<PAGE>
As filed with the Securities And Exchange Commission on May 2, 2000
Registration No. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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BLUE MARTINI SOFTWARE, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 7372 94-3303721
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer
incorporation or organization) classification code number) Identification No.)
</TABLE>
2600 Campus Drive, San Mateo, CA 94403, (650) 356-4000
(Address, including zip code, and telephone number, including area code, of the
Registrant's principal executive offices)
MONTE ZWEBEN
Chairman, President and Chief Executive Officer
Blue Martini Software, Inc.
2600 Campus Drive, San Mateo, CA 94403, (650) 356-4000
(Name, address, including zip code and telephone number, including area code,
of agent for service)
---------------
COPIES TO:
<TABLE>
<S> <C>
James C. Gaither, Esq. William H. Hinman, Jr., Esq.
Eric C. Jensen, Esq. Shearman & Sterling
Cooley Godward LLP 1550 El Camino Real
Five Palo Alto Square Menlo Park, CA 94025
3000 El Camino Real (650) 330-2200
Palo Alto, CA 94306
(650) 843-5000
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) of 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, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
<CAPTION>
Proposed Maximum Amount of
Title of Each Class of Securities Aggregate Registration
to be Registered Offering Price(1) Fee
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.001 par value................................. $75,000,000 $19,800
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</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(o) promulgated under the Securities Act.
Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act or until the registration statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
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- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. These +
+securities may not be sold until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell nor does it seek an offer to buy these securities in any +
+jurisdiction where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion. Dated May 2, 2000.
Shares
[BMSI Logo]
Common Stock
-----------
This is an initial public offering of shares of common stock of Blue Martini
Software, Inc. All of the shares of common stock are being sold by Blue
Martini.
Prior to this offering, there has been no public market for the common stock.
Blue Martini has applied for quotation of the common stock on the Nasdaq
National Market under the symbol "BLUE". It is currently estimated that the
initial public offering price per share will be between $ and $ .
See "Risk Factors" beginning on page 7 to read about factors you should
consider before buying shares of the common stock.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Initial public offering price................................. $ $
Underwriting discount......................................... $ $
Proceeds, before expenses, to Blue Martini.................... $ $
</TABLE>
To the extent that the underwriters sell more than shares of
common stock, the underwriters have the option to purchase up to an additional
shares from Blue Martini at the initial public offering price less
the underwriting discount.
-----------
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
Goldman, Sachs & Co.
Dain Rauscher Wessels
Thomas Weisel Partners LLC
U.S. Bancorp Piper Jaffray
-----------
Prospectus dated , 2000.
<PAGE>
The inside front cover features images of the Blue Martini solution. These
include screen shots of websites deployed with our CIS Website module, images
of the Symbol Technology mobile wireless device operating the Blue Martini
product and screenshots of customer service stations deployed with our Call
Center module.
<PAGE>
PROSPECTUS SUMMARY
You should read this summary together with the entire prospectus, including
the more detailed information in our financial statements and accompanying
notes appearing elsewhere in this prospectus. Unless otherwise indicated, all
information contained in this prospectus assumes: (1) no exercise of the
underwriters' over-allotment option, (2) the conversion of each outstanding
share of preferred stock into four shares of common stock and (3) no exercise
of outstanding stock options or warrants.
Blue Martini Software, Inc.
Our Business
We provide e-business software and services that enable companies to build
brand equity through direct customer interaction across Internet-related
customer "touch points," such as websites, mobile wireless devices and on-line
trading exchanges and traditional customer touch points, such as stores and
call centers. We believe that our software's integrated analytical and
operational capabilities enable companies to increase revenues by coordinating
customer interactions across these touch points. Our comprehensive, packaged
software application is designed to simplify deployment and accelerate our
customers' time to benefit while reducing their total cost of ownership. We
have targeted a number of large, vertical markets where we believe brand is
paramount, such as retail, manufacturing, financial services,
telecommunications, media and travel. Our customers range from Global 2000
companies that have adopted e-business strategies to rapidly growing Internet
companies. As of March 31, 2000, we had licensed our software to 35 customers.
Our Market Opportunity
The use and acceptance of the Internet as a medium for interacting with
customers are evolving at rates significantly faster than those experienced by
traditional media. According to estimates by International Data Corporation,
business-to-business and business-to-consumer transactions are expected to grow
from an aggregate of $111 billion at the end of 1999 to $1.3 trillion by the
end of 2003. The increasing importance and prevalence of the Internet has
further heightened the importance of brand equity and awareness. A powerful
brand can attract and retain customers, generating higher revenues and
increasing customer value.
We believe that companies need to be closer and more responsive to their
customers than ever before and, in order to compete more effectively, must
coordinate their on-line branding, marketing and merchandising efforts with
their traditional sales channels. To address this need, we have developed an
integrated suite of enterprise software applications that is designed to offer
the following capabilities:
. Product Management. Our software enables companies to richly, accurately
and persuasively describe their products and product hierarchies,
establish pricing and create promotions.
. Content Management. Our software enables companies to author, manage,
approve and track the development and use of content, such as text,
graphics, audio and video.
. Transaction Execution. Our software enables companies to conduct
business on their websites, over the phone, via wireless devices and
through other sales channels, including taking orders and managing
returns.
. Analysis. Our software's analytic capabilities increase companies'
ability to accurately identify market segments, deeply understand
customer behavior, readily mine purchase histories and determine
strategies to effectively target customers.
. Personalization. Our software's sophisticated algorithms enable
companies to effectively target customers across multiple touch points
with meaningful and relevant products, promotions and content.
3
<PAGE>
Our Strategy
Our objective is to be the leading provider of enterprise e-business
software applications and services that enable companies worldwide to build
brand equity through direct customer interaction across multiple touch points.
Key elements of our product strategy are to:
. Enable consistent and personalized customer interaction across multiple
touch points;
. Provide a comprehensive suite of e-business applications targeted at
business line managers; and
. Integrate operational and analytical applications to enable effective
customer interaction and ongoing business improvements.
Key elements of our sales and marketing strategy are to:
. Target large, vertical markets where brand equity is paramount;
. Leverage relationships with systems integrators to focus on license
revenues;
. Expand our international presence; and
. Address smaller, or mid-market, companies through a subscription-driven
business model.
We were formed in June 1998 as Blue Martini LLC, a Delaware limited
liability company, and merged into Blue Martini Software, Inc., a Delaware
corporation, in January 1999. Our principal executive offices are located at
2600 Campus Drive, San Mateo, California 94403 and our telephone number is
(650) 356-4000. Information contained on our website shall not be deemed to be
a part of this prospectus. "Blue Martini Software" is our registered trademark.
This prospectus also includes trademarks owned by other parties.
4
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered................................ shares
Common stock to be outstanding after the offering .. shares
Use of proceeds..................................... For operating activities,
including expansion of
our sales and marketing
organizations, capital
expenditures and other
general corporate
purposes, including
general and
administrative operations
and the repayment of
indebtedness.
Proposed Nasdaq National Market symbol.............. BLUE
</TABLE>
The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of April 15, 2000, and
excludes:
. 5,906,400 shares subject to options outstanding as of April 15, 2000, at
a weighted average exercise price of $2.32 per share;
. 2,445,000 shares subject to outstanding warrants as of April 17, 2000,
at a weighted average exercise price of $4.94 per share;
. 9,950,100 additional shares that are available for future grant under
our stock option plans as of April 15, 2000; and
. 4,000,000 shares that we could issue under our employee stock purchase
plan as of April 15, 2000.
5
<PAGE>
Summary Financial Data
<TABLE>
<CAPTION>
June 5, 1998 Three Months
(Inception) to Year Ended Ended March 31,
December 31, December 31, -----------------
1998 1999 1999 2000
-------------- ------------ ------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Statements of Operations Data:
Total revenues.................. $ -- $ 11,232 $ 241 $ 10,681
Gross profit.................... -- 5,084 128 3,902
Loss from operations............ (1,160) (10,181) (1,393) (11,441)
Net loss ....................... (1,145) (9,928) (1,362) (11,381)
======= ======== ======= ========
Basic and diluted net loss per
common share................... $ (0.05) $ (0.43) $ (0.06) $ (0.45)
======= ======== ======= ========
Shares used in computing basic
and diluted net loss per common
share.......................... 22,000 22,964 22,000 25,108
======= ======== ======= ========
Pro forma basic and diluted net
loss per common share.......... $ (0.24) $ (0.23)
======== ========
Shares used in computing pro
forma basic and diluted net
loss per common share.......... 41,348 48,452
======== ========
</TABLE>
The following table presents a summary of our balance sheet as of March 31,
2000:
. on an actual basis;
. on a pro forma basis after giving effect to the conversion of our
outstanding convertible preferred stock into 23,297,000 shares of common
stock immediately prior to the closing of the offering; and
. on a pro forma as adjusted basis to reflect the sale of
shares of common stock at an assumed initial public offering price of
$ per share after deducting underwriting discounts and commissions
and estimated offering expenses.
<TABLE>
<CAPTION>
Pro Pro Forma
Actual Forma As Adjusted
------- ------- -----------
(In thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents
and short-term
investments............ $13,632 $13,632
Working capital......... 1,023 1,023
Total assets............ 27,788 27,788
Long-term obligations,
less current portion... 602 602
Total stockholders'
equity................. 6,537 6,537
</TABLE>
6
<PAGE>
RISK FACTORS
An investment in our common stock is risky. You should carefully consider
the risks described below, together with all of the other information included
in this prospectus, before deciding whether to invest in our common stock. The
occurrence of any of the following risks could harm our business, financial
condition or results of operations. In such case, the trading price of our
common stock could decline, and you may lose part or all of your investment.
The risks and uncertainties described below are not exhaustive. Additional
risks and uncertainties not presently known to us, or that we currently
consider immaterial, may also harm our business.
Risks Related To Our Business
Our short operating history makes it difficult to evaluate our business and
prospects.
You must consider our business and prospects given the risks, expenses and
challenges we might encounter because we are at an early stage of development
in a new and rapidly evolving market. We licensed our first product in March
1999, and our sales and service organizations are new and still growing. As a
result, we have not yet experienced one full calendar year of operations since
we first licensed our product. Due to our short operating history, our future
financial performance is not predictable and may disappoint investors and
result in a significant decline in our stock price.
We have incurred losses during our operating history and we may not achieve or
maintain profitability.
We incurred net losses of $1.1 million for the period from June 5, 1998, our
date of inception, through December 31, 1998, $9.9 million for the year ended
December 31, 1999 and $11.4 million for the quarter ended March 31, 2000. As of
March 31, 2000, we had an accumulated deficit of $22.5 million. We expect to
continue to incur losses on both a quarterly and annual basis for the next few
years. Moreover, we expect to continue to incur significant sales and marketing
and research and development expenses. Further, we will incur substantial stock
compensation expense in future periods, which represents non-cash charges
incurred due to the issuance of stock options prior to this offering.
Therefore, we will need to significantly increase our revenues to achieve and
maintain profitability. We may not be able to sustain our recent revenue growth
rates or be able to generate sufficient revenues to achieve profitability.
If our product does not successfully function for customers with large numbers
of transactions, customers or product offerings, we may lose sales and suffer
decreased revenues.
Our product must be highly scalable to accommodate a large number of
transactions, customers and product offerings. Large scale usage presents
significant technical challenges which are difficult or impossible to predict.
To date, our product has been deployed by only a limited number of customers
and, therefore, we cannot assure you that our product is scaleable enough to
meet our customers' demands for large scale usage. If our customers experience
difficulty with our product during periods of high traffic or usage, it could
damage our reputation and reduce our revenues.
