C. Capitalized terms used herein shall have the same meaning as set forth in
the Warrant.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
1. DEFINITIONS. As used in this Antidilution Agreement, the following
terms have the following respective meanings:
1.1 "Option" means any right, option, or warrant to subscribe
for, purchase, or otherwise acquire common stock or Convertible Securities.
1.2 "Convertible Securities" means any evidences of indebtedness,
shares of stock, or other securities directly or indirectly convertible into or
exchangeable for common stock.
1.3 "Issue" means to grant, issue, sell, assume, or fix a record
date for determining persons entitled to receive, any security (including
Options), whichever of the foregoing is the first to occur.
1.4 "Additional Common Shares" means all common stock (including
reissued shares) issued (or deemed to be issued pursuant to Section 2) after the
date of the Warrant. Additional Common Shares does not include, however, any
common stock issued in a transaction described in Sections 2.1 and 2.2 of the
Warrant; any common stock Issued upon conversion of preferred stock outstanding
on the date of the Warrant; the Shares; or common stock Issued as incentive or
in a nonfinancing transaction to employees, officers, directors, or consultants
to the Company.
1.5 The shares of common stock ultimately Issuable upon exercise
of an Option (including the shares of common stock ultimately Issuable upon
conversion or exercise of a Convertible Security Issuable pursuant to an Option)
are deemed to be Issued when the Option is Issued. The shares of common stock
ultimately Issuable upon conversion or exercise of a Convertible Security (other
than a Convertible Security Issued pursuant to an Option) shall be deemed Issued
upon Issuance of the Convertible Security.
2. DEEMED ISSUANCE OF ADDITIONAL COMMON SHARES. The shares of common
stock ultimately Issuable upon exercise of an Option (including the shares of
common stock ultimately Issuable upon conversion or exercise of a Convertible
Security Issuable pursuant to an Option) are deemed to be Issued when the Option
is Issued. The shares of common stock ultimately Issuable upon conversion or
exercise of a Convertible Security (other than a Convertible Security Issued
pursuant to an Option) shall be deemed Issued upon Issuance of the Convertible
Security. The maximum amount of common stock Issuable is determined without
regard to any future adjustments permitted under the
-1-
<PAGE> 2
instrument creating the Options or Convertible Securities.
3. ADJUSTMENT OF WARRANT PRICE FOR DILUTING ISSUANCES.
3.1 RATCHET ADJUSTMENT. If the Company issues Additional Common
Shares after the date of the Warrant and the consideration per Additional Common
Share (determined pursuant to Section 9) is less than the Warrant Price in
effect immediately before such Issue, the Warrant Price shall be reduced to the
lesser of:
(a) the amount of such consideration per Additional
Common Share; or
(b) if the Company's common stock is traded on a
national securities exchange or the National Association of Securities Dealers
Automated Quotation System, the last reported bid or sale price of the Company's
common stock on the first trading day following a public announcement of the
Issuance.
3.2 ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the
Warrant Price, the number of Shares issuable upon exercise of the Warrant shall
be increased to equal the quotient obtained by dividing (a) the product
resulting from multiplying (i) the number of Shares issuable upon exercise of
the Warrant and (ii) the Warrant Price, in each case as in effect immediately
before such adjustment, by (b) the adjusted Warrant Price.
3.3 SECURITIES DEEMED OUTSTANDING. For the purpose of this
Section 3, all securities issuable upon exercise of any outstanding Convertible
Securities or Options, warrants, or other rights to acquire securities of the
Company shall be deemed to be outstanding.
4. NO ADJUSTMENT FOR ISSUANCES FOLLOWING DEEMED ISSUANCES. No adjustment
to the Warrant Price shall be made upon the exercise of Options or conversion of
Convertible Securities.
5. ADJUSTMENT FOLLOWING CHANGES IN TERMS OF OPTIONS OR CONVERTIBLE
SECURITIES. If the consideration payable to, or the amount of common stock
Issuable by, the Company increases or decreases, respectively, pursuant to the
terms of any outstanding Options or Convertible Securities, the Warrant Price
shall be recomputed to reflect such increase or decrease. The recomputation
shall be made as of the time of the Issuance of the Options or Convertible
Securities. Any changes in the Warrant Price that occurred after such Issuance
because other Additional Common Shares were Issued or deemed Issued shall also
be recomputed.
6. RECOMPUTATION UPON EXPIRATION OF OPTIONS OR CONVERTIBLE SECURITIES.
The Warrant Price computed upon the original Issue of any Options or Convertible
Securities, and any subsequent adjustments based thereon, shall be recomputed
when any Options or rights of conversion under Convertible Securities expire
without having been exercised. In the case of Convertible Securities or Options
for common stock, the Warrant Price shall be recomputed as if the only
Additional Common Shares Issued were the shares of common stock actually Issued
upon the exercise of such securities, if any, and as if the only consideration
received therefor was the consideration actually received upon the Issue,
exercise or conversion of the Options or Convertible Securities. In the case of
Options for Convertible Securities, the Warrant Price shall be recomputed as if
the only Convertible Securities Issued were the Convertible Securities actually
Issued upon the exercise thereof, if any, and as if the only consideration
received therefor was the consideration actually received by the Company
(determined pursuant to Section 9), if any, upon the Issue of the Options for
the Convertible Securities.
7. LIMIT ON READJUSTMENTS. No readjustment of the Warrant Price pursuant
to Sections 5 or 6 shall increase the Warrant Price more than the amount of any
decrease made in respect of the Issue of any Options or Convertible Securities.
8. 30 DAY OPTIONS. In the case of any Options that expire by their terms
not more than 30 days after the date of Issue thereof, no adjustment of the
Warrant Price shall be made until the expiration or exercise of all such
Options.
9. COMPUTATION OF CONSIDERATION. The consideration received by the
Company for the Issue of any Additional Common Shares shall be computed as
follows:
9.1 CASH shall be valued at the amount of cash received by the
Corporation, excluding amounts paid or payable for accrued interest or accrued
dividends.
9.2 PROPERTY. Property other than cash shall be computed at the
fair market value thereof at the time of the Issue as determined in good faith
by the Board of Directors of the Company.
-2-
<PAGE> 3
9.3 MIXED CONSIDERATION. The consideration for Additional common
Shares Issued together with other property of the Company for consideration that
covers both shall be determined in good faith by the Board of Directors.
9.4 OPTIONS AND CONVERTIBLE SECURITIES. The consideration per
Additional Common Share for Options and Convertible Securities shall be
determined by dividing:
(a) the total amount, if any, received or receivable by
the Company for the Issue of the Options or Convertible Securities, plus the
minimum amount of additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the Company upon
exercise of the Options or conversion of the Convertible Securities, by
(b) the maximum amount of common stock (as set forth in
the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number) ultimately Issuable upon the
exercise of such Options or the conversion of such Convertible Securities.
10. GENERAL.
10.1 GOVERNING LAW. This Antidilution Agreement shall be governed
in all respects by the laws of the State of California as such laws are applied
to agreements between California residents entered into and to be performed
entirely within California.
10.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
10.3 ENTIRE AGREEMENT. Except as set forth below, this
Antidilution Agreement and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
10.4 NOTICES. ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by first class
mail, postage prepaid, certified or registered mail, return receipt requested,
addressed (a) if to Purchaser at Purchaser's address as set forth in the heading
to this Agreement, or at such other address as Purchaser shall have furnished to
the Company in writing, or (b) if to the Company, at the Company's address set
forth in the heading to this Agreement, or at such other address as the Company
shall have furnished to the Purchaser in writing.
10.5 SEVERABILITY. In case any provision of this Antidilution
Agreement shall be invalid, illegal, or unenforceable, the validity, legality
and enforceability of the remaining provisions of this Antidilution Agreement
shall not in any way be affected or impaired thereby.
10.6 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Antidilution Agreement.
10.7 COUNTERPARTS. This Antidilution Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
COMPANY:
CONTINUUS SOFTWARE
CORPORATION
By /s/ John J. Laskey
------------------------------
President or Vice President
By /s/ Kay Church
------------------------------
Secretary or Ass't Secretary
PURCHASER:
SILICON VALLEY BANK
By /s/ Jack DeGroat
------------------------------
Title Senior Vice President
------------------------------
-3-
<PAGE> 1
EXHIBIT 10.24
DATED 27 FEBRUARY 1997
CONTINUUS SOFTWARE LIMITED
- and -
ROYAL BANK OF CANADA EUROPE LIMITED
-------------------------------------
MASTER PURCHASE TERMS AND CONDITIONS
--------------------------------------
EVERSHEDS
SOLICITORS
BANKING AND FINANCIAL SERVICES DEPARTMENT
Senator House, 85 Queen Victoria Street
London EC4V 4JL
Tel: 0171 919 4500 Fax: 0171 919 4919
<PAGE> 2
CONTENTS
<TABLE>
<S> <C> <C>
1. Definitions and Interpretation....................................................1
2. Conditions Precedent..............................................................5
3. Assignment Provisions.............................................................6
4. Representations...................................................................7
5. Indemnities.......................................................................8
6. Covenants.........................................................................9
7. Miscellaneous....................................................................11
8. Fees and Expenses................................................................12
9. Notices..........................................................................13
10. Law..............................................................................13
SCHEDULE 1 - (BUYER CONFIRMATION)........................................................14
SCHEDULE 2 - (CONTRACT)..................................................................16
SCHEDULE 3 - (NOTICE)....................................................................18
SCHEDULE 4 - (ACKNOWLEDGMENT OF RECEIPT OF NOTICE).......................................20
SCHEDULE 5 - (CHARGE DOCUMENTATION WAIVERS)..............................................21
</TABLE>
<PAGE> 3
MASTER PURCHASE TERMS AND CONDITIONS
DATED 27 FEBRUARY 1997
PARTIES:
1. CONTINUUS SOFTWARE LIMITED, company registration no. 2936647 of Eagle
House, The Ring, Bracknell, Berkshire RG12 1HB (facsimile no. +44 1344
382 158);
2. ROYAL BANK OF CANADA EUROPE LIMITED, company registration no. 995939, of
71 Queen Victoria Street, London EC4V 4DE (facsimile no. +44 171 329
6144).
RECITALS:
The Seller and the Bank intend to enter into certain receivable purchasing
arrangements relating to merchandise and/or services supplied by the Seller to
certain of its customers and wish that in relation to nominated receivables
standard provisions will apply.
OPERATIVE TERMS
1. Definitions and Interpretation
1.1 In these MPTCs the following words and expressions shall, unless the
context otherwise requires, have the meanings set opposite them:
<TABLE>
<S> <C>
"Acknowledgement of means an acknowledgement by the Buyer in
Receipt of Notice" respect of a Contract, substantially in
the form set out in Schedule 4 or in such
other form as the Bank may, in its
absolute and sole discretion, agree to in
respect of any Contract;
"Adjustment Rate" means the adjustment rate specified in the applicable
Contract;
"Administration Fee" means the administration fee specified in the
applicable Contract;
"Bank" means Royal Bank of Canada Europe Limited
and, as the context requires, its
permitted assigns, successors in title and
any person it may amalgamate with;
"Business Day" means a day, other than a Saturday or Sunday, on which
business is conducted by and between banks in the
London Interbank Market;
"Buyer" means the person named in an Invoice as Buyer;
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
"Buyer Confirmation" means a confirmation substantially in the form set out in
Schedule 1 completed and issued by the Bank;
"Consideration" means an amount determined by the Bank as being equal
to the discounted value of the Receivable specified in
a Contract such discounted value to be calculated by
reference to the face value of the applicable Invoice
at the Discount Rate from the Effective Date of
Assignment to the last day of the Discount Period less
the Administration Fee;
"Contract" means an equitable absolute assignment, incorporating
these MPTCs, by the Seller to the Bank of the Seller's
whole right, title, benefit and interest, present and
future, actual and contingent, in and to Receivables
expressed to be payable under an Invoice described in
the Contract substantially in the form set out in
Schedule 2, as such assignment may be amended, varied
or extended and as in force from time to time;
"Cut off Date" means the date falling 180 days after the Maturity Date
specified in a Contract in respect of an Invoice;
"Discount Period" means the Discount Period specified in the applicable
Contract;
"Discount Rate" means the Discount Rate specified in the applicable
Contract;
"Effective Date of means the date so specified in the applicable Contract;
Assignment"
"Electronic Communication" means any communication by facsimile
transmission, telex, telephone, TWX,
bank wire or other method of
telecommunication or electronic
transmission;
"Facility" means the right of the Seller to make an
offer to assign to the Bank the Seller's
whole right, title, benefit and interest,
present and future, actual and contingent,
in and to Receivables expressed to be
payable under an Invoice pursuant to the
terms of these MPTCs;
"Insolvency Event" means in relation to any person, in any jurisdiction,
the passing of any resolution by its directors (or an
equivalent executive body) or by its shareholders, the
taking of any irrevocable proceedings by such person
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
for, or the convening of a meeting by such person to
consider, or the advertising of a petition, or the
giving of any judgment, the making of any order or
direction by any judicial, governmental or official
authority or agency of any kind in any jurisdiction
for, or in respect of:
1. the bankruptcy, liquidation or dissolution of
such person or any termination of its independent
corporate existence (whether by merger or
otherwise);
2. the appointment of any liquidator,
trustee, administrator,
administrative receiver, receiver or
similar officer in respect of such
person;
3. the vesting, taking possession or assumption of
all or substantially all of the assets, or the
control, management or supervision of the
affairs, of such person by any such authority or
agency, any officer of, or any person appointed
by or representing, any such authority or agency,
or any of the creditors of such person or any
person appointed by, or representing, any such
creditor;
4. any moratorium, composition,
re-scheduling, re-organisation,
scheme or other arrangement with, or
involving, or assignment for the
benefit of, the creditors of such
person or any class of them;
5. the subjecting of such person to, or
the obtaining of any relief for such
person under, any laws relating to
insolvency;
6. any formal admission by or on behalf
of such person or any judgment,
order, declaration or finding by or
on behalf of any such authority or
agency that such person is insolvent
or is unable, or has ceased, to pay
its debts as they become due; or
7. any other event the occurrence of
which has the same or a substantial
effect in any jurisdiction to any of
the foregoing
Provided that any of the above events
shall not be considered an event of
insolvency in respect of any
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C>
person if part of a solvent reconstruction,
reorganisation or amalgamation of such person
approved in writing by the person seeking to
rely on the Insolvency Event;
"Invoice" means an invoice for the sale of merchandise or
services by the Seller to a Buyer as described in a
Contract;
"Invoice Date" means the date of an Invoice so specified in a Contract;
"Maturity Date" means the date on which the Receivable specified in an
Invoice is payable as specified in the applicable
Contract;
"MPTCs" means these master purchase terms and conditions all
as the same may be amended and as in force from time
to time;
"Notice" means a notice by the Seller to the Buyer in respect
of an Invoice, substantially in the form set out in
Schedule 3;
"Permitted Encumbrance" means a floating charge or a charge arising by
operation of law in the ordinary course of business;
"Receivable" means all amounts now or hereafter
expressed to be payable to the Seller
under the agreement relating to an Invoice
including, but not limited to, all
interest amounts and for the avoidance of
doubt a Receivable is not net of any
amount expressed to be payable by the
Seller under the agreement relating to the
Invoice;
"Seller" means Continuus Software Limited and, as the context
requires, its permitted assigns, successors in title
and any person which it may amalgamate with;
"Seller's Bankers" means Barclays Bank PLC, Bracknell Branch, P.O. Box
61, Bracknell, Berkshire RG12 1GJ or such other branch
in the United Kingdom of a clearing bank as the Seller
may specify by 14 days' notice to the Bank; and
"Trade Dispute" means the failure of a Buyer to make payment in full
of a Receivable for any reason other than an Insolvency
Event affecting such Buyer occurring on or before the
applicable Maturity Date and includes, without
limitation, disputes arising or resulting from:
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
1. alleged or actual defects or shortages in the
quality or quantity of merchandise or service
supplied by the Seller to the Buyer;
2. the return of merchandise from the
Buyer to the Seller for any reason
whatsoever;
3. the Seller's alleged or actual
failure to comply with the terms of
any agreement with the Buyer; or
4. discounts, repudiations, reductions,
adjustments, counterclaims or rights
of set-off granted by the Seller
and/or taken by the Buyer.
</TABLE>
1.2 Each reference to these MPTCs or to any Contract is to these MPTCs or to
the relevant Contract and any schedules and annexes to these MPTCs or to
the relevant Contract as the same may be amended, varied or supplemented
from time to time in accordance with the terms of these MPTCs or the
relevant Contract, each reference to a clause is to a clause of these
MPTCs or of the relevant Contract, to a sub-clause is a reference to a
sub-clause of the Clause in which the reference appears, to a paragraph
is a reference to a paragraph of the sub-clause in which the reference
appears and to a schedule or an annex is a reference to a schedule or
annex to these MPTCs or to the relevant Contract in each case unless
otherwise specified.
1.3 Headings are for ease of reference only and are to be ignored in
construing these MPTCs or the relevant Contract.
1.4 References to a person howsoever shall as the context requires, include
an individual, partnership, body corporate, unincorporated association
or state, governmental or quasi-governmental entity or agency and vice
versa. References in one gender shall, as the context requires, include
the other genders. The words "subsidiary" and "holding company", shall
have the meaning ascribed to them in Section 736 of the Companies Act
1985. Section 61 of the Law of Property Act 1925 shall apply.
2. Conditions Precedent and Availability
2.1 The Bank will have no obligation under these MPTCs or under any Contract
incorporating these MPTCs until:
2.1.1 the Bank has received from the Seller a copy, certified as a
true copy by a director of the Seller, of resolutions of the
board of directors of the Seller approving the provisions of
these MPTCs and of the Contract, authorising the Seller to enter
into these MPTCs and each Contract and to take all action
required by these MPTCs and each Contract, and authorising a
named individual or any director of the Seller to complete the
details in and to execute and deliver to the Bank each Contract
and each other document required in
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<PAGE> 8
connection with or incidental to each Contract (including but
not limited to Notices);
2.1.2 the Bank has received from any relevant person the duly completed
and executed documentation set out in Schedule 4.
2.2 The Facility shall be available from the date on which the Bank notifies
the Seller it has received and found to be satisfactory the
documentation referred to in sub-clause 2.1 until the earlier of (A) the
1st February 1998 or (B) the date on which the Bank determines in
accordance with the provisions of these MPTCs that the Facility shall
cease to be available.
2.3 From time to time the Seller may request the Bank to approve a person as
a Buyer: on making any such request the Seller shall deliver to the Bank
all information and documentation requested by the Bank. A person shall
only be a Buyer when the Bank has issued a completed Buyer Confirmation
in respect of that person and the Bank shall be entitled to withdraw any
such approval and any Buyer Confirmation at any time in the Bank's
absolute discretion.
2.4 The Facility is uncommitted and the Bank shall have absolute discretion
as to whether it will purchase any Receivable specified in an Invoice or
approve any Buyer.
3. Assignment Provisions
3.1 The Seller may, provided no Insolvency Event shall have occurred in
relation to the Seller or any Buyer, from time to time offer to assign
by way of outright sale with full title guarantee to the Bank the
Receivables expressed to be payable under certain Invoices with Buyers
acceptable to the Bank. If the Bank in its sole and absolute discretion
agrees to accept such offer each such assignment shall be effected by a
Contract the terms of which shall be first approved by the Bank.
3.2 In connection with any offer to sell a Receivable, the Seller shall
submit to the Bank:
3.2.1 a copy of the purchase order or other form of requisition issued
to the Seller by the Buyer;
3.2.2 a copy of the signed and executed licence agreement or equivalent
document or, if available, evidence of shipment or provision to
the Buyer, such as a non-negotiable copy of the bill of lading,
confirming that the merchandise or services have been despatched
or provided;
3.2.3 if other than as per the applicable Buyer Confirmation,
correspondence indicating the Maturity Date;
3.2.4 the original of the applicable Invoice; and
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<PAGE> 9
3.2.5 such other documentation as required by the applicable Buyer
Confirmation or as the Bank may request
within 20 Business Days of the applicable Invoice Date.
3.3 Immediately following execution and delivery of each Contract:
3.3.1 the Seller shall deliver to the Buyer described in that Contract
a duly completed and executed Notice together with all
documentation relating to the relevant Invoice; and
3.3.2 the Seller shall procure that each Buyer described in that
Contract shall execute and deliver to the Bank an Acknowledgement
of Receipt of Notice.
3.4 On receipt by the Bank of any Receivables under any Contract, to the
extent that the Seller can demonstrate to the satisfaction of the Bank
that any part of such Receivables comprise appropriated value added tax
payable by the relevant Buyer to the Seller in respect of an amount paid
under the relevant Invoice, and provided that the Seller is not in
default under its obligations under these MPTCs or any Contract and is
not affected by an Insolvency Event, the Bank will pay to the Seller an
amount equal to the relevant amount of value added tax.
3.5 If the Seller receives any or all of any Receivables expressed to be
payable under a Invoice the subject of a Contract, the Seller shall
immediately account and pay over to the Bank such Receivables and
meantime shall hold any such amount in a separate account on behalf of
the Bank. To the extent necessary the Seller shall procure that the
Seller's bankers shall confirm in writing to the Bank that the Seller's
bankers will not exercise any lien or right of confirmation of accounts
or set-off in respect of any Receivable assigned to the Bank.
4. Representations
4.1 The Seller shall, so as to induce the Bank to enter into each Contract,
in respect of each Contract be deemed to represent to the Bank that on
the date of each Contract and thereafter during the currency of each
Contract:
4.1.1 that the Receivable specified in an Invoice the subject of the
Contract constitutes valid and binding obligations of the
relevant Buyer and to the extent expressed to be assigned to the
Bank by the relevant Contract enforceable by the Bank against the
Buyer and that such Buyer is not a consumer;
4.1.2 that the contents of the Invoice the subject of the Contract are
complete and true and accurate in all respects and are not
disputed by the Buyer and the Invoice has been issued in respect
of a transaction in the ordinary course of the Seller's business;
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<PAGE> 10
4.1.3 that the Seller has not varied and will not vary the terms of
payment of any Receivable without the prior written consent of
the Bank;
4.1.4 that the Receivable the subject of the Contract has not been
offered for sale nor legally or equitably assigned nor otherwise
encumbered, save by way of Permitted Encumbrance, nor made the
subject of any form of security interest whatsoever nor is
subject to conditions for sale or return;
4.1.5 that on execution and delivery of each Acknowledgement of Receipt
of Notice relating to each Contract such Acknowledgement of
Receipt of Notice has been duly executed and delivered for and on
behalf of the Buyer named in that Acknowledgement of Receipt of
Notice.
4.2 Each of the Seller and the Bank represent to each other continuously
that these MPTCs and each Contract when entered into is and will be
within their respective capacities and powers and constitute and will
constitute legal, valid and binding obligations enforceable against it.
5. Indemnities
5.1 The Seller hereby agrees to indemnify the Bank and keep the Bank
indemnified from and against all losses, costs, expenses, demand and
damages whatsoever which the Bank determines it has or may suffer or
incur in respect of any obligation or liability of the Seller, or of any
Trade Dispute between the Seller and the Buyer or of any Electronic
Communication relied on by the Bank or of receipt of any amount in other
than the applicable currency.
5.2 If any event shall occur which shall result in amounts expressed to be
payable under any Invoice the subject of a Contract being reduced
whether by virtue of the operation of the terms and conditions of any
agreement relating to that Invoice or otherwise, the Seller hereby
agrees to indemnify the Bank and keep the Bank indemnified in respect of
the difference between the amount expressed to be payable when that
Invoice was issued and the amount actually received by the Bank.
5.3 When a Buyer fails to effect full payment to the Bank of a Receivable
specified in an Invoice by the applicable Maturity Date, the Seller
shall indemnify and agrees to keep indemnified the Bank for losses
incurred due to the use of an insufficient discounting period in the
calculation of the Consideration for such Receivable; such losses shall
be calculated at the Adjustment Rate upon the amount outstanding under
such Receivable from time to time, and shall be limited to those losses
arising up to the applicable Cut off Date. All amounts due under this
indemnity shall be payable by the Seller to the Bank monthly in arrears.
5.4 When the Bank has not received full payment of a Receivable due to a
Trade Dispute, the Bank shall have the option, exercisable by written
notice to the Seller, to re-assign to the Seller that portion of such
Receivable which remains unpaid for a consideration equal to such unpaid
amount. The re-assignment shall be effective immediately on
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<PAGE> 11
delivery of such written notice to the Seller and the Seller shall then
make immediate payment of such consideration to the Bank.
5.5 If (a) any amount paid or payable to the Bank under these MPTCs or under
any Contract or by way of indemnity or reimbursement (the "basic
amount") is taxable in the Bank's hands, and (b) the loss, liability,
expense or outgoing is not in the Bank's determination deductible for
tax purposes in the Bank's hands, then the Seller shall pay to the Bank
in addition to the basic amount such further amount (to be conclusively
determined by the Bank) so that if an amount equal to corporation tax at
the applicable rate (as so determined) on the total of the basic amount
and the further amount were deducted from such total amount the basic
amount would be left.
5.6 If a basic amount is paid without any further amount under sub-clause
5.5 but the Bank is later of the opinion that the circumstances
described in sub-clause 5.5 (a) and (b) have arisen or will arise then
the Seller shall make such payment to the Bank as the Bank shall from
time to time determine is appropriate in the Bank's view to restore the
Bank's position to that which it would have been had the payments been
made on the true basis in the first place.
5.7 If a further amount is paid under sub-clause 5.5 but later the Bank is
satisfied that the circumstances mentioned in either or both of
sub-clauses 5.5 (a) and (b) have not arisen and will not arise, then
such adjustments will be made between the Bank and the Seller as the
Bank shall from time to time determine as appropriate in the Bank's view
to restore the position of the Bank and the Seller to that which it
would have been had the payments under sub-clause 5.5 not been made on
the true basis in the first place.
5.8 For the purposes of this Clause (a) an amount paid or payable to the
Bank is taxable in the Bank's hands if it is to be taken into account
for the purposes of corporation tax in computing profits or gains or
losses or a chargeable gain or allowable loss of the Bank, and (b) the
amount of any loss, liability, expense or outgoing is available as a tax
deduction if (but only if) either it is deductible for the purposes of
corporation tax in computing trading profits or gains of the Bank or is
deductible for those purposes from any amount paid or payable under
these MPTCs or any Contract or any Charge in respect of it, and (c) all
adjustments between the Bank and the Seller shall be made on the footing
that the Bank at all times has profits and is liable to corporation tax
on such profits at the full standard rate at which corporation tax is
charged (ignoring any small company or similar rate) whether or not that
is in fact the case.
6. Covenants
6.1 The Seller unconditionally and irrevocably covenants with the Bank that
it will not, without the prior written consent of the Bank,:
6.1.1 make or consent to any modification, variation, amendment,
cancellation or termination of any agreement relating to an
Invoice the subject of a Contract;
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<PAGE> 12
6.1.2 make or agree any claim that any such agreement relating to an
Invoice is frustrated;
6.1.3 consent or agree to any waiver or release of any of the Buyer's
obligations under any such agreement relating to an Invoice; and
6.1.4 consent or agree to the postponement of any date for the
performance of any of the Buyer's obligations forming part of or
deriving from any such agreement relating to an Invoice.
6.2 The Seller unconditionally and irrevocably covenants with the Bank, that
the Seller will, immediately on demand for such by the Bank execute in
favour of and deliver to the Bank such further or other deeds or
documents, and do such other things, as the Bank shall require to give
effect to the provisions of these MPTCs or any Contract and the Seller,
in security of the obligations contained in these MPTCs and each
Contract and each Charge, hereby unconditionally and irrevocably
appoints (i) the Bank, and (ii) each and every person to whom the Bank
shall from time to time delegate the exercise of the power of attorney
conferred by this sub-clause jointly as well as severally to be the
attorney of the Seller and in its name and otherwise on its behalf and
as its act and deed to sign, seal, execute, deliver, perfect and do all
deeds, instruments, documents, acts and things which may be required or
which the Bank shall consider necessary for carrying out any of the
Seller's obligations or duties under these MPTCs or under any Contract.
The Bank shall have full power to delegate the powers conferred on each
of it by this sub-clause but no such delegation shall preclude the
subsequent exercise by the Bank of such power or any subsequent
delegation: any delegation may be revoked by the Bank at any time. The
Seller shall ratify and confirm all transactions entered into by the
Bank or any delegate of the Bank in exercise or purported exercise of
the powers contained in this sub-clause.
6.3 The Seller unconditionally and irrevocably covenants with the Bank that
the Seller shall not create or purport to create or permit to subsist
any mortgage, charge, pledge, lien, encumbrance or other security
interest whatsoever and howsoever arising over any Receivable and that,
in particular, but without limitation, it will forthwith after execution
of any Contract deliver to the Bank unconditional and irrevocable
confirmation (substantially in the appropriate form set out in Schedule
5) from the holder of any floating or fixed charge or mortgage created
by the Seller that such Receivable shall not form part of the property
the subject of such floating or fixed charge or mortgage and that it
will not sell, transfer or dispose of (or purport to do so) any
Receivable.
6.4 The Seller unconditionally and irrevocably authorises the Bank as the
Seller's agent to endorse any negotiable instrument payable to the
Seller which is referable to a Receivable.
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7. Miscellaneous
7.1 These MPTCs and any Contract may only be modified, varied, amended,
terminated, cancelled, waived or released by a written document duly
executed and delivered by each of the Seller and the Bank.
7.2 In respect of each Contract the Seller unconditionally and irrevocably
agrees that it will immediately on demand from the Bank indemnify the
Bank in an amount equal to all and any stamp duty payable in respect of
any Contract.
7.3 The Seller may not assign or otherwise transfer or create any mortgage,
charge, pledge, lien, encumbrance or other security interest whatsoever
over, or purport or attempt to do so, its rights, title, benefit or
interest under these MPTCs or under any Contract all of which are
personal and not capable of assignment.
7.4 Each Contract shall be a separate and independent agreement between the
Seller and the Bank.
7.5 No right or remedy in these MPTCs or in any Contract of or reserved to
either the Seller or the Bank excludes any other right or remedy of
either the Seller or the Bank or by law or equity provided or permitted,
and each shall be in addition to every other right or remedy under these
MPTCs or under any Contract or hereafter existing and may be enforced
concurrently therewith or from time to time.
7.6 No time, delay, forbearance or indulgence by the Bank shown or granted
to the Seller shall in any way diminish or restrict the full rights or
powers of the Bank under these MPTCs or under any Contract or take
effect as a waiver of any breach by the Seller of any of the provisions
of these MPTCs or of any Contract.
7.7 Time shall be of the essence for every payment due under these MPTCs and
under each Contract. If any amount is not paid for value on its due date
the defaulting payer shall pay to the payee interest on the amount in
default from its due date until the payee actually receives value for
such amount (as well before as after judgment) at a rate of interest
equal to the aggregate of two per cent. and the Discount Rate for the
related Buyer Confirmation.
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7.8 All payments by the Seller under these MPTCs and each Contract are to be
made for value on the due date for payment only in the applicable
currency together with any applicable value added tax and free and clear
of any set off, withholding, deductions or counterclaim, except as
permitted in terms of MPTCs and each Contract or in the case of any tax
as may be required by law. For the purposes of these MPTCs and each
Contract, "tax" means all taxes, charges and levies whatsoever and
howsoever in the nature of taxation imposed by any country or
sub-division or any authority thereof or therein in any way connected
with these MPTCs and each Contract or the payment of Receivables, except
such taxes as are imposed on or are measured by the Bank's net income by
the country or any sub-division or authority thereof or therein in which
the Bank's principal office or actual branch under these MPTCs and each
Contract is located and (a) all payments or reimbursements under these
MPTCs and each Contract or in respect of any Receivable and any
instrument or agreement required hereunder or thereunder or in respect
thereof shall be made free and clear of and without deduction of any
tax, (b) the payer shall pay direct to the appropriate governmental
authority or reimburse the Bank for the cost of, all tax, (c) if the
payer is legally prohibited from complying with sub-paragraphs (a) or
(b) then the payer shall increase the amount expressed to be payable to
the Bank under these MPTCs and each Contract or in respect of any
Receivable and any instrument or agreement required hereunder or
thereunder or in respect thereof, except in so far that the payer is
legally prohibited from doing so, so that, after provisions for tax and
all tax on such increase, the amounts received by the Bank shall be
equal to the amounts required under these MPTCs and each Contract or in
respect of the relevant Receivable or any instrument or agreement
required hereunder or thereunder or in respect thereof if no tax was due
on such payments, (d) the payer shall provide evidence that all
applicable tax has been paid to the appropriate taxing authorities by
delivering to the Bank official tax receipts or certified copies thereof
within thirty days after the due date for each tax payment.
7.9 If a payment under these MPTCs and each Contract is due on a day which
is not a Business Day it shall be paid on the next Business Day.
7.10 All interest payable under these MPTCs and each Contract shall accrue on
a daily basis and shall be calculated by reference to the number of days
elapsed in a three hundred and sixty five days' year.
7.11 If any of the provisions of these MPTCs or of any Contract shall be held
to be void or unenforceable or invalid no others shall be affected by
those provisions or such invalidity or unenforceability.
7.12 Any approval, certificate or determination given or made by the Bank may
be given or made in its absolute discretion and shall be conclusive
evidence as to its contents or subject save for manifest error.
7.13 If the Seller or the Bank is obliged or ordered to pay any legal or
other costs or expenses of the other such costs or expenses shall be
payable on a full indemnity basis.
8. Fees and Expenses
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8.1 On the date of execution of these MPTCs by the Bank, the Seller shall
pay to the Bank an arrangement fee in an amount specified in a letter
from the Bank to the Seller.
8.2 In consideration of the Bank agreeing to review the credit position of a
Buyer under Clause 2.3, the Seller shall pay to the Bank the Buyer
approval fee notified by the Bank to the Seller and receipt of such
amount by the Bank shall be a condition precedent to such Buyer approval
becoming effective.
8.3 On the Effective Date of Assignment of each Contract the Seller shall
pay to the Bank the Administration Fee specified in the Contract which
shall be deducted from the Consideration in respect of such Contract.
8.4 The Seller shall, within five Business Days of demand by the Bank,
reimburse the Bank for all reasonable costs and expenses (including
legal fees on a solicitor and own client indemnity basis) incurred in
connection with the preparation of these MPTCs and the negotiation and
completion of the transactions contemplated in these MPTCs.
8.5 The Seller shall within five Business Days of demand by the Bank,
reimburse the Bank for all reasonable costs and expenses (including
legal fees on a solicitor and own client indemnity basis) incurred in
connection with the preservation and/or enforcement of any of the Bank's
rights under or in connection with these MPTCs and/or any Contract
and/or the recovery or attempted recovery of any Receivable.
9. Notices
9.1 All communications under these MPTCs or under any Contract shall be made
by Electronic Communication (to be followed by delivery of the hard copy
by first class recorded delivery post or by personal delivery) or
otherwise in writing. Each communication or document to be delivered to
any party under these MPTCs shall be sent to that party at the number or
address from time to time notified by that party to the other for the
purpose of these MPTCs or any Contract. The initial number and address
designated by each party are set out under its name at the beginning of
these MPTCs. Any such communication or document which is sent by
Electronic Communication shall be deemed to be delivered when sent
provided that the hard copy shall have been received by the addressee,
but otherwise a communication or document shall only be treated as
delivered when actually delivered.
10. Law
10.1 These MPTCs and each Contract shall be governed by and construed in
accordance with English law.
THESE Master Purchase Terms and Conditions have been executed by the Seller as a
deed and by the Bank under hand and subsequently delivered the day and year
first above written.
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SCHEDULE 1
BUYER CONFIRMATION
In connection with the Master Purchase Terms and Conditions (the "MPTCs")
between Royal Bank of Canada Europe Limited ("RBCEL") and [Seller] dated
[ ], the following supplements the terms by which RBCEL will
purchase Receivables owing by [Buyer]. All capitalized words have those meanings
as attributed in the MPTCs. A Buyer Confirmation fee of [ ] is
payable by the Seller to RBCEL prior to the acceptance by the Bank of the terms
of this Buyer Confirmation.
<TABLE>
<S> <C>
BUYER: [ ]
Maximum Amount: [ ]
Invoice Payment Terms: [up to 7/30/60/90/180 days]
Discount Rate: [ %]
[Maturity Date: Maturity Date + [ ] days, unless otherwise requested
by the Seller. In no event will the Discount Maturity
Date fall more than [ ] days after the Maturity
Date.]
Adjustment Rate: [ %]
Administration Fee: The greater of [ %] of the face value of the
applicable Invoice and [ ],
Buyer Notification: Each Invoice shall include the following text:
"This receivable has been purchased by Royal Bank of
Canada Europe Limited. At maturity, please make
arrangements for your bankers to make payment directly
to National Westminster Bank Plc, 21 Lombard Street,
London EC3, Sort Code: 60-01-43 for the account of
Royal Bank of Canada Europe Limited Account Number
00841137 under reference 622/[ ].
Documentation: [anything other than as specified in the MPTCs, i.e. Buyer
acknowledgement].
Goods: [merchandise or services sold by Seller].
</TABLE>
14
<PAGE> 17
<TABLE>
<S> <C>
Acceptable Invoice Currencies: [ ]
Royal Bank of Canada Europe Limited
By:
---------------------------------------
Accepted by [the Seller]
By:
----------------------------------------
</TABLE>
15
<PAGE> 18
SCHEDULE 2
(CONTRACT)
DATED: , 199[ ]
PARTIES:
1. [Seller]
2. [Bank]
OPERATIVE TERMS
11. In consideration of the agreement of the Bank to pay to the Seller the
consideration specified in paragraph 3 within two Business Days of
receipt by the Bank of an Acknowledgement of Receipt of Notice relating
to this Contract duly executed by the Buyer described in paragraph 6,
receipt of which amount the Seller shall be deemed to have
unconditionally and irrevocably acknowledged on transfer by the Bank of
such amount to the Seller's Bankers, the Seller with effect on and from
the Effective Date of Assignment hereby assigns, with full title
guarantee, absolutely to the Bank the Seller's whole right, title,
benefit and interest, present and future, actual and contingent, in and
to [the Receivable expressed to be payable under] the Invoice (a copy of
which is attached) on and subject to the terms of the Master Purchase
Terms and Conditions.
12. The Master Purchase Terms and Conditions entered into between the Seller
and the Bank and dated the [ ] 199[ ] shall apply to this
Contract and to the extent necessary or envisaged by the Master Purchase
Terms and Conditions its provisions are incorporated in this Contract as
if the same were expressly set out in this Contract. Words and phrases
defined in the Master Purchase Terms and Conditions shall have the same
meanings in this Contract.
13. Consideration :
14. Discount Rate:
15. Discount Period:
16. Buyer:
[Name and Address]
17. Invoice Number:
18. Invoice Date:
16
<PAGE> 19
19. Maturity Date: [being 7/30/60/180 days after the Invoice Date]
20. Effective Date
of Assignment :
21. Adjustment Rate :
22. Administration Fee:
This Contract has been entered into the day and year first above written.
Executed for and on behalf of )
[Seller] )
by its duly authorised representative )
in the presence of: )
Witness: ..............................................
FULL NAME:...................................................
ADDRESS .....................................................
..............................................
..............................................
Executed for and on behalf of )
the Bank by its duly authorised )
representative in the presence of: )
Witness: ..............................................
FULL NAME:...................................................
ADDRESS .....................................................
..............................................
..............................................
17
<PAGE> 20
SCHEDULE 3
NOTICE
[On Seller's Letterhead]
To: [Name and Address of Buyer]
Reference No: [ ]
Dated: [ ] 199[ ]
Dear Sirs,
We refer to the document described in Schedule 1 to this Notice (the "Invoice").
We hereby give you notice that we have today assigned absolutely to [ ]
(the "Bank") of [ ] our whole right, title, benefit and interest, present
and future, actual and contingent, in and to [the Receivables expressed to be
payable under] the Invoice [provided always that you shall be under no greater
obligation or liability as a result of the assignment and you shall be entitled
to no lesser rights or benefits against us than you would have been had the
assignment referred to above not occurred].
[As from the date of this Notice please make all payments due under or pursuant
to the Invoice to the person and account named in Schedule 2 to this Notice
Provided always that the Bank may instruct you at any time (without our
concurrence) to make payment, as aforesaid, to another specified person or
account.]
Please note that, except with the prior written consent of the Bank, we have no
authority to (a) make or consent to any modification, variation, amendment,
cancellation or termination of the agreement relating to the Invoice, or (b)
make or agree any claim that the agreement relating to the Invoice is
frustrated, or (c) consent or agree to any waiver or release of any of your
obligations under the agreement relating to the Invoice, or (d) consent or agree
to the postponement of any date for the performance of any of your obligations
forming part of or deriving from the agreement relating to the Invoice.
Please note that, if required, your acknowledgement of this Notice shall
constitute your consent to the assignment specified above for the purposes of
the Invoice and your confirmation that the agreement relating to the Invoice
continues in full force and effect in accordance with its terms.
Please arrange to have the enclosed Acknowledgement of Receipt of Notice
executed by your duly authorised representative and return the same to the Bank
(Attn: [ ]) at its address specified above.
Please note that the contents of this Notice cannot be varied without the prior
written consent of the Bank.
18
<PAGE> 21
SCHEDULE 1
(Description of agreement relating to and of the Invoice)
SCHEDULE 2
(Description of Person)
Bankers :
Address :
Sort Code :
Account No. :
Payee :
Yours faithfully,
...............................................................
DULY AUTHORISED FOR AND ON
BEHALF OF [Seller]
19
<PAGE> 22
SCHEDULE 4
(ACKNOWLEDGMENT OF RECEIPT OF NOTICE)
To: [ ] (the "Bank")
We hereby acknowledge receipt of Notice reference no. [ ] and, in consideration
of the Bank's agreement to make payment of Pound Sterling 1.00 if demanded by
us, accept the directions contained in the Notice and hereby acknowledge that:
23. the agreement relating to the Invoice is in full force and effect and
all amounts expressed to be payable under the Invoice defined in the
Notice have been clearly expressed in the Invoice both as to due dates
and amount;
24. we shall unconditionally pay all amounts expressed to be payable under
the Invoice without set off or counterclaim when due under the Invoice
to the person and account named in Schedule 2 to the Notice irrespective
of any rights we may have against the obligor under the Invoice or
[Seller];
25. we have not received notice of any prior claim against or assignment of
the obligor's rights, title benefit of interest in and to or the benefit
of, both present and future, actual or contingent, the Invoice;
26. we will send to the Bank a copy of any notice we may give to the issuer
of the Invoice or to [Seller] relating to the Invoice;
27. we will not (a) consent or agree to any modification, variation,
amendment, cancellation or termination of the agreement relating to the
Invoice, or (b) make or agree any claim that the agreement relating to
the Invoice is frustrated, or (c) consent or agree to any waiver or
release of the obligor's obligations under the agreement relating to the
Invoice, or (d) consent or agree to the postponement of any date for the
performance of any of the obligor's obligations forming part of or
deriving from the agreement relating to the Invoice.
Signed by the duly )
authorised representative )
of [Buyer] )
Name :
Title:
Date
<PAGE> 23
SCHEDULE 5
CHARGE DOCUMENTATION WAIVERS
PART 1
To: [ ]
Dated: [ ], 199[ ]
Dear Sirs
[FIXED AND] FLOATING CHARGE DATED [ ]
We hereby confirm that as at the date of this confirmation we are not aware of
any matter which would have caused the floating element of the [Fixed and]
Floating Charge dated [ ] created by [ ] in favour of [ ] to
crystallise into a fixed charge and we further confirm that we have taken no
steps to crystallise the floating element of such [Fixed and] Floating Charge
and are not aware of any right entitling us to do so.
Yours faithfully
For and on behalf of
[ ]
<PAGE> 24
PART 2
From: [Holder of Charge]
To: Royal Bank of Canada Europe Limited
71 Queen Victoria Street
London EC4V 4DE
Re: [ ] (the "Company")
We refer to the [ ] [("Charge" which shall include any substitute or
further charge attaching to the relevant property) created in our favour by the
Company which secures to us among other things [all the book and other debts
both present and future] of the Company.
We are aware that, the Company has entered into or proposed to enter into one or
more receivables purchase agreements (the "Agreements") with Royal Bank of
Canada Europe Limited under which all or some of [book debts, invoice debts,
accounts, notes, bills, acceptances and/or other forms of obligation owed or
payable or to become owed or payable to the Company] ("Receivables") [and all or
some of any security interests (including without limitation any guarantees)
created in favour of the Company in respect of the Receivables ("Third Party
Security")] have been or are to be assigned to Royal Bank of Canada Europe
Limited.
We write to confirm that we consent to the Company entering into the Agreements
and that we have no objection to the assignment of Receivables [and/or Third
Party Security] in favour of Royal Bank of Canada Europe Limited and we agree
that whether such assignments have already been made or are made in the future
the Receivables [and/or the Third Party Security] are or, as applicable, shall
be released and freed from any security interest (fixed, floating or otherwise)
constituted by our Charge. We confirm that the consent given above shall extend
to any agreement which is supplemental to the Agreements or is made by way of
variation.
It is hereby confirmed that, if any amount owing or which may become due from
Royal Bank of Canada Europe Limited to the Company shall be subject to any
charge or assignment in our favour, any such charge of assignment shall be
subject always to all defences or rights of set-off which Royal Bank of Canada
Europe Limited may have against the Company whether arising before or after
receipt of notice of such charge or assignment by Royal Bank of Canada Europe
Limited.
<PAGE> 25
We hereby confirm that we are not aware of any event which would cause the
floating charge contained in our Charge to crystallise as at today's date.
SIGNED for and on
behalf of [ ]
in the presence of:
<PAGE> 26
EXECUTED as a deed by )
CONTINUUS SOFTWARE LIMITED )
in the presence of: )
DIRECTOR : /s/ John J. Laskey
-------------------------------
FULL NAME: John J. Laskey
SECRETARY: /s/ Kay Church
-------------------------------
FULL NAME: Kay Church
EXECUTED by ROYAL BANK OF )
CANADA EUROPE LIMITED )
in the presence of: )
DIRECTOR : /s/ Scott Brown
-------------------------------
FULL NAME: Scott Brown
SECRETARY: /s/ C.J.H. Fisher
-------------------------------
FULL NAME: C.J.H. Fisher
24
<PAGE> 27
DATED 27 MARCH 1997
CONTINUUS SOFTWARE LIMITED
- and -
ROYAL BANK OF CANADA EUROPE LIMITED
----------------------------------------
SUPPLEMENTAL DEED RELATING TO
MASTER PURCHASE TERMS AND CONDITIONS
----------------------------------------
EVERSHEDS
S O L I C I T O R S
BANKING AND FINANCIAL SERVICES DEPARTMENT
Senator House, 85 Queen Victoria Street
London EC4V 4JL
Tel: 0171 919 4500 Fax: 0171 919 4919
SUPPLEMENTAL DEED
25
<PAGE> 28
DATED: 27 MARCH 1997
PARTIES:
1. CONTINUUS SOFTWARE LIMITED, company registration no. 2936647, of Eagle
House, The Ring, Bracknell, Berkshire RG12 1HB (facsimile no. +44 1344
382 158);
2. ROYAL BANK OF CANADA EUROPE LIMITED, company registration no. 995939, of
71 Queen Victoria Street, London EC4V 4DE (facsimile no. +44 171 329
6144).
RECITALS:
A. The Seller and the Bank have entered into Master Purchase Terms and
Conditions in respect of certain receivable purchasing arrangements.
B. The Seller and the Bank have agreed that the provisions in those Master
Purchase Terms and Conditions relating to the giving of notices by the
Seller to each Buyer and the giving of acknowledgements of notice by
each Buyer to the Bank shall be amended on the terms of this Deed.
OPERATIVE TERMS
28. Definitions and Interpretation
28.1 Terms defined in the MPTCs shall have the same meaning when used in this
Deed unless separately defined in this Deed or the context otherwise
requires.
28.2 In this Deed the following words and expressions shall, unless the
context otherwise requires, have the meanings set opposite them:
<TABLE>
<S> <C>
"Deed" means this deed as the same may be amended and as in force from
time to time;
"Master Acknowledgement means an acknowledgement provided by each
of Receipt of Notice prospective Buyer substantially in the form set out in
the Schedule or in such other form as the
Bank may, in its absolute and sole
discretion, agree to in respect of such
prospective Buyer;
"Master Notice" means a notice by the Seller to each prospective
Buyer, substantially in the form set out in the
Schedule; and
"MPTCs" means the master purchase terms and
conditions dated 27th February 1997
between the Bank and the Seller as the
same may be amended and as in force from
time to time.
</TABLE>
26
<PAGE> 29
28.3 Sub-clauses 1.2, 1.4 and 1.5 of the MPTCs shall apply to this Deed
provided that, for the purposes of the Deed, any reference in those
sub-clauses to the MPTCs or any Contract shall be a reference to this
Deed.
29. Amendment to Notice and Acknowledgement Provisions
29.1 The Bank shall have no obligation to issue a completed Buyer
Confirmation in respect of a prospective Buyer under the MPTCs unless
and until the Bank has received, in respect of that person, a duly
completed and executed Master Notice and a duly completed Master
Acknowledgement of Receipt of Notice.
29.2 Provided that the Bank receives a Master Notice and a Master
Acknowledgement of Receipt of Notice in respect of a Buyer in accordance
with sub-clause 2.1 and further provided that, on execution and delivery
of each Contract in connection with that Buyer, the relevant Master
Notice and Master Acknowledgement of Receipt Notice remains in full
force and effect, then:
29.2.1 the Seller shall satisfy its obligation under sub-clause 3.3 of
the MPTCs by the deemed delivery of notice and acknowledgements
of notice in respect of such Contract in accordance with the
relevant Master Notice and Master Acknowledgement of Receipt of
Notice and any other documentation relating to the relevant
Invoice;
29.2.2 in sub-clause 4.1.5 of the MPTCs the reference to the
Acknowledgement of Receipt of Notice shall be a reference to the
Master Acknowledgement of Receipt of Notice and each
acknowledgement deemed to be delivered in accordance with it; and
29.2.3 in paragraph 1 of the form of Contract set out in Schedule 2 to
the MPTCs the reference to the execution of the Acknowledgement
of Receipt of Notice shall be a reference to the deemed delivery
of an acknowledgement in accordance with the Master
Acknowledgement of Receipt of Notice.
30. Miscellaneous
30.1 Sub-clauses 7.3, 7.5, 7.6, 7.11, 7.12 and 7.13 and Clause 9 and 10 of
the MPTCs shall apply to this Deed provided that, for the purposes of
this Deed, any reference in those sub-clauses or clauses to the MPTCs or
any Contract shall be a reference to this Deed.
This Deed has been executed by the Seller as a Deed and by the Bank under hand
and subsequently delivered the day and year first above written.
27
<PAGE> 30
SCHEDULE
(MASTER NOTICE)
[On Continuus Software Limited's letterhead]
To: [Name and address of Buyer]
Reference No: [ ]
FOR THE ATTENTION OF THE FINANCE DIRECTOR
Dated: [ ], 199[ ]
Dear Sirs,
MASTER NOTICE
We have entered into receivable purchase arrangements with Royal Bank of Canada
Europe Limited (the "BANK") of 71 Queen Victoria Street, London EC4V 4DE,
pursuant to which we will assign to the Bank our interests in certain
receivables expressed to be payable under certain invoices issued by us to you.
Each invoice so assigned will, when issued to you, bear the legend "THIS
RECEIVABLE HAS BEEN PURCHASED BY ROYAL BANK OF CANADA EUROPE LIMITED. AT
MATURITY, PLEASE MAKE ARRANGEMENTS FOR YOUR BANKERS TO MAKE PAYMENT DIRECTLY TO
NATIONAL WESTMINSTER BANK PLC, 21 LOMBARD STREET, LONDON EC3, SORT CODE:
60-92-82 FOR THE ACCOUNT OF ROYAL BANK OF CANADA EUROPE LIMITED ACCOUNT NUMBER
00841137 UNDER REFERENCE 838/CONTINUUS" and in this Master Notice each invoice
so assigned and marked is described as a "RELEVANT INVOICE".
The Bank requires us to give you certain directions in connection with each
Relevant Invoice. The Bank also requires you to acknowledge receipt of each such
notice which we send to you and to provide certain confirmations in respect of
each Relevant Invoice.
This Master Notice is intended to avoid us having to send you an individual
notice and require you to complete and return to the Bank an individual
acknowledgement for each Relevant Invoice.
By your acknowledgement and acceptance of this Master Notice, you
unconditionally and irrevocably agree with us (and the Bank) that:
1. each Relevant Invoice shall, when
delivered to you, be deemed to have
been delivered to you with a notice
containing the directions and
confirmations expressed to be made
by us set out in the Schedule duly
completed in respect of that
invoice; and
28
<PAGE> 31
2. on receipt of each Relevant Invoice
you shall be deemed to have executed
and delivered to the Bank an
acknowledgement of receipt of notice
containing the acknowledgements and
confirmations expressed to be made
by you set out in the Schedule duly
completed in respect of that
invoice.
Please arrange to have the acknowledgement and acceptance below executed by your
duly authorised representative and return the same to the Bank (Attn: Mr Alan
Hall) at its address specified above.
Please note that the contents of this Master Notice (including the Schedule)
cannot be varied without the prior written consent of the Bank.
Yours faithfully
................................................
Duly authorised for and on
behalf of Continuus Software Limited
From: [Buyer]
To: Royal Bank of Canada Europe Limited (the "Bank")
71 Queen Victoria Street
London EC4V 4DE
FOR THE ATTENTION OF MR ALAN HALL Dated : [ ], 199[ ]
We hereby acknowledge receipt of the Master Notice dated [ ] and, in
consideration of the Bank's agreement to make payment of Pound Sterling1.00 if
demanded by us, accept and agree to the terms of the Master Notice (including
the Schedule).
Signed by the duly authorised
representative of [Buyer]
Signature ............................................
Print name : .........................................
Title: ...............................................
29
<PAGE> 32
SCHEDULE TO MASTER NOTICE
(a) We confirm to you that we have assigned absolutely to the Bank our whole
right, title, benefit and interest, present and future, actual and
contingent, in and to all amounts expressed to be payable under the
Relevant Invoice provided always that you shall be under no greater
obligation or liability as a result of the assignment and you shall be
entitled to no lesser rights or benefits against us than you would have
been had the assignment referred to above not occurred.
(b) We instruct you to make all payments due under or pursuant to the
Relevant Invoice to:
Bankers: National Westminster Bank Plc
Address: 21 Lombard Street, London EC3
Sort Code: 60-92-82
Account No.: 00841137
Payee: Royal Bank of Canada Europe Limited under reference
838/Continuus
Provided always that the Bank may instruct you at any time (without our
concurrence) to make payment, as aforesaid, to another specified person
or account and you confirm that you shall unconditionally pay all
amounts expressed to be payable under the Relevant Invoice without set
off, contestation, deduction or counterclaim when due under the Relevant
Invoice to the person specified in this paragraph (b) irrespective of
any rights you may have against the obligor under the Relevant Invoice
or us.
(c) We instruct you that, except with the prior written consent of the Bank,
we have no authority to (i) make or consent to any modification,
variation, amendment, cancellation or termination of the agreement
relating to the Relevant Invoice (in this Schedule, the "AGREEMENT"), or
(ii) make or agree any claim that the Agreement is frustrated, or (iii)
consent or agree to any waiver or release of any of your obligations
under the Agreement, or (iv) consent or agree to the postponement of any
date for the performance of any of your obligations forming part of or
deriving from the Agreement and you confirm that you shall not (i)
consent or agree to any modification, variation, amendment, cancellation
or termination of the Agreement, or (ii) make or agree any claim that
the Agreement is frustrated, or (ii) consent or agree to any waiver or
release of the obligor's obligations under the Agreement, or (iv)
consent or agree to the postponement of any date for the performance of
any of the obligor's obligations forming part of or deriving from the
Agreement.
(d) You confirm that:
(i) (if required) you consent to the assignment of the Relevant
Invoice;
(ii) the Agreement continues in full force and effect in accordance
with its terms;
(iii) all amounts expressed to be payable under the Relevant Invoice
have been clearly expressed in the Relevant Invoice both as to
due dates and amount;
(iv) you have not received notice of any prior claim against or
assignment of the obligor's rights, title, benefit or interest
in and to, or the benefit of, both present and future, actual or
contingent, the Relevant Invoice; and
(v) you shall send to the Bank a copy of any notice you may give to
the issuer of the Relevant Invoice or to us relating to the
Relevant Invoice.
(e) We represent that this Master Notice and each deemed notice delivered
pursuant to it is within our capacity and constitutes legal, valid and
binding obligations enforceable against us and you represent that your
acknowledgement and acceptance of this Master Notice and each deemed
acknowledgement and acceptance delivered pursuant to it is within your
capacity and powers and constitutes legal, valid and binding obligations
enforceable against you.
(f) We covenant and confirm with the Bank and you covenant and confirm with
the Bank that each of us and you shall, immediately on demand for such
by the Bank (and, in your case, at our cost) shall executed in favour of
and deliver to the Bank such further or other deeds or documents, and do
such
30
<PAGE> 33
other things, as the Bank shall require to give effect to the provisions
of this Master Notice and/or the arrangements contemplated by it.
31
<PAGE> 34
EXECUTED as a deed by )
CONTINUUS SOFTWARE LIMITED )
in the presence of: )
DIRECTOR: /s/ Geoffrey William Haggart
----------------------------------
FULL NAME: Geoffrey William Haggart
SECRETARY: /s/ John Madelin
----------------------------------
FULL NAME: John Peter Madelin
EXECUTED by ROYAL BANK OF )
CANADA EUROPE LIMITED )
in the presence of: )
DIRECTOR: /s/ Scott Brown
----------------------------------
FULL NAME: Scott Brown
SECRETARY: /s/ C.J.H. Fisher
----------------------------------
FULL NAME: C.J.H. Fisher
32
<PAGE> 1
EXHIBIT 10.25
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE A MAXIMUM OF
____________ SHARES OF COMMON STOCK OF
CONTINUUS SOFTWARE CORPORATION
(Void after December 31, 2001)
This certifies that _____________________________, or its assigns (the
"Holder"), for value received, is entitled to purchase from CONTINUUS SOFTWARE
CORPORATION, a California corporation (the "Company"), having a place of
business at 108 Pacifica, 2nd Floor, Irvine, California 92718-3332, a maximum of
__________ fully paid and nonassessable shares of the Company's Common Stock
("Stock") for cash at a price of $0.25 per share (the "Stock Purchase Price") at
any time or from time to time up to and including 5:00 p.m. (Pacific time) on
December 31, 2001, such day being referred to herein as the "Expiration Date",
upon surrender to the Company at its principal office (or at such other location
as the Company may advise the Holder in writing) of this Warrant properly
endorsed with the Form of Subscription attached hereto duly filled in and signed
and upon payment in cash or by check of the aggregate Stock Purchase Price for
the number of shares for which this Warrant is being exercised determined in
accordance with the provisions hereof. The Stock Purchase Price and the number
of shares purchasable hereunder are subject to adjustment as provided in Section
3 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares.
1.1 General. This Warrant is exercisable at the option of the
holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Stock (but not for a fraction of a
share) which may be purchased hereunder. The Company agrees that the shares of
Stock purchased under this Warrant shall be and are deemed to be issued to the
Holder hereof as the record owner of such shares as of the close of business on
the date on which this Warrant shall have been surrendered, properly endorsed,
the completed, executed Form of Subscription delivered and payment made for such
shares. Certificates for the shares of Stock so purchased, together with any
other securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been so exercised. In case of a purchase of less than all the
shares which may be purchased under this Warrant, the Company shall cancel this
Warrant and execute and deliver a new Warrant or Warrants of like tenor for the
balance of the shares purchasable under the Warrant surrendered upon such
purchase to the Holder hereof within a reasonable time. Each stock certificate
so delivered shall be in such denominations of Stock as may be requested by the
Holder hereof and shall be registered in the
<PAGE> 2
name of such Holder.
1.2 Net Issue Exercise. Notwithstanding any provisions herein to
the contrary, if the fair market value of one share of the Company's Stock is
greater than the Stock Purchase Price (at the date of calculation as set forth
below), in lieu of exercising this Warrant for cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Form of Subscription
and notice of such election in which event the Company shall issue to the Holder
a number of shares of Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Stock to be issued to the Holder
Y = the number of shares of Stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at
the date of such calculation)
A = the fair market value of one share of the Company's
Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of one share of Stock
shall be determined by the Company=s Board of Directors in good faith; provided,
however, that in the event that at the time of any such exercise pursuant to
this Section 1.2 the Company's Common Stock (i) is listed on any established
stock exchange or a national market system, including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the fair market value of a share of
common stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in common stock) on the last market
trading day prior to the day of determination, as reporting in the Wall Street
Journal or such other source as the Board of Directors of the Company deems
reliable or (ii) is not listed on any established stock exchange or a national
market system but is quoted on the NASDAQ System (but not on the National Market
System thereof) or 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 bid and asked prices for the common stock on
the last market trading day prior to the day of determination, as reported in
the Wall Street Journal or such other source as the Board of Directors of the
Company deems reliable.
2. Shares to be Fully Paid; Reservation of Shares. The Company covenants
and agrees that all shares of Stock which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable and
<PAGE> 3
free from all preemptive rights of any shareholder and free of all taxes, liens
and charges with respect to the issue thereof. The Company further covenants and
agrees that during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of authorized
but unissued Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such shares of
Stock may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of any domestic securities exchange upon
which the Stock may be listed; provided, however, that the Company shall not be
required to effect a registration under Federal or State securities laws with
respect to such exercise. The Company will not take any action which would
result in any adjustment of the Stock Purchase Price (as defined in Section 3
hereof) if the total number of shares of Stock issuable after such action upon
exercise of all outstanding warrants, together with all shares of Stock then
issuable upon exercise of all options and upon the conversion of all convertible
securities then outstanding, would exceed the total number of shares of Stock
then authorized by the Company's Articles of Incorporation.
3. Adjustment of Stock Purchase Price and Number of Shares. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
3.1 Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding shares of Stock into a greater
number of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Stock of the Company shall be combined into a smaller
number of shares, the Stock Purchase Price in effect immediately prior to such
combination shall be proportionately increased.
3.2 Dividends in Stock, Other Stock, Property, Reclassification.
If at any time or from time to time the Holders of Stock (or any shares of stock
or other securities at the time receivable upon the exercise of this Warrant)
shall have received or become entitled to receive, without payment therefor,
(A) Stock or any shares of stock or other securities
which are at any time directly or indirectly convertible into or exchangeable
for Stock, or any rights or options to subscribe for, purchase or otherwise
acquire any of the foregoing by way of dividend or other distribution, or
(B) Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate
<PAGE> 4
rearrangement, (other than shares of Stock issued as a stock split, adjustments
in respect of which shall be covered by the terms of Section 3.1 above), then
and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Stock
receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property which such
Holder would hold on the date of such exercise had he been the holder of record
of such Stock as of the date on which holders of Stock received or became
entitled to receive such shares or all other additional stock and other
securities and property.
3.3 Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that holders of Stock shall be entitled to receive stock,
securities, or other assets or property, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the Stock of
the Company immediately theretofore purchasable and receivable upon the exercise
of the rights represented hereby) such shares of stock, securities or other
assets or property as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby. In any reorganization described
above, appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Stock Purchase
Price and of the number of shares purchasable and receivable upon the exercise
of this Warrant) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof.
3.4 Notice of Adjustment. Upon any adjustment of the Stock
Purchase Price or any increase or decrease in the number of shares purchasable
upon the exercise of this Warrant, the Company shall give written notice
thereof, by first class mail, postage prepaid, addressed to the registered
Holder of this Warrant at the address of such Holder as shown on the books of
the Company. The notice shall be signed by the Company's chief financial officer
and shall state the Stock Purchase Price resulting from such adjustment and the
increase or decrease, if any, in the number of shares purchasable at such price
upon the exercise of this Warrant, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
3.5 Other Notices. If at any time:
(1) the Company shall declare any cash dividend upon its
Common Stock;
(2) the Company shall declare any dividend upon its
Common Stock payable in stock or make any special dividend or other distribution
to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata to
the holders of its
<PAGE> 5
Common Stock any additional shares of stock of any class or other rights;
(4) there shall be any capital reorganization or
reclassification of the capital stock of the Company; or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation;
(5) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
(6) there shall be an initial public offering of Company
securities;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company, (a) at least 20 days= prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights or
for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, winding-up or public
offering, at least 20 days= prior written notice of the date when the same shall
take place; provided, however, that the Holder shall make a best efforts attempt
to respond to such notice as early as possible after the receipt thereof. Any
notice given in accordance with the foregoing clause (a) shall also specify, in
the case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto. Any notice given in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Stock shall be entitled to exchange their Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, winding-up, conversion or
public offering, as the case may be.
3.6 Certain Events. If any change in the outstanding Common Stock
of the Company or any other event occurs as to which the other provisions of
this Section 3 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance
with such provisions, then the Board of Directors of the Company shall make an
adjustment in the number and class of shares available under the Warrant, the
Stock Purchase Price or the application of such provisions, so as to protect
such purchase rights as aforesaid. The adjustment shall be such as will give the
Holder of the Warrant upon exercise for the same aggregate Stock Purchase Price
the total number, class and kind of shares as he would have owned had the
Warrant been exercised prior to the event and had he continued to hold such
shares until after the event requiring adjustment.
4. Issue Tax. The issuance of certificates for shares of Stock upon the
exercise of the Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than any applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.
<PAGE> 6
5. Closing of Books. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Stock issued or
issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.
6. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Stock, and no mere enumeration herein of the rights
or privileges of the holder hereof, shall give rise to any liability of such
holder for the Stock Purchase Price or as a shareholder of the Company, whether
such liability is asserted by the Company or by its creditors.
7. Registration Rights. The shares of Common Stock issuable pursuant to
this Warrant shall be deemed to be "Registrable Securities" for purposes of that
certain Investors= Rights Agreement dated March 4, 1994.
8. Warrants Transferable. Subject to compliance with applicable federal
and state securities laws, this Warrant and all rights hereunder are
transferable, in whole or in portions not less than 20,000 shares, without
charge to the holder hereof (except for transfer taxes), upon surrender of this
Warrant properly endorsed. Each taker and holder of this Warrant, by taking or
holding the same, consents and agrees that this Warrant, when endorsed in blank,
shall be deemed negotiable, and that the holder hereof, when this Warrant shall
have been so endorsed, may be treated by the Company, at the Company=s option,
and all other persons dealing with this Warrant as the absolute owner hereof for
any purpose and as the person entitled to exercise the rights represented by
this Warrant, or to the transfer hereof on the books of the Company any notice
to the contrary notwithstanding; but until such transfer on such books, the
Company may treat the registered owner hereof as the owner for all purposes.
9. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the Company and the Holder.
10. Notices. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered
or shall be sent by certified mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
11. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Stock issuable upon the
<PAGE> 7
exercise of this Warrant shall survive the exercise and termination of this
Warrant. All of the covenants and agreements of the Company shall inure to the
benefit of the successors and assigns of the holder hereof.
12. Descriptive Headings and Governing Law. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.
13. Lost Warrants. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
14. Fractional Shares. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 23rd day of December,
1994.
CONTINUUS SOFTWARE CORPORATION
a California corporation
By:________________________________
Title: ____________________________
<PAGE> 8
EXHIBIT A
SUBSCRIPTION FORM
Date: _________________, 19___
CONTINUUS SOFTWARE CORPORATION
108 Pacifica, 2nd Floor
Irvine, California 92718-3332
Attn: President
Gentlemen:
[ ] The undersigned hereby elects to exercise the warrant issued to it by
CONTINUUS SOFTWARE CORPORATION (the "Company") and dated
________________, 1994 (the "Warrant") and to purchase thereunder
__________________________________ shares of the Common Stock of the
Company (the "Shares") at a purchase price of ________________________
Dollars ($__________) per Share or an aggregate purchase price of
__________________ ________________ Dollars ($__________) (the "Purchase
Price").
[ ] The undersigned hereby elects to convert _______________________ percent
(____%) of the value of the Warrant pursuant to the provisions of
Section 1.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on Exhibit B attached
to the Warrant.
Very truly yours,
___________________________________
By_________________________________
Title______________________________
<PAGE> 9
EXHIBIT B
TO WARRANT CERTIFICATE
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO CONTINUUS SOFTWARE
CORPORATION ALONG WITH THE SUBSCRIPTION FORM BEFORE THE STOCK ISSUABLE UPON
EXERCISE OF THE WARRANT CERTIFICATE DATED _____________, 1994 WILL BE ISSUED.
_____________________, 19__
CONTINUUS SOFTWARE CORPORATION
108 Pacifica, 2nd Floor
Irvine, California 92718-3332
Attn: President
The undersigned, _________________________ ("Purchaser"), intends to
acquire up to ______________ shares of the Common Stock (the "Stock") of
CONTINUUS SOFTWARE CORPORATION (the "Company") from the Company pursuant to the
exercise or conversion of a certain Warrant to purchase Stock held by Purchaser.
The Stock will be issued to Purchaser in a transaction not involving a public
offering and pursuant to an exemption from registration under the Securities Act
of 1933, as amended (the "1933 Act") and applicable state securities laws. In
connection with such purchase and in order to comply with the exemptions from
registration relied upon by the Company, Purchaser represents, warrants and
agrees as follows:
Purchaser is acquiring the Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Stock in violation of the 1933 Act or the General Rules and Regulations
promulgated thereunder by the Securities and Exchange Commission (the "SEC") or
in violation of any applicable state securities law.
Purchaser has been advised that the Stock has not been registered under
the 1933 Act or state securities laws on the ground that this transaction is
exempt from registration, and that reliance by the Company on such exemptions is
predicated in part on Purchaser=s representations set forth in this letter.
Purchaser has been informed that under the 1933 Act, the Stock must be
held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such
<PAGE> 10
registration (such as Rule 144) is available with respect to any proposed
transfer or disposition by Purchaser of the Stock. Purchaser further agrees that
the Company may refuse to permit Purchaser to sell, transfer or dispose of the
Stock (except as permitted under Rule 144) unless there is in effect a
registration statement under the 1933 Act and any applicable state securities
laws covering such transfer, or unless Purchaser furnishes an opinion of counsel
reasonably satisfactory to counsel for the Company, to the effect that such
registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Stock, or any substitutions therefor, a legend stating in
substance:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities laws. These shares have been acquired for
investment and may not be sold or otherwise transferred in the absence
of an effective registration statement for these shares under the
Securities Act and applicable state securities laws, or an opinion of
counsel satisfactory to the Company that registration is not required
and that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Stock with Purchaser's counsel.
Very truly yours,
Name of Purchaser:
___________________________________
By: _______________________________
Title: ____________________________
<PAGE> 1
EXHIBIT 10.26
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE A MAXIMUM OF
___________ SHARES OF COMMON STOCK OF
CONTINUUS SOFTWARE CORPORATION
(VOID AFTER MAY 29, 2003)
This certifies that _____________________________________________ or its
assigns (the "Holder"), for value received, is entitled to purchase from
CONTINUUS SOFTWARE CORPORATION, a California corporation (the "Company"), having
a place of business at 108 Pacifica, 2nd Floor, Irvine, California 92718-3332, a
maximum of ____________ fully paid and nonassessable shares of the Company's
Common Stock ("Stock") for cash at a price of $0.58 per share (the "Stock
Purchase Price") at any time or from time to time up to and including 5:00 p.m.
(Pacific time) on May 29, 2003, such day being referred to herein as the
"Expiration Date", upon surrender to the Company at its principal office (or at
such other location as the Company may advise the Holder in writing) of this
Warrant properly endorsed with the Form of Subscription attached hereto duly
filled in and signed and upon payment in cash or by check of the aggregate Stock
Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 GENERAL. This Warrant is exercisable at the option of
the holder of record hereof, at any time or from time to time, up to the
Expiration Date for all or any part of the shares of Stock (but not for a
fraction of a share) which may be purchased hereunder. The Company agrees that
the shares of Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Stock so purchased,
together with any other securities or property to which the Holder hereof is
entitled upon such exercise, shall be delivered to the Holder hereof by the
Company at the Company's expense within a reasonable time after the rights
represented by this Warrant have been so exercised. In case of a purchase of
less than all the shares which may be purchased under
1
<PAGE> 2
this Warrant, the Company shall cancel this Warrant and execute and deliver a
new Warrant or Warrants of like tenor for the balance of the shares purchasable
under the Warrant surrendered upon such purchase to the Holder hereof within a
reasonable time. Each stock certificate so delivered shall be in such
denominations of Stock as may be requested by the Holder hereof and shall be
registered in the name of such Holder.
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions
herein to the contrary, if the fair market value of one share of the Company's
Stock is greater than the Stock Purchase Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Form of
Subscription and notice of such election in which event the Company shall issue
to the Holder a number of shares of Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Stock to be issued to the Holder
Y = the number of shares of Stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at
the date of such calculation)
A = the fair market value of one share of the Company's
Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of one share of Stock
shall be determined by the Company's Board of Directors in good faith; provided,
however, that in the event that at the time of any such exercise pursuant to
this Section 1.2 the Company's Common Stock (i) is listed on any established
stock exchange or a national market system, including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the fair market value of a share of
common stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in common stock) on the last market
trading day prior to the day of determination, as reporting in the Wall Street
Journal or such other source as the Board of Directors of the Company deems
reliable or (ii) is not listed on any established stock exchange or a national
market system but is quoted on the
2
<PAGE> 3
NASDAQ System (but not on the National Market System thereof) or 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
bid and asked prices for the common stock on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or such
other source as the Board of Directors of the Company deems reliable.
1.3 AUTOMATIC EXERCISE. To the extent this Warrant is not
previously exercised, and if the fair market value of one share of the Company's
Common Stock is greater than the Stock Purchase Price, as adjusted, this Warrant
shall be automatically exercised in accordance with Section 1.2 hereof (even if
not surrendered) immediately before the Expiration Date.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Stock which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, for the
purpose of issue or transfer upon exercise of the subscription rights evidenced
by this Warrant, a sufficient number of shares of authorized but unissued Stock,
or other securities and property, when and as required to provide for the
exercise of the rights represented by this Warrant. The Company will take all
such action as may be necessary to assure that such shares of Stock may be
issued as provided herein without violation of any applicable law or regulation,
or of any requirements of any domestic securities exchange upon which the Stock
may be listed; provided, however, that the Company shall not be required to
effect a registration under Federal or State securities laws with respect to
such exercise. The Company will not take any action which would result in any
adjustment of the Stock Purchase Price (as defined in Section 3 hereof) if the
total number of shares of Stock issuable after such action upon exercise of all
outstanding warrants, together with all shares of Stock then issuable upon
exercise of all options and upon the conversion of all convertible securities
then outstanding, would exceed the total number of shares of Stock then
authorized by the Company's Articles of Incorporation.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The
Stock Purchase Price and the number of shares purchasable upon the exercise of
this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events described in this Section 3. Upon each adjustment
of the Stock Purchase Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Stock Purchase Price resulting from such
adjustment, the number of shares obtained by multiplying the Stock Purchase
Price in effect immediately prior to such adjustment by the number of shares
3
<PAGE> 4
purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Stock Purchase Price resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company
shall at any time subdivide its outstanding shares of Stock into a greater
number of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Stock of the Company shall be combined into a smaller
number of shares, the Stock Purchase Price in effect immediately prior to such
combination shall be proportionately increased.
3.2 DIVIDENDS IN STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the Holders of Stock (or
any shares of stock or other securities at the time receivable upon the exercise
of this Warrant) shall have received or become entitled to receive, without
payment therefor,
(A) Stock or any shares of stock or other securities
which are at any time directly or indirectly convertible into or exchangeable
for Stock, or any rights or options to subscribe for, purchase or otherwise
acquire any of the foregoing by way of dividend or other distribution, or
(B) Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than shares of
Stock issued as a stock split, adjustments in respect of which shall be covered
by the terms of Section 3.1 above), then and in each such case, the Holder
hereof shall, upon the exercise of this Warrant, be entitled to receive, in
addition to the number of shares of Stock receivable thereupon, and without
payment of any additional consideration therefor, the amount of stock and other
securities and property which such Holder would hold on the date of such
exercise had he been the holder of record of such Stock as of the date on which
holders of Stock received or became entitled to receive such shares or all other
additional stock and other securities and property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER
OR SALE. If any capital reorganization of the capital stock of the Company, or
any consolidation or merger of the Company with another corporation, or the sale
of all or substantially all of its assets to another corporation shall be
effected in such a way that holders of Stock shall be entitled to receive stock,
securities, or other assets or property, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the Stock of
the Company immediately theretofore purchasable and receivable
4
<PAGE> 5
upon the exercise of the rights represented hereby) such shares of stock,
securities or other assets or property as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby. In any
reorganization described above, appropriate provision shall be made with respect
to the rights and interests of the Holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Stock Purchase Price and of the number of shares purchasable and receivable
upon the exercise of this Warrant) shall thereafter be applicable, as nearly as
may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof.
3.4 NOTICE OF ADJUSTMENT. Upon any adjustment of the Stock
Purchase Price or any increase or decrease in the number of shares purchasable
upon the exercise of this Warrant, the Company shall give written notice
thereof, by first class mail, postage prepaid, addressed to the registered
Holder of this Warrant at the address of such Holder as shown on the books of
the Company. The notice shall be signed by the Company's chief financial officer
and shall state the Stock Purchase Price resulting from such adjustment and the
increase or decrease, if any, in the number of shares purchasable at such price
upon the exercise of this Warrant, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
3.5 OTHER NOTICES. If at any time:
(1) the Company shall declare any cash dividend upon
its Common Stock;
(2) the Company shall declare any dividend upon its
Common Stock payable in stock or make any special dividend or other distribution
to the holders of its Common Stock;
(3) the Company shall offer for subscription pro
rata to the holders of its Common Stock any additional shares of stock of any
class or other rights;
(4) there shall be any capital reorganization or
reclassification of the capital stock of the Company; or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation;
(5) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
(6) there shall be an initial public offering of
Company securities;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company, (a) at least 20 days' prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights or
for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution,
5
<PAGE> 6
liquidation or winding-up, and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up or public offering, at least 20 days' prior written notice of the
date when the same shall take place; provided, however, that the Holder shall
make a best efforts attempt to respond to such notice as early as possible after
the receipt thereof. Any notice given in accordance with the foregoing clause
(a) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto. Any notice given in accordance with the foregoing clause (b)
shall also specify the date on which the holders of Stock shall be entitled to
exchange their Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, conversion or public offering, as the case may be.
3.6 CERTAIN EVENTS. If any change in the outstanding Common
Stock of the Company or any other event occurs as to which the other provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, then the Board of Directors of the Company
shall make an adjustment in the number and class of shares available under the
Warrant, the Stock Purchase Price or the application of such provisions, so as
to protect such purchase rights as aforesaid. The adjustment shall be such as
will give the Holder of the Warrant upon exercise for the same aggregate Stock
Purchase Price the total number, class and kind of shares as he would have owned
had the Warrant been exercised prior to the event and had he continued to hold
such shares until after the event requiring adjustment.
4. ISSUE TAX. The issuance of certificates for shares of Stock upon
the exercise of the Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than any applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Stock issued or
issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by
6
<PAGE> 7
the holder to purchase shares of Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such holder for the Stock Purchase Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by its creditors.
7. REGISTRATION RIGHTS. The shares of Common Stock issuable
pursuant to this Warrant shall be deemed to be "Registrable Securities" for
purposes of that certain Investors' Rights Agreement dated March 4, 1994 as
subsequently amended.
8. WARRANTS TRANSFERABLE. Subject to compliance with applicable
federal and state securities laws, this Warrant and all rights hereunder are
transferable, in whole or in portions not less than 20,000 shares, without
charge to the holder hereof (except for transfer taxes), upon surrender of this
Warrant properly endorsed. Each taker and holder of this Warrant, by taking or
holding the same, consents and agrees that this Warrant, when endorsed in blank,
shall be deemed negotiable, and that the holder hereof, when this Warrant shall
have been so endorsed, may be treated by the Company, at the Company's option,
and all other persons dealing with this Warrant as the absolute owner hereof for
any purpose and as the person entitled to exercise the rights represented by
this Warrant, or to the transfer hereof on the books of the Company any notice
to the contrary notwithstanding; but until such transfer on such books, the
Company may treat the registered owner hereof as the owner for all purposes.
9. MODIFICATION AND WAIVER. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the Company and the Holder.
10. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant or such
other address as either may from time to time provide to the other.
11. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets. All of the obligations of
the Company relating to the Stock issuable upon the exercise of this Warrant
shall survive the exercise and termination of this Warrant. All of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the holder hereof.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of California.
13. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
7
<PAGE> 8
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder
8
<PAGE> 9
entitled to such fraction a sum in cash equal to such fraction multiplied by the
then effective Stock Purchase Price.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 30th day of May, 1996.
CONTINUUS SOFTWARE CORPORATION,
a California corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
9
<PAGE> 10
EXHIBIT A
SUBSCRIPTION FORM
Date: _________________, 19___
CONTINUUS SOFTWARE CORPORATION
108 Pacifica, 2nd Floor
Irvine, California 92718-3332
Attn: President
Gentlemen:
[ ] The undersigned hereby elects to exercise the warrant issued to it by
CONTINUUS SOFTWARE CORPORATION (the "Company") and dated May ___, 1996
(the "Warrant") and to purchase thereunder
__________________________________ shares of the Common Stock of the
Company (the "Shares") at a purchase price of ________________________
Dollars ($__________) per Share or an aggregate purchase price of
__________________ ________________ Dollars ($__________) (the "Purchase
Price").
[ ] The undersigned hereby elects to convert _______________________ percent
(____%) of the value of the Warrant pursuant to the provisions of
Section 1.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on Exhibit B attached
to the Warrant.
Very truly yours,
--------------------------------------------
By:
-----------------------------------------
Title:
--------------------------------------
<PAGE> 11
EXHIBIT B
TO WARRANT CERTIFICATE
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO CONTINUUS SOFTWARE
CORPORATION ALONG WITH THE SUBSCRIPTION FORM BEFORE THE STOCK ISSUABLE UPON
EXERCISE OF THE WARRANT CERTIFICATE DATED MAY __, 1996 WILL BE ISSUED.
_____________________, 19__
CONTINUUS SOFTWARE CORPORATION
108 Pacifica, 2nd Floor
Irvine, California 92718-3332
Attn: President
The undersigned, _________________________ ("Purchaser"), intends to
acquire up to ______________ shares of the Common Stock (the "Stock") of
CONTINUUS SOFTWARE CORPORATION (the "Company") from the Company pursuant to the
exercise or conversion of a certain Warrant to purchase Stock held by Purchaser.
The Stock will be issued to Purchaser in a transaction not involving a public
offering and pursuant to an exemption from registration under the Securities Act
of 1933, as amended (the "1933 Act") and applicable state securities laws. In
connection with such purchase and in order to comply with the exemptions from
registration relied upon by the Company, Purchaser represents, warrants and
agrees as follows:
Purchaser is acquiring the Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Stock in violation of the 1933 Act or the General Rules and Regulations
promulgated thereunder by the Securities and Exchange Commission (the "SEC") or
in violation of any applicable state securities law.
Purchaser has been advised that the Stock has not been registered under
the 1933 Act or state securities laws on the ground that this transaction is
exempt from registration, and that reliance by the Company on such exemptions is
predicated in part on Purchaser's representations set forth in this letter.
1.
<PAGE> 12
Purchaser has been informed that under the 1933 Act, the Stock must be
held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any proposed transfer or disposition by Purchaser of the Stock.
Purchaser further agrees that the Company may refuse to permit Purchaser to
sell, transfer or dispose of the Stock (except as permitted under Rule 144)
unless there is in effect a registration statement under the 1933 Act and any
applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion of counsel reasonably satisfactory to counsel for the
Company, to the effect that such registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Stock, or any substitutions therefor, a legend stating in
substance:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities laws. These shares have been acquired for
investment and may not be sold or otherwise transferred in the absence
of an effective registration statement for these shares under the
Securities Act and applicable state securities laws, or an opinion of
counsel satisfactory to the Company that registration is not required
and that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Stock with Purchaser's counsel.
Very truly yours,
Name of Purchaser:
--------------------------------------------
By:
-----------------------------------------
Title:
--------------------------------------
2.
<PAGE> 1
EXHIBIT 10.27
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
STOCK PURCHASE WARRANT
To Purchase Shares of Preferred Stock of
CONTINUUS SOFTWARE CORPORATION
THIS CERTIFIES that, for value received, _____________________________
(the "Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after the date hereof and on or prior
to three years from the date hereof, but not thereafter, to subscribe for and
purchase, from CONTINUUS SOFTWARE CORPORATION, a California corporation (the
"Company"), ________ shares of Series E Preferred Stock at a purchase price per
share equal to the "Exercise Price" (as defined below). The purchase price and
the number of shares for which this Warrant is exercisable shall be subject to
adjustment as provided herein.
1. TITLE OF WARRANT. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company,
referred to in Section 3 hereof, by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant together with the Assignment
Form annexed hereto properly endorsed.
2. EXERCISE PRICE. The initial Exercise Price shall be equal to
$2.10 per share. In the event that the Company closes a Series E Preferred Stock
financing on or prior to April 30, 1997, in which the Company receives an
aggregate of at least $1,500,000 (excluding existing indebtedness), then the
Exercise Price shall be the price per share of such Series E Preferred Stock.
3. EXERCISE OF WARRANT. The purchase rights represented by this
Warrant are exercisable by the registered holder hereof, in whole or in part, at
any time before the close of business on the date three years following the date
hereof by the surrender of this Warrant and the Notice of Exercise annexed
hereto duly executed at the office of the Company, located at 108 Pacifica,
Irvine, California 92718 (or such other office or agency of the Company as it
may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company), and upon payment
of the purchase price of the shares thereby purchased (by cash or by check or
bank draft payable to the order of the Company or by cancellation of
indebtedness of the
1.
<PAGE> 2
Company to the holder hereof, if any, at the time of exercise in an amount equal
to the purchase price of the shares thereby purchased); whereupon the holder of
this Warrant shall be entitled to receive a certificate for the number of shares
of Series E Preferred Stock so purchased. The Company agrees that if at the time
of the surrender of this Warrant and purchase the holder hereof shall be
entitled to exercise this Warrant, the shares so purchased shall be and be
deemed to be issued to such holder as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been exercised as
aforesaid.
Certificates for shares purchased hereunder shall be delivered to the
holder hereof within a reasonable time after the date on which this Warrant
shall have been exercised as aforesaid.
The Company covenants that all shares of Series E Preferred Stock which
may be issued upon the exercise of rights represented by this Warrant will, upon
exercise of the rights represented by this Warrant, be fully paid and
nonassessable and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue).
4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise of
this Warrant, an amount equal to such fraction multiplied by the then current
price at which each share may be purchased hereunder shall be paid in cash to
the holder of this Warrant.
5. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares
of Series E Preferred Stock upon the exercise of this Warrant shall be made
without charge to the holder hereof for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the holder of this Warrant or in such name or names as may
be directed by the holder of this Warrant; provided, however, that in the event
certificates for shares of Series E Preferred Stock are to be issued in a name
other than the name of the holder of this Warrant, this Warrant when surrendered
for exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof; and provided further, that upon any transfer
involved in the issuance or delivery of any certificates for shares of Series E
Preferred Stock, the Company may require, as a condition thereto, the payment of
a sum sufficient to reimburse it for any transfer tax incidental thereto.
6. NO RIGHTS AS SHAREHOLDERS. This Warrant does not entitle the
holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise thereof.
2.
<PAGE> 3
7. EXCHANGE AND REGISTRY OF WARRANT. This Warrant is exchangeable,
upon the surrender hereof by the registered holder at the above-mentioned office
or agency of the Company, for a new Warrant of like tenor and dated as of such
exchange.
The Company shall maintain at the above-mentioned office or agency a
registry showing the name and address of the registered holder of this Warrant.
This Warrant may be surrendered for exchange, transfer or exercise, in
accordance with its terms, at such office or agency of the Company, and the
Company shall be entitled to rely in all respects, prior to written notice to
the contrary, upon such registry.
8. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
9. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
10. EARLY TERMINATION AND DILUTION.
(a) MERGER, SALE OF ASSETS, ETC. If at any time the company
proposes to (i) effect a merger, reorganization or sale of substantially all of
the assets of the Company in which the shareholders of the Company immediately
prior to the transaction will hold less than 50% of the surviving entity (or its
parent) immediately after the transaction, or (ii) effect a registered public
offering of the Company's shares (a "Public Offering"), then the Company shall
give the holder of this Warrant thirty days notice of the proposed closing date
of such transaction and if the Warrant has not been exercised by the closing
date of such transaction it shall terminate.
(b) ISSUE EXERCISE. In lieu of the cash payment set forth in
paragraph 3 above, the Investor may elect to pay the Exercise Price by the
surrender of Warrants ("Net Issuance") as determined below (without payment of
any kind). If the Investor elects the Net Issuance method, the Company will
issue Series E Preferred Stock in accordance with the following formula:
3.
<PAGE> 4
X = Y(A-B)
------
A
Where: X = the number of shares of Series E Preferred Stock to be
issued to the holder.
Y = the number of shares of Series E Preferred
Stock requested to be exercised under this
Warrant.
A = the fair market value of one share of the
Company's Series E Preferred Stock at the
date of calculation.
B = The Exercise Price (as adjusted to the
date of such calculation).
(ii) For purposes of the above calculation, current fair
market value of the Series E Preferred Stock shall mean with
respect to each share of Series E Preferred Stock:
(i) if the exercise is in connection with an initial public
offering and if the Company's Registration Statement relating to
such public offering has been declared effective by the
Securities and Exchange Commission, then the fair market value
per share shall be the product of (x) the "Initial Price to
Public" specified in the final prospectus with respect to the
offering and (y) the number of shares of Common Stock into which
each share of Series E Preferred Stock is convertible at the
time of such exercise;
(ii) if this Warrant is exercised prior to, and not in
connection with the Company's initial public offering, then the
current fair market value of the Series E Preferred Stock shall
be as determined in good faith by its Board of Directors, unless
the Company shall become subject to a merger, acquisition or
other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Common
Stock shall be deemed to be the value received by the holders of
the Company's Series E Preferred Stock on a common equivalent
basis pursuant to such merger or acquisition.
(c) RECLASSIFICATION, ETC. If the Company at any time shall,
by subdivision, combination or reclassification of securities or otherwise,
change any of the
4.
<PAGE> 5
securities to which purchase rights under this Warrant exist into the same or a
different number of securities of any class or classes, this Warrant shall
thereafter be to acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the securities which were
subject to the purchase rights under this Warrant immediately prior to such
subdivision, combination, reclassification or other change. If shares of the
Company's Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, the purchase price under this Warrant shall be
proportionately reduced in case of subdivision of shares or proportionately
increased in the case of combination of shares, in both cases by the ratio which
the total number of shares of Common Stock to be outstanding immediately after
such event bears to the total number of shares of Common Stock outstanding
immediately prior to such event.
(d) CASH DISTRIBUTIONS. No adjustment on account of cash
dividends or interest on the Company's Series E Preferred Stock or other
securities purchasable hereunder will be made to the purchase price under this
Warrant.
(e) AUTHORIZED SHARES. The Company covenants that it will
authorize a sufficient number of shares of Series E Preferred Stock to provide
for the issuance of Series E Preferred Stock upon the exercise of any purchase
rights under this warrant. The Series E Preferred Stock shall have rights,
preferences and privileges (including a conversion ratio to Common Stock no less
favorable than any other class or series of stock and shall have a liquidation
preference senior to all other classes or series of stock. The Company further
covenants that during the period Warrant is outstanding, it will reserve from
such authorized and unissued Series E Preferred Stock, a sufficient number of
shares of Series E Preferred Stock to provide for the issuance of such stock
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of the Company's Series
E Preferred Stock upon the exercise of the purchase rights under this Warrant.
11. MISCELLANEOUS.
(a) ISSUE DATE. The provisions of this Warrant shall be
construed and shall be given effect in all respect as if it had been issued and
delivered by the Company on the date hereof. This Warrant shall be binding upon
any successors or assigns of the Company. This Warrant shall constitute a
contract under the laws of the State of California and for all purposes shall be
construed in accordance with and governed by the laws of said state.
5.
<PAGE> 6
(b) RESTRICTIONS. The holder hereof acknowledges that the
Series E Preferred Stock acquired upon the exercise of this Warrant may have
restrictions upon its resale imposed by state and federal securities laws.
IN WITNESS WHEREOF, CONTINUUS SOFTWARE CORPORATION has caused this
Warrant to be executed by its officers thereunto duly authorized.
Dated: January 23, 1997
CONTINUUS SOFTWARE
CORPORATION
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
6.
<PAGE> 7
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information. Do
not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
----------------------------------------
(Please Print)
----------------------------------------
(address)
----------------------------------------
----------------------------------------
Holder's Signature:
--------------------------
Holder's Address:
----------------------------
----------------------------
Dated: , 19
--------------- ---
Signature Guaranteed:
---------------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
<PAGE> 8
NOTICE OF EXERCISE
To: CONTINUUS SOFTWARE CORPORATION
(1) The undersigned hereby elects to purchase shares of Series E
Preferred Stock of CONTINUUS SOFTWARE CORPORATION pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price in full,
together with all applicable taxes, if any.
(2) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
----------------------------------------
(Please Print)
----------------------------------------
(address)
(3) The undersigned represents that the aforesaid shares of Series E
Preferred Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of
distributing or reselling such shares.
- ------------------------ -------------------------------
(Date) (Signature)
<PAGE> 1
EXHIBIT 10.28
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
STOCK PURCHASE WARRANT
To Purchase Shares of Preferred Stock of
CONTINUUS SOFTWARE CORPORATION
THIS CERTIFIES that, for value received, ____________________________
(the "Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after the date hereof and on or prior
to three years from the date hereof, but not thereafter, to subscribe for and
purchase, from CONTINUUS SOFTWARE CORPORATION, a California corporation (the
"Company"), __________ shares of Series E Preferred Stock at a purchase price
per share equal to the "Exercise Price" (as defined below). The purchase price
and the number of shares for which this Warrant is exercisable shall be subject
to adjustment as provided herein.
1. TITLE OF WARRANT. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company,
referred to in Section 3 hereof, by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant together with the Assignment
Form annexed hereto properly endorsed.
2. EXERCISE PRICE. The Exercise Price shall be equal to $2.10 per
share.
3. EXERCISE OF WARRANT. The purchase rights represented by this
Warrant are exercisable by the registered holder hereof, in whole or in part, at
any time before the close of business on the date three years following the date
hereof by the surrender of this Warrant and the Notice of Exercise annexed
hereto duly executed at the office of the Company, located at 108 Pacifica,
Irvine, California 92718 (or such other office or agency of the Company as it
may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company), and upon payment
of the purchase price of the shares thereby purchased (by cash or by check or
bank draft payable to the order of the Company or by cancellation of
indebtedness of the Company to the holder hereof, if any, at the time of
exercise in an amount equal to the purchase price of the shares thereby
purchased); whereupon the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Series E Preferred
1.
<PAGE> 2
Stock so purchased. The Company agrees that if at the time of the surrender of
this Warrant and purchase the holder hereof shall be entitled to exercise this
Warrant, the shares so purchased shall be and be deemed to be issued to such
holder as the record owner of such shares as of the close of business on the
date on which this Warrant shall have been exercised as aforesaid.
Certificates for shares purchased hereunder shall be delivered to the
holder hereof within a reasonable time after the date on which this Warrant
shall have been exercised as aforesaid.
The Company covenants that all shares of Series E Preferred Stock which
may be issued upon the exercise of rights represented by this Warrant will, upon
exercise of the rights represented by this Warrant, be fully paid and
nonassessable and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue).
4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise of
this Warrant, an amount equal to such fraction multiplied by the then current
price at which each share may be purchased hereunder shall be paid in cash to
the holder of this Warrant.
5. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares
of Series E Preferred Stock upon the exercise of this Warrant shall be made
without charge to the holder hereof for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the holder of this Warrant or in such name or names as may
be directed by the holder of this Warrant; provided, however, that in the event
certificates for shares of Series E Preferred Stock are to be issued in a name
other than the name of the holder of this Warrant, this Warrant when surrendered
for exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof; and provided further, that upon any transfer
involved in the issuance or delivery of any certificates for shares of Series E
Preferred Stock, the Company may require, as a condition thereto, the payment of
a sum sufficient to reimburse it for any transfer tax incidental thereto.
6. NO RIGHTS AS SHAREHOLDERS. This Warrant does not entitle the
holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise thereof.
2.
<PAGE> 3
7. EXCHANGE AND REGISTRY OF WARRANT. This Warrant is exchangeable,
upon the surrender hereof by the registered holder at the above-mentioned office
or agency of the Company, for a new Warrant of like tenor and dated as of such
exchange.
The Company shall maintain at the above-mentioned office or agency a
registry showing the name and address of the registered holder of this Warrant.
This Warrant may be surrendered for exchange, transfer or exercise, in
accordance with its terms, at such office or agency of the Company, and the
Company shall be entitled to rely in all respects, prior to written notice to
the contrary, upon such registry.
8. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
9. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
10. EARLY TERMINATION AND DILUTION.
(a) MERGER, SALE OF ASSETS, ETC. If at any time the company
proposes to (i) effect a merger, reorganization or sale of substantially all of
the assets of the Company in which the shareholders of the Company immediately
prior to the transaction will hold less than 50% of the surviving entity (or its
parent) immediately after the transaction, or (ii) effect a registered public
offering of the Company's shares (a "Public Offering"), then the Company shall
give the holder of this Warrant thirty days notice of the proposed closing date
of such transaction and if the Warrant has not been exercised by the closing
date of such transaction it shall terminate.
(b) ISSUE EXERCISE. In lieu of the cash payment set forth in
paragraph 3 above, the Investor may elect to pay the Exercise Price by the
surrender of Warrants ("Net Issuance") as determined below (without payment of
any kind). If the Investor elects the Net Issuance method, the Company will
issue Series E Preferred Stock in accordance with the following formula:
3.
<PAGE> 4
X = Y(A-B)
------
A
Where: X = the number of shares of Series E Preferred Stock to
be issued to the holder.
Y = the number of shares of Series E Preferred Stock
requested to be exercised under this Warrant.
A = the fair market value of one share of the Company's
Series E Preferred Stock at the date of calculation.
B = The Exercise Price (as adjusted to the date of such
calculation).
(ii) For purposes of the above calculation, current fair
market value of the Series E Preferred Stock shall mean with
respect to each share of Series E Preferred Stock:
(i) if the exercise is in connection with an initial
public offering and if the Company's Registration
Statement relating to such public offering has been
declared effective by the Securities and Exchange
Commission, then the fair market value per share shall
be the product of (x) the "Initial Price to Public"
specified in the final prospectus with respect to the
offering and (y) the number of shares of Common Stock
into which each share of Series E Preferred Stock is
convertible at the time of such exercise;
(ii) if this Warrant is exercised prior to, and not
in connection with the Company's initial public
offering, then the current fair market value of the
Series E Preferred Stock shall be as determined in good
faith by its Board of Directors, unless the Company
shall become subject to a merger, acquisition or other
consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of
Common Stock shall be deemed to be the value received by
the holders of the Company's Series E Preferred Stock on
a common equivalent basis pursuant to such merger or
acquisition.
(c) RECLASSIFICATION, ETC. If the Company at any time shall,
by subdivision, combination or reclassification of securities or otherwise,
change any of the
4.
<PAGE> 5
securities to which purchase rights under this Warrant exist into the same or a
different number of securities of any class or classes, this Warrant shall
thereafter be to acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the securities which were
subject to the purchase rights under this Warrant immediately prior to such
subdivision, combination, reclassification or other change. If shares of the
Company's Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, the purchase price under this Warrant shall be
proportionately reduced in case of subdivision of shares or proportionately
increased in the case of combination of shares, in both cases by the ratio which
the total number of shares of Common Stock to be outstanding immediately after
such event bears to the total number of shares of Common Stock outstanding
immediately prior to such event.
(d) CASH DISTRIBUTIONS. No adjustment on account of cash
dividends or interest on the Company's Series E Preferred Stock or other
securities purchasable hereunder will be made to the purchase price under this
Warrant.
(e) AUTHORIZED SHARES. The Company covenants that it will
authorize a sufficient number of shares of Series E Preferred Stock to provide
for the issuance of Series E Preferred Stock upon the exercise of any purchase
rights under this warrant. The Company further covenants that during the period
Warrant is outstanding, it will reserve from such authorized and unissued Series
E Preferred Stock, a sufficient number of shares of Series E Preferred Stock to
provide for the issuance of such stock upon the exercise of any purchase rights
under this Warrant. The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of the Company's Series E Preferred Stock upon the
exercise of the purchase rights under this Warrant.
11. MISCELLANEOUS.
(a) ISSUE DATE. The provisions of this Warrant shall be
construed and shall be given effect in all respect as if it had been issued and
delivered by the Company on the date hereof. This Warrant shall be binding upon
any successors or assigns of the Company. This Warrant shall constitute a
contract under the laws of the State of California and for all purposes shall be
construed in accordance with and governed by the laws of said state.
(b) RESTRICTIONS. The holder hereof acknowledges that the
Series E Preferred Stock acquired upon the exercise of this Warrant may have
restrictions upon its resale imposed by state and federal securities laws.
5.
<PAGE> 6
IN WITNESS WHEREOF, CONTINUUS SOFTWARE CORPORATION has caused this
Warrant to be executed by its officers thereunto duly authorized.
Dated: May 19, 1997
CONTINUUS SOFTWARE CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
6.