Because a small number of customers have accounted, and are likely to continue
to account, for a substantial portion of our revenues, our revenues could
decline due to the loss or delay of a single customer order.
A relatively small number of customers account for a significant portion of
our total revenues. The loss or delay of individual orders could have a
significant impact on revenues and operating
7
<PAGE>
results. Levi Strauss & Co., Deluxe Corporation and Harley-Davidson, Inc. each
accounted for more than ten percent of our total revenues in 1999 and combined
for an aggregate of 48% of our total revenues in 1999. EighteenGlobal BVI and
ibeauty.com, Inc. each accounted for more than ten percent of our total
revenues in the quarter ended March 31, 2000 and combined for an aggregate of
22% of our total revenues in that period. We expect that revenues from a
limited number of new customers will continue to account for a large percentage
of total revenues in future quarters. Our ability to attract new customers will
depend on a variety of factors, including the performance, quality, breadth,
depth and price of our current and future products. Our failure to add new
customers that make significant purchases of our product and services would
reduce our future revenues.
We record as deferred revenues payments from customers that do not meet our
revenue recognition policy requirements. Since only a portion of our revenues
each quarter is recognized from deferred revenues, our quarterly results will
depend primarily upon entering into new contracts to generate revenues for that
quarter. New contracts may not result in revenues in the quarter in which the
contract was signed and commissions and royalties become payable, and we may
not be able to predict accurately when revenues from these contracts will be
recognized.
Substantially all of our revenues to date have been derived from the licensing
of our software product and related services, and if we fail to successfully
upgrade or enhance our product and introduce new products, our revenues would
decline.
Substantially all of our revenues to date have been derived from the
licensing of our software product and related services. Our future revenues
will depend, in significant part, on our successful development and license of
new and enhanced versions of our product and of other new products. If we are
not able to successfully develop new products or these new products do not
achieve market acceptance, our revenues would be reduced.
Our product has a long and variable sales cycle, which makes it difficult to
predict our quarterly results and may cause our operating results to vary
significantly.
The period between initial contact with a prospective customer and the
licensing of our product varies, but is typically five to seven months. The
licensing of our product is often an enterprise-wide decision by our customers
that involves a significant commitment of resources by us and the prospective
customer. Customers generally consider a wide range of issues before committing
to purchase our product, including product benefits, cost and time of
implementation, ability to operate with existing and future computer systems
and ability to accommodate increased transaction volume and product
reliability. As part of the sales process, we spend a significant amount of
resources informing prospective customers about the use and benefits of our
product, which may not result in a sale, thereby reducing our margins. As a
result of this sales cycle, our revenues are unpredictable and could vary
significantly from quarter to quarter causing our operating results to vary
significantly from quarter to quarter.
Our failure to develop and maintain strong relationships with systems
integrators would harm our ability to market our product, which could reduce
future revenues and increase our expenses.
A significant portion of our sales are influenced by the recommendation of
our product by systems integrators, consulting firms and other third parties
that help deploy our product for our customers. Losing the support of these
third parties may limit our ability to penetrate our existing or potential
markets. These third parties are under no obligation to recommend or support
our product and could recommend or give higher priority to the products and
services of other companies or to their own products. A significant shift by
these companies toward favoring competing products could negatively affect our
software license and service revenues.
8
<PAGE>
Some systems integrators also engage in joint marketing and sales efforts
with us. If our relationships with systems integrators fail, we will have to
devote substantially more resources to the sales and marketing of our product.
In many cases, these parties have extensive relationships with our existing and
potential customers and influence the decisions of these customers. A number of
our competitors have longer and more established relationships with these
systems integrators than we do, and as a result these systems integrators may
be more likely to recommend competitors' products and services and increase our
expenses.
Our failure to develop and maintain strong relationships with systems
integrators would harm our ability to implement our product.
Systems integrators assist our customers with the installation and
deployment of our product, in addition to those of our competitors, and perform
custom integration of computer systems and software. If we are unable to
develop and maintain relationships with systems integrators, we would be
required to hire additional personnel to install and maintain our product,
which would result in higher expenses.
If our product does not operate with a wide variety of hardware, software and
operating systems used by our customers, our revenues would be harmed.
We currently serve a customer base that uses a wide variety of constantly
changing hardware, software applications and operating systems. Our product
will only gain broad market acceptance if it can support a wide variety of
hardware, software applications and systems. If our product is unable to
support a variety of these products our revenues would be harmed. Our business
depends on the following factors, among others:
. our ability to integrate our product with multiple hardware systems and
existing software systems and to modify our product as new versions of
packaged applications are introduced;
. our ability to anticipate and support new standards, especially
Internet-based standards; and
. our ability to integrate additional software modules under development
with our existing product.
Defects in our product could diminish demand for our product and result in loss
of revenues, decreased market acceptance, injury to our reputation and product
liability claims.
Errors may be found from time to time in our existing, new or enhanced
products after commencement of commercial shipments, resulting in loss of
revenues or injury to our reputation. Although we conduct extensive product
testing during product development, we have in the past discovered software
errors in our product and, as a result, have experienced delays in the shipment
of our product.
Errors in our product may be caused by defects in third-party software
incorporated into our product. If so, we may not be able to fix these defects
without the cooperation of these software providers. Since these defects may
not be as significant to our software providers as they are to us, we may not
receive the rapid cooperation that we may require. We may not have the
contractual right to access the source code of third-party software and, even
if we access the source code, we may not be able to fix the defect.
Since our customers use our product for critical business applications such
as e-commerce, any errors, defects or other performance problems of our product
could result in damage to the businesses of our customers. These customers
could seek significant compensation from us for their losses. Although our
license agreements typically contain provisions designed to limit our exposure
to
9
<PAGE>
product liability claims, existing or future laws or unfavorable judicial
decisions could negate these limitations. Even if unsuccessful, a product
liability claim brought against us would likely be time consuming and costly.
We depend on technologies licensed to us by third parties, and the loss or
inability to maintain these licenses could prevent or delay sales of our
product.
We license technologies from third party software providers that are
incorporated into our product. We anticipate that we will continue to license
technologies from third parties in the future. In particular, we license
application server technology from BEA Systems, Inc. and a rules engine from
Blaze Software, Inc. The license agreement with BEA expires in July 2003, and
the license agreement with Blaze expires in March 2004. We may not be able to
renew our license agreements for this software on commercially reasonable
terms, if at all. The loss of these technologies or other third-party
technologies could prevent sales of our product and increase our costs until
substitute technologies, if available, are developed or identified, licensed
and successfully integrated into our product. Even if substitute technologies
are available, there can be no guarantee that we will be able to license these
technologies on commercially reasonable terms, if at all.
If we fail to introduce new versions and releases of our product in a timely
manner, customers may license competing products and our revenues may decline.
If we are unable to ship or implement enhancements to our product when
planned or at all, or fail to achieve timely market acceptance of these
enhancements, we may suffer lost sales and could fail to increase our revenues.
Our future operating results will depend on demand for our product, including
new and enhanced releases that are subsequently introduced.
We may not successfully enter international markets or generate significant
revenues abroad, which could result in slower revenue growth and harm our
business.
To date, we have generated limited revenues from sales outside the United
States. We intend to establish offices in the United Kingdom and elsewhere in
Europe, Asia and Latin America. If we fail to sell our product in international
markets, we could experience slower revenue growth and our business could be
harmed. We anticipate devoting significant resources and management attention
to expanding international opportunities. Expanding internationally subjects us
to a number of risks, including:
. greater difficulty in staffing and managing foreign operations;
. changes in a specific country's or region's political or economic
conditions;
. expenses associated with localizing our product for foreign countries;
. differing intellectual property rights;
. protectionist laws and business practices that favor local competitors;
. longer sales cycles and collection periods or seasonal reductions in
business activity;
. multiple, conflicting and changing governmental laws and regulations;
and
. foreign currency restrictions and exchange rate fluctuations.
Our operating results may fluctuate significantly and an unanticipated decline
in our financial performance may disappoint securities analysts or investors
and result in a decline in our stock price.
Our quarterly operating results have fluctuated significantly in the past
and will vary significantly in the future. If our operating results are below
the expectations of securities analysts or investors,
10
<PAGE>
our stock price is likely to decline. We believe that period-to-period
comparisons of our historical results of operations are not a good predictor of
our future performance.
Our revenues and operating results depend upon the volume and timing of
customer orders and the date of product delivery. Since our operating expenses
primarily consist of personnel and facilities costs which are relatively fixed,
a delay in the recognition of revenue from one or more license transactions
could cause significant, unanticipated variations in operating results from
quarter to quarter.
Our growth continues to place a significant strain on our management systems
and resources, and if we fail to manage our growth our ability to market and
license our product, sell our services and develop new products may be harmed.
We must manage our growth effectively in order to successfully license our
product, sell our services and achieve revenue growth and profitability in a
rapidly evolving market. Our growth has placed, and will continue to place, a
significant strain on our management systems and resources, and we may not be
able to effectively manage our growth in the future. We continue to increase
the scope of our operations and have added a substantial number of employees.
For example, the number of our employees grew from 23 people at March 31, 1999
to 235 people at March 31, 2000. In particular, our professional services,
technical support and training organizations grew from three people at March
31, 1999 to 109 people at March 31, 2000. In addition, we need to obtain
additional office space in Northern California to accommodate our growth. We
may not be able to obtain space at commercially reasonable rates, if at all.
For us to effectively manage our growth, we must continue to do the following:
. improve our operational, financial and management controls;
. improve our reporting systems and procedures;
. install new management and information control systems; and
. expand, train and motivate our workforce.
In particular, we are currently migrating to a new accounting software
package designed to allow greater flexibility in reporting and tracking
results. If we fail to install this software in an efficient and timely manner,
or if the new system fails to adequately support our level of operations, then
we could incur substantial additional expenses to remedy these failures.
Risks Related to the Software Industry
Competition in our markets is intense and could reduce our sales and prevent us
from achieving profitability.
The market for our product is intensely competitive and subject to rapid
technological change. We expect the intensity of competition to increase in the
future. Increased competition is likely to result in price reductions, reduced
gross margins and loss of our market share, any one of which could reduce our
future revenues or earnings. Our current competitors include:
. Point Application Vendors. We compete with providers of stand-alone
point solutions such as BroadVision, Inc., E.piphany, Inc. and Vignette
Corporation.
. Component Vendors. We compete with component vendors such as Art
Technology Group, Inc., IBM and Microsoft Corporation.
. Enterprise Resource Planning, Customer Relationship Management and
Supply Chain Management Vendors. We compete with ERP, CRM and SCM
Vendors such as Oracle, PeopleSoft, Inc., SAP AG, Siebel Systems, Inc.
and i2 Technologies, Inc.
11
<PAGE>
. Internal IT Departments. Information technology departments of potential
customers have developed or may develop systems that provide for some or
all of the functionality of our product. We expect that internally-
developed application integration and process automation efforts will
continue to be a principal source of competition for the foreseeable
future. In particular, it can be difficult to license our product to a
potential customer whose internal development group has already made
large investments in, and progress towards completion of, systems that
our product is intended to replace.
Many of our competitors have greater resources and broader customer
relationships than we do. In addition, many of these competitors have extensive
knowledge of our industry. Current and potential competitors have established,
or may establish, cooperative relationships among themselves or with third
parties to offer a single solution and increase the ability of their products
to address customer needs.
Because competition for qualified personnel is intense, we may not be able to
retain or recruit personnel, which could impact the development and license of
our product.
If we are unable to hire or retain qualified personnel, or if newly hired
personnel fail to develop the necessary skills or to reach expected levels of
productivity, our ability to develop and market our product will be weakened.