<PAGE> 7
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information. Do
not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
-----------------------------------------------------
(Please Print)
-----------------------------------------------------
(address)
-----------------------------------------------------
-----------------------------------------------------
Holder's Signature:
----------------------------------
Holder's Address:
------------------------------------
Dated: ,19
-------------- --
Signature Guaranteed: ----------------------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
<PAGE> 8
NOTICE OF EXERCISE
To: CONTINUUS SOFTWARE CORPORATION
(1) The undersigned hereby elects to purchase ______ shares of Series E
Preferred Stock of CONTINUUS SOFTWARE CORPORATION pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price in full,
together with all applicable taxes, if any.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
-----------------------------------------------
(Name)
-----------------------------------------------
(Address)
(3) The undersigned represents that the aforesaid shares of Series E
Preferred Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of
distributing or reselling such shares.
- ---------------------- -----------------------------
(Date) (Signature)
<PAGE> 1
EXHIBIT 10.29
CONTINUUS SOFTWARE CORPORATION
SENIOR SECURED CONVERTIBLE DEBENTURE
PURCHASE AGREEMENT
SEPTEMBER 23, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. SALE OF DEBENTURE...................................................................1
1.1 Sale of Debenture............................................................1
1.2 Closing Date.................................................................1
1.3 Delivery.....................................................................1
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................2
2.1 Organization and Standing....................................................2
2.2 Corporate Power..............................................................2
2.3 Subsidiaries.................................................................2
2.4 Capitalization...............................................................2
2.5 Authorization................................................................3
2.6 Contracts and Other Commitments..............................................4
2.7 Compliance with Other Instruments, etc.......................................4
2.8 Related-Party Transactions...................................................4
2.9 Litigation, etc..............................................................4
2.10 Registration Rights..........................................................5
2.11 Permits......................................................................5
2.12 Governmental Consent, etc....................................................5
2.13 Returns and Complaints.......................................................5
2.14 Disclosure...................................................................5
2.15 Offering.....................................................................6
2.16 Financial Statements.........................................................6
2.17 Business Plan................................................................6
2.18 Liabilities..................................................................6
2.19 Changes......................................................................7
2.20 Title to Properties and Assets; Liens, etc...................................8
2.21 Patents and Trademarks.......................................................8
2.22 Distribution and Marketing Rights............................................9
2.23 Tax Returns..................................................................9
2.24 Employees....................................................................9
2.25 Proprietary Information and Inventions Agreement............................10
2.26 No Defaults.................................................................10
2.27 Insurance...................................................................10
2.28 Brokers or Finders..........................................................10
2.29 Environmental and Safety Laws...............................................10
2.30 Minute Books................................................................10
2.31 Real Property Holding Corporation...........................................10
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
2.32 No Dividends................................................................11
3. INVESTMENT REPRESENTATIONS.........................................................11
3.1 Accredited Investor.........................................................11
3.2 Experience..................................................................11
3.3 Investment..................................................................11
3.4 Rule 144....................................................................11
3.5 No Public Market............................................................11
4. CONDITIONS TO CLOSING OF LENDERS...................................................12
4.1 Representations and Warranties..............................................12
4.2 Covenants...................................................................12
4.3 No Material Adverse Change..................................................12
4.4 Securities Laws.............................................................12
4.5 Compliance Certificate......................................................12
4.6 Opinion of Counsel..........................................................12
4.7 Security Agreement..........................................................12
4.8 Amendment to Investors' Rights Agreement....................................12
4.9 Proceedings and Documents...................................................12
5. CONDITIONS TO CLOSING OF COMPANY...................................................13
5.1 Representations and Warranties..............................................13
5.2 Covenants...................................................................13
5.3 Securities Laws.............................................................13
6. COVENANTS OF THE COMPANY...........................................................13
6.1 Future Indebtedness.........................................................13
6.2 Use of Proceeds.............................................................13
6.3 Capital Expenditures........................................................14
6.4 Board of Directors..........................................................14
6.5 Arrangement Fee.............................................................14
7. MISCELLANEOUS......................................................................14
7.1 Governing Law...............................................................14
7.2 Survival....................................................................14
7.3 Successors and Assigns......................................................14
7.4 Entire Agreement............................................................15
7.5 Notices, Etc................................................................15
</TABLE>
ii.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
7.6 Expenses....................................................................15
7.7 Finder's Fee................................................................15
7.8 Counterparts................................................................15
7.9 Severability................................................................15
7.10 California Corporate Securities Law.........................................15
7.11 Amendments and Waivers......................................................16
</TABLE>
iii.
<PAGE> 5
CONTINUUS SOFTWARE CORPORATION
SENIOR SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
THIS SENIOR SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (the
"AGREEMENT") is made as of September 23, 1997, by and between Continuus Software
Corporation, a California corporation (the "COMPANY"), with its principal office
at 108 Pacifica, 2nd Floor, Irvine, California, 92618 and London Pacific Life &
Annuity Company, a North Carolina joint stock life insurer (the "LENDER"), with
its principal office at 3109 Poplarwood Court, Suite 108, Raleigh, NC 27604.
WHEREAS, the Company has authorized the issuance and sale of up to $6
million in principal amount of a 12% Senior Secured Convertible Debenture in the
form attached hereto as Exhibit A (the "Debenture").
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions set forth below, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties to this
Agreement agree as follows:
1. SALE OF DEBENTURE
1.1 SALE OF DEBENTURE. Subject to the terms and conditions hereof,
Lender agrees to lend to the Company and the Company agrees to borrow from
Lender Six Million Dollars ($6,000,000.00) pursuant to the Debenture.
1.2 CLOSING DATE. The loan hereunder and the consummation of the
transactions contemplated herein shall take place at the law offices of Cooley
Godward LLP, 4365 Executive Drive, Suite 1100, San Diego, California 92121. The
closing of such loan hereunder (the "Closing") shall be held on the date of this
Agreement or at such other time upon which the Company and the Lender shall
agree.
1.3 DELIVERY. At the Closing, the Company will deliver to Lender a
Debenture representing the loan being made at the Closing by Lender in the
principal amount of Six Million Dollars ($6,000,000.00) against payment of the
loan amount therefor by wire transfer of immediately available funds.
1.
<PAGE> 6
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedule of Exceptions attached hereto as Exhibit B,
the Company hereby represents and warrants to Lender as follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
California and is in good standing under such laws. The Company has all
requisite corporate power and authority to own and operate its assets and to
carry on its business as presently conducted and as proposed to be conducted.
The Company is not required to qualify to do business as a foreign corporation
in any jurisdiction outside of the State of California.
2.2 CORPORATE POWER. The Company has all requisite legal and corporate
power to execute and deliver this Agreement, the Debenture, the Security
Agreement in substantially the form attached hereto as Exhibit C and the Sixth
Amendment to the Investors' Rights Agreement in substantially the form attached
hereto as Exhibit D (this Agreement, the Debenture, the Security Agreement and
the Sixth Amendment to the Investors' Rights Agreement are hereinafter
collectively referred to as the "Agreements"), to issue and sell the Debenture
under this Agreement, to issue the Common Stock issuable upon conversion of the
Debenture and to carry out and perform its obligations under the terms of the
Agreements, including all exhibits and schedules hereto and thereto.
2.3 SUBSIDIARIES. The Company does not own or control, directly or
indirectly, any interest in any other corporation, association or business
entity, other than Continuus Software Ltd., Continuus Software SARL, Continuus
Software GmbH and Continuus Software Company Ltd.
2.4 CAPITALIZATION. Immediately following the Closing, the authorized
capital stock of the Company consists of 40,000,000 shares of Common Stock, of
which 4,209,418 shares will be issued and outstanding immediately following the
Closing, and 20,000,000 shares of Preferred Stock, 6,072,523 of which are
designated Series A Preferred Stock, 6,030,523 of which will be issued and
outstanding immediately following the Closing, 1,195,809 of which are designated
Series B Preferred Stock, all of which will be issued and outstanding
immediately following the Closing, 2,132,368 of which are designated Series C
Preferred Stock, 1,980,950 of which will be issued and outstanding immediately
following the Closing, 957,144 of which are designated Series D Preferred Stock,
all of which will be issued and outstanding immediately following the Closing
and 2,075,000 of which are designated Series E Preferred Stock, 1,247,762 of
which will be issued and outstanding immediately following the Closing. No other
shares of capital stock or other voting securities of the Company are
outstanding. All such issued and outstanding shares have been duly authorized
and validly issued and are fully
2.
<PAGE> 7
paid and nonassessable. The Company has reserved: (i) 4,650,000 shares of its
Common Stock for issuance pursuant to the Company's Stock Option Plan (the
"Option Plan"), 3,547,595 shares of which are subject to outstanding Incentive
Stock Options, 377,000 shares of which are subject to the Non-Qualified Stock
Option Agreements, and 301,064 shares of which are available for future grants
under the Option Plan; (ii) 1,908,397 shares of Common Stock issuable upon
exercise of outstanding warrants dated December 29, 1994 (the "1994 Warrants"),
and 587,618 shares of Common Stock issuable upon exercise of outstanding
warrants dated May 30, 1996 (the "1996 Warrants," and together with the 1994
Warrants, the "Common Stock Warrants") and (iii) 42,000 shares of Series A
Preferred Stock, 151,418 shares of Series C Preferred Stock and 769,198 shares
of Series E Preferred Stock issuable upon exercise of outstanding warrants, and
such shares of Common Stock issuable upon the conversion of such Series A
Preferred Stock, Series C Preferred Stock and Series E Preferred Stock (the
"Preferred Stock Warrants") (the shares issuable pursuant to the Option Plan,
the Common Stock Warrants and the Preferred Stock Warrants are hereinafter
referred to as the "Reserved Shares"). Except for (i) the transactions
contemplated in the Agreements and the conversion privileges of the Debenture
(ii) the conversion privileges of the Company's Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series
E Preferred Stock specified in the Company's Amended and Restated Articles of
Incorporation ("Restated Articles") and (iii) rights to acquire the Reserved
Shares, there are no options, warrants, conversion privileges or other rights
(including preemptive rights) presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of the Company's capital stock or
other securities of the Company.
2.5 AUTHORIZATION. All corporate action on the part of the Company, its
directors and shareholders necessary for the authorization, execution, delivery
and performance of the Agreements by the Company, the authorization, sale,
issuance and delivery of the Debenture (and the Common Stock issuable upon
conversion of the Debenture) and the performance of the Company's obligations
under the Agreements has been taken or will be taken prior to the Closing. The
Agreements, when executed and delivered by the Company, will constitute valid
and legally binding obligations of the Company enforceable in accordance with
their terms, subject to laws of general application relating to bankruptcy,
insolvency, the relief of debtors, general equity principles, and limitations
upon rights to indemnity. The Common Stock issuable upon conversion of the
Debenture has been duly and validly reserved and, when issued in compliance with
the provisions of the Debenture, will be duly and validly issued, fully paid and
nonassessable; provided, however, that the Common Stock issuable upon conversion
of the Debenture may be subject to restrictions on transfer under state and/or
federal securities laws. Neither the Debenture nor the Common Stock issuable
upon conversion of the Debenture is subject to any preemptive rights, rights of
first refusal, rights of first offer or similar rights that have not been
waived.
3.
<PAGE> 8
2.6 CONTRACTS AND OTHER COMMITMENTS. The Company does not have any
contract, agreement, lease, commitment, or proposed transaction, written or
oral, absolute or contingent, with any continuing obligations of either party
(other than for perpetual licenses granted in the ordinary course of business),
except for contracts (i) for the purchase of supplies and services that were
entered into in the ordinary course of business, or (ii) that do not involve
more than $100,000 individually or in a series of related transactions. For the
purpose of this paragraph, employment and consulting contracts, license
agreements and any other agreements relating to the acquisition or disposition
of the Company's technology shall not be considered to be contracts entered into
in the ordinary course of business.
2.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not, and will
not by virtue of entering into and performing the Agreements and the
transactions contemplated thereunder be, in violation or default of any term of
the Restated Articles or Bylaws or any term or provision of any material
mortgage, indenture, contract, agreement, instrument, judgment, writ or decree
to which it is a party or by which it is bound, and is not, and will not by
virtue of entering into and performing the Agreements and the transactions
contemplated thereunder be, in violation of any order addressed specifically to
the Company nor, to the best of the Company's knowledge, any material order,
statute, rule or regulation applicable to the Company, other than any of the
foregoing such violations or default that do not, either individually or in the
aggregate, have a material adverse effect on the Company's business as presently
conducted or planned to be conducted (a "Material Adverse Effect").
2.8 RELATED-PARTY TRANSACTIONS. No employee, officer or director of the
Company, or any person that, within 12 months of the date of this Agreement has
been an employee, officer or director of the Company, or any member of the
immediate family of any of the foregoing, is indebted to the Company, nor is the
Company indebted (or committed to make loans or extend or guarantee credit) to
any of them. To the best of the Company's knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Company is affiliated or with which the Company has a business relationship,
or any firm or corporation that competes with the Company, except shares owned
by such persons constituting less than 2% of the voting securities of a publicly
traded company that competes with the Company. To the best of the Company's
knowledge, no officer or director or any member of their immediate families is,
directly or indirectly, interested in any material contract with the Company.
The Company is not currently in discussions with any acquiror (including
Ceyenne), nor has the Company entered into any partnerships or strategic
alliances with any third parties (including Forte and Microsoft).
4.
<PAGE> 9
2.9 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or any of its officers or directors
before any court or governmental agency (nor, to the best of the Company's
knowledge, is there any threat thereof). The Company has not initiated and does
not currently intend to initiate any action, suit, proceeding or investigation
against a third party.
2.10 REGISTRATION RIGHTS. Except as set forth in the Sixth Amendment to
the Investors' Rights Agreement, the Company is not under any obligation to
register (as defined in the Sixth Amendment to the Investors' Rights Agreement)
any of its presently outstanding securities or any of its securities that may
hereafter be issued.
2.11 PERMITS. The Company has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default or violation in any material respect under any of such franchises,
permits, licenses, or other similar authority, and the execution and delivery of
the Agreements will not result in any such default or violation, with or without
the passage of time or giving of notice or both.
2.12 GOVERNMENTAL CONSENT, ETC. No consent, approval, order or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of the Agreements, or the offer, issuance or sale of the
Debenture (or the Common Stock issuable upon conversion of the Debenture) or the
consummation of any other transaction contemplated by the Agreements, except the
qualification (or taking such action as may be necessary to secure an exemption
from qualification, if available) of the offer and sale of the Debenture (and
the Common Stock issuable upon conversion of the Debenture) under the California
Corporate Securities Law, which filing and qualification, if required, will be
accomplished in a timely manner prior to or promptly upon completion of the
Closing.
2.13 RETURNS AND COMPLAINTS. The Company has received no customer or
user complaints concerning alleged defects in its products or proposed products
(or the design thereof) that, if true, would materially adversely affect the
operations or financial condition or prospects of the Company.
2.14 DISCLOSURE. The Company has provided the Lender with all the
information reasonably available to it without undue expense that the Lender has
requested for deciding whether to purchase the Debenture and all information
that the Company believes is reasonably necessary to enable the Lender to make
such decision. To the best
5.
<PAGE> 10
of the Company's knowledge after reasonable investigation, neither this
Agreement nor any other written statements or certificates made or delivered in
connection herewith, including without limitation, the Business Plan (as defined
below), subject to the provisions of Section 2.17 hereof, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading.
2.15 OFFERING. Subject to the accuracy of the representations set forth
in Section 3 hereof, the offer, issuance and sale of the Debenture pursuant to
this Agreement and the issuance of the Common Stock to be issued upon conversion
of the Debenture constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act") and neither the Company nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption.
2.16 FINANCIAL STATEMENTS. The Company has delivered to the Lender its
audited balance sheet and statement of earnings dated as of December 31, 1996
and its unaudited balance sheet dated as of June 30, 1997 (the "Balance Sheet
Date") and related unaudited statements of earnings for the six-month period
then ended (the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis and are complete and correct in all material respects and
accurately describe in all material respects the financial condition of the
Company as of the Balance Sheet Date and results of operations and cash flows
for such period; provided, however, that the Financial Statements are subject to
normal year-end audit adjustments and do not contain footnotes. The Company is
not a guarantor or indemnitor of any indebtedness of any other person, firm, or
corporation. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles. The Company has not encountered any material
problems with respect to its revenue recognition accounting practices, nor does
it maintain a reserve for sales returns.
2.17 BUSINESS PLAN. A copy of the Company's August 9, 1997 Business Plan
(the "Business Plan") has previously been delivered to the Lender. The Business
Plan was prepared in good faith by the Company and does not, to the best of the
Company's knowledge after reasonable investigation, contain any untrue statement
of a material fact nor does it omit to state a material fact necessary to make
the statements therein not misleading, except that with respect to projections
and expressions of opinion or predictions contained in the Business Plan, the
Company represents only that such projections and expressions of opinion and
predictions were made in good faith and that the Company believes there is a
reasonable basis therefor.
6.
<PAGE> 11
2.18 LIABILITIES. The Company has no indebtedness for borrowed money
that the Company has directly or indirectly created, incurred, assumed, or
guaranteed, or with respect to which the Company has otherwise become directly
or indirectly liable, other than as reflected in the Financial Statements. The
Company has no material liability or obligation, absolute or contingent, other
than as reflected in the Financial Statements.
2.19 CHANGES. Since the Balance Sheet Date, there has not been:
(a) any change in the assets, liabilities, financial condition,
or operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, business, properties,
prospects, or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the business, properties,
prospects, or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(e) to the best of the Company's knowledge, any material change
to a material contract or arrangement by which the Company or any of its assets
is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder;
(g) any sale, assignment, or transfer of any patents, trademarks,
copyrights, trade secrets, proprietary rights or other intangible assets;
(h) any resignation or termination of employment of any key
officer of the Company; and the Company, to the best of its knowledge, does not
know of the impending resignation or termination of employment of any such
officer;
(i) receipt of notice that there has been a loss of, or material
order cancellation or modification by, any major customer of the Company;
7.
<PAGE> 12
(j) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Company to or for the
benefit of its employees, officers, or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(l) to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely affect the
business, properties, prospects, or financial condition of the Company (as such
business is presently conducted and as it is proposed to be conducted); or
(m) any agreement or commitment by the Company to do any of the
things described in this paragraph 2.19.
2.20 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good
and marketable title to its properties and assets shown in the Balance Sheet,
and has good title to all of its leasehold interests, in each case subject to no
mortgage, pledge, lien, lease, security interest, equitable interest, loan,
encumbrance or charge, other than (i) the lien of current taxes not yet due and
payable, and (ii) possible minor liens and encumbrances that do not in any case,
individually or in the aggregate, materially detract from the value of the
property subject thereto or materially impair the operations of the Company and
which have not arisen otherwise than in the ordinary course of business.
2.21 PATENTS AND TRADEMARKS. The Company has sufficient title, interest
and ownership of all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
(collectively "Proprietary Information"), or believes it has the ability to
acquire valid licenses to such Proprietary Information on reasonable terms, as
necessary for its business as now conducted and as proposed to be conducted
without any conflict with or infringement of the rights of others. The Schedule
of Exceptions contains a complete list of patents and pending patent
applications of the Company. The Company is not aware of any Proprietary
Information for which it would need to obtain title and interest for its
business as now conducted. There are no outstanding options, licenses, or
agreements of any kind relating to the foregoing, nor is the Company bound by or
a party to any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of any other person or
entity. The Company is not aware of any impropriety with regard to the granting
of any licenses of Proprietary Information to or from the Company. The Company
has not received any written communications alleging that the Company has
violated or infringed or that the Company would, by conducting its business as
proposed,
8.
<PAGE> 13
violate or infringe any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person or
entity, nor is the Company aware of any such violation or infringement. The
Company is not aware that any of its employees are obligated under any contract
(including licenses, covenants, or commitments of any nature) or other
agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted. Except pursuant to the terms of
the Employee Nondisclosure Agreements entered into between the Company and its
employees and/or consultants in the form substantially as attached hereto as
Exhibit E (the "Proprietary Information and Inventions Agreement"), there are no
agreements, understandings, instruments, or contracts to which the Company is a
party or by which it is bound that involve the license of any patent, copyright,
trade secret or other similar proprietary right to or from the Company. The
Company does not believe it is or will be necessary to use any inventions of any
of its employees (or persons it currently intends to hire) made prior to their
employment by the Company.
2.22 DISTRIBUTION AND MARKETING RIGHTS. The Company has not granted
rights to develop, produce, distribute, license, market, or sell its products to
any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, produce, distribute, license, market or sell its
products.
2.23 TAX RETURNS. The Company has accurately prepared and timely filed
all federal, state and other tax returns which are required to be filed and has
timely paid all taxes covered by such returns which have become due and payable.
The Company has not been advised that any of its returns, federal, state or
other, have been or are being audited as of the date hereof. The Company is not
delinquent in taxes or assessments and has no tax deficiency proposed or
assessed and no waiver of the statute of limitations and assessment or
collections.
2.24 EMPLOYEES. None of the Company's employees belongs to any
union or collective bargaining unit. To the best of its knowledge, the Company
has complied in all material respects with all applicable state and federal
equal opportunity and other laws related to employment. To the best of the
Company's knowledge, no employee of the Company is or will be in violation of
any judgment, decree, or order, or any term of any employment contract, patent
disclosure agreement, or other contract or agreement relating to the
relationship of any such employee with the Company, or any other party because
of the nature of the business conducted or to be conducted by the Company or to
the use by the employee of his best efforts with respect to such business. The
Company is not a party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement, or other
9.
<PAGE> 14
employee compensation agreement, other than with respect to the Option Plan and
options granted thereunder. The Company is not aware that any officer or key
employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing. Subject to general principles
related to wrongful termination of employees, the employment of each officer and
employee of the Company is terminable at the will of the Company.
2.25 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. Each employee and
officer of and consultant to the Company has executed a Proprietary Information
and Inventions Agreement.
2.26 NO DEFAULTS. The Company has, in all material respects, performed
all material obligations required to be performed by it to date and is not in
default under any of the contracts, loans, notes, mortgages, indentures,
licenses, security agreements, agreements, leases, documents, commitments or
other arrangements to which it is a party or by which it is otherwise bound,
except for such defaults which in the aggregate would not have a Material
Adverse Effect, and no event or condition has occurred which, with the lapse of
time or the giving of notice, or both, would constitute such a default.
2.27 INSURANCE. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company has in full force and effect
products liability and errors and omissions insurance in amounts customary for
companies similarly situated.
2.28 BROKERS OR FINDERS. The Company has not incurred, and will not
incur, any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with the Agreements.
2.29 ENVIRONMENTAL AND SAFETY LAWS. To the best of its knowledge, the
Company is not in violation of any applicable statute, law, or regulation
relating to the environment (including disposal of waste products and effluents)
or occupational health and safety, and to the best of its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law, or regulation.
2.30 MINUTE BOOKS. The copy of the minute books of the Company provided
to the Lender contain minutes of all meetings of directors and shareholders and
all actions by written consent without a meeting by the directors and
shareholders since the date of incorporation and reflect all actions by the
directors (and any committee of directors) and shareholders with respect to all
transactions referred to in such minutes accurately in all material respects.
10.
<PAGE> 15
2.31 REAL PROPERTY HOLDING CORPORATION. The Company is not a real
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
2.32 NO DIVIDENDS. The Company has never made any declaration, setting
aside for payment or other distribution in respect of any of the Company's
capital stock or any direct or indirect redemption, repurchase or other
acquisition of any of such stock.
3. INVESTMENT REPRESENTATIONS
The Lender hereby represents and warrants to the Company as follows:
3.1 ACCREDITED INVESTOR. The Lender is an "accredited investor" within
the meaning of Rule 501 of Regulation D promulgated under the Securities Act.
3.2 EXPERIENCE. The Lender has, from time to time, evaluated investments
in start-up companies and has, either individually or through the personal
experience of one or more of its current officers or partners, experience in
evaluating and investing in start-up companies. The Lender was not formed for
the purpose of investing in the Company hereunder.
3.3 INVESTMENT. The Lender is acquiring the Debenture (and any Common
Stock issuable upon conversion of the Debenture) for investment for its own
account and not with the view to, or for resale in connection with, any
distribution thereof. The Lender understands that the Debenture (and any Common
Stock issuable upon conversion of the Debenture) to be purchased have not been
registered under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent as expressed herein.
3.4 RULE 144. The Lender acknowledges that the Debenture and the Common
Stock into which such shares are convertible must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available. The Lender is aware of the provisions of Rule 144
promulgated under the Securities Act which permits limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the securities to be sold, the sale being through a "broker's
transaction" or in transactions directly with a "market maker" (as provided by
Rule 144(f)) and the number of shares being sold during any three-month period
not exceeding specified limitations. The Lender is aware that the conditions for
resale set forth in Rule
11.
<PAGE> 16
144 have not been satisfied and that the Company has no plan to satisfy these
conditions in the foreseeable future.
3.5 NO PUBLIC MARKET. The Lender understands that no public market now
exists for any of the securities of the Company and that it is unlikely that a
public market will ever exist for the Debenture (and any Common Stock issuable
upon the conversion of the Debenture).
4. CONDITIONS TO CLOSING OF LENDERS
The Lender's obligation to purchase the Debenture at the Closing is
subject to the fulfillment on or prior to the Closing of the following
conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of the Closing.
4.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing shall
have been performed or complied with in all material respects.
4.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the Company's financial condition, affairs or prospects
between the date of this Agreement and the Closing Date.
4.4 SECURITIES LAWS. Subject to the completion of any post-closing
securities law filings, the Company shall have obtained all necessary permits
and qualifications, or secured exemptions therefrom, required under the
Securities Act or by any state for the offer and sale of the Debenture and the
Common Stock issuable upon the conversion of the Debenture.
4.5 COMPLIANCE CERTIFICATE. The Company shall have delivered on the
Closing Date a certificate signed by an officer of the Company certifying that
the conditions specified in Sections 4.1, 4.2 and 4.3 have been fulfilled.
4.6 OPINION OF COUNSEL. The Lenders shall have received from Cooley
Godward LLP, counsel for the Company, an opinion in substantially the form
attached hereto as Exhibit F.
4.7 SECURITY AGREEMENT. The Company shall have executed and delivered
the Security Agreement in the form attached as Exhibit C hereto.
12.
<PAGE> 17
4.8 AMENDMENT TO INVESTORS' RIGHTS AGREEMENT. The Company shall have
executed and delivered the Sixth Amendment to Investors' Rights Agreement in the
form attached as Exhibit D hereto.
4.9 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Lender's counsel, which shall have received all such counterpart original and
certified or other copies of such documents as it may reasonably request.
5. CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to issue and sell the Debenture at the Closing
is subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Lender contained in Section 3 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the date of the Closing.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Lender on or prior to the Closing shall
have been performed or complied with in all respects.
5.3 SECURITIES LAWS. The Company shall have obtained all necessary
permits and qualifications, or secured exemptions therefrom, required under the
Securities Act or by any state for the offer and sale of the Debenture (and any
Common Stock issuable upon the conversion of the Debenture).
6. COVENANTS OF THE COMPANY
6.1 FUTURE INDEBTEDNESS. While any amount is outstanding under the
Debenture, the Company shall not, without obtaining the prior written consent of
the Lender, create, incur, assume, guarantee or be or remain liable with respect
to any indebtedness other than (i) indebtedness existing upon the date of this
Agreement and disclosed herein, and any further draw downs on, or expansions or
increases of the aggregate borrowing or credit limitations under, any lines of
credit or lease lines disclosed herein (subject to Section 6.2 below), (ii)
trade credit in the ordinary course of business, and (iii) indebtedness not to
exceed $7,500,000 in the aggregate which is subordinated to the obligations of
the Company under the Debenture and which does not provide for the current
payment of principal or interest prior to the Maturity Date of the Debenture (as
defined herein).
13.
<PAGE> 18
6.2 USE OF PROCEEDS. Notwithstanding anything to the contrary contained
in Section 6.1 above, the Company hereby agrees to repay out of its proceeds
from the Closing all outstanding amounts borrowed under the Company's line of
credit with Silicon Valley Bank and to terminate the Company's line of credit
with Silicon Valley Bank.
6.3 CAPITAL EXPENDITURES. While any amount is outstanding under the
Debenture, the Company shall not, without obtaining the prior written consent of
the Lender, enter into any agreement or series of agreements obligating the
Company to make any capital expenditures in the aggregate in excess of
$2,650,000 in 1998, $2,600,000 in 1999, $2,800,000 in 2000 and $3,100,000 in
2001. If the Company makes capital expenditures in any given year in an amount
less than that provided above for such year, then capital expenditures in an
additional amount equal to the difference between that year's capital
expenditure limitation and the amount of capital expenditures actually made for
such year can be made by the Company in any future year without obtaining the
Lender's prior written consent.
6.4 BOARD OF DIRECTORS. While any amount is outstanding under the
Debenture, the Company shall allow one representative designated by the Lender
to attend all meetings of the Company's Board of Directors in a nonvoting
capacity, and in connection therewith, the Company shall give such
representative copies of all notices, minutes, consents and other materials,
financial or otherwise, which the Company provides to its Board of Directors;
provided, however, that the Company requires as a condition precedent to the
Lender's rights under this Section 6.4 that each person proposing to attend any
meeting of the Board of Directors and each person to have access to any of the
information provided by the Company to the Board of Directors shall agree to
hold in confidence and trust and to act in a fiduciary manner with respect to
all information so received during such meetings or otherwise; and, provided
further, that the Company reserves the right not to provide information and to
exclude the Lender (or its representative) from any meeting or portion thereof
if delivery of such information or attendance at such meeting by the Lender (or
its representative) would result in disclosure of trade secrets to the Lender
(absent adequate steps to preserve confidentiality) or its representative or
would adversely affect the attorney-client privilege between the Company and its
counsel or if the Lender or its representative is a direct competitor of the
Company.
6.5 ARRANGEMENT FEE. Upon Closing, the Company agrees to pay to London
Pacific International Limited an arrangement fee of $540,000.
7. MISCELLANEOUS
14.
<PAGE> 19
7.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California by California residents.
7.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Lender and the closing
of the transactions contemplated hereby.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of the Lender to purchase the Debenture shall
not be assignable without the consent of the Company.
7.4 ENTIRE AGREEMENT. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
7.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by facsimile or mailed
by registered or certified mail, postage prepaid, or otherwise delivered by hand
or by messenger, addressed (a) if to the Lender, to the address set forth above
and addressed to the attention of Susan Gressel, or at such other address or
addresses as the Lender shall have furnished in writing to the Company, with a
copy to Berkeley International Capital Corporation, Legal Division, 650
California Street, Suite 2800, San Francisco, CA 94108-2609, Attn. Bob Cornman
or (b) if to the Company, to the address set forth above and addressed to the
attention of the President, or at such other address or addresses as the Company
shall have furnished in writing to the Lender. All notices and other
communications mailed pursuant to the provisions of this Section 7.5 shall be
deemed delivered when mailed or sent by facsimile or delivered by hand or
messenger.
7.6 EXPENSES. Each party to this Agreement shall bear its own expenses
and legal fees incurred by it with respect to this Agreement and all related
transactions and agreements; provided, however, that if the Closing is effected,
the Company shall reimburse the reasonable fees and out of pocket expenses of
special counsel for the Lender, not to exceed $10,000.00.
7.7 FINDER'S FEE. Except as set forth in Section 6.5, each party
represents that it neither is nor will be obligated for any finders' fee or
commission in connection with this transaction. Each party agrees to indemnify
and hold harmless the other party from any liability for any commission or
compensation in the nature of a finders' fee (and the
15.
<PAGE> 20
costs and expenses of defending against such liability or asserted liability)
for which the party or any of its officers, employees or representatives is
responsible.
7.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
7.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
7.10 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION, IF REQUIRED BY LAW, IS UNLAWFUL. THE
RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED, IF REQUIRED BY LAW.
7.11 AMENDMENTS AND WAIVERS. Any term of this agreement may be amended
or terminated and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the Lender. Any
amendment, termination or waiver effected in accordance with this section shall
be binding upon each holder of any securities issued pursuant to this Agreement
(including securities into which such securities have been converted or
exchanged), each future holder of any or all such securities and the Company.
16.
<PAGE> 21
The foregoing Agreement is hereby executed as of the date first above
written.
THE COMPANY:
CONTINUUS SOFTWARE CORPORATION
By: /s/ John Wark
----------------------------------------------
Name: John R. Wark
--------------------------------------------
Title: President and Chief Executive Officer
-------------------------------------------
THE LENDER:
LONDON PACIFIC LIFE & ANNUITY COMPANY
By: /s/ Susan Y. Gressel
----------------------------------------------
Name: Susan Y. Gressel
--------------------------------------------
Title: Vice President and Treasurer
-------------------------------------------
Signature Page to Debenture Purchase Agreement
<PAGE> 1
EXHIBIT 10.30
NEITHER THIS SENIOR SECURED CONVERTIBLE DEBENTURE NOR ANY SECURITIES ISSUABLE
UPON CONVERSION THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). NO SALE OR DISPOSITION OF THIS DEBENTURE OR SUCH
SECURITIES MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR UPON RECEIPT OF AN
OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION.
CONTINUUS SOFTWARE CORPORATION
SENIOR SECURED CONVERTIBLE DEBENTURE
September 23, 1997
$6,000,000 Irvine, California
For value received, CONTINUUS SOFTWARE CORPORATION, a California
corporation (the "Company"), hereby promises to pay to LONDON PACIFIC LIFE &
ANNUITY COMPANY, a North Carolina joint stock life insurer (the "Lender" or
"Holder"), or order, at the office of Lender, the principal amount of Six
Million Dollars ($6,000,000) or such lesser amount as shall equal the principal
amount outstanding hereunder, together with accrued and unpaid interest thereon,
payable on the dates and in the manner set forth in this Senior Secured
Convertible Debenture (the "Debenture"). The transfer of this security may be
registered upon books maintained for that purpose by or on behalf of the issuer.
All unpaid principal, together with any then unpaid and accrued interest and
other amounts payable hereunder, shall be due and payable on the "Maturity
Date," which date shall be the earlier of (i) September 23, 2002, (ii) the
occurrence of a Company Liquidity Event (as defined below); or (iii) when such
amounts are declared due and payable by the Holder or made automatically due and
payable upon or after the occurrence of an Event of Default (as defined below).
THE OBLIGATIONS DUE UNDER THIS DEBENTURE ARE SECURED BY A SECURITY
AGREEMENT DATED AS OF THE DATE HEREOF AND EXECUTED BY THE COMPANY IN FAVOR OF
THE HOLDER (THE "SECURITY AGREEMENT"). ADDITIONAL RIGHTS OF THE HOLDER ARE SET
FORTH IN THE SECURITY AGREEMENT.
1.
<PAGE> 2
1. PAYMENT OF PRINCIPAL, INTEREST AND FEES.
(a) PAYMENT OF INTEREST. Interest is due and payable on the unpaid
balance of the Debenture quarterly in arrears on the first day of each January,
April, July and October, commencing on October 1, 1997, at the rate of 12% per
annum until the principal amount shall become due and payable (whether at
maturity, by reason of acceleration or otherwise).
(b) METHOD OF PAYMENT. All payments of principal and all payments of
interest shall be made by the Company to the Lender at its office in immediately
available funds by wire transfer, on or before 12:00 noon (California time) on
the due date thereof, free and clear of, and without any deduction or
withholding for, any taxes or other payments.
(c) COMPUTATION OF INTEREST AND FEES. Interest and all fees payable
hereunder shall be computed daily on the basis of a year of 360 days and paid
for the actual number of days for which due. If the due date for any payment of
principal is extended by operation of law, interest shall be payable for such
extended time. If any payment required by this Debenture becomes due on a day
that is not a Business Day such payment may be made on the next succeeding
Business Day, and such extension shall be included in computing interest in
connection with such payment. For purposes of this Debenture, a "Business Day"
shall be any day other than a Saturday, Sunday, legal holiday or other day on
which banks in California are required or permitted by law to close.
(d) COMPANY LIQUIDITY EVENT. Upon the earlier of (i) the closing of a
firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock (whether for the account of the Company or
for the account of one or more shareholders of the Company) of the Company to
the public at an aggregate offering price of not less than $15,000,000 and at a
public offering price (prior to underwriters' discounts and expenses) equal to
or exceeding $5.25 per share of Common Stock, subject to adjustment for stock
dividends, combinations or splits with respect to such shares, or (ii) a merger
or consolidation of the Company with or into any other corporation or
corporations, or the merger of any other corporation or corporations into the
Company, in which consolidation or merger the shareholders of the Company
receive distributions in cash or in securities of another corporation or
corporations as a result of such consolidation or merger (excluding in any event
a merger the sole purpose of which is to change the state of incorporation of
the Company), or a sale of all or substantially all of the assets of the Company
(in the case of either (i) or (ii) above, a "Company Liquidity
2.
<PAGE> 3
Event"), the Lender must, in its sole discretion, demand either (A) the
immediate repayment of this Debenture in accordance with Section 1(e) below,
payable by the Company from the proceeds of the Company Liquidity Event, or (B)
the conversion of this Debenture in accordance with Section 2 herein. The
Company shall be required to give the Lender at least 10 days' prior written
notice of the date upon which a Company Liquidity Event shall take place (and
estimating the proposed value of the Company's Common Stock upon such Company
Liquidity Event), and the Lender shall be required to notify the Company in
writing of its demand upon the Company Liquidity Event within 5 days of the
Company's notice to the Lender of the Company Liquidity Event.
(e) REPAYMENT UPON COMPANY LIQUIDITY EVENT.
(i) In the event that the Lender demands
repayment of this Debenture in connection with a Company Liquidity Event
described in Section 1(d)(i) above, the Company shall be required to repay this
Debenture by paying to the Lender an amount equal to the outstanding principal
amount of this Debenture (the "Redemption Amount") plus any accrued interest
thereon, payable in full.
(ii) In the event that the Lender demands repayment
of this Debenture in connection with a Company Liquidity Event described in
Section 1(d)(ii) above, the Company shall be required to repay this Debenture by
paying to the Lender an amount equal to (A)(1) 0.1 multiplied by the number of
years between the date of this Debenture and the date of the distribution, if
any, to the Company's shareholders upon the Company Liquidity Event (with any
partial year pro-rated based on the ratio that the number of days in such
partial year bears to 365), plus (2) one, multiplied by (B) the outstanding
principal amount of this Debenture (the product of (A) and (B) being referred to
as the "Special Redemption Amount") plus any accrued interest on the outstanding
principal amount; provided, however, that the Special Redemption Amount shall be
reduced to an amount (but not to an amount less than the Redemption Amount),
such that the ratio (A) the Special Redemption Amount bears to (B) the
Redemption Amount, is always equal to the ratio (X) the aggregate per share
liquidation preference received by holders of the Series E Preferred Stock
pursuant to Section B(3)(a) of Article III of the Company's Amended and Restated
Articles of Incorporation bears to (Y) $2.10.
2. CONVERSION.
This Debenture shall be convertible into shares of the Company's Common
Stock (the "Shares"), at a purchase price per share of $2.10 (the "Conversion
Price"), subject to adjustment pursuant to the provisions set forth below, upon
the earlier of (i) the receipt by the Company from the Lender at any time of
written notice of the Lender's election to convert this Debenture in its
entirety or (ii) upon a Company Liquidity Event at the option and in the sole
election of the Lender as described in Section 1(d) above.
3.
<PAGE> 4
(a) STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend on its common stock payable in common stock or other securities, or
subdivides the outstanding common stock into a greater amount of common stock,
then upon conversion of this Debenture, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and kind of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend or subdivision occurred.
(b) RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon conversion of
this Debenture, Holder shall be entitled to receive, upon conversion of this
Debenture, the number and kind of securities and property that Holder would have
received for the Shares if this Debenture had been exercised immediately before
such reclassification, exchange, substitution, or other event. The Company or
its successor shall promptly issue to Holder a new debenture for such new
securities or other property. The new debenture shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 2 including, without limitation, adjustments to the
Conversion Price and to the number of securities or property issuable upon
exercise of the new debenture. The provisions of this Section 2(b) shall
similarly apply to successive reclassifications, exchanges, substitutions or
other events.
(c) ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Conversion Price and the number of shares issuable upon exercise
of this Debenture shall be proportionately increased.
(d) ADJUSTMENTS FOR DILUTING ISSUANCES. The Conversion Price and the
number of Shares issuable upon the exercise of this Debenture shall be subject
to adjustments from time to time, in the manner set forth on Appendix I in the
event of Diluting Issuances (as defined in Appendix I).
(e) NO IMPAIRMENT. The Company shall not, by amendment of its Articles
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Debenture by the Company, but shall at all
times in good faith assist in carrying out all the provisions of this Section 2
and in taking all such action as may be necessary or appropriate to protect the
Holder's rights under this Section 2 against impairment. If the Company takes
any action affecting the Shares or its common stock other than as described
above that adversely affects the Holder's rights under this Debenture, the
Conversion Price shall be adjusted downward and the number of Shares
4.
<PAGE> 5
issuable upon exercise of this Debenture shall be adjusted upward in such a
manner that the aggregate Conversion Price of this Debenture is unchanged.
(f) CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the
Conversion Price, the Company at its expense shall promptly compute such
adjustment, and furnish the Holder with a certificate of its Chief Financial
Officer setting forth such adjustment and the facts upon which such adjustment
is based. The Company shall, upon written request, furnish the Holder a
certificate setting forth the Conversion Price in effect upon the date thereof
and the series of adjustments leading to such Conversion Price.
3. EVENTS OF DEFAULT.
There shall be an Event of Default hereunder if any of the following
events occurs:
(a) the Company shall fail to pay when due (i) any amount of principal
on the due date hereunder, or (ii) any amount of interest thereon or any fees or
expenses payable hereunder on the due date and such payment shall not have been
made within three Business Days of the scheduled due date thereof; or
(b) the Company shall fail to perform any term, covenant or agreement
contained in Section 6 of the Senior Secured Convertible Debenture Purchase
Agreement between the Company and the Lender of even date herewith (the "Senior
Secured Convertible Debenture Purchase Agreement"), and (i) such default shall
continue for 15 days after written notice of such default is given by the Lender
to the Company and (ii) if such failure is not curable within such 15 day
period, but is reasonably capable of cure within 45 days, either (aa) such
failure shall continue for 45 days or (bb) the Company shall not have commenced
a cure in a manner reasonably satisfactory to the Lender within the initial 15
day period; or
(c) the Company shall fail to perform any term, covenant or agreement
(other than in respect of part (a) of this Section 3) contained in this
Debenture or in the Security Agreement, and (i) such default shall continue for
15 days after written notice of such default is given by the Lender to the
Company and (ii) if such failure is not curable within such 15 day period, but
is reasonably capable of cure within 45 days, either (aa) such failure shall
continue for 45 days or (bb) the Company shall not have commenced a cure in a
manner reasonably satisfactory to the Lender within the initial 15 day period;
or
(d) any representation or warranty of the Company made in this
Debenture, in the Security Agreement, in the Senior Secured Convertible
Debenture Purchase Agreement or in any certificate delivered hereunder or
thereunder shall prove to have been false in any material respect upon the date
when made or deemed to have been made; or
5.
<PAGE> 6
(e) the Company shall fail to pay at maturity, or within any applicable
period of grace, any obligations for borrowed monies or advances, or for the use
of real or personal property, or fail to observe or perform any term, covenant
or agreement evidencing or securing such obligations for borrowed monies or
advances, or relating to such use of real or personal property, the result of
which failure is to permit the holder or holders of such indebtedness to cause
indebtedness in an aggregate amount of $100,000 or more to become due prior to
its stated maturity upon delivery of required notice, if any; or
(f) the Company shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee, liquidator or
similar official of itself or of all or a substantial part of its property, (ii)
be generally not paying its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary case
under the Federal Bankruptcy Code (as now or hereafter in effect), (v) take any
action or commence any case or proceeding under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts, or
any other law providing for the relief of debtors, (vi) fail to contest in a
timely or appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code or other
law, (vii) take any action under the laws of its jurisdiction of incorporation
or organization similar to any of the foregoing, or (viii) take any corporate
action for the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the application or
consent of the Company in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, dissolution, winding up, or composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or any substantial part of its
assets, or (iii) similar relief in respect of it, under any law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or adjustment
of debts or any other law providing for the relief of debtors, and such
proceeding or case shall continue undismissed, or unstayed and in effect, for a
period of 30 days; or an order for relief shall be entered in an involuntary
case under the Federal Bankruptcy Code, against the Company; or action under the
laws of the jurisdiction of incorporation or organization of the Company similar
to any of the foregoing shall be taken with respect to the Company and shall
continue unstayed and in effect for any period of 30 days; or
(h) a judgment or order for the payment of money shall be entered
against the Company by any court, or a warrant of attachment or execution or
similar process shall be issued or levied against property of the Company that
in the aggregate exceeds $50,000 in value and such judgment, order, warrant or
process shall continue undischarged or unstayed for 30 days.
6.
<PAGE> 7
4. REMEDIES.
Upon the occurrence or existence of any Event of Default (other than an
Event of Default referred to in Sections 3(f) and (g)) and at any time
thereafter during the continuance of such Event of Default, the Holder may, by
written notice to the Company, declare all outstanding principal and accrued
interest payable by the Company hereunder to be immediately due and payable
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the Security
Agreement to the contrary notwithstanding. Upon the occurrence or existence of
any Event of Default described in Sections 3(f) and (g), immediately and without
notice, all outstanding principal and accrued interest payable by the Company
hereunder shall automatically become immediately due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Security Agreement
to the contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, the Holder may (i) demand that
the Company use its best efforts to increase the size of its Board of Directors
by one member and to permit the Holder to appoint such member to the Company's
Board of Directors, and (ii) exercise any other right, power or remedy granted
to it by the Security Agreement or otherwise permitted to it by law, either by
suit in equity or by action at law, or both.
5. MISCELLANEOUS.
(a) The undersigned maker hereby waives presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Debenture.
(b) Neither this Debenture nor any of the rights, interests or
obligations hereunder may be sold, assigned, transferred or otherwise disposed
of by the Holder, by operation of law or otherwise, without the prior written
consent of the Company (except to an Affiliate (as defined below) of the Holder,
which transfer is deemed to be permitted). For purposes of this paragraph,
"Affiliate" shall mean, with respect to any individual or entity, any other
individual or entity that directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
such individual or entity. For purposes of this definition, the term "control"
(including with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any individual or
entity, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such individual
or entity, whether through the ownership of voting securities or by contract or
otherwise.
7.
<PAGE> 8
(c) This instrument shall have the effect of an instrument executed
under seal and shall be governed by and construed in accordance with the laws of
California (without giving effect to any conflicts of laws provisions contained
therein).
CONTINUUS SOFTWARE CORPORATION LONDON PACIFIC LIFE & ANNUITY COMPANY
By:/s/ John Wark By:/s/ Susan Y. Gressel
------------------------------------ ----------------------------------
Name:John R. Wark Name:Susan Y. Gressel
---------------------------------- --------------------------------
Title:President/Chief Executive Officer Title:Vice President/Treasurer
--------------------------------- -------------------------------
8.
<PAGE> 9
APPENDIX I
In the event of the issuance (a "Diluting Issuance") by the Company,
after the date of the Senior Secured Convertible Debenture (the "Debenture"), of
securities at a price per share less than the conversion price, as provided in
Section 2 of the Debenture (the "Conversion Price"), then the number of Shares
issuable upon conversion of the Debenture shall be adjusted as a result of
Diluting Issuances in accordance with the following provisions (subject to the
automatic amendment of the following provisions when any amendments are made to
Section B(4)(c) of Article III of the Company's Amended and Restated Articles of
Incorporation:
1. CAPITALIZED TERMS.
Capitalized terms used in this Appendix I that are not otherwise defined
herein shall have the respective meanings assigned to them in the Debenture,
dated as of September 23, 1997, to which this Appendix I is attached, if therein
defined.
2. ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL STOCK.
(a) SPECIAL DEFINITIONS. For purposes of this Section 2, the following
definitions shall apply:
(i) "OPTIONS" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(ii) "ORIGINAL ISSUE DATE" shall mean the date of the Debenture.
(iii) "CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares or other securities convertible into or exchangeable for
Common Stock.
(iv) "ADDITIONAL SHARES OF COMMON" shall mean all shares of
Common Stock issued (or, pursuant to Section 2(c) hereof, deemed to be issued)
by the corporation after the Original Issue Date, other than shares of Common
Stock issued or issuable or deemed to be issued:
(1) upon conversion of shares of the Series A Preferred,
the Series B Preferred, the Series C Preferred, the Series D Preferred and/or
the Series E Preferred;
(2) upon issuance by the corporation or exercise by
holders thereof of those certain warrants dated December 29, 1994 to purchase up
to an aggregate of 1,908,397 shares of Common Stock, outstanding warrants to
purchase up to an
I-1.
<PAGE> 10
aggregate of 42,000 shares of Series A Preferred and outstanding warrants to
purchase up to an aggregate of 151,418 shares of Series C Preferred;
(3) upon issuance by the corporation or exercise by
holders thereof of warrants to purchase up to an aggregate of 587,618 shares of
Common issued substantially concurrently with the Series D Preferred;
(4) upon issuance by the corporation or exercise by
holders thereof of warrants to purchase up to an aggregate of 782,834 shares of
Series E Preferred Stock;
(5) as a result of an adjustment made pursuant to Sections
2(d) hereof or Sections 2(a), 2(b) or 2(c) of the Debenture;
(6) to officers, directors, and employees of, and
consultants to, the corporation pursuant to stock option plans or agreements as
designated and approved by the Board of Directors, in an aggregate amount of not
more than 4,650,000 shares (of which 3,584,858 shares are subject to options
outstanding as of May 15, 1997 and an additional 336,142 shares remain available
for issuance as of May 15, 1997, provided that shares subject to options that
expire pursuant to the terms of such options or that are repurchased by the
corporation at a price equal to cost thereof to the holder pursuant to the terms
of the agreement by which such shares were purchased from the corporation shall
again become available for issuance under this subparagraph (6)), subject to
appropriate adjustment for any stock split, recapitalization or similar event;
(7) as a dividend or distribution on Preferred Stock; or
(8) by way of dividend or other distribution on shares of
Common Stock excluded from the definition of Additional Shares of Common by the
foregoing clauses (1), (2), (3), (4), (5), (6), (7) or this clause (8) or on
shares of Common Stock so excluded.
(b) NO ADJUSTMENT OF CONVERSION PRICE: No adjustment in the Conversion
Price shall be made in respect of the issuance of Additional Shares of Common
unless the consideration per share for an Additional Share of Common issued or
deemed to be issued by the corporation is less than the Conversion Price in
effect on the date of, and immediately prior to the issue of, Common Stock
issued upon conversion of the Debenture.
(c) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON.
(i) OPTIONS AND CONVERTIBLE SECURITIES. In the event the
corporation at any time or from time to time after the Original Issue Date shall
issue any Options or
I-2.
<PAGE> 11
Convertible Securities, or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth in the
instrument relating thereto without regard to any provisions contained therein
for a subsequent adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common issued as of the time of such issue or,
in case such a record date shall have been fixed, as of the close of business on
such record date, provided that Additional Shares of Common shall not be deemed
to have been issued unless the consideration per share (determined pursuant to
Section 2(e) hereof) of such Additional Shares of Common would be less than the
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common are deemed to be issued;
(1) no further adjustment in the Conversion Price shall
be made upon the subsequent issue of Convertible Securities or shares of Common
upon the exercise of such Options or conversion or exchange of such Convertible
Securities;
(2) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the corporation, or decrease in the number of shares of
Common issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities; and
(3) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration, be recomputed
as if:
a. in the case of Convertible Securities or Options
for Common the only Additional Shares of Common issued were the shares of
Common, if any, actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the corporation for
the issue of all such Options, whether or not exercised, plus the consideration
actually received by the corporation upon such exercise, or for the issue of all
such Convertible Securities which were actually converted or
I-3.
<PAGE> 12
exchanged, plus the additional consideration, if any, actually received by the
corporation upon such conversion or exchange, and
b. in the case of Options for Convertible Securities
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the consideration
received by the corporation for the Additional Shares of Common deemed to have
been then issued was the consideration actually received by the corporation for
the issue of all such Options, whether or not exercised, plus the consideration
deemed to have been received by the corporation upon the issue of the
Convertible Securities with respect to which such Options were actually
exercised; and
(4) no readjustment pursuant to clause (2) or (3) above
shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (i) the Conversion Price on the original adjustment date
prior to the original adjustment, or (ii) the Conversion Price that would have
resulted from any issuance of Additional Shares of Common between the original
adjustment date and such readjustment date.
(d) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL
SHARES OF COMMON.
In the event this corporation shall issue Additional Shares of
Common (including Additional Shares of Common deemed to be issued pursuant to
Section 2(c) hereof) without consideration or for a consideration per share less
than the Conversion Price in effect on the date of and immediately prior to such
issue, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of shares of Common Stock which the
aggregate consideration received by the corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such Conversion
Price and the denominator of which shall be the number of shares of Common
outstanding immediately prior to such issue plus the number of such Additional
Shares of Common so issued; provided, however, that for the purposes of this
Section 2(d), all shares of Common Stock issuable upon conversion of outstanding
Convertible Securities, shall be deemed to be outstanding, and immediately after
any Additional Shares of Common are deemed issued pursuant to Section 2(c)
hereof, such Additional Shares of Common shall be deemed to be outstanding.
I-4.
<PAGE> 13
(e) DETERMINATION OF CONSIDERATION.
For purposes of this Section 2, the consideration received by the
corporation for the issue of any Additional Shares of Common shall be computed
as follows:
(i) CASH AND PROPERTY: Such consideration shall:
(1) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(2) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of such issue, as determined in
good faith by the corporation's Board of Directors; and
(3) in the event Additional Shares of Common are issued
together with other shares or securities or other assets of the corporation for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (A) and (B) above, as determined in
good faith by the Board.
(ii) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per
share received by the corporation for Additional Shares of Common deemed to have
been issued pursuant to Section 2(c)(i) hereof, relating to Options and
Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by
the corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common (as set forth
in the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number) issuable upon the exercise
of such Options or the conversion or exchange of such Convertible Securities.
I-5.
<PAGE> 1
EXHIBIT 10.31
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of September 23, 1997, is made by
Continuus Software Corporation, a California corporation ("Grantor"), in favor
of London Pacific Life & Annuity Company, a North Carolina joint stock life
insurer ("Lender").
RECITALS
A. Lender has made a loan to Grantor as evidenced by that certain Senior
Secured Convertible Debenture (the "Debenture") dated of even date herewith
executed by Grantor in favor of Lender (the "Loan") and issued pursuant to that
certain Senior Secured Convertible Debenture Purchase Agreement.
B. Lender is willing to make the Loan to Grantor, but only upon the
condition, among others, that Grantor shall have executed and delivered to
Lender this Security Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce Lender to make the Loan and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, Grantor hereby represents,
warrants, covenants and agrees as follows:
SECTION 1. DEFINITIONS.
1.1 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):
"COLLATERAL" shall have the meaning assigned to such term in Section 3
of this Security Agreement.
"CONTRACTS" means all contracts or other agreements in or under which
Grantor may now or hereafter have any right, title or interest.
"COPYRIGHT" means all of the following in which Grantor now holds or
hereafter acquires any interest: (a) all copyrights, whether registered or
unregistered, held pursuant to the laws of the United States, any State thereof
or any other country; (b) registrations, application 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; (c) any
1.
<PAGE> 2
continuations, renewals or extensions thereof; and (d) any registrations to be
issued in any pending applications.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 3 of the Debenture.
"LICENSE" means any Patent License, Trademark License or other license
of rights or interests now held or hereafter acquired by Grantor.
"PATENT LICENSE" means 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 country, all registrations and recordings thereof, and all applications
for letters patent of the United States or any other country and all rights
corresponding thereto, 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 and (b) all reissues, divisions, continuations, renewals,
continuations-in-part or extensions thereof.
"PERMITTED LIENS" means any interest in the Collateral securing a credit
to Grantor which is listed on the attached Schedule A.
"SECURED OBLIGATIONS" means (a) the obligation of Grantor to repay
Lender under Section 2 below and to pay fees, costs and expenses of Lender under
Section 7.2 below, and (b) all other indebtedness, liabilities and obligations
of Grantor to Lender, whether now existing or hereafter incurred.
"TRADEMARK LICENSE" means any of the following now owned or hereafter
acquired by Grantor: any written agreement granting any right to use any
Trademark or Trademark registration.
"TRADEMARKS" means any of the following now owned or hereafter acquired
by Grantor: (a) any trademarks, tradenames, corporate names, business names,
trade styles, service marks, logos, other source or business identifiers, prints
and labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof and (b) any reissues, extensions or
renewals thereof.
2.
<PAGE> 3
"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 Lender'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.
In addition, the following terms shall be defined terms having the
meaning set forth for such terms in the UCC (definition sections of the UCC are
noted parenthetically): "Account Debtor" (9105(1)(a)); "Accounts" (9106);
"Chattel Paper" (9105(1)(b)); "Documents" (9105(1)(f)); "Equipment" (9109(2));
"Fixtures" (9313(1)(a)); "General Intangibles" (9106); "Instruments"
(9105(1)(i); "Inventory" (9109(4)); "Proceeds" (9306(1)). Each of the foregoing
defined terms shall include all of such items now owned, or hereafter acquired,
by Grantor.
SECTION 2. SECURED OBLIGATION.
Grantor agrees forthwith to pay to Lender all of the unpaid principal
amount of, and accrued interest on, the Debenture and all other indebtedness,
liabilities and obligations of Grantor to Lender arising thereunder or
hereunder, whether now existing or hereafter incurred, and whether created
under, arising out of or in connection with any written agreement or otherwise.
SECTION 3. GRANT OF SECURITY INTEREST.
As collateral security for the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of all the Secured Obligations and in order to induce Lender to cause the Loan
to be made, Grantor hereby assigns, conveys, mortgages, pledges, hypothecates
and transfers to Lender, and hereby grants to Lender, a security interest in all
of Grantor's right, title and interest in, to and under the following whether
now owned or hereafter acquired (all of which being herein collectively called
the "Collateral"):
(a) All Accounts of Grantor;
(b) All Chattel Paper of Grantor;
(c) All Contracts of Grantor;
(d) All Documents of Grantor;
3.
<PAGE> 4
(e) All Equipment of Grantor;
(f) All Fixtures of Grantor;
(g) All General Intangibles of Grantor including, without
limitation, all Copyrights, Patents and Trademarks;
(h) All Instruments of Grantor;
(i) All Inventory of Grantor;
(j) All property of Grantor held by Lender, or any other party
for whom Lender 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 Lender 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;
(k) 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
(l) To the extent not otherwise included, all Proceeds of each of
the foregoing and all accessions to, substitutions and replacements for, and
rents, profits and products of each of the foregoing.
SECTION 4. RIGHTS OF LENDER; COLLECTION OF ACCOUNTS.
4.1 Notwithstanding anything contained in this Security Agreement to the
contrary, Grantor expressly agrees that it shall remain liable under each of its
Contracts and each of its Licenses to observe and perform all the conditions and
obligations to be observed and performed by it thereunder and that it shall
perform all of its duties and obligations thereunder, all in accordance with and
pursuant to the terms and provisions of each such Contract or License. Lender
shall not have any obligation or liability under any Contract or License by
reason of or arising out of this Security Agreement or the granting to Lender of
a lien therein or the receipt by Lender of any payment relating to any Contract
or License pursuant hereto, nor shall Lender be required or obligated in any
manner to perform or fulfill any of the obligations of Grantor under or pursuant
to any Contract or License, or to make any payment, or to make any inquiry as to
the nature or the sufficiency of any payment received by it or the sufficiency
of any performance by any party under any Contract or License, or to present or
file any claim, or to take any action to collect or enforce any performance or
the payment of any amounts which may have been assigned to it or to which it may
be entitled at any time or times.
4.
<PAGE> 5
SECTION 5. REPRESENTATIONS AND WARRANTIES.
Grantor hereby represents and warrants to Lender that:
5.1 Except for the security interest granted to Lender under this
Security Agreement and other Permitted Liens, Grantor is the sole legal and
equitable owner of each item of the Collateral in which it purports to grant a
security interest hereunder, having good, marketable and insurable title thereto
free and clear of any and all liens other than Permitted Liens.
5.2 No effective security agreement, financing statement, equivalent
security or lien instrument or continuation statement covering all or any part
of the Collateral exists, except such as may have been filed by Grantor in favor
of Lender pursuant to this Security Agreement or such as relate to other
Permitted Liens.
5.3 This Security Agreement creates a legal and valid security interest
on and in all of the Collateral in which Grantor now has rights, and all filings
and other actions necessary or desirable to perfect and protect such security
interest have been duly taken. Accordingly, Lender has a fully perfected first
priority security interest in all of the Collateral in which Grantor now has
rights, subject only to the Permitted Liens. This Security Agreement will create
a legal and valid and fully perfected first priority security interest in the
Collateral in which Grantor later acquires rights, when Grantor acquires those
rights, subject only to the Permitted Liens.
SECTION 6. COVENANTS.
Grantor covenants and agrees with Lender that from and after the date of
this Security Agreement and until the Secured Obligations have been performed
and paid in full:
6.1 FURTHER ASSURANCES; PLEDGE OF INSTRUMENTS. At any time and from time
to time, upon the written request of Lender, 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 Lender may reasonably
deem desirable to obtain the full benefits of this Security Agreement.
6.2 MAINTENANCE OF RECORDS. Grantor shall keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral.
5.
<PAGE> 6
SECTION 7. RIGHTS AND REMEDIES UPON DEFAULT.
7.1 If any Event of Default shall occur and be continuing, Lender may
exercise in addition to all other rights and remedies granted to it under this
Security Agreement, all rights and remedies of a secured party under the UCC.
7.2 Grantor also agrees to pay all fees, costs and expenses of Lender,
including, without limitation, reasonable attorneys' fees, incurred in
connection with the enforcement of any of its rights and remedies hereunder.
7.3 Grantor hereby waives presentment, demand, protest or any notice (to
the maximum extent permitted by applicable law) of any kind in connection with
this Security Agreement or any Collateral.
7.4 The Proceeds of any sale, disposition or other realization upon all
or any part of the Collateral shall be distributed by Lender in the following
order of priorities:
(a) First, to Lender in an amount sufficient to pay in full the
reasonable costs of Lender in connection with such sale, disposition or other
realization, including all fees, costs, expenses, liabilities and advances
incurred or made by Lender in connection therewith, including, without
limitation, reasonable attorneys' fees;
(b) Second, to Lender in an amount equal to the then unpaid
Secured Obligations;
(c) Finally, upon payment in full of the Secured Obligations, to
Grantor or its representatives or as a court of competent jurisdiction may
direct.
SECTION 8. LIMITATION ON LENDER'S DUTY IN RESPECT OF COLLATERAL.
Lender shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it takes such action as
Grantor requests in writing, but failure of Lender to comply with any such
request shall not in itself be deemed a failure to act reasonably, and no
failure of Lender to do any act not so requested shall be deemed a failure to
act reasonably.
SECTION 9. REINSTATEMENT.
This Security Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against Grantor for
liquidation or reorganization, should Grantor become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of Grantor's property and assets, and
shall continue to be effective or be reinstated, as the case may be, if at any
time payment and performance of the Secured Obligations, or any
6.
<PAGE> 7
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
SECTION 10. MISCELLANEOUS.
10.1 NO WAIVER; CUMULATIVE REMEDIES.
(a) Lender shall not by any act, delay, omission or otherwise be
deemed to have waived any of its respective rights or remedies hereunder, nor
shall any single or partial exercise of any right or remedy hereunder on any one
occasion preclude the further exercise thereof or the exercise of any other
right or remedy.
(b) The rights and remedies hereunder provided are cumulative and
may be exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law.
(c) None of the terms or provisions of this Security Agreement
may be waived, altered, modified or amended except by an instrument in writing,
duly executed by Grantor and Lender.
10.2 TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 9
hereof, this Security Agreement shall terminate upon the payment and performance
in full of the Secured Obligations.
10.3 SUCCESSOR AND ASSIGNS. This Security Agreement and all obligations
of Grantor hereunder shall be binding upon the successors and assigns of
Grantor, and shall, together with the rights and remedies of Lender hereunder,
inure to the benefit of Lender, any future holder of the indebtedness and their
respective successors and assigns. No sales of participations, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing the Secured Obligations or any portion thereof or interest
therein shall in any manner affect the lien granted to Lender hereunder.
10.4 GOVERNING LAW. In all respects, including all matters of
construction, validity and performance, this Security Agreement and the Secured
Obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the State of California applicable to contracts
made and performed in such state by residents of such state, without regard to
the principles thereof regarding conflict of laws.
7.
<PAGE> 8
IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
GRANTOR CONTINUUS SOFTWARE CORPORATION
By:/s/ John Wark
---------------------------------------------
Name:John R. Wark
---------------------------------------------
Title:President/Chief Executive Officer
---------------------------------------------
Accepted and acknowledged by:
LONDON PACIFIC LIFE & ANNUITY
COMPANY
By:/s/ Susan Y. Gressel
----------------------------------
Name:Susan Y. Gressel
----------------------------------
Title:Vice President/Treasurer
----------------------------------
8.
<PAGE> 9
SCHEDULE A
LISTING OF PERMITTED LIENS
1. Security interest of Comdisco, Inc. pursuant to line of credit for lease
financing.
2. Security interest of NTFC Capital Corporation pursuant to lease of a Norstar
Phone System.
3. Security interest of AT&T Credit Corporation pursuant to lease of a telephone
system in the Company's San Mateo office.
4. Security interest of Royal Bank of Canada Europe Limited pursuant to
receivables purchasing arrangement.
5. Computerized Medical Systems has an interest in certain of the Company's
software that is held in escrow by Data Security International for the benefit
of Computerized Medical Systems (Flex Safe Escrow Agreement #0315201-00001,
dated February 16, 1996).
6. WalMart Stores Incorporated has an interest in certain of the Company's
software that is held in escrow by Data Security International for the benefit
of WalMart Stores Incorporated (Preferred Registration Technology Escrow
Agreement, dated April 8, 1994).
7. Tandem Computers Inc. has an interest in certain of the Company's software
that is held in escrow by Brambles NSD for the benefit of Tandem Computers Inc.
8. Morgan Stanley has an interest in certain of the Company's software that is
held in escrow by Fort Knox Escrow for the benefit of Morgan Stanley (Escrow
Agreement dated June 24, 1997).
9. IBM has an interest in certain of the Company's software that is held in
escrow by National Computing Center (U.K.) for the benefit of IBM (Escrow
Agreement #5791, dated March 31, 1995).
10. Lord Chancellors has an interest in certain of the Company's software that
is held in escrow by National Computing Center (U.K.) for the benefit of Lord
Chancellors (Escrow Agreement #6445, dated August 7, 1995).
9.
<PAGE> 1
EXHIBIT 10.32
STANDARD OFFICE LEASE - GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. BASIC LEASE PROVISIONS ("BASIC LEASE PROVISIONS")
1.1 PARTIES: This Lease, dated, for references purposes only, March 5,
1992 is made by and between ST. LENDING INC., a Delaware corporation (herein
called "Lessor") and CASEWARE, INC. doing business under the name of CASEWARE,
INC. (herein called "Lessee").
1.2 PREMISES: Suite Number 200, consisting of 14,196 feet, more or less,
as defined in paragraph 2 and as shown on Exhibit "A" hereto (the "Premises").
1.3 BUILDING: Commonly described as being located at 108 Pacifica in the
City of Irvine, County of Orange, State of California and shown on Exhibit A
hereto and as defined in paragraph 2.
1.4 USE: General office and computer software sales, marketing,
development and support, subject to paragraph 6.
1.5 TERM: Sixty-six (66) months commencing May 1, 1992 ("Commencement
Date") and ending October 31, 1997 as defined in paragraph 3.
1.6 BASE RENT:
<TABLE>
<CAPTION>
Months During Monthly Rentable Area
Lease Term Base Rate Occupied
----------------------------- ------------ -------------
<S> <C> <C>
Mos. 1-18 May `92-Oct `93 $17,745.00 14,196
Mos. 19-30 Nov `93-Oct `94 $20,906.25 16,725
Mos. 31-60 Nov `94-April `97 $24,251.25 16,725
Mos. 61-66 May `97-Oct `97 $25,923.75 16,725
</TABLE>
per month, payable on the 1st day of each month, per paragraph 4.1. Concessions:
for months 1 through 6 of the Initial Lease term, Base Rent will be suspended;
for months 7 through 12 of the Initial Lease term, Base Rent will be $8517.60
per month.
The stated monthly rent amounts above shall be abated as set forth in Section
1.6.
1.7 BASE RENT INCREASE: See paragraph 1.6.
1.8 RENT PAID UPON EXECUTION: Eight Thousand, Five Hundred Seventeen and
60/100 Dollars ($8,517.60) for Base Rent for month 7 of the Initial Lease term.
1.9 SECURITY DEPOSIT: Fifteen Thousand and 00/100 Dollars ($15,000.00).
1.
<PAGE> 2
1.10 LESSEE'S SHARE OF OPERATING EXPENSE INCREASE: 42.2% as defined in
paragraph 4.2. Prior to the execution of this Lease, Lessor shall furnish Lessee
a letter from Lessor's space planner confirming the Rentable Area of the
Premises and the Building, together with supporting calculations.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 PREMISES: The Premises are a portion of a building, herein sometimes
referred to as the "Building" identified in paragraph 1.3 of the Basic Lease
Provisions. "Building" shall include adjacent parking structures used in
connection therewith. The Premises, the Building, the Common Areas, the land
upon which the same are located, along with all other buildings and improvements
thereon or thereunder are herein collectively referred to as the "Office
Building Project." Lessor hereby leases to Lessee and Lessee leases from Lessor
for the term, at the rental, and upon all of the conditions set forth herein,
the real property referred to in the Basic Lease Provisions, paragraph 1.2, as
the "Premises" including rights to the Common Areas as hereinafter specified.
2.2 VEHICLE PARKING: So long as Lessee is not in default, and subject to
the rules and regulations attached hereto, and as established by Lessor from
time to time, Lessee shall be entitled to rent and use four (4) exclusive
parking spaces located in front of the Building and designated as reserved for
Lessee's visitors and fifty-eight (58) non-exclusive parking spaces in the
Office Building Project at the monthly rate applicable from time to time for
monthly parking as set by Lessor and/or its licensee.
2.2.1 If Lessee commits, permits or allows any of the prohibited
activities described in the Lease or the rules then in effect, then Lessor shall
have the right, without notice, in addition to such other rights and remedies
that it may have, to remove or tow away the vehicle involved and charge the cost
to Lessee, which cost shall be immediately payable upon demand by Lessor.
2.2.2 Lessee's use of its vehicle parking spaces in the Office
Building Project shall not be subject to a monthly parking fee for such spaces
for the initial term of this Lease. Lessor reserves the right to set, charge
Lessee, and increase monthly rates for such spaces from time to time during any
period during which Lessee occupies the Premises after the initial term of this
Lease, provided that (a) no charges for parking may be imposed by Lessee unless
tenants occupying at least 50% of the Rentable Area in "Irvine Center" are
subject to parking charges, and (b) such parking charges may not exceed the fair
market rate for such charges. Monthly parking fees shall be payable one month in
advance prior to the first day of each calendar month.
2.3 COMMON AREAS - DEFINITION. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Office Building Project that are provided and designated by the Lessor
from time to time for the general non-exclusive use of Lessor, Lessee and of
other lessees of the Office Building Project and their respective employees,
suppliers, shippers, customers and invitees, including but not limited to common
entrances, lobbies, corridors, stairways and stairwells, public restrooms,
elevators, escalators, parking areas to the extent not otherwise prohibited by
this Lease, loading and
2.
<PAGE> 3
unloading areas, trash areas, roadways, sidewalks, walkways, parkways, ramps,
driveways, landscaped areas and decorative walls.
2.4 COMMON AREAS - RULES AND REGULATIONS. Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit B with respect
to the Office Building Project and Common Areas, and to cause its employees,
suppliers, shippers, customers, and invitees to so abide and conform. Lessor or
such other person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
modify, amend and enforce said rules and regulations. Lessor shall not be
responsible to Lessee for the noncompliance with said rules and regulations by
other lessees, their agents, employees and invitees of the Office Building
Project.
2.5 COMMON AREAS - CHANGES. Lessor shall have the right, in Lessor's
sole discretion, from time to time:
(a) With Lessee's prior consent which shall not be
unreasonably withheld, to make changes to the Building interior and exterior and
Common Areas, including, without limitation, changes in the location, size,
shape, number, and appearance thereof, including but not limited to the lobbies,
windows, stairways, air shafts, elevators, escalators, restrooms, driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, decorative walls, landscaped areas and walkways;
provided, however, Lessor shall at all times provide the parking facilities
required by applicable law but in no event less than the number of parking
spaces specified in Section 2.2;
(b) To close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises remains
available;
(c) With Lessee's prior consent which shall not be
unreasonably withheld, to designate other land and improvements outside the
boundaries of the Office Building Project to be a part of the Common Areas,
provided that such other land and improvements have a reasonable and functional
relationship to the Office Building Project;
(d) With Lessee's prior consent which shall not be
unreasonably withheld, to add additional buildings and improvements to the
Common Areas;
(e) To use the Common Areas while engaged in making
additional improvements, repairs or alterations to the Office Building Project,
or any portion thereof;
(f) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas and Office Building Project
as Lessor may, in the exercise of sound business judgement deem to be
appropriate.
If Lessee has not disapproved any matter for which Lessor has requested its
consent by written disapproval notice given no later than 10 days after Lessee's
receipt of Lessor's request for consent, lessee shall be deemed to have
consented to such matter.
3.
<PAGE> 4
3. TERM.
3.1 TERM. The term and Commencement Date of this Lease shall be as
specified in paragraph 1.5 of the Basic Lease Provisions.
3.2 DELAY IN POSSESSION. Notwithstanding said Commencement Date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date and subject to paragraph 3.2.2, Lessor shall not be subject to any
liability therefor, not shall such failure affect the validity of this Lease or
the obligations of Lessee hereunder or extend the term hereof; but, in such
case, Lessee shall not be obligated to pay rent or perform any other obligation
of Lessee under the terms of this Lease, except as may be otherwise provided in
this Lease, until possession of the Premises is tendered to Lessee, as
hereinafter defined; provided, however, that if Lessor shall not have delivered
possession of the Premises within sixty (60) days following said Commencement
Date, as the same may be extended under the terms of a Work Letter executed by
Lessor and Lessee, Lessee may, at Lessee's option, by notice in writing to
Lessor within ten (10) days thereafter, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided, however
that, as to Lessor's obligations, Lessor shall return any money previously
deposited by Lessee (less any offsets due Lessor for Non-Standard Improvements),
and provided further, that if such written notice by Lessee is not received by
Lessor within said ten (10) day period, Lessee's right to cancel this Lease
hereunder shall terminate and be of no further force or effect.
3.2.1 POSSESSION TENDERED-DEFINED. Possession of the Premises
shall be deemed tendered to Lessee ("Tender of Possession") when (1) the
improvements to be provided by Lessor under this Lease are substantially
completed, (2) the Building utilities are ready for use in the Premises, (3)
Lessee has reasonable access to the Premises, and (4) ten (10) days shall have
expired following advance written notice to Lessee of the occurrence of the
matters described in (1), (2) and (3), above of this paragraph 3.2.1.
3.2.2 DELAYS CAUSED BY LESSEE. There shall be no abatement of
rent, and the sixty (60) day period following the Commencement Date before which
Lessee's right to cancel this Lease accrues under paragraph 3.2 shall be deemed
extended to the extent of any delays caused by acts or omissions of Lessee,
Lessee's agents, employees and contractors.
3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to said
Commencement Date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not change the termination date, and Lessee shall
pay rent for such occupancy.
3.4 UNCERTAIN COMMENCEMENT. In the event commencement of the Lease term
is defined as the completion of the improvements, Lessee and Lessor shall
execute an amendment to this Lease establishing the date of Tender of Possession
(as defined in paragraph 3.2.1) or the actual taking of possession by Lessee,
whichever first occurs, as the Commencement Date.
4. RENT.
4.1 BASE RENT. Subject to adjustment as hereinafter provided in
paragraph 4.3, and except as may be otherwise expressly provided in this Lease,
Lessee shall pay to Lessor the Base
4.
<PAGE> 5
Rent for the Premises set forth in paragraph 1.6 of the Basic Lease Provisions,
without offset or deduction, Lessee shall pay Lessor upon execution hereof the
advance Base Rent described in paragraph 1.8 of the Basic Lease Provisions. Rent
for any period during the term hereof which is for less than one month shall be
prorated based upon the actual number of days of the calendar month involved.
Rent shall be payable in lawful money of the United States to Lessor at the
address stated herein or to such other persons or at such other places as Lessor
may designate in writing.
4.2 OPERATING EXPENSE INCREASE. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share, as hereinafter
defined, of the amount by which all Operating Expenses, as hereinafter defined,
for each Comparison Year exceeds the amount of all Operating Expenses for the
Base Year, such excess being hereinafter referred to as the "Operating Expense
Increase," in accordance with the following provisions:
(a) "Lessee's Share" is defined, for purposes of this
Lease, as the percentage set forth in paragraph 1.10 of the Basic Lease
Provisions, which percentage has been determined by dividing the approximate
square footage of the Premises by the total approximate square footage of the
rentable space contained in the Office Building Project. It is understood and
agreed that the square footage figures set forth in the Basic Lease Provisions
are approximations which Lessor and Lessee agree are reasonable and shall not be
subject to revision except in connection with an actual change in the size of
the Premises or a change in the space available for lease in the Office Building
Project.
(b) "Base Year" is defined as the calendar year in which
the Lease term commences.
(c) "Comparison Year" is defined as each calendar year
during the term of this Lease subsequent to the Base Year; provided, however,
Lessee shall have no obligation to pay a share of the Operating Expense Increase
applicable to the first twelve (12) months of the Lease Term (other than such as
are mandated by a governmental authority, as to which government mandated
expenses Lessee shall pay Lessee's Share, notwithstanding they occur during the
first twelve (12) months). Lessee's Share of the Operating Expense Increase for
the first and last Comparison Years of the Lease Term shall be prorated
according to that portion of such Comparison Year as to which Lessee is
responsible for a share of such increase.
(d) "Operating Expenses" is defined, for purposes of this
Lease, to include all costs, if any, incurred by Lessor in the exercise of its
reasonable discretion, for;
(i) The operation, repair, maintenance, and
replacement, in neat, clean, safe, good order and condition, of the Office
Building Project, including but not limited to, the following:
(aa) The Common Areas, including their
surfaces, coverings, decorative items, carpets, drapes and window coverings and
including parking areas (net of parking revenue received), loading and unloading
areas, trash areas, roadways, sidewalks, walkways, stairways, parkways,
driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area
lighting facilities, building exteriors and roofs, fences and gates;
5.
<PAGE> 6
(bb) All heating, air conditioning,
plumbing, electrical systems, life safety equipment, telecommunication and other
equipment used in common by, or for the benefit of, lessees or occupants of the
Office Building Project, including elevators and escalators, tenant directories,
fire detection systems including sprinkler system maintenance and repair.
(ii) Trash disposal, janitorial and security
services;
(iii) Any other service to be provided by Lessor
that is elsewhere in this Lease stated to be an "Operating Expense";
(iv) The cost of the premiums for the liability and
property insurance policies to be maintained by Lessor under paragraph 8 hereof;
(v) The amount of the real property taxes to be
paid by Lessor under paragraph 10.1 hereof;
(vi) The cost of water, sewer, gas, electricity,
and other publicly mandated services to the Office Building Project;
(vii) Labor, salaries and applicable fringe
benefits and costs, materials, supplies and tools, used in maintaining and/or
cleaning the Office Building Project and accounting and a management fee
attributable to operation of the Office Building Project, provided that no
management fee shall exceed fair market rates for such fee for the vicinity of
the Premises;
(viii) Replacing and/or adding improvements
mandated by any governmental agency and any repairs or removals necessitated
thereby amortized over its useful life according to Federal income tax
regulations or guidelines for depreciation thereof (including interest on the
unamortized balance as is then reasonable in the judgment of Lessor's
accountants);
(ix) Replacement of equipment or improvements that
have a useful life for depreciation purposes according to Federal income tax
guidelines of five (5) years or less, as amortized over such life.
(e) Operating Expenses shall not include the costs of
replacements of equipment or improvements that have a useful life for Federal
income tax purposes in excess of five (5) years unless it is of the type
described in paragraph 4.2(d) (viii), in which case their cost shall be included
as above provided.
(f) Operating Expenses shall not include any expenses paid
by any lessee directly to third parties, or as to which Lessor is otherwise
reimbursed by any third party, other tenant, or by insurance proceeds. Operating
Expenses shall not include cost of tenant improvements, legal fees in
negotiating or enforcing leases, advertising cost, expenses of hazardous waste
removal or treatment and leasing commissions.
6.
<PAGE> 7
(g) If the Building is less than ninety-five percent (95%)
occupied, then the Operating Expenses will be calculated assuming the Building
is ninety-five percent (95%) occupied for a full calendar year.
(h) Lessee's Share of Operating Expense Increase shall be
payable by Lessee within thirty (30) days after a reasonably detailed statement
of actual expenses is presented to Lessee by Lessor. At Lessor's option,
however, an amount may be estimated by Lessor from time to time in advance of
Lessee's Share of the Operating Expense Increase for any Comparison Year, and
the same shall be payable monthly or quarterly, as Lessor shall designate,
during each Comparison Year of the Lease term, on the same day as the Base Rent
is due hereunder. In the event that Lessee pays Lessor's estimate of Lessee's
Share of Operating Expense Increase as aforesaid, Lessor shall deliver to Lessee
within sixty (60) days after the expiration of each Comparison Year a reasonably
detailed statement showing Lessee's Share of the actual Operating Expense
Increase incurred during such year if Lessee's payments under this paragraph
4.2(h) during said Comparison Year exceed Lessee's Share as indicated on said
statement. Lessee shall be entitled to credit the amount of such overpayment
against Lessee's Share of Operating Expenses Increase next falling due. If
Lessee's payments under this paragraph during said Comparison Year were less
than Lessee's Share as indicated on said statement. Lessee shall pay to Lessor
the amount of the deficiency within thirty (30) days after delivery by Lessor to
Lessee of said statement. Lessor and Lessee shall forthwith adjust between them
by cash payment any balance determined to exist with respect to that portion of
the last Comparison Year for which Lessee is responsible as to Operating Expense
Increases, notwithstanding that the Lease term may have terminated before the
end of such Comparison Year. Lessee shall have the right to inspect or audit
Lessor's books and records relating to Operating Expenses on reasonable notice
to Lessor, provided that any such audit with respect to the Operating Expenses
for the Base Year or any Comparison Year must be completed within 2 years after
the end of such Base Year or Comparison Year, as applicable. Should such
inspection or audit establish that Lessee's share of Operating Expense Increase
has been overstated or understated, an appropriate adjustment shall be
immediately made. If any overstatement for any Comparison Year exceeds 10% of
the Operating Expense Increase for such Comparison Year, Lessor shall reimburse
Lessee for the reasonable costs incurred by Lessee in such audit.
4.3 RENT INCREASE.
See paragraph 1.6.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof the
security deposit set forth in paragraph 1.9 of the Basic Lease Provisions as
security for Lessee's faithful performance of Lessee's obligations hereunder. If
Lessee fails to pay rent or other charges due hereunder or otherwise defaults
with respect to any provision of this Lease, Lessor may use, apply or retain all
or any portion of said deposit for the payment of any rent or other charge in
default for the payment of any other sum to which Lessor may become obligated by
reason of Lessee's default, or to compensate Lessor for any loss or damage which
Lessor may suffer thereby. If Lessor so uses or applies all or any portion of
said deposit, Lessee shall within ten (10) days after written demand therefor
deposit cash with Lessor in an amount sufficient to restore said deposit to the
full amount then required of Lessee. Lessor shall not be required to
7.
<PAGE> 8
keep said security deposit separate from its general accounts. If Lessee
performs all of Lessee's obligations hereunder, said deposit, or so much thereof
as has not heretofore been applied by Lessor, shall be returned, without payment
of interest or other increment for its use to Lessee (or, at Lessor's option, to
the last assignee, if any, of Lessee's interest hereunder) at the expiration of
the term hereof, and after Lessee has vacated the Premises. No trust
relationship is created herein between Lessor and Lessee with respect to said
Security Deposit.
6. USE.
6.1 USE. The Premises shall be used and occupied only for the purpose
set forth in paragraph 1.4 of the Basic Lease Provisions or any other use which
is reasonably comparable to that use and for no other purpose.
6.2 COMPLIANCE WITH LAW.
(a) Lessor warrants to Lessee that the Premises, in the
state existing on the date that the Lease term commences, but without regard to
alterations or improvements made by Lessee or the use for which Lessee will
occupy the Premises, does not violate any covenants or restrictions of record,
of any applicable building code, regulation or ordinance in effect on such Lease
term Commencement Date. Lessor represents and warrants that, to the best of
Lessor's current actual knowledge, the Premises are free of hazardous substances
or materials, as may be defined by any applicable statute, law, regulation or
ordinance, except as disclosed herein or on the public record. In the event it
is determined that this warranty has been violated, then it shall be the
obligation of the Lessor, after written notice from Lessee, to promptly, at
Lessor's sole cost and expense, rectify any such violation.
(b) Except as provided in paragraph 6.2(a) Lessee shall,
at Lessee's expense, promptly comply with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements of any fire insurance underwriters or rating bureaus, now in effect
or which may hereafter come into effect, whether or not they reflect a change in
policy from that now existing, during the term or any part of the term hereof,
relating in any manner to the Premises and the occupation and use by Lessee of
the Premises. Lessee shall conduct its business in a lawful manner and shall not
use or permit the use of the Premises or the Common Areas in any manner that
will tend to create waste or a nuisance or shall tend to disturb other occupants
of the Office Building Project.
6.3 CONDITION OF PREMISES.
(a) Lessor shall deliver the Premises to Lessee in a
clean condition on the Lease Commencement Date (unless Lessee is already in
possession) and Lessor warrants to Lessee that the plumbing, lighting, air
conditioning, and heating system in the Premises shall be in good operating
condition. In the event that it is determined that this warranty has been
violated, then it shall be the obligation of Lessor, after receipt of written
notice from Lessee setting forth with specificity the nature of the violation,
to promptly, at Lessor's sole cost, rectify such violation.
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(b) Except as otherwise provided in this Lease, Lessee
hereby accepts the Premises and the Office Building Project in their condition
existing as of the Lease Commencement Date or the date that Lessee takes
possession of the Premises, whichever is earlier, subject to all applicable
zoning, municipal, county and state laws, ordinances and regulations governing
and regulating the use of the Premises, and any easements, covenants or
restrictions of record, and accepts this Lease subject thereto and to all
matters disclosed thereby and by any exhibits attached hereto. Lessee
acknowledges that it has satisfied itself by its own independent investigation
that the Premises are suitable for its intended use and that neither Lessor nor
Lessor's agent or agents has made any representation or warranty as to the
present or future suitability of the Premises, Common Areas or Office Building
Project for the conduct of Lessee's business.
7. MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREA SERVICES.
7.1 LESSOR'S OBLIGATIONS. Lessor shall keep the Office Building Project,
including the Premises, interior and exterior walls, roof and common areas, and
the equipment whether used exclusively for the Premises or in common with other
premises, in good condition and repair; provided, however, Lessor shall not be
obligated to paint, repair or replace wall coverings, or to repair or replace
any improvements that are not ordinarily part of the Building or are above the
Building standards in effect on the date Lessee first occupies the Premises.
Except as provided in paragraph 9.5, there shall be no abatement of rent or
liability of Lessee on account of any injury or interference with Lessee's
business with respect to any improvements, alterations or repairs made by Lessor
to the Office Building Project or any part thereof. Lessee expressly waives the
benefits of any statute now or hereafter in effect which would otherwise afford
Lessee the right to make repairs at Lessor's expense or to terminate this Lease
because of Lessor's failure to keep the Premises in good order, condition and
repair except with respect to (i) any single occurrence wherein the cost of
repair is $1,500 or less, and (ii) any required repair which, if not made, would
materially interfere with Lessee's productive use of the Premises.
7.2 LESSEE'S OBLIGATIONS.
(a) Notwithstanding Lessor's obligation to keep the
Premises in good condition and repair, Lessee shall be responsible for payment
of the cost thereof to Lessor as additional rent for that portion of the cost of
any maintenance and repair of the Premises, or any equipment (wherever located)
that serves only Lessee or the Premises, to the extent such cost is attributable
to causes beyond normal wear and tear. Lessee shall be responsible for the cost
of painting, repairing or replacing wall coverings, and to repair or replace any
Premises improvements that are not ordinarily a part of the Building or that are
above then Building standards. Lessor may, at its option, upon reasonable
notice, elect to have Lessee perform any particular such maintenance or repairs
the cost of which is otherwise Lessee's responsibility hereunder.
(b) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same condition
as received, ordinary wear and tear excepted, clean and free of debris. Except
as otherwise stated in this Lease, Lessee shall leave the air lines, power
panels, electrical distribution systems, lighting fixtures, air
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conditioning, window coverings, wall coverings, carpets, wall paneling, ceilings
and plumbing on the Premises.
7.3 ALTERATIONS AND ADDITIONS.
(a) Except for non-structural alterations, improvements,
additions, Utility Installations, or repairs in the Premises costing less than
Five Thousand and 00/100 Dollars ($5,000) per occurrence or less than Fifteen
Thousand and 00/100 Dollars ($15,000.00) in the aggregate during the term of the
Lease and which will not affect the Building HVAC or electrical systems, Lessee
shall not, without Lessor's prior written consent make any alterations,
improvements, additions, Utility Installations or repairs in, on or about the
Premises, or the Office Building Project. As used in this paragraph 7.3 the term
"Utility Installation" shall mean carpeting, window and wall coverings, power
panels, electrical distribution systems, lighting fixtures, air conditioning,
plumbing, and telephone and telecommunication wiring and equipment. At the
expiration of the term, Lessor may require the removal of any or all of said
alterations, improvements, additions or Utility Installations, and the
restoration of the Premises and the Office Building Project to their prior
condition, at Lessee's expense except that Lessee need not remove any such items
the installation of which was approved by Lessor in advance or otherwise made in
accordance with this Lease. Should Lessor permit Lessee to make its own
alterations, improvements, additions or Utility Installations, Lessee shall use
only such contractor as has been expressly approved by Lessor. Should Lessee
make any alterations, improvements, additions or Utility Installations without
the prior approval of Lessor, or use a contractor not expressly approved by
Lessor, Lessor may, at any time during the term of this Lease, require that
Lessee remove any part or all of the same.
(b) Any alterations, improvements, additions or Utility
Installations in or about the Premises or the Office Building Project that
Lessee shall desire to make shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent to Lessee making such
alteration, improvement, addition or Utility Installation, the consent shall be
deemed conditioned upon Lessee acquiring a permit to do so from the applicable
governmental agencies, furnishing a copy thereof to Lessor prior to the
commencement of the work, and compliance by Lessee with all conditions of said
permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use in the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Office Building
Project, or any interest therein.
(d) Lessee shall give Lessor not less than ten (10)
days' notice prior to the commencement of any work in the Premises by Lessee and
Lessor shall have the right to post notices of non-responsibility in or on the
Premises or the Building as provided by law. If Lessee shall, in good faith,
contest the validity of any such lien, claim or demand, then Lessee shall, at
its sole expense defend itself and Lessor against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Lessor or the Premises, the Building or the
Office Building Project, upon the condition that if Lessor shall require, Lessee
shall furnish to Lessor a surety bond satisfactory to Lessor in an
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amount equal to such contested lien claim or demand indemnifying Lessor against
liability for the same and holding the Premises, the Building and the Office
Building Project free from the effect of such lien or claim. In addition, Lessor
may require Lessee to pay Lessor's reasonable attorneys' fees and costs in
participating in such action if Lessor shall decide it is to Lessor's best
interest to do so.
(e) All alterations, improvements, additions and Utility
Installments (whether or not such Utility Installations constitute trade
fixtures of Lessee) which may be made to the Premises by Lessee, including but
not limited to, floor coverings, panelings, doors, drapes, built-ins, moldings,
sound attenuation and lighting and telephone or communication systems, conduit,
wiring and outlets, shall be made and done in a good and workmanlike manner and
of good and sufficient quality and materials and shall be the property of Lessor
and remain upon and be surrendered with the Premises at the expiration of the
Lease term, unless Lessor requires their removal pursuant to paragraph 7.3(a).
Provided Lessee is not in default, notwithstanding the provisions of this
paragraph 7.3(e). Lessee's personal property and equipment, other than that
which is affixed to the Premises so that it cannot be removed without material
damage to the Premises or the Building, and other than Utility Installations,
shall remain the property of Lessee and may be removed by Lessee subject to the
provision of paragraph 7.2.
(f) Lessee shall provide Lessor with as-built plans and
specifications for any alterations, improvements, additions or Utility
Installations.
7.4 UTILITY ADDITIONS. Lessor reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Office Building Project,
including, but not by way of limitation, such utilities as plumbing, electrical
systems, communication systems, and fire protection and detection systems, so
long as such installations do not unreasonably interfere with Lessee's use of
the Premises.
8. INSURANCE; INDEMNITY.
8.1 LIABILITY INSURANCE - LESSEE. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of Comprehensive
General Liability insurance utilizing an Insurance Services Office standard form
with Broad Form General Liability Endorsement (GL0404), or equivalent in an
amount of not less than $1,000,000 per occurrence of bodily injury and property
damage combined or in a greater amount as reasonably determined by Lessor and
shall insure Lessee with Lessor as an additional insured against liability
arising out of the use, occupancy or maintenance of the Premises. Compliance
with the above requirement shall not, however, limit the liability of Lessee
hereunder.
8.2 LIABILITY INSURANCE - LESSOR. Lessor shall obtain and keep in force
during the term of this Lease a policy of Combined Single Limit Bodily Injury
and Broad Form Property Damage Insurance, plus coverage against such other risks
Lessor deems advisable from time to time, insuring Lessor, but not Lessee,
against liability arising out of the ownership, use, occupancy or maintenance of
the Office Building Project in an amount not less than $5,000,000.00 per
occurrence.
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8.3 PROPERTY INSURANCE - LESSEE. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease for the benefit of
Lessee, replacement cost fire and extended coverage insurance, with vandalism
and malicious mischief, sprinkler leakage and earthquake sprinkler leakage
endorsements, in an amount sufficient to cover not less than 100% of the full
replacement cost, as the same may exist from time to time, of all of Lessee's
personal property, fixtures, equipment and tenant improvements.
8.4 PROPERTY INSURANCE - LESSOR. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss or
damage to the Office Building Project improvements, but not Lessee's personal
property, fixtures, equipment or tenant improvements, in the amount of the full
replacement cost thereof, as the same may exist from time to time, utilizing
Insurance Services Office standard form, or equivalent, providing protection
against all perils included within the classification of fire extended coverage,
vandalism, malicious mischief, plate glass, and such other perils as Lessor
deems advisable or may be required by a lender having a lien on the Office
Building Project. In addition, Lessor shall obtain and keep in force, during the
term of this Lease, a policy of rental value insurance covering a period of one
year, with loss payable to Lessor which insurance shall also cover all Operating
Expenses for said period. Lessee will not be named in any such policies carried
by Lessor and shall have no right to any proceeds therefrom. The policies
required by these paragraphs 8.2 and 8.4 shall contain such deductibles as
Lessor or the aforesaid lender may determine. In the event that the Premises
shall suffer an insured loss as defined in paragraph 9.1(f) hereof, the
deductible amounts under the applicable insurance policies shall be deemed an
Operating Expense. Lessee shall not do or permit to be done anything which shall
invalidate the insurance policies carried by Lessor. Lessee shall pay the
entirety of any increase in the property insurance premium for the Office
Building Project over what it was immediately prior to the commencement of the
term of this Lease if the increase is specified by Lessor's insurance carrier as
being caused by the nature of Lessee's occupancy or any act or omission of
Lessee.
8.5 INSURANCE POLICIES. Lessee shall deliver to Lessor copies of
liability insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance within seven (7) days
after the Commencement Date of this Lease. No such policy shall be cancelable or
subject to reduction of coverage or other modification except after thirty (30)
days prior written notice to Lessor. Lessee shall, prior to the expiration of
such policies, furnish Lessor with renewals thereof.
8.6 WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other,
for direct or consequential loss or damage arising out of or incident to the
perils covered by property insurance carried by such party, whether due to the
negligence of Lessor or Lessee or their agents, employees, contractors and/or
invitees. If necessary all property insurance policies required under this Lease
shall be endorsed to so provide.
8.7 INDEMNITY. Lessee shall indemnify and hold harmless Lessor and its
agents Lessor's master or ground lessor, partners and lenders from and against
any and all claims for damage to the person or property of anyone or any entity
arising from Lessee's use of the Office Building Project, or from the conduct of
Lessee's business or from any activity, work or things done, permitted or
suffered by Lessee in our about the Premises or elsewhere and shall further
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indemnify and hold harmless Lessor from and against any and all claims, costs
and expenses arising from any breach or default in the performance of any
obligation on Lessee's part to be performed under the terms of this Lease, or
arising from any act or omission of Lessee, or any of Lessee's agents,
contractors, employees, or invitees, and from and against all costs, attorney's
fees, expenses and liabilities incurred by Lessor as the result of any such use,
conduct, activity, work, things done, permitted or suffered, breach, default or
negligence, and in dealing reasonably therewith, including but not limited to
the defense or pursuit of any claim or any action or proceeding involved
therein; and in case any action or proceeding be brought against Lessor by
reason of any such matter, Lessee upon notice from Lessor shall defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified. Lessee, as a material part of the
consideration to Lessor, hereby assumes all risk of damage to property of Lessee
or injury to persons, in, upon or about the Office Building Project arising from
any cause and Lessee hereby waives all claims in respect thereof against Lessor
except as may result from the act or omissions of Lessor, its agents or
employees.
8.8 EXEMPTION OF LESSOR FROM LIABILITY EXCEPT AS MAY RESULT FROM THE ACT
OR OMISSIONS OF LESSOR, ITS AGENTS OR EMPLOYEES. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of income
therefrom or for loss of or damage to the goods, wares, merchandise or other
property of Lessee. Lessee's employees, invitees, customers, or any other person
in or about the Premises or the Office Building Project, nor shall Lessor be
liable for injury to the person of Lessee, Lessee's employee, agents or
contractors, whether such damage or injury is caused by or results from theft,
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause whether said
damage or injury results from conditions arising upon the Premises or upon other
portions of the Office Building Project, or from other sources or places, or
from new construction or the repair, alteration or improvement of any part of
the Office Building Project, or of the equipment, fixtures or appurtenances
applicable thereto, and regardless of whether the cause of such damage or injury
or the means of repairing the same is inaccessible. Lessor shall not be liable
for any damage arising from any act or neglect of any other lessee, occupant or
user of the Office Building Project, nor from the failure of Lessor to enforce
the provisions of any other lease or any other lessee of the Office Building
Project.
8.9 NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified in
this paragraph 8 are adequate to cover Lessee's property or obligations under
this Lease.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Damage" shall mean if the Premises are
damaged or destroyed to any extent.
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(b) "Premises Building Partial Damage" shall mean if the
Building of which the Premises are a part is damaged or destroyed to the extent
that the cost to repair is less than fifty percent (50%) of the then Replacement
Cost of the building.
(c) "Premises Building Total Destruction" shall mean if
the Building of which the Premises are a part is damaged or destroyed to the
extent that the cost to repair is fifty percent (50%) or more of the then
Replacement Cost of the Building.
(d) "Office Building Project Buildings" shall mean all
of the buildings on the Office Building Project site.
(e) "Office Building Project Buildings Total
Destruction" shall mean if the Office Building Project Buildings are damaged or
destroyed to the extent that the cost of repair is fifty percent (50%) or more
of the then Replacement Cost of the Office Building Project Buildings.
(f) "Insured Loss" shall mean damage or destruction
which was caused by an event required to be covered by the insurance described
in paragraph 8. The fact that an Insured Loss has a deductible amount shall not
make the loss an uninsured loss.
(g) "Replacement Cost" shall mean the amount of money
necessary to be spent in order to repair or rebuild the damaged area to the
condition that existed immediately prior to the damage occurring, excluding all
improvements made by lessees, other than those installed by Lessor at Lessee's
expense.
9.2 PREMISES DAMAGE: PREMISES BUILDING PARTIAL DAMAGE.
(a) INSURED LOSS. Subject to the provisions of
paragraphs 9.4 and 9.5, if at any time during the term of this Lease there is
damage which is an insured Loss and which falls into the classification of
either Premises Damage or Premises Building Partial Damage, then Lessor shall,
as soon as reasonably possible and to the extent the required materials and
labor are readily available through usual commercial channels, at Lessor's
expense, repair such damage (but not Lessee's fixtures, equipment or tenant
improvements originally paid for by Lessee) to its condition existing at the
time of the damage, and this Lease shall continue in full force and effect.
(b) UNINSURED LOSS. Subject to the provisions of
paragraphs 9.4 and 9.5, if at any time during the term of this Lease there is
damage which is not an insured Loss and which falls within the classification of
Premises Damage or Premises Building Partial Damage, unless caused by a
negligent or willful act of Lessee (in which event Lessee shall make the repairs
at Lessee's expense), which damage prevents Lessee from making any substantial
use of the Premises, Lessor may at Lessor's option either (i) repair such damage
as soon as reasonably possible at Lessor's expense, in which event this Lease
shall continue in full force and effect, or (ii) give written notice to Lessee
within thirty (30) days after the date of the occurrence of such damage of
Lessor's intention to cancel and terminate this Lease as of the date of the
occurrence of such damage, in which event this Lease shall terminate as of the
date of the occurrence of
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such damage. Lessor shall have no right to terminate this Lease unless all
leases of space in the damaged portion of the Building are terminated.