Our success also depends on the continued contributions of our key management,
engineering, sales and marketing and professional services personnel. In
particular, Monte Zweben, our Chairman, President and Chief Executive Officer,
would be difficult to replace. We do not have employment agreements with any of
our key personnel except an agreement with John E. Calonico, Jr., our Vice
President, Chief Financial Officer and Secretary.
Our ability to increase our sales will depend on our ability to recruit,
train and retain top quality sales people who are able to target prospective
customers' senior management, and who can generate and service large accounts.
There is a shortage of qualified sales personnel in our industry and
competition for them is intense.
Failure of our prospective Internet customers to receive necessary funding
could harm our business.
Our targeted customers include rapidly growing Internet companies. Most
privately and publicly held Internet companies require outside cash sources to
continue operations. To the extent additional funding is less available for
Internet companies as a result of a stock market decline or other factors,
demand for our product may decline significantly and thereby reduce our
revenues.
Increasing government regulation of the Internet, imposition of sales and other
taxes on products sold by our customers over the Internet and privacy concerns
relating to the Internet could reduce the license of our product and harm our
business.
Federal, state or foreign agencies may adopt laws or regulations affecting
the use of the Internet as a commercial medium. Although many of these laws or
regulations may not apply to our business directly, we expect that laws and
regulations relating to user privacy, pricing, content and quality of products
and services could indirectly affect our business.
Current federal legislation limits the imposition of state and local taxes
on Internet-related sales at this time. Congress may choose not to renew this
legislation in 2001, in which case state and local governments would be free to
impose taxes on electronically purchased goods. The imposition of new sales or
other taxes could limit the growth of Internet commerce in general and, as a
result, the demand for our product and services.
Businesses use our software to capture information regarding their customers
when those customers contact them on-line with customer service inquiries.
Privacy concerns may cause visitors
12
<PAGE>
to withhold personal data, which would limit the effectiveness of our software
product. More importantly, even the perception of privacy concerns, whether or
not valid, may indirectly inhibit market acceptance of our product.
If we are unable to protect our intellectual property, we may lose a valuable
asset or incur costly litigation to protect our rights.
Our success and ability to compete depend upon our proprietary rights and
intellectual property. We rely on trademark, trade secret and copyright laws to
protect our intellectual property. We have no patents and two patent
applications. Despite our efforts to protect our intellectual property, a third
party could copy or obtain the source code to our software or other proprietary
information without authorization, or could develop software competitive to
ours. Our means of protecting our proprietary rights may not be adequate, and
our competitors may independently develop similar technology or duplicate our
product.
We may have to litigate to enforce our intellectual property rights, to
protect our trade secrets or know-how or to determine their scope, validity or
enforceability. Enforcing our proprietary technology would be expensive, could
cause the diversion of our resources and may not prove successful. If we are
unable to protect our intellectual property, we may lose a valuable asset.
If we become subject to intellectual property infringement claims, these claims
could be costly and time-consuming to defend, divert management attention,
cause product delays and harm our revenues and results of operations.
We expect that software product developers will increasingly be subject to
infringement claims as the number of products and competitors in our industry
grows and the functionality of products overlaps. Any claims, with or without
merit, could be costly and time-consuming to defend, divert our management's
attention or cause product delays. We have no patents that we could use
defensively against any company bringing such a claim. If our product was found
to infringe a third party's proprietary rights, we could be required to enter
into royalty or licensing agreements to be able to sell our product. Royalty
and licensing agreements, if required, may not be available on terms acceptable
to us, or at all.
If we are unable to meet the rapid changes in technology, our existing product
could become obsolete.
The market for our product is marked by rapid technological change, frequent
new product introductions, Internet-related technology enhancements, uncertain
product life cycles, changes in client demands and evolving industry standards.
We cannot be certain that we will successfully develop and market new products,
new product enhancements or new products compliant with present or emerging
Internet technology standards. New products based on new technologies or new
industry standards can render existing products obsolete and unmarketable. To
succeed, we will need to enhance our current product and develop new products
on a timely basis to keep pace with developments related to Internet technology
and to satisfy the increasingly sophisticated requirements of our clients.
Enterprise application software technology is complex and new products and
product enhancements can require long development and testing periods. Any
delays in developing and releasing enhanced or new products could harm our
business.
Risks Related to this Offering
Our failure to raise the additional capital necessary to expand our operations
and invest in new products could reduce our ability to compete and result in
lower revenues.
We expect that the net proceeds from this offering will be sufficient to
meet our working capital and capital expenditure needs for the next twelve to
eighteen months. After that, we may need to
13
<PAGE>
raise additional funds, and we cannot be certain that we will be able to obtain
additional financing on favorable terms, or at all. If we need additional
capital and cannot raise it on acceptable terms, we may not be able to, among
other things:
. develop or enhance our product and services;
. acquire technologies, products or businesses;
. expand operations in the United States or internationally;
. hire, train and retain employees; or
. respond to competitive pressures or unanticipated capital requirements.
Our failure to do any of these things could result in lower revenues and
could harm our business.
New investors in our common stock will experience immediate and substantial
dilution.
The initial public offering price will be 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, based on the assumed initial public
offering price of $ per share. In addition, the number of shares
available for issuance under our stock option and employee stock purchase plans
will automatically increase without stockholder approval. Investors will incur
additional dilution upon the exercise of outstanding stock options.
Our directors and executive officers will retain significant control over Blue
Martini after the offering, which may lead to conflicts with other stockholders
over corporate governance.
Following the completion of this offering, our directors, executive officers
and holders of 5% or more of our outstanding common stock will beneficially own
approximately % of our outstanding common stock. Monte Zweben, our
Chairman, President and Chief Executive Officer, together with related
entities, will own approximately % of our common stock after this offering.
These stockholders, acting together, and Mr. Zweben, individually, will be able
to significantly influence all matters requiring approval by our stockholders,
including the election of directors and significant corporate transactions,
such as mergers or other business combination transactions. This control may
delay or prevent a third party from acquiring or merging with us.
Our stock price may be volatile because our shares have not been publicly
traded before and, as a result, you may lose all or a part of your investment.
The market price of our common stock may fluctuate significantly in response
to factors including the following, most of which are beyond our control:
. variations in our quarterly revenues and operating results;
. changes in overall market conditions;
. changes in market valuations of similar companies; and
. departures of key personnel.
Before this offering, you could not buy or sell our common stock publicly. The
price of our common stock that will prevail in the market after this offering
may be higher or lower than the price you pay.
Prior to this offering, you could not buy or sell our common stock publicly.
The price of the common stock that will prevail in the market after this
offering may be higher or lower than the price you pay.
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<PAGE>
An active public market for our common stock may not develop or be sustained
after the offering. We negotiated and determined the initial public offering
price with the representatives of the underwriters and this price may not be
indicative of prices that will prevail in the trading market. As a result, you
may be unable to sell your shares of common stock at or above the offering
price.
We are at risk of securities class action litigation due to our expected stock
price volatility.
In the past, securities class action litigation has often been brought
against a company following a decline in the market price of its securities.
This risk is especially acute for us because technology companies have
experienced greater than average stock price volatility in recent years and, as
a result, have been subject to, on average, a greater number of securities
class action claims than companies in other industries. We may in the future be
the target of similar litigation. Securities litigation could result in
substantial costs and divert management's attention and resources, and could
harm our business.
We have implemented anti-takeover provisions which could discourage or prevent
a takeover, even if an acquisition would be beneficial to our stockholders.
Provisions of our amended and restated certificate of incorporation and
bylaws, as well as provisions of Delaware law, could make it more difficult for
a third party to acquire us, even if doing so would be beneficial to our
stockholders. These provisions include:
. establishment of a classified board of directors requiring that not all
members of the board may be elected at one time;
. authorizing the issuance of "blank check" preferred stock that could be
issued by our board of directors to increase the number of outstanding
shares and thwart a takeover attempt;
. prohibiting cumulative voting in the election of directors, which would
otherwise allow less than a majority of stockholders to elect director
candidates;
. limitations on the ability of stockholders to call special meetings of
stockholders;
. prohibiting stockholder action by written consent, thereby requiring all
stockholder actions to be taken at a meeting of our stockholders; and
. establishing advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted upon
by stockholders at stockholder meetings.
In addition, Section 203 of the Delaware General Corporations Law and the
terms of our stock option plans may discourage, delay or prevent a change in
control of Blue Martini.
There may be sales of a substantial amount of our common stock after this
offering that could cause our stock price to fall.
Our current stockholders hold a substantial number of shares, which they
will be able to sell in the public market in the near future. Sales of a
substantial number of shares of our common stock within a short period of time
after this offering could cause our stock price to fall. In addition, the sale
of these shares could impair our ability to raise capital through the sale of
additional stock. See "Shares Eligible for Future Sale."
15
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These forward-looking
statements are not historical facts, but rather are based on current
expectations, estimates and projections about our industry, our beliefs and our
assumptions. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "potential," "continue," "may," "will," "should," "could"
and "estimates," and variations of these words and similar expressions, are
intended to identify forward-looking statements. These statements are not
guarantees of future performance and are subject to risks, uncertainties and
other factors, some of which are beyond our control and difficult to predict
and could cause actual results to differ materially from those expressed or
forecasted in the forward-looking statements. These risks and uncertainties
include those described in "Risk Factors" and elsewhere in this prospectus.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect our management's view only as of the date of this
prospectus.
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<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the shares of
common stock that we are offering will be approximately $ million, at an
assumed initial public offering price of $ per share and after deducting
estimated underwriting discounts and commissions and estimated offering
expenses. If the underwriters' over-allotment option is exercised in full, we
estimated that our net proceeds will be approximately $ million.
We intend to use the net proceeds from this offering for operating
activities, including approximately $20.5 million to expand our sales and
marketing organizations, approximately $7.3 million for capital expenditures
and the balance for other general corporate purposes, including general and
administrative operations and the repayment of approximately $650,000 of
indebtedness. Our management will retain broad discretion in the allocation of
the net proceeds of this offering. The amounts we actually spend will depend on
a number of factors, including the amount of our future revenues and other
factors described elsewhere in this prospectus. We may also use a portion of
the net proceeds to invest in or acquire additional businesses, products and
technologies, or to establish joint ventures that we believe will complement
our current or future business. Pending these uses, we will invest the net
proceeds of this offering in short-term, interest-bearing, investment-grade
securities.
DIVIDEND POLICY
We have never paid or declared any cash dividends. We currently expect to
retain earnings for use in the operation and expansion of our business, and
therefore do not anticipate paying any cash dividends for the foreseeable
future.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2000:
. on an actual basis;
. on a pro forma basis after giving effect to the conversion of our
outstanding convertible preferred stock into 23,297,000 shares of common
stock immediately prior to the closing of the offering; and
. on a pro forma as adjusted basis to reflect the sale of
shares of common stock at an assumed initial public offering price of
$ per share after deducting underwriting discounts and commissions
and estimated offering expenses.
<TABLE>
<CAPTION>
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(In thousands, except per
share amounts)
<S> <C> <C> <C>
Long-term obligations, less current portion.... $ 602 $ 602 $ 602
-------- -------- --------
Stockholders' equity:
Convertible preferred stock, $0.001 par value;
actual--7,200 shares authorized; 5,824 shares
issued and outstanding; aggregate liquidation
preference of $18,712; pro forma--5,000
shares authorized; no shares issued and
outstanding.................................. 6 -- --
Common stock, $0.001 par value; actual--46,000
shares authorized; 35,361 shares issued and
outstanding; pro forma--500,000 shares
authorized; 58,657 shares issued and
outstanding; pro forma as adjusted--500,000
shares authorized shares issued and
outstanding.................................. 35 59
Additional paid-in-capital.................... 67,086 67,068
Deferred stock compensation................... (38,136) (38,136) (38,136)
Accumulated deficit........................... (22,454) (22,454) (22,454)
-------- -------- --------
Total stockholders' equity................... $ 6,537 6,537
-------- -------- --------
Total capitalization......................... $ 7,139 $ 7,139 $
======== ======== ========
</TABLE>
The number of shares outstanding excludes:
. 5,906,400 shares subject to options outstanding as of April 15, 2000, at
a weighted average exercise price of $2.32 per share;
. 2,445,000 shares subject to outstanding warrants as of April 17, 2000 at
a weighted average exercise price of $4.94 per share;
. 9,950,100 additional shares that are available for future grant under
our stock option plans as of April 15, 2000; and
. 4,000,000 shares that we could issue under our employee stock purchase
plan as of April 15, 2000.
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<PAGE>
DILUTION
Our pro forma net tangible book value as of March 31, 2000 was approximately
$6.5 million, or approximately $0.11 per share. Net tangible book value per
share represents the amount of our total tangible assets less total liabilities
divided by the number of shares of common stock outstanding after giving effect
to the conversion of all outstanding shares of preferred stock into shares of
common stock upon completion of this offering.
Dilution in net tangible book value per share represents the difference
between the amount per share paid by new investors purchasing shares of common
stock in this offering and the net tangible book value per share immediately
after completion of this offering. Our net tangible book value as of March 31,
2000 would have been approximately $ million or $ per share, after
giving effect to the sale of shares of our common stock in this
offering at an assumed initial public offering price of $ per share and
after deducting estimated underwriting discounts and commissions and estimated
offering expenses. This amount represents an immediate increase in net tangible
book value of $ per share to existing stockholders and an immediate
dilution in net tangible book value of $ per share to new investors
purchasing shares of common stock in this offering, as illustrated in the
following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $
Pro forma net tangible book value per share as of March 31,
2000.......................................................... $0.11
Increase per share attributable to new investors...............
-----
Pro forma net tangible book value per share after this offering..
---
Dilution per share to new investors.............................. $
===
</TABLE>
The following table summarizes, on the pro forma basis described above, as
of March 31, 2000, the differences between the number of shares of common stock
purchased from us, the total consideration paid and the average price per share
paid by existing stockholders and by new investors purchasing shares in this
offering. We have assumed an initial public offering price of $ per
share, before deducting estimated underwriting discounts and commissions and
estimated offering expenses.
<TABLE>
<CAPTION>
Shares Total
Purchased Consideration Average
-------------- -------------- Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................
New investors........................
---- --- ---- --- ---
Total..............................
==== === ==== === ===
</TABLE>
As of April 17, 2000, there were outstanding options to purchase a total of
5,906,400 shares of common stock at a weighted average exercise price of $2.32
per share. As of April 17, 2000, there were outstanding warrants to purchase a
total of 2,445,000 shares of series C preferred stock at a weighted average
exercise price of $4.94 per share. To the extent these outstanding options or
warrants are exercised, there will be further dilution to new investors.
19
<PAGE>
SELECTED FINANCIAL DATA
This section presents historical financial data of Blue Martini. You should
carefully read the financial statements included in this prospectus, including
the notes to the financial statements. The selected data in this section is not
intended to replace the financial statements.
We derived the statement of operations data for the period from June 5, 1998
(Inception) to December 31, 1998 and the year ended December 31, 1999 and
balance sheet data as of December 31, 1998 and 1999 from the audited financial
statements included in this prospectus. KPMG LLP, our independent auditors,
audited these financial statements. We derived the statement of operations data
for the three months ended March 31, 1999 and 2000 and balance sheet data as of
March 31, 2000 from the unaudited financial statements included in this
prospectus. In the opinion of management, the unaudited financial statements
have been prepared on the same basis as the audited financial statements and
contain all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of our results of operations for these
periods and financial condition at that date. The historical results presented
below are not necessarily indicative of future results. The pro forma
information in the following table gives effect to the automatic conversion of
all outstanding shares of our preferred stock into common stock upon the
closing of this offering.
<TABLE>
<CAPTION>
June 5, 1998 Three Months
(Inception) to Year Ended Ended March 31,
December 31, December 31, ------------------
1998 1999 1999 2000
-------------- ------------ -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
License....................... $ -- $ 7,205 $ 25 $ 6,070
Service....................... -- 4,027 216 4,611
-------- -------- -------- --------
Total revenues............... -- 11,232 241 10,681
-------- -------- -------- --------
Cost of revenues:
License....................... -- 719 3 561
Service....................... -- 5,429 110 6,218
-------- -------- -------- --------
Total cost of revenues....... -- 6,148 113 6,779
-------- -------- -------- --------
Gross profit................. -- 5,084 128 3,902
-------- -------- -------- --------
Operating expenses:
Sales and marketing........... 407 7,177 366 8,473
Research and development...... 504 6,870 947 4,361
General and administrative.... 249 1,218 208 2,509
-------- -------- -------- --------
Total operating expenses..... 1,160 15,265 1,521 15,343
-------- -------- -------- --------
Loss from operations......... (1,160) (10,181) (1,393) (11,441)
Interest and other, net........ 15 253 31 60
-------- -------- -------- --------
Net loss..................... $ (1,145) $ (9,928) $ (1,362) $(11,381)
======== ======== ======== ========
Basic and diluted net loss per
common share.................. $ (0.05) $ (0.43) $ (0.06) $ (0.45)
======== ======== ======== ========
Shares used in computing basic
and diluted net loss per
common share.................. 22,000 22,964 22,000 25,108
======== ======== ======== ========
Pro forma basic and diluted net
loss per common share......... $ (0.24) $ (0.23)
======== ========
Shares used in computing pro
forma basic and diluted net
loss per common share......... 41,348 48,452
======== ========
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------ March 31,
1998 1999 2000
---- ------- ---------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term investments....... $261 $12,924 $13,632
Working capital ........................................ 53 7,708 1,023
Total assets ........................................... 742 20,360 27,788
Long-term obligations, less current portion............. 39 544 602
Total stockholders' equity.............................. 317 10,295 6,537
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with "Selected Financial Data" and
our financial statements and related notes appearing elsewhere in this
prospectus. This discussion and analysis contains forward-looking statements
that involve risks, uncertainties and assumptions. The actual results may
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including, but not limited to, those set forth
under "Risk Factors" and elsewhere in this prospectus.
Overview
Blue Martini LLC, a Delaware limited liability company, was founded on June
5, 1998. On January 12, 1999, Blue Martini LLC merged into Blue Martini
Software, Inc., a Delaware corporation, with Blue Martini Software, Inc. being
the surviving entity.
We provide e-business software and services that enable companies to build
brand equity through direct customer interaction across customer Internet-
related touch points, such as websites, mobile wireless devices and on-line
trading exchanges and traditional customer touch points, such as stores and
call centers. In March 1999, we released the first commercial version of our
product. Following the initial release of our product, we accelerated the
development of our professional services, technical support, training, sales
and marketing organizations. We have incurred significant losses since
inception, and as of March 31, 2000, we had an accumulated deficit of $22.5
million.
Our revenues are derived from the licensing of our software product and the
sale of related services. The license agreement for our software product
typically provides for an initial fee to use the software in perpetuity.
License revenues are recognized when persuasive evidence of an agreement
exists, delivery of the product has occurred, the fee is fixed or determinable
and collectibility is probable, assuming no significant future obligations or
customer acceptance rights exist. If an acceptance period is contractually
provided, revenues are recognized upon the earlier of customer acceptance or
the expiration of that period. In instances where delivery is electronic and
all other criteria for revenue recognition have been achieved, the product is
considered to have been delivered when the customer either takes possession by
downloading the software or the access code to download the software from the
Internet has been provided to the customer. Payments received in advance of
revenue recognition are recorded as deferred revenues.
Services revenues are principally derived from professional services,
technical support and training. Customers who license our product typically
purchase maintenance contracts. Our maintenance agreements entitle customers to
receive software updates, maintenance releases and technical support.
Maintenance is typically paid in advance and the related revenues are deferred
and recognized ratably over the term of the maintenance contract, which is
typically one year. A majority of our customers use systems integrators to
implement our product. Customers typically purchase additional professional
services and training from us to support their implementations. Professional
services and training are typically sold on a time-and-materials basis and
revenues from these services are recognized when the services are performed and
collectibility is deemed probable.
We market our software product through a direct sales force. We also engage
in alliances with systems integrators and technology vendors to assist us in
marketing and selling our software product and related services. While our
revenues to date have been derived principally from customers in the United
States, 19% of our revenues for the quarter ended March 31, 2000, were from
customers outside the United States. We believe international revenues will
represent a more
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<PAGE>
significant portion of our total revenues in the future. Although we have a
limited operating history, we believe that our quarterly operating results may
experience seasonal fluctuations. For instance, quarterly results may fluctuate
based on our customers' fiscal year, budgeting cycles and slow summer
purchasing patterns.
We have derived a significant portion of our license revenues in each
quarter from a small number of relatively large orders. In 1999, revenues from
each of Levi Strauss & Co., Deluxe Corporation and Harley-Davidson, Inc.
represented more than 10% of our total revenues and combined for an aggregate
of 48% of our total revenues in 1999. EighteenGlobal BVI and ibeauty.com each
accounted for more than 10% of our total revenues in the quarter ended March
31, 2000, and combined for an aggregate of 22% of our total revenues in that
period. While we do not anticipate that any one customer will represent more
than 10% of total revenues in 2000, we do expect that a limited number of
customers will continue to account for a substantial portion of our license
revenues in a given quarter. As a result, if we lose a major customer or if an
anticipated license contract is delayed or cancelled, our revenues and
operating results in a particular quarterly period would be adversely affected.
In addition, customers that have accounted for significant revenues in the past
may not generate revenues in any future period. If we fail to obtain a
significant number of new customers or additional orders from existing
customers, our business and operating results could be harmed.
We believe our success requires expanding our customer base, continuing to
enhance our software product and growing our professional services, technical
support and training organizations. We expect that our operating expenses will
increase as we invest to expand our sales and marketing operations worldwide,
fund greater levels of research and development, grow our global professional
services, technical support and training organizations and expand our related
infrastructure. As a result of anticipated increases in our operating expenses,
we expect to continue to incur net losses both on a quarterly and annual basis
for the next few years. Our operating expenses are based in part on our
expectations of future revenues and are relatively fixed in the short term. As
such, a delay in the recognition of revenues from one or more license contracts
could cause variations in our operating results from quarter to quarter and
could result in net losses in a given quarter being greater than expected.
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<PAGE>
Results of Operations
The following table presents selected financial data for the periods
indicated as a percentage of total revenues:
<TABLE>
<CAPTION>
Three
Months Ended
Year Ended March 31,
December 31, ---------------
1999 1999 2000
------------ ------ ------
<S> <C> <C> <C>
Revenues:
License........................................ 64% 10% 57%
Service........................................ 36 90 43
--- ------ ------
Total revenues............................... 100 100 100
--- ------ ------
Cost of revenues:
License........................................ 6 1 5
Service........................................ 48 46 58
--- ------ ------
Total cost of revenues....................... 54 47 63
--- ------ ------
Gross profit................................. 46 53 37
--- ------ ------
Operating expenses:
Sales and marketing............................ 64 152 79
Research and development....................... 61 393 41
General and administrative..................... 11 86 24
--- ------ ------
Total operating expenses..................... 136 631 144
--- ------ ------
Loss from operations......................... (90) (578) (107)
Interest and other, net.......................... 2 13 1
--- ------ ------
Net loss..................................... (88)% (565)% (106)%
=== ====== ======
</TABLE>
Revenues
License. Our software product was commercially released in March 1999, and
we recognized no license revenues before that date. License revenues increased
from $25,000 for the three months ended March 31, 1999 to $6.1 million for the
three months ended March 31, 2000 due to an increase in software licenses to
new customers. License revenues were $7.2 million in 1999.