9.3 PREMISES BUILDING TOTAL DESTRUCTION: OFFICE BUILDING PROJECT TOTAL
DESTRUCTION. Subject to the provisions of paragraphs 9.4 and 9.5, if at any time
during the term of this Lease there is damage, whether or not it is an Insured
Loss, which falls into the classification of either (i) Premises Building Total
Destruction, or (ii) Office Building Project Total Destruction, then Lessor may
at Lessor's option either (i) repair such damage or destruction as soon as
reasonably possible at Lessor's expense (to the extent required materials are
readily available through usual commercial channels) to its condition existing
at the time of the damage, but not Lessee's fixtures, equipment or tenant
improvements, and this Lease shall continue in full force and effect, or (ii)
give written notice to Lessee within thirty (30) days after the date of
occurrence of such damage of Lessor's intention to cancel and terminate this
Lease, in which case this Lease shall terminate as of the date of the occurrence
of such damage. Lessor shall have no right to terminate this Lease unless all
leases in the Building or Office Building Project (whichever is destroyed) are
terminated.
9.4 DAMAGE NEAR END OF TERM.
(a) Subject to paragraph 9.4(b) if at any time during
the last twelve (12) months of the term of this Lease there is substantial
damage to the Premises, either party may at its option, cancel and terminate
this Lease as of the date of occurrence of such damage by giving written notice
to the other party of its election to do so within 30 days after the date of
occurrence of such damage.
(b) Notwithstanding paragraph 9.4(a), in the event that
Lessee has an option to extend or renew this Lease, and the time within which
said option may be exercised has not yet expired, Lessee shall exercise such
option, if it is to be exercised at all, no later than twenty (20) days after
the occurrence of an insured Loss failing within the classification of Premises
Damage during the last twelve (12) months of the term of this Lease. If Lessee
duly exercises such option during said twenty (20) day period, Lessor shall, at
Lessor's expense, repair such damage, but not Lessee's fixtures, equipment or
tenant improvements, as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option
during said twenty (20) day period, then Lessor may at Lessor's option terminate
and cancel this Lease as of the expiration of said twenty (20) day period by
giving written notice to Lessee of Lessor's election to do so within ten (10)
days after the expiration of said twenty (20) day period, notwithstanding any
term or provision in the grant of option to the contrary.
9.5 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event Lessor repairs or restores the Building
or Premises pursuant to the provisions of this paragraph 9, and any part of the
Premises are not usable (including loss of use due to loss of access or
essential services), the rent payable hereunder (including Lessee's Share of
Operating Expense Increase) for the period during which such damage, repair or
restoration continues shall be abated, provided the damage was not the result of
the negligence of Lessee. Except for said abatement of rent, if any, Lessee
shall have no
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claim against Lessor for any damage suffered by reason of any such
damage, destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore
the Premises or the Building under the provisions of this Paragraph 9 and shall
not commence such repair or restoration within thirty (30) days after such
occurrence, or if Lessor shall not complete the restoration and repair within
two (2) months after such occurrence, Lessee may at Lessee's option cancel and
terminate this Lease by giving Lessor written notice of Lessee's election to do
so at any time prior to the commencement or completion, respectively, of such
repair or restoration. In such event this Lease shall terminate as of the date
of such notice. If such repair or restoration cannot reasonably be completed in
such 2-month period, then, provided that at least fifty percent (50%) of the
rentable square footage of the Premises is undamaged, such period shall be
extended for up to an additional four (4) months, for a total of six (6) months,
so long as Lessor is pursuing diligently and in good faith the completion of
such repair or restoration.
(c) Lessee agrees to cooperate with Lessor in connection
with any such restoration and repair, including but not limited to the approval
and/or execution of plans and specifications required.
9.6 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall, in
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.7 WAIVER. Lessor and Lessee waive the provisions of any statute which
relate to termination of leases when leased property is destroyed and agree that
such event shall be governed by the terms of this Lease.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the real property tax, as
defined in paragraph 10.3, applicable to the Office Building Project subject to
reimbursement by Lessee of Lessee's Share of such taxes in accordance with the
provisions of paragraph 4.2, except as otherwise provided in paragraph 10.2.
10.2 ADDITIONAL IMPROVEMENTS. Lessee shall not be responsible for paying
any increase in real property tax specified in the tax assessor's records and
work sheets as being caused by additional improvements placed upon the Office
Building Project by other lessees or by Lessor for the exclusive enjoyment of
any other lessee. Lessee shall, however, pay to Lessor at the time that
Operating Expenses are payable under paragraph 4.2(c) the entirety of any
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee or at Lessee's request.
10.3 DEFINITION OF "REAL PROPERTY TAX." As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or
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tax (other than inheritance, personal income or estate taxes) imposed on the
Office Building Project or any portion thereof by an authority having the direct
or indirect power to tax, including any city, county, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, as against any legal or equitable interest
of Lessor in the Office Building Project or in any portion thereof, as against
Lessor's right to rent or other income therefrom, and as against Lessor's
business of leasing the Office Building Project. The term "real property tax"
shall also include any tax, fee, levy, assessment or charge (i) in substitution
of, partially or totally, any tax, fee, levy, assessment or charge hereinabove
included within the definition of "real property tax," or (ii) the nature of
which was hereinbefore included within the definition of "real property tax," or
(iii) which is imposed for a service or right not charged prior to June 1, 1978,
or, if previously charged, has been increased since June 1, 1978, or (iv) which
is imposed as a result of a change in ownership, as defined by applicable local
statutes for property tax purposes, of the Office Building Project or which is
added to a tax or charge hereinbefore included within the definition of real
property tax by reason of such change of ownership, or (v) which is imposed by
reason of this transaction, any modifications or changes hereto, or any
transfers hereof. Notwithstanding the foregoing, the term "real property tax"
shall include, with respect to any Comparison Year occurring during the initial
Lease term, only (i) such real property taxes levied against the Office Building
Project for the year 1991-1992 (as the same may be reduced as a result of any
appeal by Lessor), and (ii) the portion of real property taxes attributable to
the assessed value of the Office Building Project, if any, in excess of
$4,500,000,00. With respect to any Comparison Year occurring after the initial
Lease term, the term "real property tax" shall include all real property taxes
attributable to the assessed value of the Office Building Project. If any
assessment, tax, levy, fee or charge (collectively "Charge") is imposed on the
Office Building Project in lieu of real property taxes following any judicial or
legislative modification to or limitation of the current method of real property
taxation as a result of any challenge to Proposition 13, then the term "real
property tax" shall include any such Charge to the extent the same is reasonably
levied in substitution of property taxes on the assessed valuation of the Office
Building Project in excess of $4,500,000.00.
10.4 JOINT ASSESSMENT. If the improvements or property, the taxes for
which are to be paid separately by Lessee under paragraph 10.2 or 10.5 are not
separately assessed, Lessee's portion of that tax shall be equitably determined
by Lessor from the respective valuations assigned in the assessor's work sheets
or such other information (which may include the cost of construction) as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.5 PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency all taxes
assessed against and levied upon trade fixtures, furnishings, equipment and all
other personal property of Lessee contained in the Premises or elsewhere.
(b) If any of Lessee's said personal property shall be
assessed with Lessor's real property, Lessee shall pay to Lessor the taxes
attributable to Lessee within ten (10) days after receipt of a written statement
setting forth the taxes applicable to Lessee's property.
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11. UTILITIES.
11.1 SERVICES PROVIDED BY LESSOR. Lessor shall provide, as an Operating
Expense, heating, ventilation, air conditioning, and janitorial service as
reasonably required, reasonable amounts of electricity for normal lighting and
office machines, water for reasonable and normal drinking and lavatory use, and
replacement light bulbs and/or fluorescent tubs and ballasts for standard
overhead fixtures. Lessor shall maintain, at all times during the term of this
Lease, including any extensions, a contract for maintenance of the Building HVAC
System.
11.2 SERVICES EXCLUSIVE TO LESSEE. Subject to the provisions of
Paragraph 11.1 and 11.3, Lessee shall pay for all water, gas, heat, light,
power, telephone and other utilities and services specially or exclusively
supplied and/or metered exclusively to the Premises or to Lessee, together with
any taxes thereon. If any such services are not separately metered to the
Premises, Lessee shall pay at lessor's option, either Lessee's Share or a
reasonable proportion to be determined by Lessor of all charges jointly metered
with other premises in the Building.
11.3 HOURS OF SERVICE. Said services and utilities shall be provided
during generally accepted business days between the hours of 7:00 a.m. and 7:30
p.m. and on Saturdays from 8:00 a.m. to 12:00 noon. Utilities and services
required at other times shall be subject to advance request and reimbursement by
Lessee to Lessor of the cost thereof. Lessee may request, no more frequently
than quarterly, Lessor to change such hours of service to such other 12-hour
period on Monday through Friday and such other 4-hour period on Saturday as
Lessee may establish as its customary business hours in the Premises. Lessee may
operate the Building HVAC and electrical systems serving the Premises before or
after the established 12-hour period for Monday through Friday and before or
after the established 4-hour period on Saturday but shall pay lessor Twelve
Dollars ($12.00) per hour for such use ("After-Hour Use Charge"). Lessor
reserves the right to increase the After-Hour Use Charge, from time to time, to
reflect solely the percentage increase in the rate charged to Lessor by the
utility provider for the provision of electricity. Lessee shall pay such charges
to Lessor, as additional rent, within thirty (30) days after receipt of a
written itemized statement from Lessor, itemizing all After Hour Use Charges
incurred by Lessee since the last such statement.
11.4 EXCESS USAGE BY LESSEE. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water, lighting
or power, or suffer or permit any act that causes extra burden upon the
utilities or services, including but not limited to security services, over
standard office usage for the Office Building Project. Lessor shall require
Lessee to reimburse Lessor for any excess expenses or costs that may arise out
of a breach of this subparagraph by Lessee. Lessor may in it sole discretion,
install at Lessee's expense supplemental equipment and/or separate metering
applicable to Lessee's excess usage or loading. Notwithstanding the foregoing,
Lessee shall not be deemed to have incurred excess use so long as Lessee
conducts solely the activities described in Paragraph 1.4.
11.5 INTERRUPTIONS. There shall be no abatement of rent and Lessor shall
not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service due to riot, strike,
labor dispute, breakdown, accident, repair or other cause beyond Lessor's
reasonable control or in cooperation with governmental request of directions,
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provided that, if any such interruption or discontinuance is in excess of 5 days
and results in a material disruption which precludes Lessee from operating its
business, Lessee shall be entitled to rent abatement for the period of such
interruption or discontinuance beyond such 5 days of material disruption.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a material
default and breach of this Lease without the need for notice to Lessee under
paragraph 13.1 "Transfer" within the meaning of this paragraph 12 shall include
the transfer or transfers aggregating (a) if Lessee is a corporation, more than
fifty percent (50%) of the voting stock of such corporation, or (b) if Lessee is
a partnership, more than fifty percent (50%) of the profit and loss
participation in such partnership. Notwithstanding the foregoing, Lessor's
consent shall not be required for each of the following transferees (any of
which are herein defined as a "Lessee Affiliate"):
(a) A transfer of one hundred percent (100%) of the
voting stock of Caseware, Inc. (a "Sale") if the Net Worth (as defined below) of
the entity acquiring Caseware, Inc. is at least equal to One Million Dollars
($1,000,000.00). "Net Worth" means the sum of all assets minus all liabilities
of the entity in question as shown on a certified financial statement (the
"Financial Statement") for the entity prepared by a certified public accountant
acceptable to Lessor in Lessor's reasonable judgment. Lessor shall be given
written notice of the proposed effective date of a Sale at least thirty (30)
days before that date and such notice shall include copies of the Financial
Statements of Caseware, Inc. and of the entity which intends to acquire
Caseware, Inc.
(b) A sublease of a portion of the Premises if the
aggregate total of all space in the Premises (not including the Second Floor
Additional Space (as defined in Rider No. 2 to this Lease), which space may be
subleased by Lessee without the consent of Lessor), including the area contained
in the portion of the Premises which Lessee intends to sublease, will not exceed
twenty-five percent (25%) of the square footage of the area of the Premises
then-occupied by Lessee.
(c) An assignment of any portion of Lessee's interest in
this Lease to (i) a trust established for estate planning purposes by Fed Cox
and/or Sol Zechter, or (ii) any family member of either such individual.
12.2 LESSEE AFFILIATE. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent to any corporation, partnership or other entity which
controls, is controlled by or is under common control with Lessee, or to any
corporation, partnership or other entity, resulting from the merger or
consolidation with Lessee, or to any person or entity which acquires all the
assets of Lessee as a going concern of the business that is being conducted on
the Premises, all of which are referred
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to as "Lessee Affiliate;" provided that before such assignment or sublease shall
be effective, (a) said assignee or sublessee shall assume, in full, the
obligations of Lessee under this Lease, (b) Lessor shall be given written notice
of such assignment and assumption. Any such assignment shall not, in any way,
affect or limit the liability of Lessee under the terms of this Lease even if
after such assignment or subletting the terms of this Lease are materially
changed or altered without the consent of Lessee, the consent of whom shall not
be necessary.
12.3 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, no assignment or
subletting shall release Lessee of Lessee's obligations hereunder or alter the
primary liability of Lessee to pay the rent and other sums due Lessor hereunder
including Lessee's Share of Operating Expense increase, and to perform all other
obligations to be performed by lessee hereunder.
(b) Lessor may accept rent from any person other than
Lessee pending approval or disapproval of such assignment.
(c) Neither a delay in the approval or disapproval of
such assignment or subletting, nor the acceptance of rent, shall constitute a
waiver or estoppel of Lessor's right to exercise its remedies for the breach of
any of the terms or conditions of this paragraph 12 or this Lease.
(d) If Lessee's obligations under this Lease have been
guaranteed by third parties, than an assignment or sublease, and Lessor's
consent thereto shall not be effective unless said guarantors give their written
consent to such sublease and the terms thereof.
(e) The consent by Lessor to any assignment or
subletting shall not constitute a consent to any subsequent assignment or
subletting by Lessee or to any subsequent or successive assignment or subletting
by the sublessee. However, Lessor may consent to subsequent subletting and
assignments of the sublease or any amendments or modifications thereto without
notifying Lessee or anyone else liable on the Lease or sublease and without
obtaining their consent and such action shall not relieve such persons from
liability under this Lease or said sublease; however, such persons shall not be
responsible to the extent any such amendment or modification enlarges or
increases the obligations of the Lessee or sublessee under this Lease or such
sublease.
(f) In the event of any default under this Lease, Lessor
may proceed directly against Lessee, any guarantors or any one else responsible
for the performance of this Lease, including the sublessee, without first
exhausting Lessor's remedies against any other person or entity responsible
therefor to Lessor, or any security held by Lessor or Lessee.
(g) Lessor's written consent to any assignment or
subletting of the Premises by Lessee shall not constitute an acknowledgement
that no default then exists under this Lease of the obligations to be performed
by Lessee nor shall such consent be deemed a waiver of any then existing
default, except as may be otherwise stated by Lessor at the time.
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(h) The discovery of the fact that any financial
statement relied upon by Lessor in giving its consent to an assignment or
subletting was materially false shall, at Lessor's election, render Lessor's
said consent null and void.
12.4 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING.
Regardless of Lessor's consent, the following terms and conditions shall apply
to any subletting by Lessee of all or any part of the Premises and shall be
deemed included in all subleases under this Lease whether or not expressly
incorporated therein.
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease heretofore
or hereafter made by Lessee, and Lessor may collect such rent and income and
apply same toward Lessee's obligations under this Lease; provided, however, that
until a default shall occur in the performance of Lessee's obligations under
this Lease, Lessee may receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of this or any other assignment of such
sublease to Lessor nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under such
sublease. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice from Lessor stating that a default exists in
the performance of Lessee's obligations under this Lease, to pay to Lessor the
rents due and to become due under the sublease. Lessee agrees that such
sublessee shall have the right to rely upon any such statement and request from
Lessor, and that such sublessee shall pay such rents to Lessor without any
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against said sublessee or Lessor for any such rents
so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be
effective unless and until it has been approved in writing by Lessor. In
entering into any sublease, Lessee shall use only such form of sublessee as is
satisfactory to Lessor, and once approved by Lessor such sublease shall not be
changed or modified without Lessor's prior written consent. Any sublease shall,
by reason of entering into a sublease under this Lease, be deemed, for the
benefit of Lessor to have assumed and agreed to conform and comply with each and
every obligation herein to be performed by Lessee other than such obligations as
are contrary to or inconsistent with provisions contained in a sublease to which
Lessor has expressly consented in writing.
(c) In the event Lessee shall default in the performance
of its obligations under this Lease, Lessor at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of Lessee under such sublease from
the time of the exercise of said option to the termination of such sublease,
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to Lessee or for any other prior defaults of
Lessee under such sublease.
(d) No sublessee shall further assign or sublet all or
any part of the Premises without Lessor's prior written consent.
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(e) With respect to any subletting to which Lessor has
consented, Lessor agrees to deliver a copy of any notice of default by Lessee to
the sublessee. Such sublessee shall have the right to cure a default of Lessee
within three (3) days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset from
and against Lessee for any such defaults cured by the sublessee.
12.5 LESSOR'S EXPENSES. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable costs and expenses incurred in
connection therewith, including attorneys', architects,' or other consultants'
fees not to exceed $2,500 for any single request for consent.
12.6 CONDITIONS TO CONSENT. Lessor reserves the right to condition any
approval to assign or sublet upon Lessor's determination that (a) the proposed
assignee or sublessee shall conduct a business on the Premises of a quality
substantially equal to that of Lessee and consistent with the general character
of the other occupants of the Office Building Project and not in violation of
any exclusives or rights then held by other tenants, and (b) the proposed
assignee be at least as financially responsible as Lessee was expected to be at
the time of the execution of this Lease or of such assignment or subletting,
whichever is greater.
13. DEFAULT; REMEDIES.
13.1 DEFAULT. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee.
(a) The vacation or abandonment of the Premises by
Lessee. Vacation of the Premises shall include the failure to occupy the
Premises for a continuous period of sixty (60) days or more, whether or not the
rent is paid.
(b) The breach by Lessee of any of the covenants,
conditions or provisions of paragraphs 7.3(a), (b) or (d) (alterations), 12.1
(assignment or subletting), 13.1(a) (vacation or abandonment), 13.1(e)
(insolvency), 13.1(f) (false statement), 16(a) (estoppel certificate), 30(b)
(subordination), 33 (auctions), or 41.1 (easements), all of which are hereby
deemed to be material, non-curable defaults without the necessity of any notice
by Lessor to Lessee thereof.
(c) The failure by Lessee to make any payment of rent or
any other payment required to be made by Lessee hereunder as and when due where
such failure shall continue for a period of three (3) days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.
(d) The failure by Lessee to observe or perform any of
the covenants, conditions or provisions of this Lease to be observed or
performed by Lessee other than those referenced in subparagraphs (b) and (c)
above, where such failure shall continue for a period of thirty (30) days after
written notice thereof from Lessor to Lessee; provided, however, that if the
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nature of Lessee's noncompliance is such that more than thirty (30) days are
reasonably required for its cure, then Lessee shall not be deemed to be in
default if Lessee commenced such cure within said (30) day period and thereafter
diligently pursues such cure completion. To the extent permitted by law, such
thirty (30) day notice shall constitute the sole and exclusive notice required
to be given to Lessee under applicable Unlawful Detainer statutes.
(e) (i) The making by Lessee of any general arrangement or
general assignment for the benefit of creditors; (ii) Lessee becoming a debtor
as defined in 11 U.S.C. Section 101 or any successor statute thereto (unless in
the case of a petition filed against Lessee, the same is dismissed within ninety
(90) days; (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within ninety
(90) days; (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within ninety (90)
days. In the event that any provision of this paragraph 13(e) is contrary to any
applicable law, such provision shall no be of no force or effect.
(f) The discovery by Lessor that any financial statement
given to Lessor by Lessee, or its successor in interest or by any guarantor of
Lessee's obligation hereunder, was materially false.
13.2 REMEDIES. In the event of any material default or breach of this
lease by Lessee, Lessor may at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such default:
(a) Terminate Lessee's right to possession of the
Premises by any lawful means, in which case this Lease and the term hereof shall
terminate and Lessee shall immediately surrender possession of the Premises to
Lessor. In such event Lessor shall be entitled to recover from Lessee all
damages incurred by Lessor by reason of Lessee's default including, but not
limited to, the cost of recovering possession of the Premises; expenses of
reletting, including necessary renovation and alteration of the Premises,
reasonable attorneys' fees, and any real estate commission actually paid, the
worth at the time of award by the court having jurisdiction thereof of the
amount by which the unpaid rent for the balance of the term after the time of
such award exceeds the amount of such rental loss for the same period that
Lessee proves could be reasonably avoided; that portion of the leasing
commission paid by Lessor pursuant to paragraph 15 applicable to the unexpired
term of this Lease.
(b) Maintain Lessee's right to possession in which case
this Lease shall continue in effect whether or not Lessee shall have vacated or
abandoned the Premises. In such event Lessor shall be entitled to enforce all of
Lessor's rights and remedies under this Lease, including the right to recover
the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located. Unpaid installments of rent and other unpaid monetary obligations
of Lessee under the terms of this Lease shall bear interest from the date due at
the maximum rate then allowable by law.
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13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required to Lessor within a reasonable time, but in
no event later than thirty (30) days after written notice by Lessee to Lessor
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default in Lessor commences performance within such 30-day period and thereafter
diligently pursues the same to completion.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of Base Rent, Lessee's Share of Operating Expense increase or
other sums due hereunder will cause Lessor to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting charges,
and late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Office Building Project. Accordingly, if any installment
of Base Rent, Operating Expense Increase or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within ten(10) days after such
amount shall be due then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to 3% of such overdue amount. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of late payment by Lessee.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's default with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder.
14. CONDEMNATION. If the Premises or any portion thereof or the Office Building
Project are taken under the power of eminent domain, or sold under the threat of
the exercise of said power (all of which are herein called "condemnation"), this
Lease shall terminate as to the part so taken as of the date the condemning
authority takes title or possession, whichever first occurs; provided that if so
much of the Premises or the Office Building Project are taken by such
condemnation as would substantially and adversely affect the operation and
profitability of Lessee's business conducted from the Premises, Lessee shall
have the option, to be exercised only in writing within thirty (30) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within thirty (30) days after the condemning authority shall
have taken possession), to terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this increase shall be reduced in the proportion
that the floor area of the Premises taken bears to the total floor area of the
Premises. Common Areas taken shall be excluded from the Common Areas usable by
Lessee and no reduction of rent shall occur with respect thereto or by reason
thereof. Lessor shall have the option in its sole discretion to terminate this
Lease as of the taking of possession by the condemning authority, by giving
written notice to Lessee of such election within thirty (30) days after receipt
of notice of a taking by condemnation of any part of the Premises or the Office
Building Project. Any award for the taking of all or any part of the Premises or
the Office Building Project under the power of eminent domain or any payment
made under threat of the exercise of such power shall be the property of Lessor,
whether such award shall be made as compensation for diminution in value of the
leasehold or for taking of the fee, or as severance damages; provided, however,
that Lessee shall be entitled to any separate
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award for loss of or damage to Lessee's trade fixtures, removable personal
property and unamortized tenant improvements that have been paid for by Lessee.
For that purpose the cost of such improvements shall be amortized over the
original term of this Lease excluding any options. In the event that this Lease
is not terminated by reason of such condemnation, Lessor shall to the extent of
severance damages received by Lessor in connection with such condemnation,
repair any damage to the Premises caused by such condemnation except to the
extent that Lessee has been reimbursed therefor by the condemning authority.
Lessee shall pay any amount in excess of such severance damages required to
complete such repair.
15. BROKER'S FEE.
(a) The brokers involved in this transaction are Craig Perkins &
Derek Dean of Grubb & Ellis as "listing broker" and Jim Cunningham of Grubb &
Ellis as "cooperating broker," licensed real estate broker(s). A "cooperating
broker" is defined as any broker other than the listing broker entitled to a
share of any commission arising under this Lease. Upon execution of this Lease
by both parties, Lessor shall pay to said brokers jointly, or in such separate
shares as they may mutually designate in writing, a fee as set forth in a
separate agreement between Lessor and said broker(s), or in the event there is
no separate agreement between Lessor and said broker(s), the sum of $[per
separate agreement], for brokerage services rendered by said broker(s) to Lessor
in this transaction.
(b) Lessee and Lessor each represent and warrant to the other
that neither has had any dealings with any person, firm, broker or finder (other
than the person(s), if any, whose names are set forth in paragraph 15(a) above)
in connection with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby and no other broker or other person, firm or
entity is entitled to any commission or finder's fee in connection with said
transaction and Lessee and Lessor do each hereby indemnify and hold the other
harmless from and against any costs, expenses, attorneys' fees or liability for
compensation or charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of the indemnifying
party.
16. ESTOPPEL CERTIFICATE.
(a) Each party (as "responding party") shall at any time upon not
less than ten (10) days' prior written notice from the other party ("requesting
party") execute, acknowledge and deliver to the requesting party a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Office Building Project or
of the business of Lessee.
(b) At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it shall
be conclusive upon such party that (i) this Lease is in
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full force and effect, without modification, except as may be represented by the
requesting party, (ii) there are no uncured defaults in the requesting party's
performance and (iii) if Lessor is the requesting party, not more than one
month's rent has been paid in advance.
(c) If Lessor desires to finance, refinance, or sell the Office
Building Project, or any part thereof, Lessee hereby agrees to deliver to any
lender or purchaser designated by Lessor such financial statements of Lessee as
may be reasonably required by such lender or purchaser. Such statements shall
include the past three (3) years' financial statements of Lessee. All such
financial statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only the
owner or owners, at the time in question, of the fee title or a lessee's
interest in a ground lease of the Office Building Project, and except as
expressly provided in Paragraph 15, in the event of any transfer of such title
or interest. Lessor herein named (and in case of any subsequent transfers then
the grantor) shall be relieved from and after the date of such transfer of all
liability as respects Lessor's obligations thereafter to be performed, provided
that any funds in the hands of Lessor or the then grantor at the time of such
transfer, in which Lessee has an interest, shall be delivered to the grantee.
The obligations contained in this Lease to be performed by Lessor shall, subject
as aforesaid, be binding on Lessor's successors and assigns, only during their
respective periods of ownership.
18. SEVERABILITY. The invalidity of any provision of this Lease as determined by
a court of competent jurisdiction shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law or judgments from the date due. Payment of such interest
shall not excuse or cure any default by Lessee under this Lease; provided,
however, that interest shall not be payable on late charges incurred by Lessee
nor on any amounts upon which late charges are paid by Lessee.
20. TIME OF ESSENCE. Time is of the essence with respect to the obligations to
be performed under this Lease.
21. ADDITIONAL RENT. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's Share of Operating
Expense Increase and any other expenses payable by Lessee hereunder shall be
deemed to be rent.
22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
or contemporaneous agreement or understanding pertaining to any such matter
shall be effective. This Lease may be modified in writing only, signed by the
parties in interest at the time of the modification. Except as otherwise stated
in this Lease, Lessee hereby acknowledges that neither the real estate broker
listed in paragraph 15 hereof nor any cooperating broker on this transaction nor
the Lessor or any employee or agents of any of said persons has made any oral or
written warranties or representations to Lessee relative to the condition or use
by Lessee of the Premises or the Office Building Project and Lessee acknowledges
that Lessee assumes all responsibility regarding the
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Occupational Safety Health Act, the legal use and adaptability of the Premises
and the compliance thereof with all applicable laws and regulations in effect
during the term of this Lease.
23. NOTICES. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery or by certified or registered
mail, and shall be deemed sufficiently given if delivered or addressed to Lessee
or to Lessor at the address noted below or adjacent to the signature of the
respective parties, as the case may be. Mailed notices shall be deemed given
upon actual receipt at the address required, or forty-eight hours following
deposit in the mail, postage prepaid, whichever first occurs. Either party may
by notice to the other specify a different address for notice purposes except
that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereafter designate by notice to Lessee.
24. WAIVERS. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to or approval of any
subsequent act shall not be deemed to render unnecessary the obtaining of
Lessor's consent to or approval of any subsequent act by Lessee. The acceptance
of rent hereunder by Lessor shall not be a waiver of any preceding breach by
Lessee of any provision hereof other than the failure of Lessee to pay the
particular rent so accepted, regardless of Lessor's knowledge of such preceding
breach at the time of acceptance of such rent.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession of the
Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, except that the rent payable
shall by one hundred twenty-five percent (125%) of the rent payable immediately
preceding the termination date of this Lease, and all Options, if any, granted
under the terms of this Lease shall be deemed terminated and be of no further
effect during said month to month tenancy.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. Each provision of this Lease performable by Lessee
shall be deemed both a covenant and a condition.
29. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of paragraph
17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
where the Office Building Project is located and any litigation concerning
27.
<PAGE> 28
this Lease between the parties hereto shall be initiated in the county in which
the Office Building Project is located.
30. SUBORDINATION.
(a) This Lease, and any Option or right of first refusal granted
hereby, at Lessor's option, shall be subordinate to any ground lease, mortgage,
deed of trust, or any other hypothecation or security now or hereafter placed
upon the Office Building Project and to any and all advances made on the
security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof. Notwithstanding such subordination,
Lessee's right to quiet possession of the Premises shall not be disturbed if
Lessee is not in default and so long as Lessee shall pay the rent and observe
and perform all of the provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms. If any mortgagee, trustee or ground lessor
shall elect to have this Lease and any Options granted hereby prior to the lien
of its mortgage, deed of trust or ground lease, and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
mortgage, deed of trust or ground lease, whether this Lease or such Options are
dated prior or subsequent to the date of said mortgage deed of trust or ground
lease or the date of recording thereof.
(b) Lessee agrees to execute any documents required to effectuate
an attornment, a subordination or to make this Lease or any Option granted
herein prior to the lien of any mortgage deed of trust or ground lease, as the
case may be, provided Lessee has received a nondisturbance agreement in a form
reasonably acceptable to Lessee pursuant to which Lessee's tenancy shall not be
disturbed by the holder of such mortgage or deed of trust or the lessor under
such ground lease for so long as Lessee is not in default under this Lease.
Lessee's failure to execute such documents within ten (10) days after written
demand shall constitute a material default by Lessee hereunder without further
notice to Lessee or, at Lessor's option, Lessor shall execute such documents on
behalf of Lessee as Lessee's attorney-in-fact. Lessee does hereby make,
constitute and irrevocably appoint Lessor as Lessee's attorney-in-fact and in
Lessee's name, place and stead, to execute such documents in accordance with
this paragraph 30(b).
31. ATTORNEYS' FEES.
31.1 If either party or the broker(s) named herein bring an action to
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, trial or appeal thereof, shall be entitled to his reasonable
attorneys' fees to be paid by the losing party as fixed by the court in the same
or a separate suit, and whether or not such action is pursued to decision or
judgment. The provisions of this paragraph shall inure to the benefit of the
broker named herein who seeks to enforce a right hereunder.
31.2 The attorneys' fee award shall not be computed in accordance with
any court fee schedule, but shall be such as to fully reimburse all attorneys'
fees reasonably incurred in good faith.
31.3 Lessor shall be entitled to reasonable attorneys' fees and all
other costs and expenses incurred in the preparation and service of notice of
default and consultations in
28.
<PAGE> 29
connection therewith, whether or not a legal transaction is subsequently
commenced in connection with such default.
32. LESSOR'S ACCESS.
32.1 Lessor and Lessor's agents shall have the right to enter the
Premises at reasonable times during regular business hours and on 24-hours prior
notice (except for emergencies in which case no notice shall be required) for
the purpose of inspecting the same, performing any services required of Lessor,
showing the same to prospective purchasers, lenders or lessees, taking such
safety measures, erecting such scaffolding or other necessary structures, making
such alterations, repairs, improvements or additions to the Premises or to the
Office Building Project as lessor may reasonably deem necessary or desirable and
the erecting, using and maintaining of utilities, services, pipes and conduits
through the Premises and/or other premises as long as there is no material
adverse effect to Lessee's use of the Premises. Lessor may at any time place on
or about the Premises or the Building any ordinary "For Sale" signs and lessor
may at any time during the last 120 days of the term hereof place on or about
the Premises any ordinary "For Lease" signs.
32.2 All activities of Lessor pursuant to this paragraph shall be
without abatement of rent, nor shall Lessor have any liability to Lessee for the
same
32.3 Lessor shall have the right to retain keys to the Premises and to
unlock all doors in or upon the Premises other than to files, vaults and safes,
and in the case of emergency to enter Premises by any reasonably appropriate
means, and any such entry shall not be deemed a forceable or unlawful entry or
detainer of the Premises or an eviction. Lessee waives any charges for damages
or injuries or interference with Lessee's property or business in connection
therewith.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common Areas
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent. The holding of any auction on the Premises or Common Areas in violation
of this paragraph shall constitute a material default of this Lease.
34. SIGNS. Except as provided in paragraph 51 of this Lease, Lessee shall not
place any sign upon the Premises or the Office Building Project without Lessor's
prior written consent. Under no circumstances shall Lessee place a sign on any
roof of the Office Building Project.
35. MERGER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. CONSENTS. Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever in this Lease the consent of one party is required to an act of the
other party such consent shall not be unreasonably withheld or delayed.
29.
<PAGE> 30
37. GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and observing
and performing all of the covenants, conditions and provisions on Lessee's part
to be observed and performed hereunder Lessee shall have quiet possession of the
Premises for the entire term hereof subject to all of the provisions of this
Lease. The individuals executing this Lease on behalf of Lessor represent and
warrant to Lessee that they are fully authorized and legally capable of
executing this Lease on behalf of Lessor and that such execution is binding upon
all parties holding an ownership interest in the Office Building Project.
39. OPTIONS.
39.1 DEFINITION. As used in this paragraph the word "Option" has the
following meaning: (1) the right or option to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option of right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of first
refusal to lease other space within the Office Building Project or other
property of Lessor or the right of first offer to lease other space within the
Office Building Project or other property of Lessor; (3) the right or option to
purchase the Premises or the Office Building Project, or the right of first
refusal to purchase the Premises or the Office Building Project or the right of
first offer to purchase the Premises or the Office Building Project, or the
right or option to purchase other property of Lessor, or the right of first
refusal to purchase other property of Lessor or the right of first offer to
purchase other property of Lessor.
39.2 OPTIONS PERSONAL. Each Option granted to Lessee in this Lease is
personal to the original Lessee and may be exercised only by the original Lessee
while occupying the Premises who does so without the intent of thereafter
assigning this Lease or subletting the Premises or any portion thereof, and may
not be exercised or be assigned, voluntarily or involuntarily, by or to any
person or entity other than Lessee; provided, however, that an Option may be
exercised by or assigned to any Lessee Affiliate as defined in paragraph 12.2 of
this Lease. The Options, if any, herein granted to Lessee are not assignable
separate and apart from this Lease, nor may any Option be separated from this
Lease in any manner, either by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple options
to extend or renew this Lease a later option cannot be exercised unless the
prior option to extend or renew this Lease has been so exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i) during
the time commencing from the date Lessor gives to Lessee a notice of default
pursuant to paragraph 13.1(c) or 13.1(d) and continuing until the noncompliance
alleged in said notice of default is cured, or (ii) during the period of time
commencing on the day after a monetary obligation to Lessor is due from Lessee
and unpaid (without any necessity for notice thereof to Lessee) and continuing
until the obligation is paid, or (iii) in the event that Lessor has given to
Lessee three or more notices of
30.
<PAGE> 31
default under paragraph 13.1(c) or paragraph 13.1(d), whether or not the
defaults are cured, during the 12 month period of time immediately prior to the
time that Lessee attempts to exercise the subject Option, (iv) if Lessee has
committed any non-curable breach, including without limitation, those described
in paragraph 13.1(b), or is otherwise in default of any of the terms, covenants
or conditions of this Lease.
(b) The period of time within which an Option may be
exercised shall not be extended or enlarged by reason of Lessee's inability to
exercise an Option because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of
Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessee fails to commence to cure a default specified in paragraph 13.1(d) within
thirty (30) days after the date that Lessor gives notice to Lessee of such
default and/or Lessee fails thereafter to diligently prosecute said cure to
completion, or (iii) Lessor gives to Lessee three or more notices of default
under paragraph 13.1.(c), or paragraph 13.1(d), whether or not the defaults are
cured, or (iv) if Lessee has committed any non-curable breach, including without
limitation those described in paragraph 13.1(b), or is otherwise in default of
any of the terms, covenants and conditions of this Lease.
40. SECURITY MEASURES - LESSOR'S RESERVATION.
40.1 Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide guard service or other security measures for the benefit
of the Premises or the Office Building Project. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole option,
from providing security protection for the Office Building Project or any part
thereof, in which event the cost thereof shall be included within the definition
of Operating Expenses, as set forth in paragraph 4.2(b). If Lessor elects to
provide security protection pursuant to the immediately preceding sentence,
Lessor shall use its best efforts to inform Lessee of the nature of those
security protection arrangements.
40.2 Lessor shall have the following rights:
(a) To change the name, address or title of the Office
Building Project or building in which the Premises are located upon not less
than 90 days prior written notice;
(b) To, at Lessor's expense, provide and install Building
standard graphics on the door of the Premises, the lobby directory and such
portions of the Common Areas as Lessor shall reasonably deem appropriate;
(c) To permit any lessee the exclusive right to conduct
any business as long as such exclusive does not conflict with any rights
expressly given herein;
31.
<PAGE> 32
(d) To place such signs, notices or displays as Lessor
reasonably deems necessary or advisable upon the roof, exterior of the buildings
or the Office Building Project or on pole signs in Common Areas;
40.3 Lessee shall not suffer or permit anyone, except in emergency, to
go upon the roof of the Building.
41. EASEMENTS.
41.1 Lessor reserves to itself the right, from time to time, to grant
such easements, rights and dedications that Lessor deems necessary or desirable,
and to cause the recordation of Parcel maps and restrictions, so long as such
easements, rights, dedications, maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material default of this Lease by Lessee without the need for
further notice to Lessee.
41.2 The obstruction of Lessee's view, air, or light by any structure
erected in the vicinity of the Building, whether by Lessor or third parties,
shall in no way affect this Lease or impose any liability upon Lessor.
42. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the provisions
hereof, the party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment, and there shall survive the right on the part
of said party to institute suit for recovery of such sum. If it shall be
adjudged that there was no legal obligation on the part of said party to pay
such sum or any part thereof, said party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions of
this Lease.
43. AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, Lessee, and each individual executing this Lease on behalf of such
entity, represent and warrant that such individual is duly authorized to execute
and deliver this Lease on behalf of said entity. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days after execution of
this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
44. CONFLICT. Any conflict between the printed provisions, Exhibits or Addenda
of this Lease and the typewritten or handwritten provisions, if any, shall be
controlled by the typewritten or handwritten provisions.
45. NO OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This Lease shall become biding upon Lessor and Lessee only when fully executed
by both parties.
46. LENDER MODIFICATION. Lessee agrees to make such reasonable modifications to
this Lease as may be reasonably required by an institutional lender in
connection with the obtaining of normal financing or refinancing of the Office
Building Project.
32.
<PAGE> 33
47. MULTIPLE PARTIES. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint an several
responsibility of all persons or entities named herein as such Lessor or Lessee,
respectively.
48. WORK LETTER. This Lease is supplemented by that certain Work Letter of even
date executed by Lessor and Lessee, attached hereto as Exhibit C, and
incorporated herein by this reference.
49. ATTACHMENTS. Attached hereto are the following documents which constitute a
part of this Lease:
(a) Addendum to Office Building Lease, dated March 5,
1992, between Lessor and Lessee; and
(b) Rider Nos. 1, 2, 3 and 4.
NOTICES.
Lessee: Mr. Fred Cox
Caseware Inc.
108 Pacifica, Suite 200
Irvine, CA 92718
Lessor: Mr. Todd Smith
Lomas Management
1420 Viceroy Drive
Dallas, TX 95235
Property Manager: Mr. Rick Macklin
1500 Quail Street, Suite 250
Newport Beach, CA 92660
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE, AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
33.
<PAGE> 34
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR
SUBMISSION TO YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION
OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION OR BY THE REAL ESTATE BROKER OR ITS AGENTS OR
EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO;
THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL
COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
LESSOR LESSEE
ST LENDING, INC., CASEWARE, INC.,
A DELAWARE CORPORATION A CALIFORNIA CORPORATION
By: /s/ Todd Smith By: /s/ Fred Cox
-------------------------- ----------------------
Todd Smith Fred Cox
Its Vice President Its President
Executed at Dallas, TX Executed at Costa Mesa, CA
on 4/4/92 on 4/2/92
Address: 1920 Viceroy Drive Address:____________________
Dallas, TX 75235 ____________________
34.
<PAGE> 35
ADDENDUM TO OFFICE BUILDING LEASE
BETWEEN ST LENDING INC. ("LESSOR")
AND CASEWARE, INC. ("LESSEE")
DATED MARCH 5, 1992
50. TENANT IMPROVEMENTS. Prior to Lessee's occupancy Lessor shall, at Lessor's
expense, clean and repair the existing carpet in the Premises and inspect and
repair or replace, as necessary to place in good working condition, all
electrical outlets, light fixtures, ceiling tiles, HVAC and plumbing located in
or serving the Premises and shall make all improvements/repairs as described in
Exhibit C. Otherwise, except as described in Exhibit C attached to the Lease and
incorporated herein by reference, the Premises shall be delivered "As Is."
51. SIGNAGE. Lessee may obtain approval for, install and maintain, all at
Lessee's sole cost and expense, (a) secondary eyebrow signage (the "Secondary
Sign") on the facade of the building facing Pacifica Ave., (b) primary eyebrow
signage ("Primary Sign") on the facade of the building facing State Route 133,
and (c) a monument sign. The Secondary Sign and the Primary Sign shall comply
with all approval and other requirements of (i) all applicable codes, statutes,
and regulations of each governmental entity with jurisdiction over the Building
and (ii) all covenants, conditions and restrictions affecting the Building. The
aesthetics, size, appearance, and location of the Primary Sign and the Secondary
Sign shall, before installation, be approved by Lessor in writing which approval
shall not be unreasonably withheld. If Lessor fails to reasonably disapprove
Lessee's proposed signs within ten (10) days following its receipt of design
specifications, they shall be deemed approved. Lessor shall cooperate, without
any obligation to incur any costs or pursue any legal action against any party,
with Lessee in Lessee's efforts to obtain all necessary approvals of the
Secondary Sign and the Primary Sign. Lessee's failure to obtain approval of
either or both the Primary Sign or the Secondary Sign shall not constitute a
breach of this Lease by Lessor or entitle Lessee to any abatement or reduction
in Base Rent or any other obligations of Lessee under this Lease. Lessee may at
its sole expense place a monument sign of reasonable size and in a reasonable
location if such sign is (a) approved by cognizant governmental agencies, and
(b) in compliance with all covenants, conditions and restrictions applicable to
the Premises.
52. Lessee acknowledges (i) the presence of the Marine Air Base and the
accompanying aircraft noise over and around the Premises, and (ii) the presence
of hazardous materials in the water table deep below ground under the Premises
which have apparently resulted from the Marine Base operations nearby. Lessor
shall indemnify, defend and hold Lessee harmless for any loss, damage, claim,
cost or expense Lessee incurs as a result of the presence of hazardous materials
described in this Paragraph 52(ii).
53. Lessee shall have the right to cancel this Lease by written notice given to
Lessor on or before April 17, 1992, if either (i) Lessor has not delivered to
Lessee a nondisturbance and attornment agreement in form reasonably satisfactory
to Lessee executed by each person or entity holding the beneficial interest
under any mortgage or deed of trust encumbering the Office Building Project
prior to Lessee's taking possession of the Premises, or (ii) Lessee disapproves
the condition of title to the Office Building Project (provided that Lessee
shall not unreasonably withhold its approval thereof). If Lessee has not
cancelled this Lease by April 17, 1992 by
1.
<PAGE> 36
written notice as provided above, Lessee shall be deemed to have waived the
foregoing contingencies and its right to cancel and the Lease shall remain in
full force and effect. If Lessee cancels this Lease as provided herein, Lessor
shall return Lessee's security deposit to Lessee within five (5) days after such
cancellation and neither Lessor nor Lessee shall have any further liability to
the other.
2.
<PAGE> 37
EXHIBIT A
STANDARD OFFICE LEASE
FLOOR PLAN
[DRAWING OF FLOOR PLAN]
EXHIBIT A
<PAGE> 38
RULES AND REGULATIONS FOR
STANDARD OFFICE LEASE
Dated: March 5, 1992
By and Between ST LENDING INC. ("Lessor"), and CASEWARE INC. ("Lessee")
GENERAL RULES
1. Lessee shall not suffer or permit the obstruction of any Common
Areas, including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor in
good faith judges to be a threat to the safety, reputation, or property of the
Office Building Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or
interfere with other lessees or persons having business within the Office
Building Project.
4. Lessee shall not keep animals or birds within the Office Building
Project, and shall not bring bicycles, motorcycles or other vehicles into areas
not designated as authorized for same.
5. Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks or
bolts, except as reasonably necessary to secure the Premises and then only if
Lessee provides Lessor with functioning copies of all keys needed to gain access
to the Premises.
7. Lessee shall be responsible for the inappropriate use of any toilet
rooms, plumbing or other utilities. No foreign substances of any kind are to be
inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of
the Premises or the Office Building Project.
9. Lessee shall not suffer or permit any thing in or around the Premises
or Building that causes excessive vibration or floor loading in any part of the
Office Building Project.
10. Furniture, significant freight and equipment shall be moved into or
out of the building only with the Lessor's knowledge and consent, and subject to
such reasonable limitations, techniques and timing, as may be designated by
Lessor, Lessee shall be responsible for any damage to the Office Building
Project arising from any such activity.
11. Lessee shall not employ any service or contractor for services for
work to be performed in the Building, except for work to be done to the Premises
in connection with Lessee's business activities or as approved by Lessor.
EXHIBIT B
<PAGE> 39
12. Lessor reserves the right to close and lock the Building on
Saturdays, Sundays and legal holidays, and on other days between the hours of
6:30 p.m. and 6:30 a.m. of the following day. If Lessee uses the Premises during
such periods, Lessee shall be responsible for securely locking any doors it may
have opened for entry.
13. Lessee shall return all keys at the termination of its tenancy and
shall be responsible for the cost of replacing any keys that are lost.
14. No window coverings, shades or awnings shall be installed or used by
Lessee.
15. No Lessee, employee or invitee shall go upon the roof of the
Building.
16. Lessee shall not suffer or permit smoking or carrying of lighted
cigars or cigarettes in areas reasonably designated by Lessor or by applicable
governmental agencies as non-smoking areas.
17. Lessee shall not use any method or heating or air conditioning other
than as provided by Lessor.
18. Lessee shall not install, maintain or operate any vending machines
upon the Premises without Lessor's written consent.
19. The Premises shall not be used for lodging or manufacturing, cooking
or food preparation, except the use by Lessee of Underwriters' Laboratory
approved equipment for brewing coffee, tea, hot chocolate and similar beverages
shall be permitted, and the use of a microwave oven, vending machines,
refrigerator, dishwasher, stove and oven for employees' use shall be permitted,
provided that such equipment and use is in accordance with all applicable
federal, state, county and city laws, codes, ordinances, rules and regulations.
20. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.
21. Lessor reserves the right to waive any one of these rules or
regulations, and/or as to any particular Lessee, and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
22. Lessee assumes all risks from theft or vandalism and agrees to keep
its Premises locked as may be required.
23. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and safety of the Office Building Project and it occupants, Lessee
agrees to abide by these and such rules and regulations.
EXHIBIT B
<PAGE> 40
PARKING RULES
1. Parking areas shall be used only for parking by vehicles no longer
than full size, passenger automobiles herein called "Permitted Size Vehicles."
Vehicles other than Permitted Size Vehicles are herein referred to as "Oversized
Vehicles."
2. Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers, or
invitees to be loaded, unloaded, or parked in areas other than those designated
by Lessor for such activities.
3. Parking stickers or identification devices shall be the property of
Lessor and be returned to Lessor by the holder thereof upon termination of the
holder's parking privileges. Lessee will pay such replacement charge as is
reasonably established by Lessor for the loss of such devices.
4. Lessor reserves the right to refuse the sale of monthly
identification devices to any person or entity that willfully refuses to comply
with the applicable rules, regulations, laws and/or agreements.
5. Lessor reserves the right to relocate all or a party of the
unreserved parking spaces from floor to floor, or within one floor and to
reasonably allocate them between compact and standard size spaces, as long as
the same complies with the applicable laws, ordinances and regulations.
6. Users of the parking area will obey all posted signs and park only
the areas designated for vehicle parking.
7. Unless otherwise instructed, every person using the parking area is
required to park and lock his own vehicle, Lessor will not be responsible for
any damage to vehicles, injury to persons or loss of property, all of which
risks are assumed by the party using the parking areas.
8. Validation, if established, will be permissible only by such method
or methods as Lessor and/or it licensee may establish at rates generally
applicable to visitor parking.
9. The maintenance, washing, waxing or cleaning of vehicles in the
parking structure or Common Areas is prohibited.
10. Lessee shall be responsible for seeing that all of its employees,
agents and invitees comply with the applicable parking rules, regulations, laws
and agreements.
11. Lessor reserves the right to modify these rules and/or adopt such
other reasonable and non-discriminatory rules and regulations as it may deem
necessary for the proper operation of the parking area.
12. Such parking use as is herein provided is intended merely as a
license only and no bailment is intended or shall be created hereby.
EXHIBIT B
<PAGE> 41
ADDITIONAL TENANT IMPROVEMENTS
The following is a punch list of improvements which are to be completed by
Lessor at Lessor's sole cost and expense prior to Lessee's occupancy. These
improvements are subject to governmental approvals and restrictions. The
improvements are listed in order and correspond to the numbers on the attached
Exhibit "Punch List".
1. Hallway: Repair damage to wall caused by door handle and add a door
stop.
2. Remove existing wall, door and ceiling. Relocate desk top. Repair
carpet, walls and ceiling.
3. Add a wall and door to create an office similar in size to the
contiguous office to the North.
4. Add carpet and patch carpet base.
5. Remove existing materials being stored. Paint room and finish door
frame.
6. Add two (2) rooms and doors.
7. Add dead bolt.
8. Repair damaged walkboard above base.
9. Add metal plate to backside of door and cover existing electrical holes
with cover plates.
10. Paint and add two cover plates.
11. Patch and paint walls. Replace missing vinyl tiles.
12. Add custom door with grill. Do not close off air plenum.
13. Patch base.
14. Add dead bolt lock (two way).
15. Patch carpet, paint room and add base.
16. Remove carpet and use as filler for patching where necessary. Replace
with new carpet. Re-attach keyboard shelve to reception desk. Add
baseboard and paint lobby.
17. Add dead bolt.
18. Repair lobby entry door so it closes and locks properly.
19. Conference Room - Trim projection room door so it opens and closes
smoothly. Add trim around door.
EXHIBIT C
<PAGE> 42
20. Add door between existing conference room and future "must take" space.
Add dead bolt lock (two ways) to this new door.