Service. Service revenues increased from $216,000 for the three months ended
March 31, 1999 to $4.6 million for the three months ended March 31, 2000. This
increase was due to an increase in the number of customer deployments and
customers under maintenance agreements, as well as an increase in training
revenues. Service revenues were $4.0 million in 1999, reflecting revenues from
our professional services, technical support and training organizations
established during the year and maintenance revenues associated with new
product licenses. We expect that our service revenues will increase as a
percentage of total revenues as we build our professional services staff in the
near term, and then decrease as a percentage of total revenues over the long
term as we increase the number of business alliances with systems integrators
and other professional services organizations.
Cost of Revenues
License. Cost of license revenues consists of royalties payable to third
parties for software that is either embedded in or bundled with our product.
Cost of license revenues increased from $3,000 for the three months ended March
31, 1999 to $561,000 for the three months ended March 31, 2000. These amounts
represented 12% and 9% of license revenues for these periods. The increase in
cost of license revenues in absolute dollars was principally the result of
growth in license revenues resulting in increased royalties payable to third
parties. In 1999, cost of license revenues was $719,000 and represented 10% of
license revenues for the period. We expect cost of license
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<PAGE>
revenues will increase in absolute dollars in the future due to higher
royalties payable to third parties as a result of anticipated growth in license
revenues. To the extent license revenues increase, we expect cost of license
revenues to decline as a percentage of total revenues as a result of royalty
agreements with declining royalty rates.
Service. Cost of service revenues consists primarily of salaries and other
personnel-related expenses, as well as depreciation on equipment used to
provide professional services, technical support and training. Cost of service
revenues increased from $110,000 for the three months ended March 31, 1999 to
$6.2 million for the three months ended March 31, 2000. These amounts
represented 51% and 135% of service revenues for these periods. The increase in
absolute dollars resulted from the expansion of our professional services,
technical support and training organizations to support the growth in new
licenses and a $1.1 million increase in stock compensation. For 1999, cost of
service revenues was $5.4 million and represented 135% of related service
revenues reflecting the significant costs incurred in establishing our
professional services, technical support and training organizations. We expect
cost of service revenues to increase in absolute dollars in the future as we
continue to expand our professional services, technical support and training
organizations to meet anticipated growth. While cost of services, when
expressed as a percentage of related service revenues, may fluctuate in the
near term as additional personnel are hired, we expect this percentage to
decrease over time due to higher productivity of our professional services
organizations and economics of scale.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of costs
of our direct sales and marketing personnel as well as costs of marketing
programs including trade shows, advertisements, promotional activities and
media events. Sales and marketing expenses increased from $366,000 for the
three months ended March 31, 1999 to $8.5 million for the three months ended
March 31, 2000. Of this increase, $4.3 million was attributable to an increase
in sales and marketing personnel expenses and commissions to sales personnel
associated with higher revenues, and $1.6 million was due to increased spending
for marketing programs. In addition, amortization of stock compensation
accounted for $1.3 million of the increase. For 1999, sales and marketing
expenses were $7.2 million as compared with $407,000 for the period from
inception to December 31, 1998. The increase in sales and marketing expenses
resulted from a full year of operations in 1999, hiring and training of
additional sales and marketing personnel, increased spending on advertising and
marketing campaigns and amortization of deferred stock compensation. We believe
sales and marketing expenses will continue to increase in absolute dollars in
the future due to the planned growth of our sales force, the establishment of
additional sales offices in both domestic and foreign locations and increases
in marketing programs.
In April 2000, we entered into a non-exclusive marketing and business
development agreement with a systems integrator to promote and market our
product in Europe, the Middle East and Africa. As part of this arrangement, we
issued a warrant to purchase 2,400,000 shares of our series C convertible
preferred stock at an exercise price of $5 per share on an as-converted basis.
The warrant is exercisable at the end of eight years and can be exercised
sooner upon the achievement of performance thresholds during the first four
years of the agreement. The fair value of this warrant, which is expected to be
between $12 to $15 million, will be capitalized and amortized over the service
period and included as a non-cash component of marketing and sales expense in
our statement of operations.
Research and Development. Research and development expenses consist
primarily of salaries and related expenses for engineering personnel, costs of
contractors and depreciation of equipment used in the development of our
software product. To date, we have expensed all internal software development
costs as incurred.
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<PAGE>
Research and development expenses increased from $947,000 for the three
months ended March 31, 1999 to $4.4 million for the three months ended March
31, 2000. The growth in expenses was primarily due to the increase in the
number of engineering personnel to support the development and enhancement of
our product and a $2.1 million increase in stock compensation. Research and
development expenses increased from $504,000 for the period from inception to
December 31, 1998 to $6.9 million for 1999. Research and development expenses
increased over the prior period due to a full year of operations in 1999, an
increase in the number of engineering personnel and amortization of deferred
stock compensation. We expect research and development expenses to increase
significantly in absolute dollars in future periods.
General and Administrative. General and administrative expenses include
costs associated with our finance, human resources, legal and other
administrative functions and consist principally of salaries and related
expenses, professional fees and equipment depreciation. General and
administrative expenses increased from $208,000 for the three months ended
March 31, 1999 to $2.5 million for the three months ended March 31, 2000. Of
this increase, $501,000 was attributable to increased professional fees,
$384,000 was attributable to an increase in personnel-related costs and $1.0
million was attributable to an increase in stock compensation. General and
administrative expenses increased from $249,000 for the period from inception
to December 31, 1998 to $1.2 million for 1999, reflecting an increase in
administrative personnel, increased professional fees and amortization of
deferred stock compensation. We believe general and administrative expenses
will continue to increase in absolute dollars in future periods as we hire
additional staff, invest in infrastructure projects to support our continued
growth and incur expenses associated with operating as a public company.
Stock Compensation. Deferred stock compensation represents the difference
between the exercise price of stock option grants to employees and the deemed
fair value of our common stock at the time of those grants. We recorded
deferred stock compensation of $516,000 for the period from inception to
December 31, 1998, $9.8 million for 1999 and $34.3 million for the three months
ended March 31, 2000. Amounts related to employee stock options are being
amortized to operations over the vesting periods of the individual stock
options using a graded vesting method. Such amortization amounted to $91,000
for the period from inception to December 31, 1998, $2.2 million in 1999 and
$4.2 million for the three months ended March 31, 2000.
During the year ended December 31, 1999 and the three months ended March 31,
2000, we granted immediately vested and exercisable stock options to non-
employees. In connection with these grants, we recorded non-cash compensation
expense of $47,000 in 1999 and $1.4 million for the three months ended March
31, 2000 which reflects the fair value of these options based on the Black-
Scholes option pricing model.
The amortization of deferred stock compensation, combined with the expense
associated with stock options granted to non-employees, relates to the
following items in the accompanying statement of operations (in thousands):
<TABLE>
<CAPTION>
June 5, 1998 Three Months
(Inception) to Year Ended Ended
December 31, December 31, March 31,
1998 1999 2000
-------------- ------------ ------------
<S> <C> <C> <C>
Cost of revenues................. $ -- $ 385 $1,084
Sales and marketing.............. 14 839 1,285
Research and development......... 33 882 2,126
General and administrative....... 44 146 1,080
---- ------ ------
$ 91 $2,252 $5,575
==== ====== ======
</TABLE>
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<PAGE>
Amortization of deferred stock compensation is estimated to total $22.7
million for 2000, $12.3 million for 2001, $5.5 million for 2002 and $1.7
million for 2003. Amortization of deferred stock compensation will be reduced
in future periods to the extent options are terminated prior to full vesting.
Interest and Other, Net
Interest and other, net consists of interest income from cash, cash
equivalents and available-for-sale short-term investments, partially offset by
interest expense associated with capital leases and bank borrowings. Interest
and other, net increased from $31,000 for the three months ended March 31, 1999
to $60,000 for the three months ended March 31, 2000 due primarily to higher
average balances of cash, cash equivalents and short-term investments. Interest
and other, net increased from $15,000 for the period from inception to December
31, 1998 to $253,000 in 1999 due to a full year of operations and an increase
in average cash, cash equivalents and short-term investment balances.
Income Taxes
From inception to December 31, 1999, we incurred net losses for federal and
state tax purposes and have not recognized any tax provision or benefit. As of
December 31, 1999, we had approximately $4.3 million of federal and $2.2
million state net operating loss carryforwards to offset future taxable income.
The federal and state tax net operating loss carryforwards are available to
reduce future taxable income and expire at various dates through 2019 and 2004,
respectively. Because of our limited operating history, our losses incurred to
date and the difficulty in accurately forecasting our future results,
management does not believe that the realization of the related deferred income
tax asset meets the criteria required by generally accepted accounting
principles. Therefore, we have recorded a 100% valuation allowance against the
deferred income tax asset. See Note 10 of the notes to our financial
statements. Significant future changes in our share ownership, as defined in
the Tax Reform Act of 1986 and similar state provisions, may restrict the
utilization of these carryforwards.
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<PAGE>
Quarterly Results of Operations
The following tables set forth statement of operations data for our most
recent five quarters. This information has been derived from our unaudited
financial statements that, in the opinion of our management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of this information. You should read this statement of
operations data in conjunction with our audited financial statements and
related notes appearing elsewhere in this prospectus. We have experienced and
expect to continue to experience fluctuations in operating results from quarter
to quarter. We incurred net losses in each quarter since inception and expect
to continue to incur losses in the foreseeable future. You should not draw any
conclusions about our future results from the results of our operations for any
quarter, as quarterly results are not indicative of the results for a full
fiscal year or any other period.
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------
June
Mar. 31, 30, Sept. 30, Dec. 31, Mar. 31,
1999 1999 1999 1999 2000
-------- ------- --------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
License............... $ 25 $ 1,066 $ 1,934 $ 4,180 $ 6,070
Service............... 216 410 1,661 1,740 4,611
------- ------- ------- ------- --------
Total revenues...... 241 1,476 3,595 5,920 10,681
------- ------- ------- ------- --------
Cost of revenues:
License............... 3 214 170 332 561
Service............... 110 346 1,808 3,165 6,218
------- ------- ------- ------- --------
Total cost of
revenues........... 113 560 1,978 3,497 6,779
------- ------- ------- ------- --------
Gross profit........ 128 916 1,617 2,423 3,902
------- ------- ------- ------- --------
Operating expenses:
Sales and marketing... 366 786 2,000 4,025 8,473
Research and
development.......... 947 1,540 1,887 2,496 4,361
General and
administrative....... 208 275 284 451 2,509
------- ------- ------- ------- --------
Total operating
expenses........... 1,521 2,601 4,171 6,972 15,343
------- ------- ------- ------- --------
Loss from
operations......... (1,393) (1,685) (2,554) (4,549) (11,441)
Interest and other,
net.................... 31 13 97 112 60
------- ------- ------- ------- --------
Net loss............ $(1,362) $(1,672) $(2,457) $(4,437) $(11,381)
======= ======= ======= ======= ========
As a Percentage of Total
Revenues:
Revenues:
License............... 10 % 72 % 54 % 71 % 57 %
Service............... 90 28 46 29 43
------- ------- ------- ------- --------
Total revenues...... 100 100 100 100 100
------- ------- ------- ------- --------
Cost of revenues:
License............... 1 15 5 6 5
Service............... 46 23 50 53 58
------- ------- ------- ------- --------
Total cost of
revenues........... 47 38 55 59 63
------- ------- ------- ------- --------
Gross profit........ 53 62 45 41 37
------- ------- ------- ------- --------
Operating expenses:
Sales and marketing... 152 53 56 68 79
Research and
development.......... 393 104 52 42 41
General and
administrative....... 86 19 8 8 24
------- ------- ------- ------- --------
Total operating
expenses........... 631 176 116 118 144
------- ------- ------- ------- --------
Loss from
operations......... (578) (114) (71) (77) (107)
Interest and other,
net.................... 13 1 3 2 1
------- ------- ------- ------- --------
Net loss............ (565)% (113)% (68)% (75)% (106)%
======= ======= ======= ======= ========
</TABLE>
27
<PAGE>
Our revenues and operating results are likely to vary significantly from
quarter to quarter. A number of factors are likely to cause these variations,
including:
. demand for our product and services;
. the timing of sales of our product and services;
. the timing of customer orders, customer budget cycles and product
implementations;
. unexpected delays in introducing new products, product enhancements and
services;
. the introduction of competing products;
. increased expenses related to sales and marketing, professional
services, product development, technical support or administration;
. availability of financing sources for our customers;
. the mix of license and service revenues;
. the rate of international expansion;
. non-renewal of service agreements;
. changes in our pricing policies or those of our competitors;
. changes in our sales compensation and incentive plans;
. the rate at which new sales personnel become productive;
. changes in our strategy; and
. costs related to possible acquisitions of technologies or businesses.