21. Finish base around conference room.
22. Remove Davcon signage from building and repair surface.
Landlord will clean, patch and repair the suite so the premises is in good
working order upon occupancy. Landlord will add carpet base and any vinyl base
where necessary and appropriate.
EXHIBIT C
<PAGE> 43
STANDARD OFFICE LEASE
FLOOR PLAN
[DRAWING OF FLOOR PLAN]
EXHIBIT C-1
<PAGE> 44
FIRST FLOOR OPTION AREA
EXHIBIT D
[DRAWING OF FLOOR PLAN]
<PAGE> 45
INDEX OF LEASE RIDERS
1. Option to Extend Term
2. Obligation to Lease Additional Space
3. Option to Lease Additional Space
4. Abated Rent Provisions
<PAGE> 46
LEASE RIDER NO. 1
OPTION TO EXTEND TERM
This Rider is attached to and made a part of that certain Standard
Office Lease Gross (the "Lease"), dated March 5, 1992, between ST Lending Inc.
("Lessor"), and Caseware, Inc. ("Lessee") for the premises known as Suite 200,
108 Pacifica, Irvine, California (the "Premises"). Defined or initially
capitalized terms in this Rider have the same meaning as in the Lease. The
provisions of this Rider shall supersede any inconsistent or conflicting
provisions of the Lease.
Lessor grants to Lessee an option (the "Option") to extend the term of
the Lease for five (5) additional years (the "Extension") on the same terms and
conditions as set forth in the Lease, except that the Base Rent shall be
adjusted on November 1, 1997, the first day of the Extension (the "Adjustment
Date") to an amount equal to the greater of (i) the Base Rent payable by Lessee
for the calendar month immediately preceding such Adjustment Date, or (ii)
ninety-five (95%) of the "fair rental value" of the Premises on the Adjustment
Date to be determined as follows:
(a) The Option shall be exercised only by written notice received by
Lessor at least two hundred seventy (270) days before expiration of the initial
term of the Lease. Such notice of exercise shall also include Lessee's
determination of the "fair rental value," including annual escalations, which
determination shall be considered by Lessor and Lessee during their good faith
negotiations under Paragraph (b) below. If Lessor does not timely receive
Lessee's written notice of the exercise of the Option, the Option under this
Rider shall immediately lapse, and there shall be no further right to extend the
term or to the Extension. The Option shall be exercisable by Lessee on the
express condition for Lessor's benefit that Lessee shall not be in default
either at the time of the exercise of the Option or at the commencement of the
Extension. If Lessee timely exercises the Option under this Rider, "term" shall
mean, for all purposes under the Lease unless otherwise indicated, the sum of
(a) the initial lease term, plus (b) the term of the Extension for which the
Option has been exercised.
(b) At least two hundred sixty (260) days before the Adjustment Date,
Lessor and Lessee shall meet in an effort to negotiate, in good faith, the fair
rental value of the Premises, including annual escalations, as of the Adjustment
Date. If Lessor and Lessee have not agreed upon the fair rental value of the
Premises at least two hundred forty (240) days before the Adjustment Date,
Lessor and Lessee shall attempt to agree in good faith upon a single appraiser
not later than two hundred thirty (230) days before the Adjustment Date. If
Lessor and Lessee are unable to agree upon a single appraiser within this time
period, then Lessor and Lessee shall each appoint one (1) appraiser not later
than two hundred ten (210) days before the Adjustment Date. Within ten (10) days
thereafter, the two appointed appraisers shall appoint a third appraiser. If
either Lessor or Lessee fails to appoint its appraiser within the prescribed
time period, the single appraiser appointed shall determine the fair rental
value of the Premises. If both parties fail to appoint appraisers with in the
prescribed time periods, then the first appraiser thereafter selected by a party
shall determine the fair rental value of the Premises. Each party shall bear the
cost of its own appraiser, and the parties shall share equally the cost of a
single or a third appraiser, if applicable. Each appraiser shall have at least
five (5) years experience in the
1
<PAGE> 47
appraisal of Class A office buildings in Orange County, California and shall be
a member of one or more professional organizations such as MAI or an equivalent.
(c) For purposes of such appraisal, "fair rental value" shall mean the
price that a ready and willing tenant would pay, as of the Adjustment Date, as
monthly rent to a ready and willing landlord of comparable, first-class office
buildings in the vicinity of the Building for space comparable to the Premises
if that property were exposed for lease on the open market for a reasonable
period of time with a lease comparable to the Lease and with tenant improvements
comparable to those in the Premises, including annual escalations. If a single
appraiser is chosen, then such appraisal shall determine the fair rental value
of the Premises. Otherwise, (i) the fair rental value of the Premises as of the
Adjustment Date shall be the arithmetic average of the fair rental value
established by the two of the three appraisals which are closest in amount, and
the third appraisal shall be disregarded and (ii) the fair rental value of the
Premises as of each anniversary of the Adjustment Date shall be the arithmetic
average of the fair rental value established by the two of the three appraisals
which are closest in amount, and the third appraisal shall be disregarded and
(ii) the fair rental value of the Premises as of each anniversary of the
Adjustment Date shall be the arithmetic average of the fair rental value
established by the two of the three appraisals which are closest in amount, and
the third appraisal shall be disregarded. In no event, however, shall the
then-existing monthly rent ever be reduced by reason of such computation, nor
shall there be any rent concession or additional tenant improvement allowance
for the Extension term. Lessor and Lessee shall instruct the appraiser(s) to
complete their determination of the fair rental value not later than one hundred
eighty (180) days before the Adjustment Date.
(d) If the fair rental value of the Premises is determined not later
than one hundred eighty (180) days before the Adjustment Date, Lessor shall
deliver notice of that amount to Lessee, and Lessee shall, within five (5)
business days after receipt of such notice, deliver written unconditional notice
to Lessor either confirming or revoking Lessee's exercise of the Option. If
Lessee confirms Lessee's exercise of the Option, the Base Rent shall be adjusted
on the Adjustment Date in accordance with the terms of this Lease Rider No. 1.
If Lessee fails to deliver the written notice required under this paragraph (d),
Lessee shall be deemed to have confirmed its exercise of the Option.
(e) If the fair rental value of the Premises is determined after the
date which is one hundred eighty (180) days before the Adjustment Date but
before the date which is one hundred fifty (150) days before the Adjustment
Date, Lessor shall deliver notice of that amount to Lessee, and Lessee shall,
within five (5) business days after receipt of such notice, deliver written
unconditional notice to Lessor either confirming or revoking Lessee's exercise
of the Option. If Lessee confirms Lessee's exercise of the Option, the Base Rent
shall be adjusted on the Adjustment Date in accordance with the terms of this
Lease Rider No. 1. If Lessee fails to deliver the written notice required under
this paragraph (e), Lessee shall be deemed to have confirmed its exercise of the
Option.
(f) If the fair rental value of the Premises is not determined by the
date which is one hundred fifty (150) days before the Adjustment Date, Lessee
shall, by the date which is five (5) business days after such one hundred
fiftieth (150th) day, deliver written unconditional notice to Lessor either
confirming or revoking Lessee's exercise of the Option. If Lessee fails to
deliver
2
<PAGE> 48
the written notice required under this paragraph (f), Lessee shall be deemed to
have confirmed its exercise of the Option. If Lessee confirms Lessee's exercise
of the Option, the Base Rent shall be adjusted on the Adjustment Date in
accordance with the terms of this Lease Rider No. 1.
(g) If Lessee revokes Lessee's exercise of the Option under either
paragraph (e) or paragraph (f) above, Lessor may, at Lessor's election by
written notice to Lessee, extend the term of this Lease for one (1) additional
month. If Lessor elects to extend the term of the Lease pursuant to this
paragraph, Lessee shall pay to Lessor $25,923.75, as Base Rent for the one-month
extension period, and the Lease shall expire one month after the date on which
the Lease would otherwise have expired in the absence of such extension. If
Lessor elects not to extend the term of this Lease pursuant to this paragraph,
the Lease shall expire on its originally scheduled expiration date.
(h) On each anniversary of the Adjustment Date, Base Rent shall be
increased in accordance with the annual escalations, if any, determined by the
agreement of the parties or by the appraisal process described in this Lease
Rider No. 1.
(i) The Option is personal to Lessee, any Lessee Affiliate and any
full-floor subtenant or assignee approved by Lessor.
3
<PAGE> 49
LEASE RIDER NO. 2
OBLIGATION TO
LEASE ADDITIONAL SPACE
This Rider is attached to and made a part of that certain Standard
Office Lease Gross (the "Lease"), dated March 5, 1992, between ST Lending Inc.
("Lessor"), and Caseware, Inc. ("Lessee") for the premises known as Suite 200,
108 Pacifica, Irvine, California (the "Premises"). Defined or initially
capitalized terms in this Rider have the same meaning as in the Lease. The
provisions of this Rider shall supersede any inconsistent or conflicting
provisions of the Lease.
Lessee shall lease from Lessor the remaining 2529 square feet of space
contained on the second (2nd) floor of the Building and not included in the
Premises (the "Second Floor Additional Space") as depicted on Exhibit "A"
beginning on the first day of the nineteenth (19th) month of the initial term of
the Lease or on such earlier date as Lessee may designate in writing to Lessor
at least sixty (60) days in advance of the date Lessee designates (the "Second
Floor Expansion date"). Before the Second Floor Expansion date, Lessor shall, at
Lessor's expenses, clean and repair the existing carpet in the Second Floor
Additional Space (so it is compatible with the Premises) and inspect and repair
or replace, as necessary to place in good working condition, all electrical
outlets, light fixtures, ceiling tiles, HVAC and plumbing located in or serving
the Second Floor Additional Space and make all locks in the Second Floor
Additional Space compatible with the Premises. Otherwise, except as described in
Exhibit C to the Lease, the Second Floor Additional Space shall be delivered "As
Is." Beginning on the Second Floor Expansion Date, the term "Premises," as used
in this Lease, shall include the Second Floor Additional Space; the Base Rent
shall be as shown in Insert 1A to Section 1.6, and Lessee's Share of Operating
Expenses Increase shall be adjusted to include the Second Floor Additional space
in the square footage on which the Base Rent and Lessee's Share of Operating
Expenses Increase are based. All other terms and conditions of the Lease (except
as specified in the immediately preceding sentence) shall remain the same and in
full effect.
In connection with Lessee's leasing of the Second Floor Additional
Space, Lessee shall be entitled to the use of eight additional parking spaces
for a total of seventy parking spaces, on the terms set forth in Insert 1 to
Section 2.2.2.
<PAGE> 50
LEASE RIDER NO. 3
OPTION TO LEASE ADDITIONAL SPACE
This Rider is attached to and made a part of that certain Standard
Office Lease Gross (the "Lease"), dated March 5, 1992, between ST Lending Inc.
("Lessor"), and Caseware, Inc. ("Lessee") for the premises known as Suite 200,
108 Pacifica, Irvine, California (the "Premises"). Defined or initially
capitalized terms in this Rider have the same meaning as in the Lease. The
provisions of this Rider shall supersede any inconsistent or conflicting
provisions of the Lease.
Lessor grants to Lessee an option (the "Space Option") to lease
approximately 3300 square feet of space located on the first (1st) floor of the
Building in which the Premises are located (the "First Floor Additional Space").
The First Floor Additional Space is shown as the area marked with diagonal lines
on Exhibit D attached to the Lease. Lessee may exercise the Space Option by
giving unconditional written notice to Lessor that Lessee is exercising the
Space Option ("Lessee's Notice"). Lessee shall deliver Lessee's Notice only
after the Second Floor Expansion Date and must deliver Lessee's Notice by on or
before the first (1st) day of the thirty-sixth (36th) month of the Lease term
(the "Option Termination Date"). If Lessor fails to receive Lessee's Notice by
on or before the Option Termination Date, then all rights of Lessee to lease the
First Floor Additional Space under this Rider shall automatically terminate, and
Lessor shall thereafter have no further obligation to lease the First Floor
Additional Space to Lessee and shall thereafter have the unconditional right to
lease the First Floor Additional Space to third parties on any terms and
conditions that Lessor thereafter negotiates, without further obligation to
Lessee.
If Lessee duly exercises the Space Option, then: (a) Within fifteen (15)
days after Lessor receives Lessee's Notice, Lessor will notify Lessee of the
date the First Floor Additional Space will be ready for occupancy by Lessee (the
"First Floor Expansion Date"); (b) Lessor shall, at Lessor's cost not to exceed
Eighty-Five Thousand dollars ($85,000.00) (the "Maximum Cost") for hard costs
(defined as all costs of constructing First Floor Tenant Improvements other than
fees of architects and engineers, interest on Lessor's borrowed funds, permits,
Lessor's administrative overhead and supervisory fees (collectively, "Soft
Costs")), install basic tenant improvements (the "First Floor Tenant
Improvements') in the First Floor Expansion Space by on or before the First
Floor Expansion Date; and (c) Beginning on the later of (i) the First Floor
Expansion Date, or (ii) the date of Lessee's occupancy of the First Floor
Additional Space (which occupancy shall be deemed to have commenced on the first
day of the 43rd month of the Lease Term if Lessee has not actually occupied the
First Floor Additional Space prior to such date), the term "Premises," as used
in this Lease, shall include the First Floor Additional Space; and the Base Rent
and Lessee's Share of Operating Expenses Increase shall be proportionately
adjusted to include the First Floor Additional Space in the square footage on
which the Base Rent and Lessee's Share of Operating Expenses Increase are based.
In addition, Lessor shall pay all Soft Costs required to complete the
construction of the First Floor Tenant Improvements. All other terms and
conditions of the Lease (except as specified in the first sentence of this
paragraph) shall remain the same and in full effect.
1
<PAGE> 51
Upon receipt of Lessee's Notice, Lessor shall promptly solicit at least
two (2) bids for the general contractor and each major sub-trade for the tenant
improvements in the First Floor Additional Space. The general contractors from
whom such bids are solicited shall be subject to Lessee's prior written
approval, which approval shall not be unreasonably withheld or delayed. Lessor
shall give Lessee promptly written notice ("Estimate Notice") of Lessor's
determination of the estimated hard costs of such improvements. Within ten (10)
days after Lessee's receipt of the Estimate Notice, Lessee shall, if such
estimate of hard costs exceeds $85,000, give Lessor written notice of Lessee's
election either (i) to pay the excess hard costs over $85,000, or (ii) to cancel
Lessee's exercise of the Space Option, or (iii) to revise the plans on which
such estimate is based at Lessee's sole cost and expense, provided that such
revisions must be completed no later than fifteen (15) days after Lessee's
receipt from Lessor of the Estimate Notice. If Lessee elects to pay the excess
hard costs, Lessee shall deposit with Lessor or Lessor's contractor the amount
of such excess prior to commencement of work. If Lessee elects to cancel its
exercise of the Space Option, the Space Option shall be deemed cancelled
entirely and the Lease shall continue otherwise in full force and effect. If
Lessee fails to give such notice within such 10-day period and fails to revise
the plans as set forth in clause (iii) above, Lessee shall be deemed to have
elected to pay the excess hard costs over $85,000. If Lessee elects to revise
the plans as set forth in clause (iii) above, (1) Lessee shall, once such plans
have been completed to Lessee's satisfaction and before Lessor's commencement of
work on such tenant improvements, deposit with Lessor or Lessor's contractor the
amount, if any, by which the cost of the improvements called for in such revised
plans exceeds $85,000, and (2) the term of the Lease shall be extended by the
number of days in excess of fifteen (15) days, if any, elapsing from the date
Lessee received the Estimate Notice until the date Lessor commences construction
on such tenant improvements for the First Floor Additional Space.
Lessee shall receive a credit toward the payment of Base Rent for the
first month(s) Lessee occupies the First Floor Additional Space equal to the
amount by which $85,000 exceeds the amount Lessor spends for hard costs pursuant
to the preceding paragraph. Lessor shall provide Lessee with paid invoices
reflecting the hard costs actually incurred.
The design and scope of the First Floor Tenant Improvements shall be as
specified by Lessee, subject to Lessor's approval, which approval shall not be
unreasonably withheld or delayed.
For purposes of recalculating the Base Rent and Lessee's Share of
Operating Expenses Increase, the square footage contained in the First Floor
Additional Area shall be calculated in accordance with the guidelines for
measuring rentable area of office space specified in the American National
Standard Institute Publication ANSI Z65.1-1980 (reaffirmed 1989).
In connection with the leasing of the First Floor Additional Space,
Lessee shall be entitled to the use of five additional parking spaces, for a
total of seventy-five (75) parking spaces on the terms set forth in Insert 1 to
Section 2.2.2 of the Lease.
2
<PAGE> 52
LEASE RIDER NO. 4
ABATED RENT PROVISIONS
This Rider is attached to and made a part of that certain Standard
Office Lease Gross, dated March 5, 1992 (the "Lease"), between ST Lending Inc.
("Lessor") and Caseware, Inc. ("Lessee"). Defined or initially capitalized terms
in this Rider have the same meaning as in the Lease. The provisions of this
Rider shall supersede any inconsistent or conflicting provisions of the Lease.
Section 1.6 of the Lease provides for postponement of Base Rent for
months one (1) through and including six (6), and for a reduction of Base Rent
for months seven (7) through and including twelve (12) of the initial Lease term
(collectively, "Abated Rent"). Lessee shall be credited with having paid all of
the Abated Rent on the expiration of the initial term of the Lease only if
Lessee has (i) occupied (or subleased or assigned as permitted by this Lease)
all or substantially all of the Premises for the entire initial term of the
Lease, and (ii) fully, faithfully, and punctually performed all of Lessee's
monetary obligations, including without limitation, the payment of all rent
(other than the Abated Rent) and all other monetary obligations, and has
surrendered the Premises in the condition required by the Lease. Lessee
acknowledges that its right to receive credit for the Abated Rent is absolutely
conditioned upon Lessee's full, faithful, and punctual performance of all its
monetary obligations under the Lease. If Lessee does not cure a monetary default
under the Lease both (a) within any applicable grace period, and (b) within 7
days after a second written notice of default given by Lessor, the Abated Rent
shall immediately become due and payable in full and the Lease shall be enforced
as if there were no Abated Rent or other rent concession. In such case Abated
Rent shall be calculated based on the full Base Rent which but for the Abated
Rent provision would have been payable under the Lease.
<PAGE> 53
LEASE AMENDMENT NO. 1
THIS FIRST AMENDMENT (the Amendment") is entered into effective as of
June 1, 1997, by and between The French Company, a California general
partnership, Winston O. Franklin, a married man as his sole and separate
property, Robert A. Franklin, an unmarried man, John T. Franklin, a married man
as his sole and separate property, Mathew Franklin, an unmarried man, Elizabeth
(Franklin) Cushman, a married woman as her sole and separate property and The
Leighton French Company, a California corporation, together as tenants-in-common
as "Lessor" and Continuus Software Corporation, a California corporation, as
"Lessee" with reference to the following facts:
A. ST Lending, Inc., a Delaware corporation ("STL"), and Lessee
(formerly known as Caseware, Inc.) executed that certain Standard Office Lease -
Gross dated March 5, 1992 (the "Lease") for Premises commonly known as Suite
200, 108 Pacifica, Irvine, California. All capitalized terms not otherwise
defined in this Amendment shall have the meaning ascribed to them in the Lease.
B. Lessor succeeded to STL's interest as "Lessor" under the Lease
pursuant to Lessor's acquisition of the property of which the Premises are a
part.
C. The Term of the Lease expires on October 31, 1997. Lessee, however,
desires to extend the Term and to continue to occupy the Premises on the terms
and conditions contained in this Amendment.
D. The parties to this Amendment desire to amend the Lease to reflect
the extension of the Term, the revised rent and to address certain other matters
as more particularly described in this Amendment.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises and covenants contained herein, the parties hereto agree as
follows:
1. TERM. The Term of the Lease shall expire December 31, 1998.
2. BASE RENT. Commencing as of June 1, 1997 the Base Rent shall be
$33,450. Commencing as of January 1, 1998 the Base Rent shall be $35,123. There
shall be no abatement of Base Rent as otherwise described in Section 1.6 and
Lease Rider No. 4.
3. LAPSE OF OPTIONS. Lessee acknowledges and agrees that (1) all of
Lessee's rights (a) to extend the Term pursuant to Lease Rider No. 1 and (b) to
lease additional space pursuant to Lease Rider No. 3 have terminated; (2) Lessee
has no right to extend the term of the Lease; and (3) Lessor has no obligation
to lease additional space to Lessee.
4. BROKERS. Lessor and Lessee each represent and warrant to the other
that neither has had any dealings with any person, firm, broker or finder
(collectively, "Broker") in connection with the negotiation of this Amendment
and no Broker is entitled to any commission, finder's fee or similar
compensation in connection with the transaction contemplated by this Amendment.
Lessor and Lessee further do each hereby indemnify and hold the other harmless
from and against any costs, expenses, attorneys' fees or liability for
compensation or charges
1.
<PAGE> 54
which may be claimed by any such unnamed Broker by reason of any dealings or
actions of the indemnifying party.
5. NO DEFAULTS. As of the date of Lessee's execution of this Amendment,
Lessee is unaware of any defaults by Lessor under the Lease.
6. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives and permitted successors and assigns.
7. FURTHER DOCUMENTS. The parties hereto agree to perform any and all
acts and execute and deliver any and all documents that are, or may become,
necessary or convenient or may be reasonably required to effectuate and carry
out the provisions of this Amendment.
8. AUTHORITY/COUNTERPARTS. All parties covenant that they possess all
necessary capacity and authority to sign and enter this Agreement. All
individuals signing this Agreement for a party, who is a corporation, a
partnership, or other legal entity, or signing pursuant to a power of attorney
or in any other legal capacity, covenant that they have the necessary capacity
and authority to act for, sign, and bind the respective entity or principal on
whose behalf they are signing. This Amendment may be signed in multiple
counterparts and by different parties in separate counterparts. Each counterpart
shall be deemed an original Amendment and all of them together shall constitute
one Amendment, among all of the parties signing the counterparts.
9. NO OTHER AMENDMENTS. Except as expressly amended or modified by this
Amendment, the Lease, as previously amended, continues in full force and effect.
In the event of any conflict between this Amendment and the Lease, the terms of
this Amendment shall control.
IN WITNESS WHEREOF, this Amendment has been executed as of the date
first hereinabove written.
LESSOR: BY ITS AUTHORIZED AGENT
THE FRENCH COMPANY,
A CALIFORNIA CORPORATION
By: /s/ Peter L. French
------------------------
Name: Peter L. French
------------------------
Title: Authorized Signatore
------------------------
LESSEE: CONTINUUS SOFTWARE CORPORATION,
A CALIFORNIA CORPORATION
By: /s/ John J. Laskey
------------------------
Name: John J. Laskey
------------------------
Title: Vice President Finance
------------------------
2.
<PAGE> 55
LEASE AMENDMENT NO. 2
THE SECOND AMENDMENT (the "Amendment") is entered into effective as of
April 15, 1998, by and between The French Company, a California general
partnership, Winston O. Franklin, a married man as his sole and separate
property, Robert A. Franklin, an unmarried man, John T. Franklin, a married man
as his sole and separate property, Mathew Franklin, an unmarried man, Elizabeth
(Franklin) Cushman, a married woman as her sole and separate property and The
Leighton French Company, a California corporation, together as tenants-in-common
as "Lessor" and Continuus Software Corporation, a California corporation, as
"Lessee" with reference to the following facts:
A. ST Lending, Inc., a Delaware corporation ("STL"), and Lessee
(formerly known as Caseware, Inc.) executed that certain Standard Office Lease -
Gross dated March 5, 1992 (the "Lease") for Premises commonly known as Suite
200, 108 Pacifica, Irvine, California. All capitalized terms not otherwise
defined in this Amendment shall have the meaning ascribed to them in the Lease.
B. Lessor succeeded to STL's interest as "Lessor" under the Lease
pursuant to Lessor's acquisition of the property of which the Premises are a
part.
C. Per Lease Amendment No. 1 the Term of the Lease expires on December
31, 1998, Lessee, however, desires to extend the Term and to continue to occupy
the Premises on the terms and conditions contained in this Amendment.
D. The parties to this Amendment desire to amend the Lease to reflect
the extension of the Term, the revised rent and to address certain other matters
as more particularly described in this Amendment.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises and covenants contained herein, the parties hereto agree as
follows:
1. TERM. The Term of the Lease shall expire March 31, 1999.
2. BASE RENT. Commencing as of January 1, 1999 the Base Rent shall be
$37,631. There shall be no abatement of Base Rent as otherwise described in
Section 1.6 and Lease Rider No. 4.
3. LAPSE OF OPTIONS. Lessee acknowledges and agrees that (1) all of
Lessee's rights (a) to extend the term pursuant to Lease Rider No. 1 and (b) to
lease additional space pursuant to Lease Rider No. 3 have terminated; (2) Lessee
has no right to extend the term of the Lease; and (3) Lessor has no obligation
to lease additional space to Lessee.
4. BROKERS. Lessor and Lessee each represent and warrant to the other
that neither has had any dealings with any person, firm, broker or finder
(collectively, "Broker") in connection with the negotiation of this Amendment
and no Broker is entitled to any commission, finder's fee or similar
compensation in connection with the transaction contemplated by this Amendment.
Lessor and Lessee further do each hereby indemnify and hold the other harmless
1.
<PAGE> 56
from and against any costs, expenses, attorneys' fees or liability for
compensating or charges which may be claimed by any such unnamed Broker by
reason of any dealings or actions of the indemnifying party.
5. NO DEFAULTS. As of the date of Lessee's execution of this Amendment,
Lessee is unaware of any defaults by Lessor under the Lease.
6. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives and permitted successors and assigns.
7. FURTHER DOCUMENTS. The parties hereto agree to perform any and all
acts and execute and deliver any and all documents that are, or may become,
necessary or convenient or may be reasonably required to effectuate and carry
out the provisions of this Amendment.
8. AUTHORITY/COUNTERPARTS. All parties covenant that they possess all
necessary capacity and authority to sign and enter this Agreement. All
individuals signing this Agreement for a party, who is a corporation, a
partnership, or other legal entity, or signing pursuant to a power of attorney
or in any other legal capacity, covenant that they have the necessary capacity
and authority to act for, sign, and bind the respective entity or principal on
whose behalf they are signing. This Amendment may be signed in multiple
counterparts and by different parties in separate counterparts. Each counterpart
shall be deemed an original Amendment and all of them together shall constitute
one Amendment, among all of the parties signing the counterparts.
9. NO OTHER AMENDMENTS. Except as expressly amended or modified by this
Amendment, the Lease, as previously amended, continues in full force and effect.
In the event of any conflict between this Amendment and the Lease, the terms of
this Amendment shall control.
IN WITNESS WHEREOF, this Amendment has been executed as of the date
first hereinabove written.
LESSOR: BY ITS AUTHORIZED AGENT
THE FRENCH COMPANY,
A CALIFORNIA CORPORATION
By: /s/ Peter L. French
------------------------
Name: Peter L. French
------------------------
Title: Authorized Signatore
------------------------
LESSEE: CONTINUUS SOFTWARE CORPORATION,
A CALIFORNIA CORPORATION
By: /s/ John J. Laskey
------------------------
Name: John J. Laskey
------------------------
Its: Vice President Finance
------------------------
2.
<PAGE> 57
LEASE AMENDMENT NO. 3
THIS THIRD AMENDMENT (the "Amendment") is entered into effective as of
September 15, 1998, by and between White Pearl Investment Company, a Virginia
corporation, as "Lessor" and Continuus Software Corporation, a California
corporation, as "Lessee" with reference to the following facts:
A. ST Lending, Inc., a Delaware corporation ("STL"), and Lessee
(formerly known as Caseware, Inc.) executed that certain Standard Office Lease -
Gross dated March 5, 1992 (the "Lease") for Premises commonly known as Suite
200, 108 Pacifica, Irvine, California. All capitalized terms not otherwise
defined in this Amendment shall have the meaning ascribed to them in the Lease.
B. The French Company, a California general partnership, Winston O.
Franklin, a married man as his sole and separate property, Robert A. Franklin,
an unmarried man, John T. Franklin, a married man as his sole and separate
property, Mathew Franklin, an unmarried man, Elizabeth (Franklin) Cushman, a
married woman as her sole and separate property and The Leighton French Company,
a California corporation, together as tenants-as-common ("French Partners")
succeeded to STL's interest as "Lessor" under the Lease pursuant to French
Partners acquisition of the property of which the Premises are a part and
executed Amendment No. 2 with Lessee effective April 15, 1998.
C. Lessor has succeeded to French Partners interest as Lessor under the
Lease pursuant to Lessor's acquisition of the property of which the Premises are
a part.
D. Per Lease Amendment No. 2 the Term of the Lease expires on March 31,
1998, Lessee, however, desires to extend the Term and to continue to occupy the
Premises on the terms and conditions contained in this Amendment.
E. The parties to this Amendment desire to amend the Lease to reflect
the extension of the Term, the revised rent and to address certain other matters
as more particularly described in this Amendment.
NOW, THEREFORE, in consideration on the foregoing recitals and the
mutual promises and covenants contained herein, the parties hereto agree as
follows:
1. TERM. The Term of the Lease shall expire March 31, 2000.
2. BASE RENT. Commencing as of January 1, 1999, the Base Rent shall be
$37,631. There shall be no abatement of Base Rent as otherwise described in
Section 1.6 and Lease Rider No. 4.
3. TERMINATION OPTION. Provided that at no time, from the date of this
amendment forward no event of Tenant default has occurred, Continuus shall have
a one time right to terminate this extension early, effective September 30, 1999
by giving the Landlord written notice of early termination no later than March
31, 1999. Any failure by Continuus to deliver
1.
<PAGE> 58
such notice to Landlord by such
date shall be deemed Continuus' affirmation of this extension until March 31,
2000.
4. LAPSE OF OPTIONS. Lessee acknowledges and agrees that (1) all of
Lessee's rights (a) to extend the term pursuant to Lease Rider No. 1 and (b) to
lease additional space pursuant to Lease Rider No. 3 have terminated; (2) Lessee
has no right to extend the term of the Lease; and (3) Lessor has no obligation
to lease additional space to Lessee.
5. BROKERS. Lessor and Lessee each represent and warrant to the other
that neither has had any dealings with any person, firm, broker or finder
(collectively, "Broker") in connection with the negotiation of this Amendment
and no Broker is entitled to any commission, finder's fee or similar
compensation in connection with the transaction contemplated by this Amendment.
Lessor and Lessee further do each hereby indemnify and hold the other harmless
from and against any costs, expenses, attorneys' fees or liability for
compensation or charges which may be claimed by any such unnamed Broker by
reason of any dealings or actions of the indemnifying party.
6. NO DEFAULTS. As of the date of Lessee's execution of this Amendment,
Lessee is unaware of any defaults by Lessor under the Lease.
7. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives and permitted successors and assigns.
8. FURTHER DOCUMENTS. The parties hereto agree to perform any and all
acts and execute and deliver any and all documents that are, or may become,
necessary or convenient or may be reasonably required to effectuate and carry
out the provisions of this Amendment.
9. AUTHORITY/COUNTERPARTS. All parties covenant that they possess all
necessary capacity and authority to sign and enter this Agreement. All
individuals signing this Agreement for a party, who is a corporation, a
partnership, or other legal entity, or signing pursuant to a power of attorney
or in any other legal capacity, covenant that they have the necessary capacity
and authority to act for, sign, and bind the respective entity or principal on
whose behalf they are signing. This Amendment may be signed in multiple
counterparts and by different parties in separate counterparts. Each counterpart
shall be deemed an original Amendment and all of them together shall constitute
one Amendment, among all of the parties signing the counterparts.
10. NO OTHER AMENDMENTS. Except as expressly amended or modified by this
Amendment, the Lease, as previously amended, continues in full force and effect.
In the event of any conflict between this Amendment and the Lease, the terms of
this Amendment shall control.
2.
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IN WITNESS WHEREOF, this Amendment has been executed as of the date
first hereinabove written.
LESSOR: WHITE PEARL INVESTMENT COMPANY
A VIRGINIA CORPORATION
/s/ Jonathan J. Feucht
------------------------
Jonathan J. Feucht
Assistant Secretary
LESSEE: CONTINUUS SOFTWARE CORPORATION,
A CALIFORNIA CORPORATION
By: /s/ John J. Laskey
------------------------
Name: John J. Laskey
------------------------
Its: VP Finance
------------------------
3.
<PAGE> 1
EXHIBIT 10.33
Contact No. 6458-00
*** TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTIONS 200.80(b)(4)
200.83 AND 230.406
VALUE ADDED RESELLER LICENSE AGREEMENT
The parties to this Value Added Reseller License Agreement ("Agreement") are
Informix Software, Inc. ("Informix"), a Delaware corporation, and the party
identified on the signature block ("Licensee"), both having principal places of
business at the addresses specified in the signature block of this Agreement.
Capitalized terms used in this agreement shall have the meanings specified in
Section 9 of this Agreement.
IT IS HEREBY MUTUALLY AGREED AND UNDERSTOOD:
SECTION 1. LICENSE GRANT AND RESTRICTIONS.
1.1 NONEXCLUSIVE LICENSE GRANT. Informix hereby grants Licensee, subject to
Paragraph 1.2 of this Agreement, the following royalty-bearing,
nontransferable, nonexclusive licenses which may be exercised solely within
the Distribution Territory. Licensee may:
(a) obtain from Informix the finished "shrink-wrap" version of Products
for: (a) internal development purposes of the VAR Program; and (b)
distribution to Sublicensees and End Users in conjunction with the
Application Packages; and
(b) grant the right for one or more Distributors to distribute and
sublicense the Products, with or as part of the Application Packages,
to Resellers or End Users; and
(c) use the Informix trademarks and/or service marks solely to promote the
distribution of the Products with or as part of the Application
Packages, provided such use conforms to the Informix Trademark Use
Policy.
1.2 LICENSING RESTRICTIONS. The rights granted in Section 1.1 of this Agreement
are expressly limited to, and restricted by, the following:
(a) COPYING. No copies may be made of the Products except as explicitly
authorized by this Agreement or the End User License Agreement.
Licensee shall have no right to manufacture, modify or copy User
Documentation.
(b) COMPUTER SYSTEM. The Products shall be distributed only for use on, or
in conjunction with, the Computer Systems specified in Exhibit A,
Section 1, of this Agreement.
(c) SUBLICENSING.
(1) No Products may be distributed by or to a Sublicensee prior to
the execution of a written agreement between Licensee and the
Sublicensee, or between any Sublicensee and its further
Sublicensee, in accordance with this Section 1.2(c).
(2) Each agreement between Licensee and a Sublicensee or any of
Sublicensee's further Sublicensees shall include the provisions
of the Sections or subsections of this Agreement titled "License
Restrictions" "Licensee Representations and Obligations,"
"Limitation of Warranty and Liability," "Confidential and
Proprietary Information," "Term and Termination" and "General" in
substantially similar terms. Licensee shall make a good faith
effort to insure that all Sublicensees between Licensee and the
End User refrain from infringing upon Informix's proprietary
rights, do not make any unauthorized copies of the Products and
otherwise comply with the requirements of such agreements.
Licensee shall take such action as is necessary to enforce such
agreements and the End User License Agreement, including
termination of the Sublicensee's rights thereunder, if
1.
<PAGE> 2
any violations come to its attention.
(3) Upon Informix's written request, Licensee shall supply Informix
with a copy of any sublicense agreement, including an English
translation if the agreement is written in a language other than
English.
(4) All license and other fees charged by Licensee to a Sublicensee
shall be in Licensee's sole discretion.
(5) Licensee shall have no authority to grant any rights to a
Sublicensee other than those specified in Sections 1.1(b) and
1.1(c) of this Agreement.
(6) Licensee shall have no authority to grant to anyone a license to
copy, manufacture, adapt, create derivative works for, translate
or otherwise modify the Products, User Documentation or any other
property of Informix.
(d) EXPORTS AND RE-EXPORTS. If licensee is permitted by this Agreement to
distribute the Products outside the United States, Licensee and
Sublicensee shall comply with the export and re-export provisions in
Exhibit D.
(e) SIMILAR PRODUCTS. Licensee shall not, either directly or through a
third party, use the Products, or the Source Code, or a derivative
thereof, or any confidential or proprietary information to Informix,
to create any computer software programs or user documentation which
is functionally, visually or otherwise identical or substantially
similar to any Informix Product or product, whether or not listed in
Exhibit A of this Agreement.
(f) REVERSE ENGINEERING. Licensee shall not, either directly or through a
third party, reverse engineer, disassemble or decompile any of the
Products, or make any attempt in any fashion to obtain or derive the
Source Code from any Informix Product or product, whether or not
listed in Exhibit A of this Agreement.
(g) DERIVATIVE WORKS. Licensee shall have no right to create derivative
works of the Products, whether directly or through any third party,
including, but not limited to, translated or localized versions of the
Products. Use of the Products as described in the User Documentation,
including creation of Application Packages, shall not be considered
using the Products to create derivative works.
(h) TIME-SHARING, RENTAL OR LEASE. Licensee shall not time share, rent,
lease or make internal productive use of the Products.
SECTION 2. RESERVATION OF RIGHTS AND REMDIES.
In addition to any particular right or remedy provided for under this Agreement,
Informix reserves all other rights and remedies available under copyright,
patent, trademark, trade secret, and other applicable laws and administrative
regulations.
SECTION 3. LICENSEE REPRESENATIONS AND OBLIGATIONS.
Licensee represents and warrants that as of the Effective Date and continuing
until termination of this Agreement:
(a) Licensee will use its best efforts to protect Informix's rights in its
trademarks, patents, logos, service marks, copyrights and trade
secrets.
(b) Licensee will make no representations, nor give any warranties, about
the Products to anyone, unless the representation or warranty is
contained in the End User License Agreement, the User Documentation,
or other materials relating to the Products which are provided by
Informix. Licensee expressly disclaims any ownership or other interest
in the intellectual property and proprietary rights
2.
<PAGE> 3
in the Products, including, but not limited to, all copyright,
trademark, patent, service mark, logo, confidential information or
trade secret rights. Unless specifically requested by Informix,
Licensee will not in any way identify itself as the owner of any
Informix copyright, patent trademark, service mark, logo or
confidential information, or register or attempt to register same in
Licensee's name or any other name, or request or assist anyone else in
doing so.
(c) The End User License Agreement will apply to the Products distributed
by Licensee and Sublicensees to End Users.
(d) Licensee will provide the first level of support and skilled
instruction including all maintenance, update, warranty and/or support
services for all Application Packages.
(e) If Licensee becomes aware of any actual or suspected unauthorized use
or disclosure of the Products, copyrights, patents, trademarks,
service marks, trade secrets or confidential information of Informix,
Licensee will promptly notify Informix and will assist Informix, at
Informix's request and expense, in the investigation and prosecution
of such unauthorized use or disclosure.
(f) Licensee warrants that there are no impediments known to Licensee
which would prevent Licensee's compliance with all of the terms of
this Agreement.
(g) All advertising, and all promotional and marketing materials,
particularly where an Informix logo, trademark, or service mark is
used, shall be of at least the same quality as similar advertising or
marketing or promotional materials provided or used by Informix. Upon
Informix's request, Licensee's advertising, marketing or promotional
materials in which an Informix logo, trademark or service mark is used
shall be submitted to Informix for its prior written approval, which
shall not be unreasonably withheld.
SECTION 4. PAYMENT, RECORDS AND AUDIT.
4.1 LICENSE FEES. Licensee shall pay all Product license fees and other charges
relating to either the Products or to services provided by Informix, as
specified in Exhibit B of this Agreement.
4.2 RECORDS AND ROYALTY REPORTS. Licensee shall keep complete and accurate
records of all copies of the Products. These records shall include (without
limitation) the Product name, Computer System (including Operating System
and model), the Informix machine class, the number of users per license,
the software serial numbers, the date of distribution, and the name and
address of the recipient of each copy including the zip or postal code
("Copy Records"). If requested by Informix, within twenty (20) days of
Informix's request, Licensee shall provide Informix with a copy of the Copy
Records for the previous month.
4.3 AUDITS. Informix shall have the right to audit all Licensee records
reasonably related to this Agreement. An audit may be conducted on five (5)
days' notice, during Licensee's normal business hours, no more than once
each calendar year, and at Informix's expense. However, if the audit
reveals either: (a) any material breach of the terms and conditions of this
Agreement; or (b) that there is a difference between the amount due to
Informix and the amount reported by Licensee, Licensee shall pay the
difference, and shall also pay all costs of the audits if the difference is
greater than five percent (5%) of the total due to Informix. If the amount
due is less than the amount reported, the difference shall be credited
toward future license fees due from Licensee.
4.4 LICENSEE EXPENSES. Licensee shall be solely responsible for payment of all
expenses incurred by Licensee in its performance of this Agreement,
including, but not limited to expenses relating to: local marketing and
promotion; support and warranty services; travel to or from Informix's
premises; bad debts; collection agency's fees; law suits between Licensee
and any third party; and all taxes, tariffs and transportation costs
identified in Exhibit B of this Agreement.
3.
<PAGE> 4
SECTION 5. LIMITATION OF WARRANT AND LIABILITY.
5.1 LIMITED WARRANTY.
(a) Informix warrants:
(1) that the use or distribution of unmodified Products, or the
exercise of the licensees granted hereunder, will not infringe
the intellectual property rights of any third party under
copyright, trademark or patent law of the United States;
(2) that it has full power and right to license the Products and
perform all other terms of this Agreement;
(3) that it will honor the terms and conditions of the End User
License Agreement;
(4) that the media on which Informix delivers the Products will
remain free from defects in materials and workmanship for a
period of ninety (90) days from the receipt by the End User; and
(5) that the Products will substantially conform to the User
Documentation.
(b) EXCEPT FOR THE LIMITED WARRANTIES STATED ABOVE, LICENSEE ACCEPTS THE
PRODUCTS PROVIDED UNDER THIS AGREEMENT "AS IS," WITH ALL FAULTS AND
WITHOUT OTHER WARRANTIES OR CONDITIONS OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
5.2 REMEDY FOR BREACH OF LIMITED WARRANTY.
(a) Licensee's sole remedy for Informix's breach of Sections 5.1(a)(1) or
5.1(a)(2) of this Agreement shall be that: Informix will indemnify and
hold Licensee harmless from and against any loss, cost, liability and
expense (including reasonable attorney fees), arising out of
Informix's breach of any of the warranties or representations of
Informix contained in those Sections, provided: (a) Licensee promptly
gives written notice of any claim to Informix; (b) Licensee provides
any assistance which Informix may reasonably request for the defense
of the claim; and (c) Informix has complete control of the defense.
(b) Licensee's sole remedy for Informix's breach of Sections 5.1(a)(3),
5.1(a)(4), and 5.1(a)(5) of this Agreement shall be: During the 90-day
warranty period and without charge to Licensee, a Sublicensee, or an
End User, Informix in its sole discretion will replace defective media
manufactured by Informix with new media, or either provide maintenance
or service to Licensee, but not on-site service, to keep the Products
in working order, or replace the Products, or refund the Object Code
license fee paid to Informix for the Products.
(c) the above remedies are subject to Sections 5.3 and 5.4 of this
Agreement.
5.3 LIMITATION OF LIABILITY. EXCEPT AS SPECIFIED IN SECTION 5.2 OF THIS
AGREEMENT: (A) INFORMIX'S LIABILITY TO LICENSEE OR ANY OTHER THIRD PARTY,
FOR A CLAIM OF ANY KIND ARISING AS A RESULT OF, OR RELATED TO ANY PRODUCT
OR USER DOCUMENTATION PROVIDED OR MANUFACTURED PURSUANT TO THIS AGREEMENT,
WHETHER IN CONTRACT, IN TORT
4.
<PAGE> 5
(INCLUDING NEGLIGENCE OR STRICT LIABILITY), UNDER ANY WARRANTY, OR
OTHERWISE, SHALL BE LIMITED TO MONETARY DAMAGES AND THE AGGREGATE AMOUNT
THEREOF FOR ALL CLAIMS RELATING TO ANY PARTICULAR PRODUCT OR USER
DOCUMENTATION SHALL IN NO EVENT EXCEED AN AMOUNT EQUAL TO THE CUMULATIVE
OBJECT CODE LICENSE FEE PAID TO INFORMIX UNDER THIS AGREEMENT FOR THE
PRODUCTS, THE USE OR PERFORMANCE OF WHICH GIVES RISE TO THE CLAIM; AND (B)
UNDER NO CIRCUMSTANCES SHALL INFORMIX BE LIABLE TO LICENSEE OR ANY THIRD
PARTY FOR INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF INFORMIX HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, OR FOR WARRANTIES GRANTED BY LICENSEE OR ANY THIRD PARTY IN EXCESS
OF THOSE CONTAINED IN THE STANDARD INFORMIX END USER LICENSE AGREEMENT.
NO ACTION, REGARDLESS OF FORM, ARISING UNDER THIS AGREEMENT MAY BE BROUGHT
BY LICENSEE MORE THAN ONE (1) YEAR AFTER THE OCCURRENCE OF THE EVENTS WHICH
GAVE RISE TO THE CAUSE OF ACTION.
5.4 LICENSEE'S INDEMNIFICATION. Licensee shall indemnify and hold harmless
Informix from all claims, losses, and damages which may arise from:
(a) representations or misrepresentations made by Licensee or
Sublicensees;
(b) any warranties granted in excess of those contained in the End User
License Agreement;
(c) inadequate installation, maintenance or support by Licensee or
Sublicensees;
(d) the marketing of the Products by Licensee or Sublicensees;
(e any other act, or failure to act, not in accordance with the terms and
conditions of this Agreement by Licensee or Sublicensees.
SECTION 6. CONFIDENTIAL AND PROPRIETARY INFORMATION.
6.1 CONFIDENTIALITY. Neither party shall use or disclose to any person, either
during the term or after the termination of this Agreement, any Object
Code, technical data or correspondence owned by the other party, or
provided to the other party hereunder, nor disclose any other information
which has been identified as confidential or proprietary by the other
party, nor disclose any information concerning the contents of this
Agreement, except for purposes consistent with the administration and
performance of a party's obligations hereunder, or as required by law. Both
parties shall use the highest degree of care to avoid disclosure of any
confidential or proprietary information of the other party. The obligation
of the parties not to disclose information shall not apply to information
which was already in the public domain, or in the rightful possession of
the other party, at the time of its disclosure, or which is disclosed as a
matter of right by a third party after the execution of this Agreement, or
which passes into the public domain by acts other than the unauthorized
acts of the other party.
6.2 AUTHORIZED DISCLOSURE. Either party may disclose the existence of this
Agreement without the prior consent of the other party.
6.3 INJUNCTIVE RELIEF. In the event of a breach of this Section 6, money or
damages will not be an adequate remedy, and therefore, in addition to any
other legal or equitable remedies, either party shall be entitled to seek
an injunction or other equitable relief against such breach.
SECTION 7. TERM AND TERMINATION
7.1 TERM. The term of this Agreement is specified in Exhibit A, Section 3, of
this Agreement.
7.2 TERMINATION. The Agreement will terminate automatically for just cause:
(a) Immediately upon written notice if the material breach specified
constitutes a
5.
<PAGE> 6
violation of Sections of this Agreement titled, "License Grant and
Restrictions," and "Confidential and Proprietary Information";
(b) Subject to Section 7.2(a) of this Agreement, at the end of thirty (30)
days after written notice specifying a material breach, if the
breaching party fails to cure the breach within that time;
(c) Upon written notice if either party becomes insolvent or bankrupt, or
is unable to meet its obligations when they become due;
(d) Immediately and without notice if a receiver or other liquidating
officer is appointed for substantially all of the assets or business
of either party, or if either party makes an assignment for the
benefit of creditors, or if the rights or interest of either party
under this Agreement becomes an asset under any bankruptcy, insolvency
or reorganization proceeding.
7.3 RESULTS OF TERMINATION.
(a) All licenses and other rights granted by Informix shall become null
and void upon the termination of this Agreement, regardless of the
reason for termination, except: (a) for the End User licenses for
Products previously distributed by Licensee or a Sublicensee, or (b)
for a limited license to Licensee to use the Products for the sole
purpose of fulfilling any contractual obligations for maintenance and
support services to End Users.
(b) The rights to distribute Products already in Licensee's inventory or
in transit as of the effective date of the termination, shall cease on
the earlier of: (a) ninety (90) days after the effective date of
termination, or (b) distribution by Licensee of the last Product to a
Sublicensee. All Products remaining in Licensee's inventory after such
ninety (90) day period shall be returned to Informix. Alternatively,
upon Informix's written request, Licensee shall destroy the remaining
Products and certify in writing to Informix that the Products have
been destroyed.
(c) Within thirty (30) days of termination of this Agreement for any
reason, Licensee shall return to Informix all materials related to the
Products, except that Licensee may retain the minimum number of copies
reasonably necessary to fulfill its contractual obligations for
maintenance and support services. Licensee shall continue to make any
payments due to Informix in connection with Licensee's fulfillment of
such contractual obligations. Within said thirty (30) days, Licensee
shall deliver to Informix a notarized certification signed by an
officer of Licensee that Licensee has complied with the requirements
of this Section 7.3.(c).
(d) Upon termination of this Agreement, all outstanding obligations or
commitments to pay nonrefundable amounts to Informix, if any, shall
become immediately due and payable.
(e) Upon termination of this Agreement, Licensee shall have no right to
receive any compensation, reimbursement or other amounts from
Informix, and shall have no ownership or other right whatsoever in or
to (a) the Products, (b) the User Documentation, (c) any copyrighted
materials relating to the Products, (d) any trademarks, service marks,
trade secrets or other proprietary rights relating to the Products, or
(e) any goodwill that may have developed during the term of this
Agreement.
7.4 SURVIVAL. Regardless of the reason for any termination of this Agreement,
Sections or subsections of this Agreement titled "License Restrictions,"
"Payment, Records and Audit," "Limitation of Warranty and Liability,"
"Confidential and Proprietary Information," "Results of Termination,"
"Governing Law and Venue," and "Effect of Invalid Section" shall survive.
6.
<PAGE> 7
SECTION 8. GENERAL
8.1 INDEPENDENT CONTRACTORS. Informix and Licensee are strictly independent
contractors and shall so represent themselves to all third parties. Neither
party has the right to bind the other in any manner whatsoever and nothing
in this Agreement shall be interpreted to make either party the agent or
legal representative of the other or to make the parties joint venturers.
Licensee specifically agrees that it is not being appointed as a commercial
agent of Informix, and that Licensee shall not register this Agreement, or
itself, under any commercial agency laws. Licensee shall not appoint any
Sublicensees or other representatives to perform, or assist in the
performance of, any services under this Agreement, without the prior
written consent of Informix, except for the performance of sublicensing
agreements authorized in Section 1 of this Agreement.