Accordingly, quarter-to-quarter comparisons of our operating results are not
necessarily meaningful and investors should not rely on the results of one
quarter as an indicator of our future performance.
We plan to significantly increase our operating expenses to expand our sales
and marketing operations, develop new distribution channels, fund greater
levels of research and development, broaden professional services, technical
support and training and improve operational and financial systems. If our
revenues do not increase along with these expenses, our business, operating
results or financial condition could be harmed and net losses in a given
quarter would be greater than expected.
Although we have a limited operating history, we believe that our quarterly
operating results may experience seasonal fluctuations. For instance, quarterly
results may fluctuate based on our clients' calendar year budgeting cycles and
slow summer purchasing patterns.
Liquidity and Capital Resources
Since inception, we have financed our operations with $18.7 million from the
sale of our preferred stock, $2.2 million from the sale of our common stock and
$750,000 of borrowings under a secured loan agreement. As of March 31, 2000, we
had cash, cash equivalents and short-term investments of $13.6 million and $1.5
million available under an equipment lease facility.
As of March 31, 2000, we had outstanding borrowings of $625,000 under a
secured loan agreement. The loan agreement provides for borrowing of up to
$750,000 and is collateralized by equipment and other assets. This borrowing
bears interest at the bank's prime rate plus 0.50% per annum. At March 31,
2000, we also had capital lease obligations of $476,000.
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<PAGE>
Net cash used in operating activities was $854,000 for the period from
inception to December 31, 1998 and $2.3 million in 1999 and cash provided by
operating activities was $2.1 million for the three months ended March 31,
2000. Net cash used in operating activities from inception to December 31, 1998
and for 1999 was primarily the result of net losses of $1.1 million for the
period from inception to December 31, 1998 and $9.9 million in 1999, after
adjusting for stock compensation of $91,000 for the period from inception to
December 31, 1998 and $2.3 million in 1999. For the three months ended March
31, 2000, cash provided by operations was $2.1 million, which reflected a net
loss of $11.4 million, amortization of stock compensation of $5.6 million, and
changes in operating assets and liabilities.
Net cash used for investing activities was $249,000 from inception to
December 31, 1998, $5.9 million for 1999 and $2.4 million for the three months
ended March 31, 2000. The cash used for investing activities was related to the
purchase of computer hardware and software, office furniture and equipment and
short-term investments.
At March 31, 2000, we had rental obligations of approximately $1.7 million
for the remaining nine months of 2000, $2.5 million for the year ending
December 31, 2001, $2.5 million for the year ending December 31, 2002, $2.3
million for the year ending December 31, 2003, $1.3 million for the year ending
December 31, 2004 and $108,000 thereafter. A substantial portion of our
operating lease commitments relate to our headquarters and principal facility
in San Mateo, California and our training facility in Redwood City, California.
We expect to experience significant growth in our operating expenses for the
foreseeable future in order to execute our business plan. As a result, we
expect that operating expenses and planned capital expenditures will constitute
a material use of our cash balances. In addition, we may use cash to fund
acquisitions or invest in other businesses, technologies or product lines. We
currently anticipate that the net proceeds from this offering, together with
our available cash balances and credit facilities, will be sufficient to meet
our presently anticipated working capital, capital expenditure and business
expansion requirements for the next twelve to eighteen months. However, we may
require additional funds within this time period. We may seek to raise these
additional funds through public or private debt or equity financing to meet
these additional working capital requirements. There can be no assurance that
this additional financing will be available, or if available, will be on
reasonable terms and not dilutive to our stockholders. If adequate funds are
not available on acceptable terms, our business and operating results could be
adversely affected.
Qualitative and Quantitative Disclosures about Market Risk
Foreign Currency Exchange Rate Risk
Through March 31, 2000, all of our recognized revenues have been denominated
in United States dollars and were primarily from customers in the United
States. Our exposure to foreign currency exchange rate changes has been
immaterial. We expect, however, that future license and service revenues may
also be derived from international markets and may be denominated in the
currency of the applicable market. In addition, as we expand our international
operations and hire personnel in Europe and Asia Pacific, we will have
operating expenses denominated in foreign currencies. As a result, our
operating results may become subject to significant fluctuations based upon
changes in the exchange rates of foreign currencies in relation to the United
States dollar. Furthermore, to the extent that we engage in international sales
denominated in United States dollars, an increase in the value of the United
States dollar relative to foreign currencies could make our products less
competitive in international markets. Although we will continue to monitor our
exposure to currency fluctuations and, when appropriate, may use financial
hedging techniques in the future to minimize the effect of these fluctuations,
we cannot assure you that exchange rate fluctuations will not adversely affect
our financial results in the future.
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<PAGE>
Interest Rate Risk
Our exposure to financial market risk, including changes in interest rates
and marketable equity security prices, relates primarily to our investment
portfolio. We typically do not attempt to reduce or eliminate our market
exposure on our investment securities because a substantial majority of our
investments are in fixed rate, short-term securities. We do not have any
derivative instruments. The fair value of our investment portfolio or related
income would not be significantly impacted by either a 100 basis point increase
or decrease in interest rates due mainly to the fixed-rate, short-term nature
of our available-for-sale investment portfolio.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, or SFAS, No. 133, entitled Accounting for
Derivative Instruments and Hedging Activities, SFAS No. 133. We are required to
adopt SFAS No. 133, as amended, for the year ending December 31, 2001. SFAS No.
133 establishes methods of accounting for derivative financial instruments and
hedging activities related to those instruments as well as other hedging
activities. Because we currently hold no derivative financial instruments and
do not currently engage in hedging activities, the adoption of SFAS No. 133 is
not expected to have a material impact on our financial condition or results of
operations.
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<PAGE>
BUSINESS
Overview
We provide e-business software and services that enable companies to build
brand equity through direct customer interaction across Internet-related
customer touch points, such as websites, mobile wireless devices and on-line
trading exchanges and traditional customer touch points, such as stores and
call centers. We believe that our software's integrated analytical and
operational capabilities enable companies to increase revenues by coordinating
customer interactions across these touch points. Our comprehensive, packaged
application is designed to simplify deployment and accelerate our customers'
time to benefit while reducing their total cost of ownership. We have targeted
a number of large vertical markets where we believe brand is paramount such as
retail, manufacturing, financial services, telecommunications, media and
travel. Our customers range from Global 2000 companies that have adopted
e-business strategies to rapidly growing Internet companies. As of March 31,
2000, we had licensed our software to 35 customers.
Industry Background
Growth of the Internet and e-Commerce
The emergence of the Internet has enabled the delivery of diverse types of
content and the sale of products and services to a worldwide audience.
Moreover, unlike traditional media such as print, radio and television, the
Internet can be used to deliver targeted information to specific constituencies
and to receive real-time feedback from current and prospective customers.
Consequently, the use and acceptance of the Internet as a medium for
interacting with customers are growing at rates significantly faster than those
experienced by traditional media. According to estimates by International Data
Corporation, or IDC, 196 million people were connected to the Internet at the
end of 1999, with that total expected to grow to 502 million by the end of
2003. During that same period, IDC expects on-line commerce transactions,
including both business-to-business and business-to- consumer transactions, to
grow from $111 billion to $1.3 trillion. With the widespread adoption of the
Internet by traditional companies and the emergence of Internet-based
businesses and on-line trading networks such as exchanges and marketplaces,
competitors are becoming more plentiful and are often only a click away from a
company's customers. As a result, we believe that companies need to be closer
and more responsive to their customers than ever before and, to compete more
effectively, must seamlessly integrate their on-line brand, marketing and
merchandising efforts with their traditional sales channels.
Traditional Approaches Fall Short
With the advent of e-commerce in the mid-1990s, companies had few, if any,
choices in building their software infrastructure for conducting business over
the Internet. The first generation of e-business applications deployed by e-
commerce pioneers were, therefore, typically developed internally. The software
architectures underlying these applications were often insufficiently flexible,
scalable or extensible to adapt readily to changing, and often increasing,
customer requirements. Furthermore, large internal information technology, or
IT, staffs evolved to maintain and enhance these applications. These IT staffs
often proved difficult and expensive to hire, train and retain. The burden
placed upon them from increasing traffic and complexity has also grown
significantly over time. In addition, unlike third-party applications
providers, individual companies are unable to spread the expense of substantial
in-house development, integration and maintenance efforts across a broad
customer base.
The next generation of e-business applications were typically assembled from
software components--transaction engines, personalization tools and content
management--made available by tool and platform vendors. These components
provide both in-house and independent developers with the tools and building
blocks for assembling e-business applications, reducing the time, complexity
and expense typically associated with fully customized approaches.
Nevertheless,
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<PAGE>
building these applications continues to require extensive and ongoing
customization and integration by staffs of highly specialized and expensive IT
personnel. While a number of third-party applications offering transaction,
content management, personalization and/or analytical capabilities have been
introduced, none provides a solution to all of a company's needs on a fully
integrated basis. Consequently, companies implementing these component, or
point, solutions still face significant and costly integration challenges at
the same time that they need to respond quickly to increasing competition and
accelerating technological change.
The challenge of component integration for a company's on-line e-business
presence is further heightened by the ongoing demand for more functionality.
The first generation of providers of e-commerce websites typically assembled a
catalog of products and presented it via simple, static web pages.
Subsequently, many companies revised their websites to include more
sophisticated functionality, such as personalized recommendations, search and
streamlined purchasing. As e-commerce websites evolved further, gift registries
and loyalty programs appeared. As customer expectations have increased, this
process of innovation and functionality enhancement has become a continuous
cycle. The requirement of continually developing this new functionality
internally compounds the burden on typically scarce and expensive IT resources
of integrating, maintaining and upgrading point solutions.
Need to Serve Customers Consistently Across Multiple Touch Points
The advent of e-commerce has required many companies to interact with their
customers, whether businesses or consumers, through both Internet-related touch
points, such as websites, mobile wireless devices and on-line trading exchanges
and traditional touch points, such as stores and call centers. In order to
compete more effectively, many companies are taking a hybrid, or "clicks and
mortar," approach to their marketing, sales and customer service functions,
dividing them across these touch points. Ideally, each of these touch points
should be consistent and coordinated with the others, providing companies with
a unified, up-to-date view of the customer and providing customers with a
consistent face that is personalized to their individual requirements and
unique characteristics. Companies that are unable to serve customers
consistently across multiple touch points run the risk of inefficient and
ineffective marketing, sales, service and support efforts, which can lead to
dissatisfied customers, damage to brand and reputation and ultimately lost
revenues.