8.2 ASSIGNMENT. This Agreement shall not be assigned by either party without
the prior written consent of the other party, which shall not be
unreasonably withheld. However, either party may assign this Agreement in
connection with a merger, consolidation, reorganization or sale of
substantially all of the assigning party's assets, provided that the
surviving entity has a net worth equal to or greater than that of the
assigning party prior to such event. Any attempted assignment in
contravention of this Section 8.2, by operation of law or otherwise, shall
be null and void. This Agreement shall bind and inure to the benefit of
successors and assigns. Anything to the contrary notwithstanding, if any
rights to Informix Source Code are granted to Licensee hereunder, or if
Source Code is escrowed under this Agreement, Informix's consent to any
proposed assignment shall be required, and shall be in Informix's sole and
absolute discretion.
8.3 FORCE MAJEURE. Neither party shall be responsible for failure of
performance due to causes beyond its control, including, but not limited to
acts of God or nature, labor disputes, actions of any Government agency and
shortage of materials.
8.4 NOTICES. Any notice shall be delivered by hand, by courier service, or by
registered or certified mail, return receipt requested, postage prepaid.
Notices shall be addressed to the other party at the address given on the
signature block of this Agreement, or to another address which may
subsequently be specified in writing by a party. Notices shall be effective
as of the date personally delivered, by hand or courier service, or for
notices sent by mail, the earlier of the date of receipt, or five (5)
business days after the postmark date.
8.5 ENTIRE AGREEMENT. This Agreement is the complete and exclusive statement of
the understandings of the parties, and supersedes and merges all prior
proposals and understandings, whether oral or written, relating to the
subject matter of this Agreement. This Agreement may not be modified except
in writing, signed by an officer of Informix and a duly authorized
representative of Licensee, and expressly referring to this Agreement.
8.6 PURCHASE ORDERS. Any purchase order or other document issued by Licensee is
for administrative convenience only. In the event of any conflict between
this Agreement and any purchase order, this Agreement shall prevail.
8.7 WAIVER. The waiver of one breach or default shall not constitute the waiver
of any subsequent breach or default, and shall not act to amend or negate
the rights of the parties.
8.8 DEFINITIONS AND SECTION HEADINGS. Singular terms shall be construed as
plural, and vice versa, where the context requires. Section headings are
for purposes of convenience and shall not be considered part of this
Agreement.
8.9 GOVERNING LAW AND VENUE. This Agreement shall be governed by and construed
in accordance with the laws of California, U.S.A. The United Nations
Convention on Contracts for the International Sale of Goods shall not apply
to any transactions under this Agreement, whether between Informix and
Licensee, or between Licensee and any Sublicensee. Licensee hereby submits
to the jurisdiction of the appropriate state or federal courts in
California. Informix at its option may seek to enforce, or prevent a breach
of, any term of this Agreement in the appropriate courts of any state or
country in which the Products are distributed by Licensee or a
7.
<PAGE> 8
Sublicensee, or in which Licensee maintains an office. The prevailing party
in any suit instituted under this Agreement will be entitled to recover all
costs, expenses and reasonable attorneys' fees incurred in such action.
8.10 EFFECT OF INVALID SECTION. If any provision of this Agreement is declared
invalid by any tribunal, then such provision shall automatically be revised
to the minimum extent necessary to the requirements for validity as
declared at such time and, as so adjusted, shall be deemed a provision of
this Agreement as though originally included herein. In the event that the
provision invalidated is of such a nature that it cannot be so revised, the
provision shall be deemed deleted from this Agreement. In either case, the
remaining provisions of this Agreement shall remain in effect.
SECTION 9. DEFINITIONS
"APPLICATION PACKAGE" means the Object Code form of the VAR Program distributed
in conjunction with a Product.
"COMPUTER SYSTEM" means the computer, operating system, peripheral devices and
related software specified in Exhibit A, Section 1, of this Agreement, on which
Licensee has the right to distribute the Application Package.
"DISTRIBUTION TERRITORY" means the geographical region specified in Exhibit A,
Section 2, of this Agreement, in which Licensee is authorized to exercise the
licenses granted under this Agreement.
"DISTRIBUTOR" means a third party appointed by Licensee pursuant to this
Agreement, which is a full-time operator of one or more locations from which
computers, related equipment and/or computer software are distributed to
Resellers.
"EFFECTIVE DATE" means the date of execution of this Agreement by Informix, as
indicated on the signature page.
"END USER" means any third party individual, business or governmental customer
of Licensee of Sublicensee, which acquires one or more copies of the Products
for use in conjunction with the Application Package for personal or internal
business use in accordance with the End User License Agreement, and not for
transfer to others.
"END USER LICENSE AGREEMENT" means the standard Informix agreement accompanying
each copy of the Product, which specifies the terms and conditions of the
license granted by Informix to the End User to use the Product.
"NEW PRODUCT" means the Object Code form of a computer software program,
including all User Documentation: (a) which Informix in its sole discretion
designates as a New Product; (b) which is made generally commercially available
by Informix; and (c) which is marketed by Informix as a separate and distinct
computer program, even if the New Product is in any manner derived from, or is
capable of being integrated or used with, any other Informix product.
"NEW VERSION" means any modification of a Product for which Informix, in its
sole discretion, changes the number to the left of the first decimal point in
the Product version number, e.g., a change from version 3.10.01 to 4.0.
"OBJECT CODE" means the machine-readable computer code which enables the
computer to execute the programs that comprise the Products, which is derived
from the Source Code to the Products by a process generally referred to as
compilation, and which may be stored in a variety of magnetic media or other
formats.
"OPERATING SYSTEM" means a computer program which directs the basic functions of
a computer.
"PRICE LIST" means the Informix suggested retail price list in effect at the
time Licensee orders Products from Informix, and in the country where Licensee
distributes the Products. The Price Lists which shall apply to this Agreement
are as listed in Exhibit B, Section 3, of this Agreement. By its execution of
this Agreement, Licensee acknowledges receipt of a copy of the Price List(s) in
effect on the Effective Date of this Agreement. Informix reserves the right to
change the Price List at any time on ninety (90) days' notice to Licensee.
"PRODUCTS" means the standard proprietary Informix software program packages
listed in Exhibit A, Section 1, of this Agreement, each of which includes: (a)
the Object Code form of the computer programs on magnetic media; (b) User
Documentation; and (c) the End User License Agreement. User Documentation is not
included with the runtime versions of Products.
8.
<PAGE> 9
"RESELLER" means a third party appointed by Licensee pursuant to this Agreement,
which is a full-time operator of one or more retail locations from which
computers, related equipment and/or computer software, including the Application
Package, are distributed solely to End Users.
"SOURCE CODE" means the underlying computer programs: (a) which comprise the
Products; (b) which are readable by human beings when displayed on a monitor or
printed on paper, regardless of the media on which the programs are stored; and
(c) which must be translated, by a process generally known as compilation into
Object Code before the Products can be executed by a computer.
"SUBLICENSEE" means, as the context requires, a Distributor or Reseller which is
granted sublicensing rights under this Agreement.
"TRADEMARK USE POLICY" means the legal guideline manual, as amended from time to
time, which contains the Informix policies and procedures describing the proper
usage of Informix trademarks, service marks, and logos for the purposes
authorized under this Agreement. By its execution of this Agreement, Licensee
acknowledges receipt of a copy of the Trademark Use Policy.
"UPDATE" means any modification of a Product for which Informix, in its sole
discretion, changes a number to the right of the first decimal point in the
Product version number, e.g., a change from version 3.10 to 3.30.
"USER DOCUMENTATION" means the Informix user manual(s) and other related written
materials regarding the proper installation and use of the Products, which are
normally distributed to End Users with the Products.
"VAR PROGRAM" means an application computer program which is developed by
Licensee and is proprietary to Licensee.
SECTION 10. EXHIBITS
Exhibits included and made a part of this Agreement are:
Exhibit A: PRODUCTS & COMPUTER SYSTEMS DISTRIBUTION TERRITORY TERM
Exhibit B: FEES, DISCOUNTS AND PAYMENTS PRICE LISTS
Exhibit C: STANDARD MAINTENANCE SERVICES AND FEES
Exhibit D: EXPORT PROVISIONS
The parties have executed duplicate originals of this Agreement, by their duly
authorized representatives.
LICENSEE:
Caseware, Inc.
- ------------------------------------------
(Name)
3530 Hyland Ave.
- ------------------------------------------
(Address)
Costa Mesa, CA 92626
- ------------------------------------------
(714) 754-0308
- ------------------------------------------
(Telephone Number)
/s/ Fred B. Cox
- ------------------------------------------
(Signature)
Fred B. Cox
- ------------------------------------------
(Printed Name/Title)
9-24-92
- ------------------------------------------
(Date)
INFORMIX SOFTWARE, INC.
4100 Bohannon Drive
Menlo Park, California 94025
Attn: General Counsel
(415) 926-8300
/s/ David H. Stanley
- ------------------------------------------
(Signature)
David H. Stanley, Vice President Legal
and General Counsel
- ------------------------------------------
(Printed Name/Title)
9-24-92
- ------------------------------------------
(Date)
9.
<PAGE> 10
EXHIBIT A
SECTION 1. PRODUCTS AND COMPUTER SYSTEMS LICENSED.
1.1 AUTHORIZED PRODUCTS. The following Products are licensed for the uses
specified in this Agreement and as described in the User Documentation. The
Products shall be licensed for the U.S. English language only.
C-ISAM
INFORMIX-SQL
RUNTIME INFORMIX-SQL
INFORMIX-ESQL/C
RUNTIME INFORMIX-ESQL/C
INFORMIX-ESQL/COBOL
INFORMIX-ESQL/FORTRAN
INFORMIX-4GL
RUNTIME INFORMIX-4GL
INFORMIX-4GL Rapid Development System
RUNTIME INFORMIX-4GL Rapid Development System
INFORMIX-4GL Interactive Debugger
INFORMIX-NET PC
INFOMRIX-NET TCP/IP
RUNTIME INFORMIX-NET TCP/IP
INFORMIX-NET TURBO TCP/IP
INFORMIX-NET StarLAN
INFORMIX-NET StarGroup
RUNTIME INFORMIX-NET StarGroup
INFORMIX-NET TURBO StarLAN
INFORMIX-STAR TCP/IP
RUNTIME INFORMIX-STAR TCP/IP
INFORMIX-STAR StarGroup
RUNTIME INFORMIX-STAR StarGroup
INFORMIX-QuickStep
INFORMIX Standard Engine
RUNTIME INFORMIX Standard Engine
INFORMIX-TURBO
INFORMIX-OnLine
RUNTIME INFORMIX-OnLine
<PAGE> 11
1.2 AUTHORIZED COMPUTER SYSTEMS. The Products are authorized only for use on
the following Computer Systems: As generally available on the Informix
Product Availability List published from time to time by Informix.
SECTION 2. DISTRIBUTION TERRITORY.
Licensee's Distribution Territory shall be: UNITED STATES AND CANADA
SECTION 3. TERM
The initial term of this Agreement shall be one (1) year from the Effective Date
of this Agreement, unless terminated earlier under the provisions of Section 7
of this Agreement. This Agreement will automatically renew for additional one
(1) year terms unless terminated under the provisions of Section 7 or upon
ninety (90) days' prior written notice by either party.
<PAGE> 12
EXHIBIT B
FEES, DISCOUNTS AND PAYMENTS
SECTION 1. DISCOUNTS/FEES.
BASE DISCOUNTS: Licensee shall receive a [***] discount off the then current
Informix Price List for Products licensed under this Agreement. (Discounts shall
not apply to User Documentation ordered separately, marketing collateral
materials or maintenance.)
SECTION 2. OTHER PRODUCTS, GOODS OR SERVICES.
Any products, goods or services provided by Informix to Licensee for which no
fee or other charge is specified in this Agreement shall be provided at full
retail price, unless Informix, in its sole discretion, elects to offer a lower
price to Licensee.
SECTION 3. PRICE LIST.
The Price List which shall apply to Products licensed under this Agreement is:
[***]
SECTION 4. GENERAL PAYMENT PROVISIONS.
4.1 Licensee shall pay Informix the amounts shown pursuant to this Agreement on
or before the dates such payments become due or within thirty (30) days of
the date of Informix's invoice therefor. In the event Informix determines,
in its sole discretion, that Licensee does not have a sufficient credit
rating to support "net-30" terms, Licensee agrees that until such credit
rating is supported, it shall prepay for Informix Products and/or services.
Unless otherwise expressly provided in this Agreement, all amounts due to
Informix hereunder shall be paid by Licensee to the address specified on
the invoice. Anything to the contrary notwithstanding, Informix may invoice
Licensee thirty (30) or more days prior to the due date of any specified
payment under this Agreement, without the necessity of a purchase order or
other document being issued by Licensee. Issuance of such an invoice shall
not accelerate the due date of the payment, unless the acceleration is
otherwise expressly provided for in this Agreement. In the event Licensee
is overdue in making payments to Informix, Informix may suspend performance
until Licensee has made the required payments.
4.2 CURRENCY AND INTEREST. All payments shall be in United States currency, and
any amount not paid when due shall bear interest at one and one-half
percent (1.5%) per month, or the maximum rate allowed by the governing law
under this Agreement. Costs of conversion, collection and related bank
charges shall be paid by Licensee.
4.3 TAXES, TARIFFS AND TRANSPORTATION COSTS. All present or future domestic or
foreign sales, use, value-added, personal property, withholding, excise or
other similar taxes, all export or import taxes, duties, tariffs or
charges, and all transportation expenses related to the shipment of any
Product or other material to Licensee, or which become due based on any
transaction under this Agreement, shall be paid directly by Licensee or
Licensee shall reimburse Informix following receipt of Informix's invoice
for any such amount paid by Informix. If Licensee supplies Informix with
tax exemption certificates issued by the appropriate taxing authorities
which result in abatement of the tax and refund of previously paid taxes,
then Licensee shall be similarly relieved of liability for such tax, and
shall receive a refund of any amounts previously paid to Informix on
account thereof. Any such refund shall be paid within thirty (30) days of
Informix's receipt of the refund from the appropriate taxing authority. If
an audit of either party by a governmental authority results in an
assessment of any such taxes, tariffs or other charges, Licensee shall pay
the amount due, plus any applicable interest, penalties and other costs, on
demand by Informix.
*Confidential Treatment Requested
<PAGE> 13
EXHIBIT C
STANDARD MAINTENANCE SERVICES AND FEES
SECTION 5. MAINTENANCE SERVICES.
5.1 Licensee agrees to:
(a) purchase maintenance from Informix on the then standard applicable
Informix business terms in effect at the time, for each initial copy
of each Product acquired by Licensee from Informix for internal
development use of the VAR Program;
(b) provide the first level of support and skilled instruction to End
Users regarding the use and installation of the Application Package;
(c) provide, using skilled support technicians experienced in the computer
industry, post delivery technical support and assistance to the End
Users of Licensee and Licensee's Sublicensees which acquire the
Application Package, in order to answer their questions regarding the
use and operation of the Application Package and any technical
problems encountered.
5.2 LATE PAYMENT. If Licensee fails to make any maintenance fee payment when
due, Informix shall have no obligation to provide any further maintenance
coverage until Informix receives payment in full for each payment missed.
<PAGE> 14
EXHIBIT D
EXPORT PROVISIONS
EXPORTS AND RE-EXPORTS. The following export and re-export restrictions apply if
Licensee is authorized to distribute Products under this Agreement outside of
the United States:
(1) Unless explicitly permitted by the Export Administration Regulations (EAR)
of the United States Department of Commerce, or prior written authorization
is given by the Office of Export Licensing:
(a) Licensee and Sublicensees will not export or re-export, either
directly or indirectly, either the Products or any direct product
thereof, to Country Groups Q, S, W, Y, or Z, as identified in the EAR,
or to the People's Republic of China, or to Afghanistan;
(b) Neither Licensee nor Sublicensees will distribute or otherwise make
available either the Products, or any direct product thereof, to, or
for use by or for, any military or police entities of the Republic of
South Africa as identified in the EAR;
(2) Licensee and Sublicensees shall comply with all requirements of the EAR,
the International Traffic in Arms Regulations of the U.S. Department of
State, or any other applicable law or administrative regulation of the
United States Government, as those laws, regulations, and rules are changed
from time to time.
(3) The obligations of this Exhibit D shall survive the termination of this
Agreement, regardless of the reason for termination.
(4) WORLDWIDE DISTRIBUTION RESTRICTION. Informix reserves the right to identify
in writing to Licensee one or more countries where copyright, trademark and
other intellectual property and proprietary rights laws are insufficient to
fully protect Informix's rights therein. In any country so identified by
Informix, Licensee shall not, directly or indirectly, distribute any
Products or exercise any of the rights granted under this Agreement.
Licensee agrees to take all actions and execute all documents reasonably
requested by Informix to ensure: (a) protection, within any country in
which the Products are distributed by Licensee or a Sublicensee, of
Informix's intellectual property rights, proprietary right, trade secrets
and confidential information provided to Licensee hereunder; and (b) the
enforceability of all terms and conditions of this Agreement within each
such country. All such actions shall be at Licensee's and/or Sublicensee's
sole expense.
<PAGE> 15
Contact No. 6458-01
PREMIER VAR TERMS AND CONDITIONS
AMENDMENT #1 TO THE VALUE ADDED RESELLER AGREEMENT
The parties to this Amendment #1 to the Value Added Reseller Agreement effective
September 24, 1992 (the "Agreement") are Informix Software, Inc. ("Informix")
and the party identified in the signature block ("Licensee"), both having
principal places of business at the addresses specified in the signature block
below. This Amendment #1 is made as of the Effective Date hereinafter set forth.
This Amendment #1 is made with reference to Paragraph 8.5 of the Agreement which
provides that modifications of any of the provisions of the Agreement are
binding provided they are contained in a writing signed by an officer of
Informix and a duly authorized representative of Licensee which expressly refers
to the Agreement. All unmodified and remaining terms and conditions of the
Agreement shall remain in full force and effect.
IT IS HEREBY MUTUALLY AGREED AND UNDERSTOOD:
SECTION 6. Paragraph 1.1(a) is hereby restated as follows:
"a. obtain from Informix either the finished "shrink-wrap" version of
Products or serial numbers and keys with distribution masters in order for
Licensee to manufacture Products for: (a) internal development purposes of
the VAR Program; and (b) distribution to Sublicensee and End User in
conjunction with the Application Package. Each complete or partial copy of
the Product manufactured by Licensee shall bear both a written serial
number assigned by Informix in Informix's standard format and Informix's
standard copyright and proprietary data legends, as specified on the
original copy delivered to Licensee by Informix; Licensee may also copy
portions of the Informix installation documentation for inclusion in
Licensee's manuals, provided that (1) Licensee shall preserve any and all
intellectual or proprietary rights notices within such documentation; and
(2) the same shall be produced and/or reproduced by means of quality
consistent with that produced by Informix, using such camera-ready artwork
as Informix may provide."
SECTION 7. Section 3.c of the Agreement is revised to read as follows:
"Licensee shall indemnify and hold harmless Informix from and against any
loss, claim, or damage ensuing to Informix arising from Licensee's failure
or refusal to secure, in the end user license agreement to be employed by
Licensee for licensing to end users, the same protections of Informix's
rights under the Informix End User License Agreement."
SECTION 8. The third sentence of Paragraph 4.2 of the Agreement is hereby
restated as follows:
"Within twenty (20) days of the end of each month, Licensee shall provide
Informix with a copy of the Copy Records for the previous month."
SECTION 9. The words [***] in the the tenth line of Section 4.3 of the Agreement
are revised to read [***].
1. *Confidential Treatment Requested
<PAGE> 16
SECTION 10. Paragraph 5.1.b of the Agreement is amended to include, "INFORMIX
MAKES NO WARRANTIES OF ANY TYPE WITH REGARD TO THE MEDIA FOR
PRODUCTS MANUFACTURED BY LICENSEE."
SECTION 11. Paragraph 5.4.d of the Agreement is restated in its entirety to
read, "the manufacturing or marketing of the Products by Licensee or
Sublicensees."
SECTION 12. Exhibit A is amended to the extent that manufacturing rights shall
extend only to the following Products: INFORMIX-SQL; Runtime
INFORMIX-SQL; Runtime INFORMIX-NET TCP/IP; Runtime INFORMIX-NET
StarGroup; Runtime INFORMIX-STAR TCP/IP; Runtime INFORMIX-STAR
StarGroup; Runtime INFORMIX-OnLine;
SECTION 13. Exhibit A, Section 2, is amended to provide that the Licensee's
Distribution Territory is worldwide.
SECTION 14. The words "one (1) year" and "ninety (90) days" in the first and
third lines, respectively, of Exhibit A, Section 3, are revised to
read "three (3) years" and "one hundred and eighty (180) days,"
respectively.
SECTION 15. Exhibit B, Section 1, "Base Discounts" shall be restated as follows:
Nonrefundable Prepayment. Licensee and Informix expressly agree that
Licensee has made a guaranteed, nonrefundable commitment to pay one hundred
and fifteen thousand dollars (US$115,000.00) in fees pertaining to object
code license fees and initial standard support, in accordance with the
schedule below ("Nonrefundable Prepayment").
<TABLE>
<CAPTION>
PAYMENT DUE DATE (ON OR BEFORE) APPLICABLE TO:
------- ---------------------- -------------
<S> <C> <C>
[***] Effective Date Product licenses
[***] Effective Date Initial maintenance
[***] January 15, 1993 Product licenses
[***] April 15, 1993 Product licenses
[***] July 15, 1993 Product licenses
</TABLE>
Any payment below which falls due on a weekend or public holiday shall be
due on the business day immediately preceding the weekend day or public
holiday. In the event Licensee orders Products exceeds the contract
payments actually paid to Informix as specified below, Licensee shall be
liable for payment to Informix of any excess amount. Such amount shall be
immediately due and payable in accordance with Informix's invoice for same
and shall be applied to the next payment due in the payment schedule, if
any. Any payment made beyond the amount due on any of the above-referenced
due dates shall operate to reduce the next due payment dollar for dollar,
but will otherwise not affect due dates.
Contract Maintenance: [***] of the Nonrefundable Prepayment shall be
attributable to initial (first year) maintenance for only Runtime version
Products licensed by Licensee pursuant to this Agreement. The initial
maintenance effective period shall be the
2. *Confidential Treatment Requested
<PAGE> 17
Effective Date of this Agreement through the first anniversary of this
Agreement. Renewal maintenance may not be deducted from any prepayments
made by Licensee.
Discounts. Licensee shall receive pricing on Products licensed under this
Agreement according to the following, until the first anniversary of the
Effective Date of Amendment #1:
(a) a. Licensee shall receive a discount of [***] off of the then-current
Informix Americas Price List for all Development version Products, with
reference to the applicable machine class and user band pricing set forth
therein;
(b) b. For each server platform, Licensee shall pay to Informix a fee to
acquire one (1) license to each of INFORMIX-OnLine and INFORMIX-STAR TCP/IP
(collectively, "Server Software"), respectively, according to the following:
<TABLE>
<CAPTION>
MANUFACTURER/MODEL TOTAL SERVER SOFTWARE PRICE
------------------ ---------------------------
<S> <C>
HP 9000/370, 375, 400 [***]
HP 9000/720, 808 [***]
Sun Sparc (370, 2) [***]
Sun 4/280 [***]
Sun Sparc 4/470, 4/490 [***]
All C platforms not listed above [***]
All D platforms not listed above [***]
All E, F platforms not listed above [***]
</TABLE>
(c) c. For each client platform, Licensee shall acquire at least one (1)
license to each of INFORMIX ESQL/C and INFORMIX-NET TCP/IP (collectively,
"Client Software"), respectively. For each single combination of INFORMIX-ESQL/C
and INFORMIX-NET TCP/IP, Licensee shall pay to Informix a total license fee of
[***].
Any discounts reflected by the above shall not apply to User Documentation
ordered separately, marketing collateral materials or maintenance.
SECTION 16. The following is added to Exhibit B, Section 3:
"It is provided, however, that the applicable price for Products for
delivery in or to the regions of Europe and Africa shall be [***] that of
the [***] Price List, and Licensee shall provide to Informix, as part of
the regular reporting requirements as referenced in Section 4.2 of the
Agreement, detailed reports of sales of licenses to Products within Europe
and Africa, including without limitation the names and complete addresses
of the recipients of such licenses."
3. *Confidential Treatment Requested
<PAGE> 18
Contact No. 6458-01
SECTION 17. Exhibit C, Section 1, "Maintenance Services" is modified to add a
new Paragraph 1.3 as follows:
"If Licensee does not resell its own support services to End Users for the
Products, Licensee may purchase the initial Informix standard maintenance
services for resale to End Users under Informix's then current terms and
conditions."
SECTION 18. This Amendment #1 shall be effective as of the last date signed
below ("Effective Date").
The parties have executed duplicate originals of this Agreement, by their duly
authorized representative.
LICENSEE: INFORMIX:
CASEWARE, INC. INFORMIX SOFTWARE, INC.
3530 Hyland Avenue 4100 Bohannon Dr.
Costa Mesa, California 92626 Menlo Park, California 94025
Attn: Fred Cox Attn: General Counsel
(714) 754-0308 (415) 926-6300
/s/ Fred B. Cox /s/ David H. Stanley
- ------------------------------------- --------------------------------------
(Signature) (Signature)
Fred B. Cox David H. Stanley, Vice President Legal
- ------------------------------------- and General Counsel
(Printed Name/Title) --------------------------------------
(Printed Name/Title)
September 24, 1992 9-24-92
- ------------------------------------- --------------------------------------
(Date) (Date)
4.
<PAGE> 19
Contact No. 6458-02
AMENDMENT #2
This Amendment #2 ("Amendment #2) to the Value Added Reseller License
Agreement effective September 24, 1992 between Informix Software, Inc.
("Informix") and Caseware, Inc. ("Licensee"), as amended by Amendment #1
effective September 24, 1992 ("Amendment #1") ("Agreement"), having respective
principal places of business as set forth in the signature block below, is made
as of the Effective Date hereinafter set forth.
This Amendment #2 is made with reference to Section 8.5 of the Agreement
which provides that modifications of any of the provisions of the Agreement are
binding provided they are contained in a writing signed by a duly authorized
representative of Informix and Licensee which expressly refers to the Agreement.
All unmodified and remaining terms and conditions of the Agreement shall remain
in full force and effect.
IT IS HEREBY MUTUALLY AGREED AND UNDERSTOOD:
SECTION 19. Section 1.1 of the Agreement is hereby restated as follows:
19.1 NONEXCLUSIVE LICENSE GRANT. Informix hereby grants to Licensee,
subject to Paragraph 1.2 of this Agreement, the following
non-transferable, royalty-bearing, nonexclusive licenses which may be
exercised solely within the Distribution Territory. Licensee is hereby
designated as an "Industrial Manufacturer", and is given the right to
use internally and so embed one or more Products in a machine other
than a traditional computer system that the user of the machine is
unable to discern at any time that the Products are in use. For
purposes of this Agreement, as amended by Amendment #2, all references
to "Value Added Reseller" and "VAR", as applicable to Licensee, are
hereby deleted and replaced with "Industrial Manufacturer" Licensee
may:
(a) obtain from Informix either the finished "shrink-wrap" version of
Products or serial numbers and keys with distribution masters in
order for Licensee to manufacture Products for: (a) internal
development purposes of the Industrial Manufacturer program; and
(b) distribution to Sublicensee and End User only as part of the
Application Package. Each complete or partial copy of the Product
manufactured by Licensee shall bear both a written serial number
assigned by Informix in Informix's standard format and Informix's
standard copyright and proprietary data legends, as specified on
the original copy delivered to Licensee by Informix; Licensee may
also copy portions of the Informix installation documentation for
inclusion in Licensee's manuals, provided that (1) Licensee shall
preserve any and all intellectual and/or proprietary rights
notices within such documentation; and (2) the same shall be
produced and/or reproduced by means of quality consistent with
that produced by Informix, using such camera-ready artwork as
Informix may provide.
(b) grant the right for one or more Distributors to distribute and
sublicense the Products, as part of the Application Packages, to
Resellers or End Users.
(c) use the Informix trademarks and/or service marks solely to
promote the distribution of the Products with or as part of the
Application Packages, provided such use conforms to the Informix
Trademark Use Policy.
1.
<PAGE> 20
SECTION 20. The definition of "Application Package" in Section 9 of the
Agreement is hereby restated in its entirety as follows:
"APPLICATION PACKAGE" means the combination of Industrial Manufacturer
hardware, Industrial Manufacturer program and one or more Products.
SECTION 21. Exhibit A, Section 1.1 of the Agreement is hereby restated as
follows:
21.1 AUTHORIZED PRODUCTS. The following Products are licensed for the uses
specified in this Agreement and as described in the User
Documentation. The Products shall be licensed for the U.S. English
language only. Licensee's manufacturing rights shall extend only to
the Products listed hereinbelow.
<TABLE>
<CAPTION>
<S> <C>
PRODUCTS
--------------------------------------
INFORMIX-SQL INFORMIX-NET PC
INFORMIX-SQL Runtime INFORMIX-NET TCP/IP
INFORMIX-NET TCP/IP Runtime
INFORMIX-ESQL/C INFORMIX-NET StarGroup
INFORMIX-ESQL Runtime INFORMIX-NET StarGroup
Runtime
INFORMIX-4GL
INFORMIX-4GL Runtime INFORMIX-STAR TCP/IP
INFORMIX-4GL Rapid Development System INFORMIX-STAR TCP/IP Runtime
INFORMIX-4GL Rapid Development System INFORMIX-STAR StarGroup
Runtime
INFORMIX-4GL Interactive Debugger INFORMIX-STAR StarGroup Runtime
Wingz 1.1
INFORMIX -OnLine
INFORMIX- OnLine Runtime
INFORMIX-SE
INFORMIX-SE Runtime
</TABLE>
MANUFACTURING RIGHTS
--------------------
INFORMIX-SQL Runtime
INFORMIX-ESQL Runtime
INFORMIX-NET TCP-IP Runtime
INFORMIX-NET StarGroup Runtime
INFORMIX-STAR TCP/IP Runtime
INFORMIX-STAR StarGroup Runtime
INFORMIX-OnLine Runtime
2.
<PAGE> 21
Contact No. 6458-02
SECTION 22. Exhibit A, Section 2 of the Agreement is hereby restated in its
entirety as follows:
SECTION 2. DISTRIBUTION TERRITORY. Licensee's Distribution Territory shall
be worldwide for the runtime version only of the Products and United States
and Canada only for the development version of the Products.
SECTION 23. Exhibit B, Section 1, "Base Discounts" is hereby restated in its
entirety as follows:
1. NONREFUNDABLE PREPAYMENT. Licensee and Informix expressly agree that
Licensee has made a guaranteed, nonrefundable commitment to pay [***]
in fees pertaining to object code license fees and initial standard
support, in accordance with the schedule below ("Nonrefundable
Prepayment").
<TABLE>
<CAPTION>
PAYMENT DUE DATE APPLICABLE
------- --------------------------------------- -------------------
<S> <C> <C>
[***] Upon the Effective Date of Amendment #1 Product licenses
[***] Upon the Effective Date of Amendment #1 Initial maintenance
[***] On or before January 15, 1993 Product licenses
[***] On or before April 15, 1993 Product licenses
[***] On or before July 15, 1993 Product licenses
[***] TOTAL
</TABLE>
2. Any payment above which falls due on a weekend or public holiday shall
be due on the business day immediately preceding the weekend day or
public holiday. In the event Licensee orders Products exceeds the
contract payments actually paid to Informix as specified above,
Licensee shall be liable for payment to Informix of any excess amount.
Such amount shall be immediately due and payable in accordance with
Informax's invoice for same and shall be applied to the next payment
due in the payment schedule, if any. Any payment made beyond the
amount due on any of the above-referenced due dates shall operate to
reduce the next due payment dollar for dollar, but will otherwise not
affect due dates.
3. CONTRACT MAINTENANCE. [***] of the Nonrefundable Prepayment shall be
attributable to initial (first year) maintenance for only the runtime
version of the Products licensed by Licensee pursuant to this
Agreement. The initial maintenance effective period shall be the
Effective Date of this Effective Date of this Agreement through the
first anniversary of this Agreement. Renewal maintenance may not be
deducted from any prepayments made by Licensee.
4. DISCOUNTS. Licensee shall receive pricing on Products licensed under
this Agreement according to the following, until September 24, 1993.
(a) Licensee shall receive a discount of [***] off the then-current
Price List for all Products, except as set forth in paragraphs b
and c hereinafter.
(b) For each server platform, Licensee shall pay to Informix a fee to
acquire one (1) license to each of INFORMIX-OnLine Runtime and
INFORMIX-STAR TCP/IP Runtime (collectively, "Server Software"),
respectively, according to the following:
3. *Confidential Treatment Requested
<PAGE> 22
<TABLE>
<CAPTION>
MANUFACTURER /MODEL TOTAL SERVER SOFTWARE PRICE
----------------------------------- ---------------------------
<S> <C>
HP 9000/370, 375, 400 [***]
HP 9000/720, 808 [***]
Sun Sparc (370, 2) [***]
Sun 4/280 [***]
Sun Sparc 4/470, 4/490 [***]
All C platforms not listed above [***]
All D platforms not listed above [***]
All E, F platforms not listed above [***]
</TABLE>
(c) For each client platform, Licensee shall acquire at least one (1)
license to each of INFORMIX-ESQL Runtime, INFORMIX-OnLine
Runtime, and INFORMIX-NET TCP/IP Runtime (collectively, "Client
Software"), respectively. For each single combination of
INFORMIX-ESQL Runtime and INFORMIX-NET TCP/IP Runtime, Licensee
shall pay to Informix a total license fee of [***]
SECTION 24. Exhibit B, Section 3 of the Agreement is hereby restated in its
entirety as follows:
SECTION 3. PRICE LIST.
The price list which shall apply to Products licensed under this Agreement
is: [***]
SECTION 25. Exhibit C, Section 1.3 of the Agreement is hereby deleted in its
entirety.
SECTION 26. This Amendment #2 shall be effective as of the last date signed
below ("Effective Date").
The parties have executed duplicate originals of this Agreement, by their
duly authorized representatives.
4. *Confidential Treatment Requested
<PAGE> 23
LICENSEE: INFORMIX
CASEWARE, INC. INFORMIX SOFTWARE, INC
108 Pacifica 4100 Bohannon Drive
Irvine, California 92718 Menlo Park, California 34025
Attn: Fred Cox Attn: General Counsel
(714) 754-0308 (415) 926-6300
/s/ Fred B. Cox /s/ David H. Stanley
- ------------------------------------- --------------------------------------
Signature Signature
Fred B. Cox David H. Stanley, Vice President Legal
- ------------------------------------- and General Counsel
Printed Name/Title -------------------------------------
Printed Name/Title
3/5/93 3-5-93
- ------------------------------------- --------------------------------------
Date Date
5.
<PAGE> 24
Contact No. 6458-03
AMENDMENT #3
This Amendment #3 ("Amendment #3") to the Value Added Reseller License
Agreement effective September 24, 1992 between Informix Software, Inc.
("Informix") and Caseware, Inc. ("Licensee"), as amended by Amendment #1
effective September 24, 1992 ("Amendment #1") and Amendment #2 effective March
5, 1993 ("Amendment #2") ("Agreement"), having respective principal places of
business as set forth in the signature block below, is made as of the Effective
Date hereinafter set forth.
This Amendment #3 is made with reference to Section 8.5 of the Agreement
which provides that modifications of any of the provisions of the Agreement are
binding provided they are contained in a writing signed by a duly authorized
representative of Informix and Licensee which expressly refers to the Agreement.
All unmodified and remaining terms and conditions of the Agreement shall remain
in full force and effect.
IT IS HEREBY MUTUALLY AGREED AND UNDERSTOOD:
SECTION 27. Exhibit B, Section 1(4) is hereby restated in its entirety as
follows:
"4. DISCOUNTS. Licensee shall receive pricing on Products licensed under
this Agreement according to the following, until September 24, 1995.
a. Licensee shall receive a discount of [***] off the then-current
Price List for all Products, except as set forth in paragraph b
hereinafter.
b. For bundles of INFORMIX-ESQL Runtime Version 5.xx,
INFORMIX-OnLine Runtime Version 5.xx, INFORMIX-STAR TCP/IP
Runtime Version 5.xx and INFORMIX-NET TCP/IP Runtime Version 5.xx
manufactured by Licensee as provided in this Agreement, Licensee
shall pay to Informix a total license fee of [***] per user."
SECTION 28. This Amendment #3 shall be effective as of the last date signed
below ("Effective Date").
The parties have executed duplicate originals of this Agreement, by their
duly authorized representatives.
*Confidential Treatment Requested
1.
<PAGE> 25
Contact No. 6458-03
LICENSEE: INFORMIX:
CASEWARE, INC. INFORMIX SOFTWARE, INC.
108 North Pacifica, 2nd Floor 4100 Bohannon Drive
Irvine, California 92718 Menlo Park, California 34025
Attn: Fred Cox Attn: General Counsel
(714) 453-2200 (415) 926-6300
/s/ Fred B. Cox /s/ David H. Stanley
- ------------------------------------- --------------------------------------
(Signature) (Signature)
Fred B. Cox David H. Stanley, Vice President Legal
- ------------------------------------- and General Counsel
(Printed Name/Title) --------------------------------------
(Printed Name/Title)
8-26-93 8-26-93
- ------------------------------------- --------------------------------------
(Date) (Date)
2.
<PAGE> 26
Contact No. 6458-04
AMENDMENT #4
This Amendment #4 ("Amendment #4") to the Value Added Reseller License
Agreement effective September 24, 1992 between Informix Software, Inc.
("Informix") and Caseware, Inc. ("Licensee"), as amended by Amendment #1
effective September 24, 1992 ("Amendment #1"), Amendment #2 effective March 5,
1993 ("Amendment #2") and Amendment #3 effective August 26, 1993 ("Amendment
#3") ("Agreement"), having respective principal places of business as set forth
in the signature block below, is made as of the Effective Date hereinafter set
forth.
This Amendment #4 is made with reference to Section 8.5 of the Agreement
which provides that modifications of any of the provisions of the Agreement are
binding provided they are contained in a writing signed by a duly authorized
representative of Informix and Licensee which expressly refers to the Agreement.
All unmodified and remaining terms and conditions of the Agreement shall remain
in full force and effect.
IT IS HEREBY MUTUALLY AGREED AND UNDERSTOOD:
SECTION 29. Exhibit B, Section 1.4. is hereby restated in its entirety as
follows:
"4. DISCOUNTS. Licensee shall receive pricing on Products licensed under
this Agreement according to the following, until September 24, 1995.
a. Licensee shall receive a discount of [***] off the then-current
Price List for all Products, except as set forth in paragraph b
hereof.
b. For bundles of INFORMIX-ESQL Runtime Version 5.xx or 6.xx,
INFORMIX-OnLine Runtime Version 5.xx or 6.xx, INFORMIX-STAR
TCP/IP Runtime Version 5.xx or 6.xx and INFORMIX-NET TCP/IP
Runtime Version 5.xx or 6.xx manufactured by Licensee as provided
in this Agreement, Licensee shall pay to Informix a total license
fee of [***] per user."
SECTION 30. This Amendment #4 shall be effective as of the last date signed
below ("Effective Date").
The parties have executed duplicate originals of this Agreement, by their
duly authorized representatives.
1. *Confidential Treatment Requested
<PAGE> 27
Contact No. 6458-04
LICENSEE: INFORMIX:
CASEWARE, INC. INFORMIX SOFTWARE, INC.
108 North Pacifica, 2nd Floor 4100 Bohannon Drive
Irvine, California 92718 Menlo Park, California 34025
Attn: Fred Cox Attn: General Counsel
(714) 453-2200 (415) 926-6300
/s/ Fred B. Cox /s/ John Wolfe
- ------------------------------------- --------------------------------------
(Signature) (Signature)
Fred B. Cox, President John Wolfe, Corporate Counsel
- ------------------------------------- --------------------------------------
(Printed Name/Title) (Printed Name/Title)
Aug. 2, 1994 8-2-94
- ------------------------------------- --------------------------------------
(Date) (Date)
2.
<PAGE> 28
Contact No. 6458-05
AMENDMENT #5
This Amendment #5 ("Amendment #5") to the Value Added Reseller License
Agreement effective September 24, 1992 between Informix Software, Inc.
("Informix") and Continuous Software, previously known as Caseware, Inc.
("Licensee"), as amended by Amendment #1 effective September 24, 1992
("Amendment #1"), Amendment #2 effective March 5, 1993 ("Amendment #2"),
Amendment #3 effective August 26, 1993 ("Amendment #3") and Amendment #4
effective August 2, 1994 ("Amendment #4") (collectively, the "Agreement"),
having respective principal places of business as set forth in the signature
block below, is made as of the Amendment #5 Effective Date hereinafter set
forth.
This Amendment #5 is made with reference to Section 8.5 of the Agreement
which provides that modifications of any of the provisions of the Agreement are
binding provided they are contained in a writing signed by a duly authorized
representative of Informix and Licensee which expressly refers to the Agreement.
All unmodified and remaining terms and conditions of the Agreement shall remain
in full force and effect.
IT IS HEREBY MUTUALLY AGREED AND UNDERSTOOD:
SECTION 31. This Agreement is hereby amended by adding the following Exhibit E.
EXHIBIT E
UNLIMITED USE LICENSE
1. UNLIMITED USE LICENSE. Licensee shall pay to Informix the irrevocable,
nonrefundable amount of [***] (the "Payment") for the right to
manufacture, embed and distribute an unlimited number of copies of
INFORMIX-OnLine Runtime, INFORMIX-STAR TCP/IP Runtime, INFORMIX-ESQL
Runtime and INFORMIX-NET TCP/IP Runtime ("Unlimited Use Products"), or
their successors, within Licensee's configuration management product
until the fifth anniversary of the Amendment #5 Effective Date
("Unlimited Use License"). Licensee shall pay installments of the
Payment to Informix in accordance with the following schedule:
<TABLE>
<CAPTION>
PAYMENT DUE DATE
---------------- ------------------------------
<S> <C>
[***] Upon execution of Amendment #5
[***] On or before June 15, 1995
[***] On or before September 15, 1995
[***] On or before December 15, 1995
[***]
</TABLE>
The Payment is not inclusive of fees for INFORMIX-Assurance (formerly
"Basic Maintenance") services for the Unlimited Use Products. The
Payment price set forth above is not subject to any Discounts set
forth in the Agreement.
1. *Confidential Treatment Requested
<PAGE> 29
2. ROYALTY PAYMENTS. In the event Licensee's total gross revenues for its
configuration management product during any period up to twelve (12)
months in duration exceed [***] at any time during the term of the
Unlimited Use License, Licensee shall, within ten (10) days of the end
of each month thereafter until the firth anniversary of the Amendment
#5 Effective Date, pay to Informix monthly [***] of the prior month's
revenues for such product ("Royalty Payments"). In addition, Licensee
shall concurrently submit to Informix reasonable documentation to
permit Informix to verify the amount of all such Royalty Payments.
SECTION 32. This Amendment #5 shall be effective as January 4, 1995
("Amendment #5 Effective Date").
The parties have executed duplicate originals of this Agreement, by their
duly authorized representatives.
LICENSEE: INFORMIX:
CONTINUOUS SOFTWARE INFORMIX SOFTWARE, INC.
108 North Pacifica, 2nd Floor 4100 Bohannon Drive
Irvine, California 92718 Menlo Park, California 34025
Attn: John Wark, President Attn: General Counsel
(714) 453-2200 (415) 926-6300
/s/ John Wark /s/ David H. Stanley
- ------------------------------------- --------------------------------------
Signature (Signature)
John Wark, President and CEO David H. Stanley, Vice President Legal
- ------------------------------------- and General Counsel
Printed Name/Title --------------------------------------
(Printed Name/Title)
March 30, 1995 3-31-95
- ------------------------------------- --------------------------------------
Date Date
2. *Confidential Treatment Requested
<PAGE> 1
EXHIBIT 10.34
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of the Series E Preferred Stock of
Continuus Software Corporation
Dated as of May 20, 1997 (the "Effective Date")
WHEREAS, Continuus Software Corporation, a California corporation (the
"Company") has entered into a Master Lease Agreement dated as of April 20, 1995,
Equipment Schedule No. VL-4 dated as of February 28, 1997, and related Summary
Equipment Schedules (the "Leases") with Comdisco, Inc., a Delaware corporation
(the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in
consideration for such Leases, the right to purchase shares of its Preferred
Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder
is entitled, upon the terms and subject to the conditions hereinafter set forth,
to subscribe to and purchase, from the Company, 14,285 fully paid and
non-assessable shares of the Company's Series E Preferred Stock ("Preferred
Stock") at a purchase price of $2.10 per share (the "Exercise Price"). The
number and purchase price of such shares are subject to adjustment as provided
in Section 8 hereof. Notwithstanding any provision(s) in this Warrant to the
contrary, in the event that the outstanding shares of the Company's Series E
Preferred Stock automatically covert into Common Stock pursuant to the
provisions of Article III B., Section 4(a) of the Company's Articles of
Incorporation, then this Warrant shall automatically convert into a warrant to
purchase the number of shares of Common Stock as would have been issuable to the
Warrantholder had this Warrant been exercised in full immediately prior to the
automatic conversion of Series E Preferred Stock into Common Stock.
1.
<PAGE> 2
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i) ten
(10) years or (ii) five (5) years from the effective date of the Company's
initial public offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form attached
hereto as Exhibit I (the "Notice of Exercise"), duly completed and executed.
Promptly upon receipt of the Notice of Exercise and the payment of the purchase
price in accordance with the terms set forth below, and in no event later than
twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a
certificate for the number of shares of Preferred Stock purchased and shall
execute the Notice of Exercise indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
-----
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Common Stock.
B = the Exercise Price.
As used herein, current fair market value of Common Stock shall mean
with respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering,
and if the Company's Registration Statement relating to such public
offering has been declared effective by the SEC, then the initial
"Price to Public" specified in the final prospectus with respect to the
offering;
2.
<PAGE> 3
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the average of the closing prices over a
twenty-one (21) day period ending three days before the day
the current fair market value of the securities is being
determined; or
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the average of the closing bid and asked
prices quoted on the NASDAQ system (or similar system) over
the twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being
determined;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market,
the current fair market value of Common Stock shall be the highest
price per share which the Company could obtain from a willing buyer
(not a current employee or director) for shares of Common Stock sold by
the Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors, unless the Company shall become
subject to a merger, acquisition or other consolidation pursuant to
which the Company is not the surviving party, in which case the fair
market value of Common Stock shall be deemed to be the value received
by the holders of the Company's Preferred Stock on a common equivalent
basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of
this Warrant Agreement, the Company will at all times have authorized and
reserved a sufficient number of shares of its Preferred Stock to provide for the
exercise of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock
required to be reserved hereunder require registration with or approval of any
governmental authority under any Federal or State law (other than any
registration under the 1933 Act, as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
3.
<PAGE> 4
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred
Stock purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a
capital reorganization of the shares of the Company's stock (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or a merger or consolidation of the Company with or into
another corporation when the Company is not the surviving corporation, or the
sale of all or substantially all of the Company's properties and assets to any
other person (hereinafter referred to as a "Merger Event"), then, as a part of
such Merger Event, lawful provision shall be made so that the Warrantholder
shall thereafter be entitled to receive, upon exercise of the Warrant, the
number of shares of preferred stock, other securities, or other assets or
property of the successor corporation resulting from such Merger Event,
equivalent in value to that which would have been payable if Warrantholder had
exercised this Warrant immediately prior to the Merger Event. In any such case,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
Agreement with respect to the rights and interest of the Warrantholder after the
Merger Event to the end that the provisions of this Warrant Agreement (including
adjustments of the Exercise Price and number of shares of Preferred Stock
purchasable) shall be applicable to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall,
by combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
4.
<PAGE> 5
(c) Subdivision or Combination of Shares. If the Company at any
time shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a
dividend payable in, or make any other distribution (except any distribution
specifically provided for in the foregoing subsections (a) or (b)) of the
Company's stock, then the Exercise Price shall be adjusted, from and after the
record date of such dividend or distribution, to that price determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction (i) the numerator of which shall be the total number of all shares
of the Company's stock outstanding immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of all
shares of the Company's stock outstanding immediately after such dividend or
distribution. The Warrantholder shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Preferred
Stock (calculated to the nearest whole share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Preferred Stock issuable upon the exercise hereof immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable
to the Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit A (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prompt written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security was sold, (b) the
number of shares issued, and (c) such other information as necessary for
Warrantholder to determine if a dilutive event has occurred, provided, however,
no such notice will be required with respect to issues of stock resulting from
the exercise of options or warrants which are outstanding as of the date of this
Warrant Agreement.
(f) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be any voluntary or involuntary dissolution, liquidation
or winding up of the Company; or (v) there shall be an underwritten initial
public offering of Company securities; then, in connection with each such event,
the Company shall send to the Warrantholder: (A) at least twenty (20) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Preferred Stock shall be entitled
thereto) or for determining rights to vote in respect of such Merger Event,
dissolution, liquidation or winding up; and (B) in the case of any such Merger
Event, dissolution, liquidation or winding up or public offering, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up).
5.
<PAGE> 6
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required
by subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable
upon exercise of the Warrantholder's rights has been duly and validly reserved
and, when issued in accordance with the provisions of this Warrant Agreement,
will be validly issued, fully paid and non-assessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Preferred Stock issuable pursuant to this Warrant Agreement
may be subject to restrictions on transfer under state and/or Federal securities
laws. The Company has made available to the Warrantholder true, correct and
complete copies of its Charter and Bylaws, as amended. The issuance of
certificates for shares of Preferred Stock upon exercise of the Warrant
Agreement shall be made without charge to the Warrantholder for any issuance tax
in respect thereof, or other cost incurred by the Company in connection with
such exercise and the related issuance of shares of Preferred Stock. The Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved and the issuance and delivery of any certificate in a name
other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of
this Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization
or other similar laws affecting the enforceability.
(c) Consents and Approvals. No consent or approval of, giving of
notice to, registration with, or taking of any other action in respect of any
state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant Agreement, except for the filing of notices
pursuant to
6.
<PAGE> 7
Regulation D under the 1933 Act and Section 25102(f)of the California Corporate
Securities Law, which filings, if required, will be effective by the time
required thereby.
(d) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(e) Exempt Transaction. Subject to the accuracy of the
Warrantholder's representations in Section 10 hereof, the issuance of the
Preferred Stock upon exercise of this Warrant will constitute a transaction
exempt from (i) the registration requirements of Section 5 of the 1933 Act, in
reliance upon Section 4(2) thereof, and (ii) the qualification requirements of
the California Corporate Securities Law, in reliance upon Section
25102(f)thereof.
(f) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time; provided, however, that the provisions of this Section 9(g) shall not
apply unless and until the Company is a reporting company under the Securities
Exchange Act of 1934, as amended.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or
the Preferred Stock issuable upon exercise of the Warrantholder's rights
contained herein will be acquired for investment and not with a view to the sale
or distribution of any part thereof, and the Warrantholder shall not sell or
engage in any public distribution of the same except pursuant to a registration
or exemption.
(b) Private Issue. The Warrantholder understands (i) that the
Preferred Stock issuable upon exercise of this Warrant is not registered under
the 1933 Act or qualified under applicable state securities laws on the ground
that the issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory
7.