Increasing Importance of Brand Equity and Awareness
In most industries, a company's brand is its most strategic asset. A brand
embodies a company's value proposition to its customers. For customers, brands
simplify choice, thereby speeding purchase decisions and eliminating time-
consuming rounds of competitive evaluation. A strong brand can enable a company
to achieve premium pricing for its products and services, accelerate revenue
and profitability growth rates, provide a barrier to entry to competitors and
reduce marketing costs. In industries where companies do not sell directly to
the end users of their products, brand is often the only means by which they
can differentiate themselves and convey their value proposition. The increasing
importance and prevalence of the Internet has further heightened the importance
of brand equity and awareness. A powerful brand can attract and retain
customers, generating higher revenues and increasing customer value.
Conversely, mismanaging a brand can drive customer traffic elsewhere,
particularly on the Internet where competitors are only a click away. To
compete effectively, many companies are seeking a solution that enables them to
manage a brand successfully across both new and traditional channels.
The e-Business Application Opportunity
We believe a significant market opportunity exists for a solution that
enables companies to effectively integrate their e-business strategies with
their other marketing, sales and customer service efforts. Additionally, an
integrated solution is required that offers a wide range of functionality and
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<PAGE>
permits companies to interact on a consistent and personalized basis across
multiple touch points. A comprehensive, easily deployed solution that
integrates operational and analytical applications allows a company to
leverage resources, build brand equity, enhance customer interactions and
increase revenues.
The Blue Martini Solution
Our software and services enable e-businesses to interact more effectively
with customers across multiple touch points. We provide an integrated suite of
enterprise software applications that allow e-businesses to extend their
brands across their Internet-based and traditional sales/marketing and
merchandising efforts.
Our software is designed to provide the following compelling business
benefits to our customers:
Build and Enhance Brand Equity and Awareness. Our software allows companies
to interact directly with their customers on a consistent, coordinated and
personalized basis irrespective of whether such customer interaction takes
place on a website, at a store, through a call center or across on-line
trading exchanges. This coordinated approach is designed to enable companies
to effectively build and enhance brand equity and awareness across multiple
touch points.
Generate Revenues Through Sales Channels By Coordinating Across Multiple
Touch Points. By coordinating interaction across multiple touch points, our
software enables companies to increase revenues through multiple sales
channels, such as stores, call centers, websites and on-line trading
exchanges. This coordination allows companies to avoid channel conflict and
reduce cannibalization. For example, a customer can browse, compare and
purchase products on a company's website and then choose to pick up the items
at the company's local store to avoid shipping costs and wait time. Similarly,
a business-to-business customer could identify the appropriate product through
an e-mail campaign by the seller, then establish mutually agreeable terms with
a salesperson on the telephone and subsequently execute recurring transactions
on the seller's website according to the negotiated terms.
Convert Browsers into Long-Term and Profitable Customers. The dynamic
publishing capabilities of our software are designed to enable companies to
publish new content. Our software's fully-integrated analytical and
personalization capabilities enable companies to specifically target each
customer through interactions that are appropriate to the customer's
preferences. We believe that this content and personalization attracts more
customers to a website and encourages customers to visit more often and stay
longer, creating a "stickier" website and increasing the likelihood of
purchases. Additionally, our software enables companies to recognize and take
advantage of cross-selling and up-selling opportunities by promoting related
and complementary products to customers, with the goal of increasing the
average size of transactions.
Accelerate Time to Benefit through Rapid Deployment and Dynamic
Updating. Our software is designed to enable companies to deploy their e-
business solutions in as little as eight weeks and begin generating revenues
substantially earlier than would be possible with other solutions. Deployments
of in-house developed or third-party point solutions for e-business typically
take many months and, in some cases, years to complete. By the time these
solutions are deployed, competitors may have already captured the market.
Additionally, the dynamic capabilities of our software enable companies to
readily publish fresh content on an ongoing basis and to respond quickly to
changing market conditions.
Reduce Total Cost of Ownership. Our comprehensive, integrated suite of
applications is designed to allow business users, who best know their
customers, to manage the content of their websites, freeing up scarce and
expensive IT professionals to focus on their core competencies. In addition,
because our software fully integrates the business-critical functions for
conducting e-business, customers should need to dedicate substantially fewer
IT resources to development, integration and ongoing maintenance.
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<PAGE>
Our software integrates five key capabilities that we believe are required
by companies employing e-business strategies:
Product Management. Our software enables companies to richly, accurately and
persuasively describe their products and product hierarchies, establish pricing
and create promotions. Companies can specify as many product attributes as
necessary, vary attributes by product or product type and change product
attributes over time. This flexibility allows more accurate customer targeting
and a more compelling presentation of products for sale.
Content Management. Our software enables companies to author, manage,
approve and track the development and use of content, such as text, graphics,
audio and video. Companies can use this content for product presentation,
information, entertainment and brand and community building.
Transaction Execution. Our software enables companies to conduct business on
their websites, over the phone, via wireless devices and through other sales
channels, including taking orders and managing returns.
Analysis. Our software's data analysis capabilities increase companies'
ability to accurately identify market segments, deeply understand customer
behavior, readily mine purchase histories and determine strategies to
effectively target customers.
Personalization. Our software's sophisticated algorithms enable companies to
target customers across multiple touch points with meaningful and relevant
products, promotions and content to increase website "stickiness" as well as
the likelihood, size and profitability of a transaction.
Our software features the following characteristics that we believe
differentiate it from other software solutions:
Open. Through adherence to open software standards as well as through the
support of pre-built, pre-tested interfaces to leading packaged enterprise
resource planning and customer relationship management software packages, our
software is designed to be easy to implement within companies. Our software
also interoperates with a wide variety of legacy applications, standards and
protocols, thereby unifying the various aspects of IT infrastructure.
Scalable. Our software architecture is designed to be highly scalable. The
architecture may be fully distributed across any number of web and application
servers, making it possible to support large amounts of content and products
and large numbers of products and concurrent users. Our software provides
support for replicated databases, for load balancing among web and application
servers and for multi-tier content and data caching, all of which contribute to
rapid response times.
Flexible. Our architecture is modular, allowing customers to implement
either our entire product or only selected portions critical to their
businesses with the option to add our other modules easily and without time-
consuming integration. Using a published Applications Programming Interface, or
API, website developers can customize the behavior of Internet interactions and
extend our business functionality to accommodate their unique business needs.
Available. With support for automatic server failover and updates while in
production, our software is designed to enable companies to maintain continuous
customer interactions on-line in unstable hardware and networking environments,
even as new product catalogs and content are published.
Integrated. The adoption of applications software raises several integration
issues. Point solutions or internally developed software that are integrated on
an ad hoc basis can be difficult to deploy and maintain. Our integrated
software matches and links operational and analytical capabilities, enabling
both deeper analysis and faster reaction times in operations.
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Strategy
Our objective is to be the leading provider of enterprise e-business
software applications and services that enable companies worldwide to build
brand equity through direct customer interaction across multiple touch points.
Key elements of our product strategy are to:
Enable Consistent and Personalized Customer Interaction Across Multiple
Touch Points. As the importance of consistent and personalized customer
interaction for e-businesses continues to grow, we plan to continually enhance
the distinctive capabilities of our software and develop new capabilities to
expand our market opportunities and establish ourselves as the worldwide leader
in providing enterprise e-business applications and services. We continue to
focus on providing e-businesses with software to immerse their customers in
their brand by providing their customers with a consistent and personalized
experience across multiple touch points.
Provide a Comprehensive Suite of e-Business Applications Targeted at
Business Line Managers. To address the shortcomings of custom-developed and
point-based e-business software products, we plan to continue to develop a
comprehensive suite of software applications to conduct e-business throughout a
company. We plan to continue to design our software to be usable by business
line managers, who typically have little or no technical training, but are
closest to customers and best able to ascertain their demands and desires.
Integrate Operational and Analytical Applications to Enable Effective
Customer Interaction and Ongoing Business Improvements. We plan to continue to
support direct interaction between our operational and analytical applications.
This enables a company to dynamically adapt and refine customer interactions on
an ongoing basis, creating a powerful and personalized customer experience. It
also permits adjustments to business processes in response to customer feedback
and the success or failure of various sales and marketing initiatives.
Key elements of our sales and marketing strategy are to:
Target Large, Vertical Markets Where Brand Equity is Paramount. Initially,
we are focusing our marketing and sales efforts on those large, vertical
markets where brand equity and awareness are critical, such as retail,
manufacturing, financial services, telecommunications, media and travel. Within
these markets, we intend to target the leaders, both with respect to market
share and business practices, in the belief that having these leaders as our
customers will motivate other companies to use our software as well.
Leverage Relationships with Systems Integrators to Focus on License
Revenues. Our business model is predicated on the licensing of our software. We
intend to continue to pursue additional relationships with systems integrators
to enable us to achieve a high-margin, software-driven business model with a
minimum investment in consulting and integration services over time. These
relationships with systems integrators are also designed to enable us to extend
the reach of our sales and marketing efforts. Initially, however, it is our
intention to directly provide consulting services to both ensure customer
satisfaction and to train other consultants in the implementation of our
software.
Expand Our International Presence. We intend to expand our sales and
marketing operations in Europe, Asia and Latin America to take advantage of the
growing penetration of the Internet in these geographies. We plan to localize
our product for these markets. We also intend to focus on building distribution
channels for our products in these markets, including entering into
relationships with systems integrators.
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Address Smaller, or Mid-Market, Companies Through a Subscription-Driven
Business Model. We believe that there is a significant opportunity to sell
specific modules of our product to smaller, or mid-market, companies who want
to coordinate their different touch points. We intend to license our product to
these companies using an applications software provider model to make the
adoption of our product cheaper for these smaller companies.
Products
We offer both software and services. Our Customer Interaction System, or
CIS, is a comprehensive software application for building brand across multiple
touch points. We complement our software with training, deployment and support
services, as well as assisting businesses in using the analytical capabilities
provided by our software.
Software
The CIS consists of pre-integrated modules that can be implemented
individually or together. Because we offer an integrated application rather
than a tool kit, we expect our customers to enjoy faster time to benefit and
lower total cost of ownership.
The CIS is deployed by IT professionals and systems integrators and is used
on an ongoing basis by business users within an organization to manage products
and merchandise, to manage images and other rich media content, to perform data
mining investigations and to administer customer profiles and transaction
histories. The CIS provides our customers with the software necessary to
operate high-volume websites as well as wireless and telephone interactions
with their customers. The CIS is divided into four subsystems: Operations,
Analysis and Targeting, Interaction and Tools and Integration. The four
subsystems consist of thirteen modules which are shown below:
[A three-dimensional diagram shows the relationship among the four subsystems,
"Operations," "Analysis and Targeting," "Interaction," and "Integration," and
our twelve modules: "Merchandise Management," "Content Management," "Customer
Management," "Date Warehousing and Reporting," "Data Mining and Visualization,"
"Personalization," "Customer Collaboration," "Website," "Call Center," "Mobile
Wireless," "Tools" and "Workflow." "Business Users" appears on an arrow that
points to the left side of the diagram. "Customers" appears on an arrow that
points to the right side of the diagram. Above the diagram appear two headed
arrows and the words "POS Systems," "ERP Applications," "CRM Applications,"
"Fulfillment Applications," "Shopping Services," "Taxation Services," "Payment
Services" and "Email Services."]