<PAGE> 8
to the Company and its counsel to the effect that (A) appropriate action
necessary for compliance with the 1933 Act has been taken, or (B) an exemption
from the registration requirements of the 1933 Act is available. Notwithstanding
the foregoing, the restrictions imposed upon the transferability of any of its
rights to acquire Preferred Stock or Preferred Stock issuable on the exercise of
such rights do not apply to transfers from the beneficial owner of any of the
aforementioned securities to its nominee or from such nominee to its beneficial
owner, and shall terminate as to any particular share of Preferred Stock when
(1) such security shall have been effectively registered under the 1933 Act and
sold by the holder thereof in accordance with such registration or (2) such
security shall have been sold without registration in compliance with Rule 144
under the 1933 Act, or (3) a letter shall have been issued to the Warrantholder
at its request by the staff of the Securities and Exchange Commission or a
ruling shall have been issued to the Warrantholder at its request by such
Commission stating that no action shall be recommended by such staff or taken by
such Commission, as the case may be, if such security is transferred without
registration under the 1933 Act in accordance with the conditions set forth in
such letter or ruling and such letter or ruling specifies that no subsequent
restrictions on transfer are required. Whenever the restrictions imposed
hereunder shall terminate, as hereinabove provided, the Warrantholder or holder
of a share of Preferred Stock then outstanding as to which such restrictions
have terminated shall be entitled to receive from the Company, without expense
to such holder, one or more new certificates for the Warrant or for such shares
of Preferred Stock not bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to bear the economic
risks of its investment.
(e) Risk of No Registration. The Warrantholder understands that if
the Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1933 Act, or file reports pursuant to Section
15(d), of the Securities Exchange Act of 1934 (the "1934 Act"), or if a
registration statement covering the securities under the 1933 Act is not in
effect when it desires to sell (i) the rights to purchase Preferred Stock
pursuant to this Warrant Agreement, or (ii) the Preferred Stock issuable upon
exercise of the right to purchase, it may be required to hold such securities
for an indefinite period. The Warrantholder also understands that any sale of
its rights of the Warrantholder to purchase Preferred Stock or Preferred Stock
which might be made by it in reliance upon Rule 144 under the 1933 Act may be
made only in accordance with the terms and conditions of that Rule.
11. TRANSFERS. Subject to the terms and conditions contained in Section 10
hereof, this Warrant Agreement and all rights hereunder are transferable in
whole or in part by the Warrantholder and any successor transferee, provided,
however, in no event shall the number of transfers of the rights and interests
in all of the Warrants exceed three (3) transfers. The transfer shall be
recorded on the books of the Company upon receipt by the Company of a notice of
transfer in the form attached hereto as Exhibit II (the "Transfer Notice"), at
its principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.
12. MISCELLANEOUS.
8.
<PAGE> 9
(a) Effective Date. The provisions of this Warrant Agreement shall
be construed and shall be given effect in all respects as if it had been
executed and delivered by the Company on the date hereof. This Warrant Agreement
shall be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party shall be entitled to attorneys' fees and expenses and all costs
of proceedings incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or seven (7) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the Warrantholder
at Comdisco, Inc. 6111 North River Road, Rosemont, Illinois 60018, attention:
James Labe, , cc: Legal Department, (and/or, if by facsimile, (708) 518-5465 and
(708) 518-5088) and (ii) to the Company at Continuus Software Corporation, 108
Pacifica, Irvine, CA 92718 (and/or if by facsimile, (714) 453-2276) or at such
other address as any such party may subsequently designate by written notice to
the other party.
(f) Remedies. In the event of any default hereunder, the
non-defaulting party may proceed to protect and enforce its rights either by
suit in equity and/or by action at law, including but not limited to an action
for damages as a result of any such default, and/or an action for specific
performance for any default where Warrantholder will not have an adequate remedy
at law and where damages will not be readily ascertainable. The Company
expressly agrees that it shall not oppose an application by the Warrantholder or
any other person entitled to the benefit of this Agreement requiring specific
performance of any or all provisions hereof or enjoining the Company from
continuing to commit any such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of
its Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and
conditions of the respective parties contained herein or made pursuant to this
Warrant Agreement shall survive the execution and delivery of this Warrant
Agreement.
9.
<PAGE> 10
(i) Severability. In the event any one or more of the provisions
of this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be
amended by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this
Warrant Agreement, shall provide the Warrantholder with certified resolutions of
the Board of Directors of the Company approving this Warrant Agreement and the
transactions contemplated thereby. The Company shall also supply such other
documents as the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized as of the
Effective Date.
Company: CONTINUUS SOFTWARE CORPORATION
By:
Title:
Warrantholder: COMDISCO, INC.
By:
Title:______________________________________
10.
<PAGE> 11
EXHIBIT I
NOTICE OF EXERCISE
To: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares
of the Preferred Stock of _________________, pursuant to the terms of
the Warrant Agreement dated the ______ day of ________________________,
19__ (the "Warrant Agreement") between
_____________________________________ and the Warrantholder, and
tenders herewith payment of the purchase price for such shares in full,
together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock of
________________________________________, the undersigned hereby
confirms and acknowledges the investment representations and warranties
made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Preferred Stock in the name of the undersigned or in such other name as
is specified below.
(4) The undersigned Warrantholder understands and agrees that there will be
placed on the certificate or certificates for the Preferred Stock, or
any substitutions therefor, a legend stating in substance:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
any state securities laws. These shares have been acquired for
investment and may not be sold or otherwise transferred in the absence
of an effective registration statement for these shares under the
Securities Act and applicable state securities laws, or an opinion of
counsel satisfactory to the Company that registration is not required
and that an applicable exemption is available.
_________________________________
(Name)
_________________________________
(Address)
Warrantholder: COMDISCO, INC.
By: _____________________________
Title: __________________________
Date: ___________________________
11.
<PAGE> 12
ACKNOWLEDGEMENT OF EXERCISE
The undersigned ____________________________________, hereby
acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase
____ shares of the Preferred Stock of _________________, pursuant to the terms
of the Warrant Agreement, and further acknowledges that ______ shares remain
subject to purchase under the terms of the Warrant Agreement.
Company: CONTINUUS SOFTWARE CORPORATION
By: _____________________________
Title: __________________________
Date: ___________________________
12.
<PAGE> 13
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this
form and supply required information. Do not use this form to purchase
shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
_________________________________________________________________
(Please Print)
whose address is_________________________________________________
_________________________________________________________________
Dated _________________________________________
Holder's Signature ____________________________
Holder's Address ______________________________
_______________________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Transfer Notice must correspond with the
name as it appears on the face of the Warrant Agreement,
without alteration or enlargement or any change whatever.
Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of
authority to assign the foregoing Warrant Agreement.
13.
<PAGE> 1
EXHIBIT 10.35
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of the Series E Preferred Stock of
Continuus Software Corporation
Dated as of July 22, 1997(the "Effective Date")
WHEREAS, Continuus Software Corporation, a California corporation (the
"Company") has entered into a Master Lease Agreement dated as of April 20, 1995,
Equipment Schedule No. VL-5 and related Summary Equipment Schedules (the
"Leases") with Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in
consideration for such Leases, the right to purchase shares of its Preferred
Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder
is entitled, upon the terms and subject to the conditions hereinafter set forth,
to subscribe to and purchase, from the Company, 17,857 fully paid and
non-assessable shares of the Company's Series E Preferred Stock ("Preferred
Stock") at a purchase price of $2.10 per share (the "Exercise Price"). The
number and purchase price of such shares are subject to adjustment as provided
in Section 8 hereof. Notwithstanding any provision(s) in this Warrant to the
contrary, in the event that the outstanding shares of the Company's Series E
Preferred Stock automatically covert into Common Stock pursuant to the
provisions of Article III B., Section 4(a) of the Company's Articles of
Incorporation, then this Warrant shall automatically convert into a warrant to
purchase the number of shares of Common Stock as would have been issuable to the
Warrantholder had this Warrant been exercised in full immediately prior to the
automatic conversion of Series E Preferred Stock into Common Stock.
1.
<PAGE> 2
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i) ten
(10) years or (ii) five (5) years from the effective date of the Company's
initial public offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form attached
hereto as Exhibit I (the "Notice of Exercise"), duly completed and executed.
Promptly upon receipt of the Notice of Exercise and the payment of the purchase
price in accordance with the terms set forth below, and in no event later than
twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a
certificate for the number of shares of Preferred Stock purchased and shall
execute the Notice of Exercise indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Common Stock.
B = the Exercise Price.
As used herein, current fair market value of Common Stock shall mean
with respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering,
and if the Company's Registration Statement relating to such public
offering has been declared effective by the SEC, then the initial
"Price to Public" specified in the final prospectus with respect to the
offering;
2.
<PAGE> 3
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the average of the closing prices over a
twenty-one (21) day period ending three days before the day
the current fair market value of the securities is being
determined; or
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the average of the closing bid and asked
prices quoted on the NASDAQ system (or similar system) over
the twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being
determined;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market,
the current fair market value of Common Stock shall be the highest
price per share which the Company could obtain from a willing buyer
(not a current employee or director) for shares of Common Stock sold by
the Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors, unless the Company shall become
subject to a merger, acquisition or other consolidation pursuant to
which the Company is not the surviving party, in which case the fair
market value of Common Stock shall be deemed to be the value received
by the holders of the Company's Preferred Stock on a common equivalent
basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of
this Warrant Agreement, the Company will at all times have authorized and
reserved a sufficient number of shares of its Preferred Stock to provide for the
exercise of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock
required to be reserved hereunder require registration with or approval of any
governmental authority under any Federal or State law (other than any
registration under the 1933 Act, as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
3.
<PAGE> 4
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred
Stock purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a
capital reorganization of the shares of the Company's stock (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or a merger or consolidation of the Company with or into
another corporation when the Company is not the surviving corporation, or the
sale of all or substantially all of the Company's properties and assets to any
other person (hereinafter referred to as a "Merger Event"), then, as a part of
such Merger Event, lawful provision shall be made so that the Warrantholder
shall thereafter be entitled to receive, upon exercise of the Warrant, the
number of shares of preferred stock, other securities, or other assets or
property of the successor corporation resulting from such Merger Event,
equivalent in value to that which would have been payable if Warrantholder had
exercised this Warrant immediately prior to the Merger Event. In any such case,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
Agreement with respect to the rights and interest of the Warrantholder after the
Merger Event to the end that the provisions of this Warrant Agreement (including
adjustments of the Exercise Price and number of shares of Preferred Stock
purchasable) shall be applicable to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall,
by combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
4.
<PAGE> 5
(c) Subdivision or Combination of Shares. If the Company at any
time shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a
dividend payable in, or make any other distribution (except any distribution
specifically provided for in the foregoing subsections (a) or (b)) of the
Company's stock, then the Exercise Price shall be adjusted, from and after the
record date of such dividend or distribution, to that price determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction (i) the numerator of which shall be the total number of all shares
of the Company's stock outstanding immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of all
shares of the Company's stock outstanding immediately after such dividend or
distribution. The Warrantholder shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Preferred
Stock (calculated to the nearest whole share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Preferred Stock issuable upon the exercise hereof immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable
to the Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit A (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prompt written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security was sold, (b) the
number of shares issued, and (c) such other information as necessary for
Warrantholder to determine if a dilutive event has occurred, provided, however,
no such notice will be required with respect to issues of stock resulting from
the exercise of options or warrants which are outstanding as of the date of this
Warrant Agreement.
(f) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be any voluntary or involuntary dissolution, liquidation
or winding up of the Company; or (v) there shall be an underwritten initial
public offering of Company securities; then, in connection with each such event,
the Company shall send to the Warrantholder: (A) at least twenty (20) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Preferred Stock shall be entitled
thereto) or for determining rights to vote in respect of such Merger Event,
dissolution, liquidation or winding up; and (B) in the case of any such Merger
Event, dissolution, liquidation or winding up or public offering, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up).
5.
<PAGE> 6
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required
by subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable
upon exercise of the Warrantholder's rights has been duly and validly reserved
and, when issued in accordance with the provisions of this Warrant Agreement,
will be validly issued, fully paid and non-assessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Preferred Stock issuable pursuant to this Warrant Agreement
may be subject to restrictions on transfer under state and/or Federal securities
laws. The Company has made available to the Warrantholder true, correct and
complete copies of its Charter and Bylaws, as amended. The issuance of
certificates for shares of Preferred Stock upon exercise of the Warrant
Agreement shall be made without charge to the Warrantholder for any issuance tax
in respect thereof, or other cost incurred by the Company in connection with
such exercise and the related issuance of shares of Preferred Stock. The Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved and the issuance and delivery of any certificate in a name
other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of
this Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization
or other similar laws affecting the enforceability.
(c) Consents and Approvals. No consent or approval of, giving of
notice to, registration with, or taking of any other action in respect of any
state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant Agreement, except for the filing of notices
pursuant to
6.
<PAGE> 7
Regulation D under the 1933 Act and Section 25102(f) of the California Corporate
Securities Law, which filings, if required, will be effective by the time
required thereby.
(d) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(e) Exempt Transaction. Subject to the accuracy of the
Warrantholder's representations in Section 10 hereof, the issuance of the
Preferred Stock upon exercise of this Warrant will constitute a transaction
exempt from (i) the registration requirements of Section 5 of the 1933 Act, in
reliance upon Section 4(2) thereof, and (ii) the qualification requirements of
the California Corporate Securities Law, in reliance upon Section
25102(f)thereof.
(f) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time; provided, however, that the provisions of this Section 9(g) shall not
apply unless and until the Company is a reporting company under the Securities
Exchange Act of 1934, as amended.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or
the Preferred Stock issuable upon exercise of the Warrantholder's rights
contained herein will be acquired for investment and not with a view to the sale
or distribution of any part thereof, and the Warrantholder shall not sell or
engage in any public distribution of the same except pursuant to a registration
or exemption.
(b) Private Issue. The Warrantholder understands (i) that the
Preferred Stock issuable upon exercise of this Warrant is not registered under
the 1933 Act or qualified under applicable state securities laws on the ground
that the issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory
7.
<PAGE> 8
to the Company and its counsel to the effect that (A) appropriate action
necessary for compliance with the 1933 Act has been taken, or (B) an exemption
from the registration requirements of the 1933 Act is available. Notwithstanding
the foregoing, the restrictions imposed upon the transferability of any of its
rights to acquire Preferred Stock or Preferred Stock issuable on the exercise of
such rights do not apply to transfers from the beneficial owner of any of the
aforementioned securities to its nominee or from such nominee to its beneficial
owner, and shall terminate as to any particular share of Preferred Stock when
(1) such security shall have been effectively registered under the 1933 Act and
sold by the holder thereof in accordance with such registration or (2) such
security shall have been sold without registration in compliance with Rule 144
under the 1933 Act, or (3) a letter shall have been issued to the Warrantholder
at its request by the staff of the Securities and Exchange Commission or a
ruling shall have been issued to the Warrantholder at its request by such
Commission stating that no action shall be recommended by such staff or taken by
such Commission, as the case may be, if such security is transferred without
registration under the 1933 Act in accordance with the conditions set forth in
such letter or ruling and such letter or ruling specifies that no subsequent
restrictions on transfer are required. Whenever the restrictions imposed
hereunder shall terminate, as hereinabove provided, the Warrantholder or holder
of a share of Preferred Stock then outstanding as to which such restrictions
have terminated shall be entitled to receive from the Company, without expense
to such holder, one or more new certificates for the Warrant or for such shares
of Preferred Stock not bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to bear the economic
risks of its investment.
(e) Risk of No Registration. The Warrantholder understands that if
the Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1933 Act, or file reports pursuant to Section
15(d), of the Securities Exchange Act of 1934 (the "1934 Act"), or if a
registration statement covering the securities under the 1933 Act is not in
effect when it desires to sell (i) the rights to purchase Preferred Stock
pursuant to this Warrant Agreement, or (ii) the Preferred Stock issuable upon
exercise of the right to purchase, it may be required to hold such securities
for an indefinite period. The Warrantholder also understands that any sale of
its rights of the Warrantholder to purchase Preferred Stock or Preferred Stock
which might be made by it in reliance upon Rule 144 under the 1933 Act may be
made only in accordance with the terms and conditions of that Rule.
11. TRANSFERS. Subject to the terms and conditions contained in Section 10
hereof, this Warrant Agreement and all rights hereunder are transferable in
whole or in part by the Warrantholder and any successor transferee, provided,
however, in no event shall the number of transfers of the rights and interests
in all of the Warrants exceed three (3) transfers. The transfer shall be
recorded on the books of the Company upon receipt by the Company of a notice of
transfer in the form attached hereto as Exhibit II (the "Transfer Notice"), at
its principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.
12. MISCELLANEOUS.
8.
<PAGE> 9
(a) Effective Date. The provisions of this Warrant Agreement shall
be construed and shall be given effect in all respects as if it had been
executed and delivered by the Company on the date hereof. This Warrant Agreement
shall be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party shall be entitled to attorneys' fees and expenses and all costs
of proceedings incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or seven (7) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the Warrantholder
at Comdisco, Inc. 6111 North River Road, Rosemont, Illinois 60018, attention:
James Labe, , cc: Legal Department, (and/or, if by facsimile, (708) 518-5465 and
(708) 518-5088) and (ii) to the Company at Continuus Software Corporation, 108
Pacifica, Irvine, CA 92718 (and/or if by facsimile, (714) 453-2276) or at such
other address as any such party may subsequently designate by written notice to
the other party.
(f) Remedies. In the event of any default hereunder, the
non-defaulting party may proceed to protect and enforce its rights either by
suit in equity and/or by action at law, including but not limited to an action
for damages as a result of any such default, and/or an action for specific
performance for any default where Warrantholder will not have an adequate remedy
at law and where damages will not be readily ascertainable. The Company
expressly agrees that it shall not oppose an application by the Warrantholder or
any other person entitled to the benefit of this Agreement requiring specific
performance of any or all provisions hereof or enjoining the Company from
continuing to commit any such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of
its Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and
conditions of the respective parties contained herein or made pursuant to this
Warrant Agreement shall survive the execution and delivery of this Warrant
Agreement.
(i) Severability. In the event any one or more of the provisions
of this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this
9.
<PAGE> 10
Warrant Agreement shall be unimpaired, and the invalid, illegal or unenforceable
provision shall be replaced by a mutually acceptable valid, legal and
enforceable provision, which comes closest to the intention of the parties
underlying the invalid, illegal or unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be
amended by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this
Warrant Agreement, shall provide the Warrantholder with certified resolutions of
the Board of Directors of the Company approving this Warrant Agreement and the
transactions contemplated thereby. The Company shall also supply such other
documents as the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized as of the
Effective Date.
Company: CONTINUUS SOFTWARE CORPORATION
By:
Title:
Warrantholder: COMDISCO, INC.
By:
Title:______________________________________
10.
<PAGE> 11
EXHIBIT I
NOTICE OF EXERCISE
To: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares
of the Preferred Stock of _________________, pursuant to the terms of
the Warrant Agreement dated the ______ day of ________________________,
19__ (the "Warrant Agreement") between
_____________________________________ and the Warrantholder, and
tenders herewith payment of the purchase price for such shares in full,
together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock of
________________________________________, the undersigned hereby
confirms and acknowledges the investment representations and warranties
made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Preferred Stock in the name of the undersigned or in such other name as
is specified below.
(4) The undersigned Warrantholder understands and agrees that there will be
placed on the certificate or certificates for the Preferred Stock, or
any substitutions therefor, a legend stating in substance:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
any state securities laws. These shares have been acquired for
investment and may not be sold or otherwise transferred in the absence
of an effective registration statement for these shares under the
Securities Act and applicable state securities laws, or an opinion of
counsel satisfactory to the Company that registration is not required
and that an applicable exemption is available.
_________________________________
(Name)
_________________________________
(Address)
Warrantholder: COMDISCO, INC.
By: _____________________________
Title: __________________________
Date: ___________________________
11.
<PAGE> 12
ACKNOWLEDGEMENT OF EXERCISE
The undersigned ____________________________________, hereby
acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase
____ shares of the Preferred Stock of _________________, pursuant to the terms
of the Warrant Agreement, and further acknowledges that ______ shares remain
subject to purchase under the terms of the Warrant Agreement.
Company: CONTINUUS SOFTWARE CORPORATION
By: _____________________________
Title: __________________________
Date: ___________________________
12.
<PAGE> 13
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this
form and supply required information. Do not use this form to purchase
shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
_________________________________________________________________
(Please Print)
whose address is_________________________________________________
_________________________________________________________________
Dated _________________________________________
Holder's Signature ____________________________
Holder's Address ______________________________
_______________________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Transfer Notice must correspond with the
name as it appears on the face of the Warrant Agreement,
without alteration or enlargement or any change whatever.
Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of
authority to assign the foregoing Warrant Agreement.
13.
<PAGE> 1
EXHIBIT 10.36
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of the Series E Preferred Stock of
Continuus Software Corporation
Dated as of December 10, 1997(the "Effective Date")
WHEREAS, Continuus Software Corporation, a California corporation (the
"Company") has entered into a Master Lease Agreement dated as of April 20, 1995,
Equipment Schedule No. VL-6 and related Summary Equipment Schedules (the
"Leases") with Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in
consideration for such Leases, the right to purchase shares of its Preferred
Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder
is entitled, upon the terms and subject to the conditions hereinafter set forth,
to subscribe to and purchase, from the Company, 10,714 fully paid and
non-assessable shares of the Company's Series E Preferred Stock ("Preferred
Stock") at a purchase price of $2.10 per share (the "Exercise Price"). The
number and purchase price of such shares are subject to adjustment as provided
in Section 8 hereof. Notwithstanding any provision(s) in this Warrant to the
contrary, in the event that the outstanding shares of the Company's Series E
Preferred Stock automatically covert into Common Stock pursuant to the
provisions of Article III B., Section 4(a) of the Company's Articles of
Incorporation, then this Warrant shall automatically convert into a warrant to
purchase the number of shares of Common Stock as would have been issuable to the
Warrantholder had this Warrant been exercised in full immediately prior to the
automatic conversion of Series E Preferred Stock into Common Stock.
1.
<PAGE> 2
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i) ten
(10) years or (ii) five (5) years from the effective date of the Company's
initial public offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form attached
hereto as Exhibit I (the "Notice of Exercise"), duly completed and executed.
Promptly upon receipt of the Notice of Exercise and the payment of the purchase
price in accordance with the terms set forth below, and in no event later than
twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a
certificate for the number of shares of Preferred Stock purchased and shall
execute the Notice of Exercise indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Common Stock.
B = the Exercise Price.
As used herein, current fair market value of Common Stock shall mean
with respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering,
and if the Company's Registration Statement relating to such public
offering has been declared effective by the SEC, then the initial
"Price to Public" specified in the final prospectus with respect to the
offering;
2.
<PAGE> 3
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the average of the closing prices over a
twenty-one (21) day period ending three days before the day
the current fair market value of the securities is being
determined; or
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the average of the closing bid and asked
prices quoted on the NASDAQ system (or similar system) over
the twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being
determined;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market,
the current fair market value of Common Stock shall be the highest
price per share which the Company could obtain from a willing buyer
(not a current employee or director) for shares of Common Stock sold by
the Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors, unless the Company shall become
subject to a merger, acquisition or other consolidation pursuant to
which the Company is not the surviving party, in which case the fair
market value of Common Stock shall be deemed to be the value received
by the holders of the Company's Preferred Stock on a common equivalent
basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of
this Warrant Agreement, the Company will at all times have authorized and
reserved a sufficient number of shares of its Preferred Stock to provide for the
exercise of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock
required to be reserved hereunder require registration with or approval of any
governmental authority under any Federal or State law (other than any
registration under the 1933 Act, as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
3.
<PAGE> 4
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred
Stock purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a
capital reorganization of the shares of the Company's stock (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or a merger or consolidation of the Company with or into
another corporation when the Company is not the surviving corporation, or the
sale of all or substantially all of the Company's properties and assets to any
other person (hereinafter referred to as a "Merger Event"), then, as a part of
such Merger Event, lawful provision shall be made so that the Warrantholder
shall thereafter be entitled to receive, upon exercise of the Warrant, the
number of shares of preferred stock, other securities, or other assets or
property of the successor corporation resulting from such Merger Event,
equivalent in value to that which would have been payable if Warrantholder had
exercised this Warrant immediately prior to the Merger Event. In any such case,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
Agreement with respect to the rights and interest of the Warrantholder after the
Merger Event to the end that the provisions of this Warrant Agreement (including
adjustments of the Exercise Price and number of shares of Preferred Stock
purchasable) shall be applicable to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall,
by combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
4.
<PAGE> 5
(c) Subdivision or Combination of Shares. If the Company at any
time shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a
dividend payable in, or make any other distribution (except any distribution
specifically provided for in the foregoing subsections (a) or (b)) of the
Company's stock, then the Exercise Price shall be adjusted, from and after the
record date of such dividend or distribution, to that price determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction (i) the numerator of which shall be the total number of all shares
of the Company's stock outstanding immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of all
shares of the Company's stock outstanding immediately after such dividend or
distribution. The Warrantholder shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Preferred
Stock (calculated to the nearest whole share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Preferred Stock issuable upon the exercise hereof immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable
to the Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit A (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prompt written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security was sold, (b) the
number of shares issued, and (c) such other information as necessary for
Warrantholder to determine if a dilutive event has occurred, provided, however,
no such notice will be required with respect to issues of stock resulting from
the exercise of options or warrants which are outstanding as of the date of this
Warrant Agreement.
(f) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be any voluntary or involuntary dissolution, liquidation
or winding up of the Company; or (v) there shall be an underwritten initial
public offering of Company securities; then, in connection with each such event,
the Company shall send to the Warrantholder: (A) at least twenty (20) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Preferred Stock shall be entitled
thereto) or for determining rights to vote in respect of such Merger Event,
dissolution, liquidation or winding up; and (B) in the case of any such Merger
Event, dissolution, liquidation or winding up or public offering, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up).
5.
<PAGE> 6
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required
by subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable
upon exercise of the Warrantholder's rights has been duly and validly reserved
and, when issued in accordance with the provisions of this Warrant Agreement,
will be validly issued, fully paid and non-assessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Preferred Stock issuable pursuant to this Warrant Agreement
may be subject to restrictions on transfer under state and/or Federal securities
laws. The Company has made available to the Warrantholder true, correct and
complete copies of its Charter and Bylaws, as amended. The issuance of
certificates for shares of Preferred Stock upon exercise of the Warrant
Agreement shall be made without charge to the Warrantholder for any issuance tax
in respect thereof, or other cost incurred by the Company in connection with
such exercise and the related issuance of shares of Preferred Stock. The Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved and the issuance and delivery of any certificate in a name
other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of
this Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization
or other similar laws affecting the enforceability.
(c) Consents and Approvals. No consent or approval of, giving of
notice to, registration with, or taking of any other action in respect of any
state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant Agreement, except for the filing of notices
pursuant to
6.
<PAGE> 7
Regulation D under the 1933 Act and Section 25102(f)of the California Corporate
Securities Law, which filings, if required, will be effective by the time
required thereby.
(d) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(e) Exempt Transaction. Subject to the accuracy of the
Warrantholder's representations in Section 10 hereof, the issuance of the
Preferred Stock upon exercise of this Warrant will constitute a transaction
exempt from (i) the registration requirements of Section 5 of the 1933 Act, in
reliance upon Section 4(2) thereof, and (ii) the qualification requirements of
the California Corporate Securities Law, in reliance upon Section
25102(f)thereof.
(f) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time; provided, however, that the provisions of this Section 9(g) shall not
apply unless and until the Company is a reporting company under the Securities
Exchange Act of 1934, as amended.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or
the Preferred Stock issuable upon exercise of the Warrantholder's rights
contained herein will be acquired for investment and not with a view to the sale
or distribution of any part thereof, and the Warrantholder shall not sell or
engage in any public distribution of the same except pursuant to a registration
or exemption.
(b) Private Issue. The Warrantholder understands (i) that the
Preferred Stock issuable upon exercise of this Warrant is not registered under
the 1933 Act or qualified under applicable state securities laws on the ground
that the issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory
7.
<PAGE> 8
to the Company and its counsel to the effect that (A) appropriate action
necessary for compliance with the 1933 Act has been taken, or (B) an exemption
from the registration requirements of the 1933 Act is available. Notwithstanding
the foregoing, the restrictions imposed upon the transferability of any of its
rights to acquire Preferred Stock or Preferred Stock issuable on the exercise of
such rights do not apply to transfers from the beneficial owner of any of the
aforementioned securities to its nominee or from such nominee to its beneficial
owner, and shall terminate as to any particular share of Preferred Stock when
(1) such security shall have been effectively registered under the 1933 Act and
sold by the holder thereof in accordance with such registration or (2) such
security shall have been sold without registration in compliance with Rule 144
under the 1933 Act, or (3) a letter shall have been issued to the Warrantholder
at its request by the staff of the Securities and Exchange Commission or a
ruling shall have been issued to the Warrantholder at its request by such
Commission stating that no action shall be recommended by such staff or taken by
such Commission, as the case may be, if such security is transferred without
registration under the 1933 Act in accordance with the conditions set forth in
such letter or ruling and such letter or ruling specifies that no subsequent
restrictions on transfer are required. Whenever the restrictions imposed
hereunder shall terminate, as hereinabove provided, the Warrantholder or holder
of a share of Preferred Stock then outstanding as to which such restrictions
have terminated shall be entitled to receive from the Company, without expense
to such holder, one or more new certificates for the Warrant or for such shares
of Preferred Stock not bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to bear the economic
risks of its investment.
(e) Risk of No Registration. The Warrantholder understands that if
the Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1933 Act, or file reports pursuant to Section
15(d), of the Securities Exchange Act of 1934 (the "1934 Act"), or if a
registration statement covering the securities under the 1933 Act is not in
effect when it desires to sell (i) the rights to purchase Preferred Stock
pursuant to this Warrant Agreement, or (ii) the Preferred Stock issuable upon
exercise of the right to purchase, it may be required to hold such securities
for an indefinite period. The Warrantholder also understands that any sale of
its rights of the Warrantholder to purchase Preferred Stock or Preferred Stock
which might be made by it in reliance upon Rule 144 under the 1933 Act may be
made only in accordance with the terms and conditions of that Rule.
11. TRANSFERS. Subject to the terms and conditions contained in Section 10
hereof, this Warrant Agreement and all rights hereunder are transferable in
whole or in part by the Warrantholder and any successor transferee, provided,
however, in no event shall the number of transfers of the rights and interests
in all of the Warrants exceed three (3) transfers. The transfer shall be
recorded on the books of the Company upon receipt by the Company of a notice of
transfer in the form attached hereto as Exhibit II (the "Transfer Notice"), at
its principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.
12. MISCELLANEOUS.
8.
<PAGE> 9
(a) Effective Date. The provisions of this Warrant Agreement shall
be construed and shall be given effect in all respects as if it had been
executed and delivered by the Company on the date hereof. This Warrant Agreement
shall be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party shall be entitled to attorneys' fees and expenses and all costs
of proceedings incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or seven (7) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the Warrantholder
at Comdisco, Inc. 6111 North River Road, Rosemont, Illinois 60018, attention:
James Labe, , cc: Legal Department, (and/or, if by facsimile, (708) 518-5465 and
(708) 518-5088) and (ii) to the Company at Continuus Software Corporation, 108
Pacifica, Irvine, CA 92718 (and/or if by facsimile, (714) 453-2276) or at such
other address as any such party may subsequently designate by written notice to
the other party.
(f) Remedies. In the event of any default hereunder, the
non-defaulting party may proceed to protect and enforce its rights either by
suit in equity and/or by action at law, including but not limited to an action
for damages as a result of any such default, and/or an action for specific
performance for any default where Warrantholder will not have an adequate remedy
at law and where damages will not be readily ascertainable. The Company
expressly agrees that it shall not oppose an application by the Warrantholder or
any other person entitled to the benefit of this Agreement requiring specific
performance of any or all provisions hereof or enjoining the Company from
continuing to commit any such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of
its Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and
conditions of the respective parties contained herein or made pursuant to this
Warrant Agreement shall survive the execution and delivery of this Warrant
Agreement.
9.
<PAGE> 10
(i) Severability. In the event any one or more of the provisions
of this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be
amended by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this
Warrant Agreement, shall provide the Warrantholder with certified resolutions of
the Board of Directors of the Company approving this Warrant Agreement and the
transactions contemplated thereby. The Company shall also supply such other
documents as the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized as of the
Effective Date.
Company: CONTINUUS SOFTWARE CORPORATION
By:
Title:
Warrantholder: COMDISCO, INC.
By:
Title:______________________________________
10.
<PAGE> 11
EXHIBIT I
NOTICE OF EXERCISE
To: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares
of the Preferred Stock of _________________, pursuant to the terms of
the Warrant Agreement dated the ______ day of ________________________,
19__ (the "Warrant Agreement") between
_____________________________________ and the Warrantholder, and
tenders herewith payment of the purchase price for such shares in full,
together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock of
________________________________________, the undersigned hereby
confirms and acknowledges the investment representations and warranties
made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Preferred Stock in the name of the undersigned or in such other name as
is specified below.
(4) The undersigned Warrantholder understands and agrees that there will be
placed on the certificate or certificates for the Preferred Stock, or
any substitutions therefor, a legend stating in substance:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
any state securities laws. These shares have been acquired for
investment and may not be sold or otherwise transferred in the absence
of an effective registration statement for these shares under the
Securities Act and applicable state securities laws, or an opinion of
counsel satisfactory to the Company that registration is not required
and that an applicable exemption is available.
_________________________________
(Name)
_________________________________
(Address)
Warrantholder: COMDISCO, INC.
By: _____________________________
Title: __________________________
Date: ___________________________
11.
<PAGE> 12
ACKNOWLEDGEMENT OF EXERCISE
The undersigned ____________________________________, hereby
acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase
____ shares of the Preferred Stock of _________________, pursuant to the terms
of the Warrant Agreement, and further acknowledges that ______ shares remain
subject to purchase under the terms of the Warrant Agreement.
Company: CONTINUUS SOFTWARE CORPORATION
By: _____________________________
Title: __________________________
Date: ___________________________
12.
<PAGE> 13
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this
form and supply required information. Do not use this form to purchase
shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
_________________________________________________________________
(Please Print)
whose address is_________________________________________________
_________________________________________________________________
Dated _________________________________________
Holder's Signature ____________________________
Holder's Address ______________________________
_______________________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Transfer Notice must correspond with the
name as it appears on the face of the Warrant Agreement,
without alteration or enlargement or any change whatever.
Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of
authority to assign the foregoing Warrant Agreement.
13.
<PAGE> 1
EXHIBIT 10.37
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of the Series E Preferred Stock of
Continuus Software Corporation
Dated as of February 20, 1998(the "Effective Date")
WHEREAS, Continuus Software Corporation, a California corporation (the
"Company") has entered into a Master Lease Agreement dated as of April 20, 1995,
Equipment Schedule No. VL-7 and related Summary Equipment Schedules (the
"Leases") with Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in
consideration for such Leases, the right to purchase shares of its Preferred
Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder
is entitled, upon the terms and subject to the conditions hereinafter set forth,
to subscribe to and purchase, from the Company, 7,142 fully paid and
non-assessable shares of the Company's Series E Preferred Stock ("Preferred
Stock") at a purchase price of $2.10 per share (the "Exercise Price"). The
number and purchase price of such shares are subject to adjustment as provided
in Section 8 hereof. Notwithstanding any provision(s) in this Warrant to the
contrary, in the event that the outstanding shares of the Company's Series E
Preferred Stock automatically covert into Common Stock pursuant to the
provisions of Article III B., Section 4(a) of the Company's Articles of
Incorporation, then this Warrant shall automatically convert into a warrant to
purchase the number of shares of Common Stock as would have been issuable to the
Warrantholder had this Warrant been exercised in full immediately prior to the
automatic conversion of Series E Preferred Stock into Common Stock.
1.
<PAGE> 2
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i) ten
(10) years or (ii) five (5) years from the effective date of the Company's
initial public offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form attached
hereto as Exhibit I (the "Notice of Exercise"), duly completed and executed.
Promptly upon receipt of the Notice of Exercise and the payment of the purchase
price in accordance with the terms set forth below, and in no event later than
twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a
certificate for the number of shares of Preferred Stock purchased and shall
execute the Notice of Exercise indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Common Stock.
B = the Exercise Price.
As used herein, current fair market value of Common Stock shall mean
with respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering,
and if the Company's Registration Statement relating to such public
offering has been declared effective by the SEC, then the initial
"Price to Public" specified in the final prospectus with respect to the
offering;
2.
<PAGE> 3
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the average of the closing prices over a
twenty-one (21) day period ending three days before the day
the current fair market value of the securities is being
determined; or
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the average of the closing bid and asked
prices quoted on the NASDAQ system (or similar system) over
the twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being
determined;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market,
the current fair market value of Common Stock shall be the highest
price per share which the Company could obtain from a willing buyer
(not a current employee or director) for shares of Common Stock sold by
the Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors, unless the Company shall become
subject to a merger, acquisition or other consolidation pursuant to
which the Company is not the surviving party, in which case the fair
market value of Common Stock shall be deemed to be the value received
by the holders of the Company's Preferred Stock on a common equivalent
basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of
this Warrant Agreement, the Company will at all times have authorized and
reserved a sufficient number of shares of its Preferred Stock to provide for the
exercise of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock
required to be reserved hereunder require registration with or approval of any
governmental authority under any Federal or State law (other than any
registration under the 1933 Act, as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
3.
<PAGE> 4
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred
Stock purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a
capital reorganization of the shares of the Company's stock (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or a merger or consolidation of the Company with or into
another corporation when the Company is not the surviving corporation, or the
sale of all or substantially all of the Company's properties and assets to any
other person (hereinafter referred to as a "Merger Event"), then, as a part of
such Merger Event, lawful provision shall be made so that the Warrantholder
shall thereafter be entitled to receive, upon exercise of the Warrant, the
number of shares of preferred stock, other securities, or other assets or
property of the successor corporation resulting from such Merger Event,
equivalent in value to that which would have been payable if Warrantholder had
exercised this Warrant immediately prior to the Merger Event. In any such case,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
Agreement with respect to the rights and interest of the Warrantholder after the
Merger Event to the end that the provisions of this Warrant Agreement (including
adjustments of the Exercise Price and number of shares of Preferred Stock
purchasable) shall be applicable to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall,
by combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
4.
<PAGE> 5
(c) Subdivision or Combination of Shares. If the Company at any
time shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a
dividend payable in, or make any other distribution (except any distribution
specifically provided for in the foregoing subsections (a) or (b)) of the
Company's stock, then the Exercise Price shall be adjusted, from and after the
record date of such dividend or distribution, to that price determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction (i) the numerator of which shall be the total number of all shares
of the Company's stock outstanding immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of all
shares of the Company's stock outstanding immediately after such dividend or
distribution. The Warrantholder shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Preferred
Stock (calculated to the nearest whole share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Preferred Stock issuable upon the exercise hereof immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable
to the Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit A (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prompt written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security was sold, (b) the
number of shares issued, and (c) such other information as necessary for
Warrantholder to determine if a dilutive event has occurred, provided, however,
no such notice will be required with respect to issues of stock resulting from
the exercise of options or warrants which are outstanding as of the date of this
Warrant Agreement.
(f) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be any voluntary or involuntary dissolution, liquidation
or winding up of the Company; or (v) there shall be an underwritten initial
public offering of Company securities; then, in connection with each such event,
the Company shall send to the Warrantholder: (A) at least twenty (20) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Preferred Stock shall be entitled
thereto) or for determining rights to vote in respect of such Merger Event,
dissolution, liquidation or winding up; and (B) in the case of any such Merger
Event, dissolution, liquidation or winding up or public offering, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up).
5.
<PAGE> 6
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required
by subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable
upon exercise of the Warrantholder's rights has been duly and validly reserved
and, when issued in accordance with the provisions of this Warrant Agreement,
will be validly issued, fully paid and non-assessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Preferred Stock issuable pursuant to this Warrant Agreement
may be subject to restrictions on transfer under state and/or Federal securities
laws. The Company has made available to the Warrantholder true, correct and
complete copies of its Charter and Bylaws, as amended. The issuance of
certificates for shares of Preferred Stock upon exercise of the Warrant
Agreement shall be made without charge to the Warrantholder for any issuance tax
in respect thereof, or other cost incurred by the Company in connection with
such exercise and the related issuance of shares of Preferred Stock. The Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved and the issuance and delivery of any certificate in a name
other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of
this Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization
or other similar laws affecting the enforceability.
(c) Consents and Approvals. No consent or approval of, giving of
notice to, registration with, or taking of any other action in respect of any
state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant Agreement, except for the filing of notices
pursuant to
6.
<PAGE> 7
Regulation D under the 1933 Act and Section 25102(f)of the California Corporate
Securities Law, which filings, if required, will be effective by the time
required thereby.
(d) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(e) Exempt Transaction. Subject to the accuracy of the
Warrantholder's representations in Section 10 hereof, the issuance of the
Preferred Stock upon exercise of this Warrant will constitute a transaction
exempt from (i) the registration requirements of Section 5 of the 1933 Act, in
reliance upon Section 4(2) thereof, and (ii) the qualification requirements of
the California Corporate Securities Law, in reliance upon Section
25102(f)thereof.
(f) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time; provided, however, that the provisions of this Section 9(g) shall not
apply unless and until the Company is a reporting company under the Securities
Exchange Act of 1934, as amended.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or
the Preferred Stock issuable upon exercise of the Warrantholder's rights
contained herein will be acquired for investment and not with a view to the sale
or distribution of any part thereof, and the Warrantholder shall not sell or
engage in any public distribution of the same except pursuant to a registration
or exemption.
(b) Private Issue. The Warrantholder understands (i) that the
Preferred Stock issuable upon exercise of this Warrant is not registered under
the 1933 Act or qualified under applicable state securities laws on the ground
that the issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory
7.
<PAGE> 8
to the Company and its counsel to the effect that (A) appropriate action
necessary for compliance with the 1933 Act has been taken, or (B) an exemption
from the registration requirements of the 1933 Act is available. Notwithstanding
the foregoing, the restrictions imposed upon the transferability of any of its
rights to acquire Preferred Stock or Preferred Stock issuable on the exercise of
such rights do not apply to transfers from the beneficial owner of any of the
aforementioned securities to its nominee or from such nominee to its beneficial
owner, and shall terminate as to any particular share of Preferred Stock when
(1) such security shall have been effectively registered under the 1933 Act and
sold by the holder thereof in accordance with such registration or (2) such
security shall have been sold without registration in compliance with Rule 144
under the 1933 Act, or (3) a letter shall have been issued to the Warrantholder
at its request by the staff of the Securities and Exchange Commission or a
ruling shall have been issued to the Warrantholder at its request by such
Commission stating that no action shall be recommended by such staff or taken by
such Commission, as the case may be, if such security is transferred without
registration under the 1933 Act in accordance with the conditions set forth in
such letter or ruling and such letter or ruling specifies that no subsequent
restrictions on transfer are required. Whenever the restrictions imposed
hereunder shall terminate, as hereinabove provided, the Warrantholder or holder
of a share of Preferred Stock then outstanding as to which such restrictions
have terminated shall be entitled to receive from the Company, without expense
to such holder, one or more new certificates for the Warrant or for such shares
of Preferred Stock not bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to bear the economic
risks of its investment.
(e) Risk of No Registration. The Warrantholder understands that if
the Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1933 Act, or file reports pursuant to Section
15(d), of the Securities Exchange Act of 1934 (the "1934 Act"), or if a
registration statement covering the securities under the 1933 Act is not in
effect when it desires to sell (i) the rights to purchase Preferred Stock
pursuant to this Warrant Agreement, or (ii) the Preferred Stock issuable upon
exercise of the right to purchase, it may be required to hold such securities
for an indefinite period. The Warrantholder also understands that any sale of
its rights of the Warrantholder to purchase Preferred Stock or Preferred Stock
which might be made by it in reliance upon Rule 144 under the 1933 Act may be
made only in accordance with the terms and conditions of that Rule.
11. TRANSFERS. Subject to the terms and conditions contained in Section 10
hereof, this Warrant Agreement and all rights hereunder are transferable in
whole or in part by the Warrantholder and any successor transferee, provided,
however, in no event shall the number of transfers of the rights and interests
in all of the Warrants exceed three (3) transfers. The transfer shall be
recorded on the books of the Company upon receipt by the Company of a notice of
transfer in the form attached hereto as Exhibit II (the "Transfer Notice"), at
its principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.
12. MISCELLANEOUS.
8.
<PAGE> 9
(a) Effective Date. The provisions of this Warrant Agreement shall
be construed and shall be given effect in all respects as if it had been
executed and delivered by the Company on the date hereof. This Warrant Agreement
shall be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party shall be entitled to attorneys' fees and expenses and all costs
of proceedings incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or seven (7) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the Warrantholder
at Comdisco, Inc. 6111 North River Road, Rosemont, Illinois 60018, attention:
James Labe, , cc: Legal Department, (and/or, if by facsimile, (708) 518-5465 and
(708) 518-5088) and (ii) to the Company at Continuus Software Corporation, 108
Pacifica, Irvine, CA 92718 (and/or if by facsimile, (714) 453-2276) or at such
other address as any such party may subsequently designate by written notice to
the other party.
(f) Remedies. In the event of any default hereunder, the
non-defaulting party may proceed to protect and enforce its rights either by
suit in equity and/or by action at law, including but not limited to an action
for damages as a result of any such default, and/or an action for specific
performance for any default where Warrantholder will not have an adequate remedy
at law and where damages will not be readily ascertainable. The Company
expressly agrees that it shall not oppose an application by the Warrantholder or
any other person entitled to the benefit of this Agreement requiring specific
performance of any or all provisions hereof or enjoining the Company from
continuing to commit any such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of
its Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and
conditions of the respective parties contained herein or made pursuant to this
Warrant Agreement shall survive the execution and delivery of this Warrant
Agreement.
9.
<PAGE> 10
(i) Severability. In the event any one or more of the provisions
of this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be
amended by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this
Warrant Agreement, shall provide the Warrantholder with certified resolutions of
the Board of Directors of the Company approving this Warrant Agreement and the
transactions contemplated thereby. The Company shall also supply such other
documents as the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized as of the
Effective Date.
Company: CONTINUUS SOFTWARE CORPORATION
By:
Title:
Warrantholder: COMDISCO, INC.
By:
Title:______________________________________
10.
<PAGE> 11
EXHIBIT I
NOTICE OF EXERCISE
To: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares
of the Preferred Stock of _________________, pursuant to the terms of
the Warrant Agreement dated the ______ day of ________________________,
19__ (the "Warrant Agreement") between
_____________________________________ and the Warrantholder, and
tenders herewith payment of the purchase price for such shares in full,
together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock of
________________________________________, the undersigned hereby
confirms and acknowledges the investment representations and warranties
made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Preferred Stock in the name of the undersigned or in such other name as
is specified below.
(4) The undersigned Warrantholder understands and agrees that there will be
placed on the certificate or certificates for the Preferred Stock, or
any substitutions therefor, a legend stating in substance:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
any state securities laws. These shares have been acquired for
investment and may not be sold or otherwise transferred in the absence
of an effective registration statement for these shares under the
Securities Act and applicable state securities laws, or an opinion of
counsel satisfactory to the Company that registration is not required
and that an applicable exemption is available.
_________________________________
(Name)
_________________________________
(Address)
Warrantholder: COMDISCO, INC.
By: _____________________________
Title: __________________________
Date: ___________________________
11.
<PAGE> 12
ACKNOWLEDGEMENT OF EXERCISE
The undersigned ____________________________________, hereby
acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase
____ shares of the Preferred Stock of _________________, pursuant to the terms
of the Warrant Agreement, and further acknowledges that ______ shares remain
subject to purchase under the terms of the Warrant Agreement.
Company: CONTINUUS SOFTWARE CORPORATION
By: _____________________________
Title: __________________________
Date: ___________________________
12.
<PAGE> 13
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this
form and supply required information. Do not use this form to purchase
shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
_________________________________________________________________
(Please Print)
whose address is_________________________________________________
_________________________________________________________________
Dated _________________________________________
Holder's Signature ____________________________
Holder's Address ______________________________
_______________________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Transfer Notice must correspond with the
name as it appears on the face of the Warrant Agreement,
without alteration or enlargement or any change whatever.
Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of
authority to assign the foregoing Warrant Agreement.
13.
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES
Continuus Software Limited
6 Bracknell Lane
Bracknell, Berkshire
England RG 121 7BW
Continuus Software Gmbh
Arnulfstr.27
D-80335 Muenchen
Germany
Continuus Software SARL
Immeuble Labrador
3, avenue de Quebec
91951 Courtaboeuf Cedex
France
Continuus Software Company Limited
Temple House
Temple Road Blackrock
Co. Dublin, Ireland
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors and Stockholders of
Continuus Software Corporation and subsidiaries
We consent to the use in this Registration Statement of Continuus Software
Corporation and subsidiaries on Form S-1 of our report dated ,
appearing in the Prospectus, which is a part of this Registration Statement, and
to the reference to us under the heading "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of Continuus Software Corporation
and subsidiaries, listed in Item 16. This financial statement schedule is the
responsibility of the Corporation's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, present fairly in all material respects the information set forth
therein.
Costa Mesa, California
- --------------------
The above consent is in the form which will be signed by Deloitte & Touche LLP
upon consummation of the reverse stock split and reincorporation in the State of
Delaware which is described in Note 1 of the notes to the consolidated financial
statements and assuming that from January 26, 1999 to the date of such reverse
stock split and reincorporation, no other events have occurred that would affect
the accompanying financial statements and notes thereto.
Deloitte & Touche LLP
Costa Mesa, California
April 20, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND THE YEAR ENDED DECEMBER
31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 2,452 2,357
<SECURITIES> 0 0
<RECEIVABLES> 7,406 8,255
<ALLOWANCES> 339 397
<INVENTORY> 0 0
<CURRENT-ASSETS> 10,296 11,058
<PP&E> 5,443 5,612
<DEPRECIATION> 3,752 4,059
<TOTAL-ASSETS> 12,748 13,323
<CURRENT-LIABILITIES> 9,463 10,232
<BONDS> 6,440 6,376
0 0
18,018 18,018
<COMMON> 1,900 1,968
<OTHER-SE> (23,073) (23,271)
<TOTAL-LIABILITY-AND-EQUITY> 12,748 13,323
<SALES> 14,429 4,172
<TOTAL-REVENUES> 27,436 8,239
<CGS> 654 156
<TOTAL-COSTS> 8,100 2,101
<OTHER-EXPENSES> 22,445 6,035
<LOSS-PROVISION> 205 58
<INTEREST-EXPENSE> 880 215
<INCOME-PRETAX> (3,859) (193)
<INCOME-TAX> 7 5
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,866) (198)
<EPS-PRIMARY> (0.62) (0.03)
<EPS-DILUTED> (0.62) (0.03)
</TABLE>