Operations Subsystem
The Operations subsystem allows business users to define products, create
and manage content, price their offerings and manage customer information
without dependence upon IT professionals. The Operations subsystem consists of
the following modules:
Product Management Module. The Product Management module manages product and
product line hierarchies, product attributes, cross-sells, up-sells,
assortments, promotions and pricing
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data. Our customers may use an as many attributes as necessary to describe
their products in full detail, allowing their customers to obtain the
information they require to make informed decisions. This data can be imported
from external systems or maintained entirely within the application.
The Product Management module allows business users to create and implement
promotions, to highlight products or categories or to assist with inventory
level management. The Product Management module allows a product to inherit the
attributes of products above it in the product hierarchy, minimizing the effort
required for content tagging and targeting. In combination with the Content
Management module, business users can link products and content together in one
system for more effective, targeted merchandising.
Content Management Module. The Content Management module stores and
categorizes simple and rich media, provides versioning and configuration
management and supports team-based development strategies for large and complex
websites. The Content Management module manages and controls media assets such
as website templates, product images and brand building content. Users can
assign content-, product- and market-specific attributes to each item.
The Content Management module supports images, text, HTML templates, audio,
video and other types of content. In combination with the Product Management
module, business users may link product and content in one system for more
effective merchandising.
Customer Management Module. The Customer Management module captures profiles
across customer touch points via the Interaction subsystem and manages customer
data. Profile data can be extracted from clickstream data, responses to survey
questions, summaries of order history or external databases. The Customer
Management module delivers value-added customer services including loyalty
programs, gift registries, gift certificates, employee purchasing and express
buying.
The Customer Management module ensures there is a uniform view of the
customer across touch points. The Customer Management module also ensures that
customers are recognized when they return to the store, whether on-line or off,
enabling organizations to treat a customer who returns every day differently
than someone who returns less frequently. Companies can continue to learn about
visitors to their websites and enhance profiling information as visitors
transition from anonymous browsers to registered users to buyers.
Analysis and Targeting Subsystem
The Analysis and Targeting subsystem allows business users to obtain timely
and critical information regarding which products are selling, which customers
are more profitable and which merchandising or marketing strategies are more
successful. With the results determined using the analytical tools, business
users can better understand their customers and to personalize subsequent
customer interactions. The Analysis and Targeting subsystem consists of the
following modules:
Data Warehousing and Reporting Module. The Data Warehousing and Reporting
module provides tools for automatically extracting operational data obtained
from multiple touch points. The extracted data is made available in a data
warehouse to enable quick answers to complex questions about orders, customers,
products and sources of revenues and to allow business users to understand the
effectiveness of their decisions.
The Data Warehousing and Reporting module allows business users to generate
reports on customer orders based on attributes such as geographies, units and
revenues of items sold. For example, reports describing conversion ratios of
each promotion allow business users to make informed decisions about which
promotions are most effective. Other reports list revenues, profits, visits,
page views and browsing time for each customer session. With these reports,
business users
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can understand sources of revenue and profitability by aggregating values for
groups such as new and returning customers, or registered and unregistered
customers.
Data Mining and Visualization Module. The Data Mining and Visualization
module complements our reporting capabilities with sophisticated data
transformation and analysis capabilities. While reports answer specific
inquiries, data mining assists marketers in addressing issues that are
difficult to articulate or quantify, such as determining which customer
attributes are associated with buying behaviors. Data mining is also used to
predict customer behavior, customer purchases or long-term value of the
customer. Moreover, the results of mining on-line shopping data can be used
across other channels to increase revenue and customer loyalty.
Large amounts of data can be difficult to understand and interpret. Our
integrated data visualization tools quickly render large amounts of data
graphically in presentations that make sense not only to highly trained
analysts, but also to marketers with key business insights. These advanced
visualization tools present customer segmentations, operational characteristics
and other results in three dimensional, easily navigable forms and facilitate
interactive analysis by business users.
Personalization Module. The Personalization module enables rules-based
personalization and targeted selling to end customers through the Interaction
subsystem. In addition, the Personalization module generates rules for
personalized content, cross-sells, up-sells, product assortments and
promotional campaigns based upon the results of data mining analyses.
Businesses can create or modify rules manually to leverage their own expertise
and understanding of customer requirements.
Interaction Subsystem
The Interaction subsystem Internet-related touch points such as websites,
mobile wireless devices and on-line trading exchanges, and targets customers
across traditional touch points such as stores and call centers. Built-in
collaboration enables customers to work and shop together as well as allowing
sales representatives and call center agents to guide customers. Because all
modules of the Interaction subsystem share the same underlying architecture,
product catalog, content, customer database and personalization capabilities,
customers can move easily between the touch points, maintaining their contact
information, preferences, order history and inferred profiles. The Interaction
subsystem consists of the following modules.
Website Module. The Website module is designed to run large webstores
securely and reliably. The system is designed to handle spikes in demand by
offering two levels of web server and application server load balancing. The
distributed architecture of the Interaction subsystem is designed to manage
large numbers of users. By adding additional servers, the capacity of the
system can be increased. This distributed architecture also improves system
availability, by allowing sessions to continue uninterrupted in the event of
web, applications or catalog database server failure or in the event of website
updates. Full text and parametric search help end customers locate products
quickly, increasing sales and reducing requirements for support.
Call Center Module. The Call Center module empowers customer service
representatives to serve customers better by allowing them to place or modify
product orders received by telephone by using the customer profile and
preferences submitted by customers from the website or other touch points. With
Call Center, contact center representatives create and edit orders, deepen
customer profiles, check on customer order status or history, process returns,
recommend cross-sells and up-sells and provide customer accommodations. The
browser-based interface allows for remote operation and provides a familiar
interface, thereby minimizing training.
Mobile Wireless Module. The Mobile Wireless module offers the capabilities
of the CIS in a wireless device. With in-store wireless handheld devices,
shoppers can browse the bricks and mortar
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Mobile Wireless Module. The Mobile Wireless module offers the capabilities
of the CIS in a wireless device. With in-store wireless handheld devices,
shoppers can browse the bricks and mortar store while scanning items. Scanned
items can be captured for gift and wedding registries, permanent shopping lists
or for immediate sale. In addition, the cross-sell and up-sell information in
our Product Management module can be combined with personalization to target
promotions and other products and services to browsing customers.
Our Mobile Wireless module also enables sales staff to merchandise goods
more effectively by providing them with customer-specific preferences and
relevant cross-sell and up-sell promotions. For example, as a customer heads to
a dressing room with a product, a salesperson can scan the tag on the item to
suggest additional information and complementary products, increasing both the
likelihood and potential size of the sale.
The Mobile Wireless module currently supports PalmOS-based devices from
Symbol Technologies.
Customer Collaboration Module. The Customer Collaboration module, scheduled
to be commercially available in July 2000, will allow a customer to link
browsers with a friend or a sales or support person to conduct online shopping
together on a website.
The Browse Together functionality will support collaborative browsing
between two customers in different locations, or between a salesperson and a
customer. For example, two friends can browse and purchase clothes together,
despite the fact that they may be located in different cities. Similarly, a
salesperson or customer service representative can lead a customer through a
website to help her locate the content or products in which she is interested.
The Chat functionality will allow linked users to communicate through a
text-based chat feature. Participants will be able to exchange opinions and
ideas easily as they navigate through the website. Customer service
representatives will be able to provide additional contextual information to
the customer. Text-based chat is designed for customers who do not have access
to a telephone while on-line.
Tools and Integration Subsystem
The Tools and Integration subsystem allows customization and configuration
of the CIS, offers workflow capabilities to smooth operations and provides
adapters to link our software to legacy systems, packaged applications and
syndicated data providers. The Tools and Integration subsystem consist of the
following modules:
Tools Module. The Tools module enables our customers to adapt the CIS to
their specific requirements. This module provides tools for operating a website
and other customer touch points, enabling rapid response in changing
environments and allowing for immediate error correction. This module also
provides tools that enable rapid deployment of new products and content, remote
website administration and emergency updates to production sites. For example,
if a computer server is mistakenly priced at $899 rather than $8,990 on a
website, an administrator can bypass the normal data publishing process and
correct the error on the live website within minutes.
Workflow Module. The Workflow module allows customers to graphically build
and tune the business processes needed for day-to-day operations, from the
creation of a new promotion to the addition of a new line of products. With our
Workflow module, business users can define participants involved in a process
and can specify the process via a simple graphical interface. This interface
also allows business users to initiate and manage workflow processes, including
user-specific tasks.
Integration Module. The CIS is an open system designed for use in
conjunction with both an organization's existing systems and complementary
systems from third parties. All the modules of the CIS can be integrated with a
company's existing customer relationship management software,
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or CRM, enterprise resource planning software, or ERP, retail software and
supply chain management software, or SCM, making possible real-time product
availability checks, cross-platform content gathering, accurate tax
calculation, fraud protected credit card authorization and precise
determination of shipping costs. The Integration module provides a collection
of adapters, each tuned to a particular integration challenge. The adapters
offer both support for open standards as well as support for links to packaged
applications like SAP and PeopleSoft. With the tools provided, customers can
integrate systems in both a batch and interactive manner.
Services
While our business model focuses on the development and licensing of
software, we also offer a comprehensive selection of services to our customers,
including professional, technical support and training services, as well as
value-added data analysis services.
Professional Services. We offer professional services to our customers for
the deployment of the CIS and the integration with third-party software such as
CRM, ERP and SCM systems. Our service professionals work directly with our
customers as well as with systems integrators such as Andersen Consulting,
Inforte and Viant. In addition to working with systems integrators, we have
relationships with a number of companies that provide website design as well as
systems integration services such as marchFIRST, Inc.
Technical Support Services. We offer a comprehensive collection of support
services designed to respond to inquiries and rapidly resolve issues. Our
technical support services are available to our customers worldwide under
maintenance agreements. We field questions via our call center, through email
and in person for customers that have our consultants on site.
Our standard technical support services include responding to inquiries
regarding installation, administration and basic usage. Our customers or their
representatives may log product questions by phone or through the Internet via
our Technical Support WebAccess module, and can track our responses in a
similar fashion. Maintenance upgrades and release upgrades are also included
with our standard technical support package.
Training Services. We offer a comprehensive training curriculum designed for
systems integrators and customers. Our courses not only train professionals in
the use and implementation of our software, but also educate business users on
key concepts such as personalization and data mining. We offer courses in our
facilities in Redwood City, California.
E-Business Intelligence Services. We offer our customers subscription-based,
value-added data analysis services. Our E-Business Intelligence Services, or E-
BIS, process and analyze transaction, clickstream, customer and product data to
produce insights that can improve business results. These investigations are
performed by a dedicated team of consultants trained in target marketing,
merchandising, data mining technologies and statistical methods. Results are
presented to clients in easy-to-understand Business Intelligence Briefings that
combine statistics, business rules, customer profiles and plain-English
business advice. These briefings provide information to enable critical sales
and marketing decisions. E-BIS investigations are performed using the product
management, targeting and analysis capabilities of our CIS. Our customers use
E-BIS to target promotions, assortments, products and content more effectively
to the right customers at the right time.
E-BIS is available on a six-month renewable subscription basis. Our
customers may choose from a number of subscription levels designed to meet
their specific needs.
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Alliances
Our alliances include those with systems integrators, independent software
vendors, or ISVs, platform vendors and other services providers. We have
established a formal program that classifies alliance members into one of three
tiers: "Strategic," "Premier" and "Certified."
Systems Integrators. Systems integrator alliance members lead the
integration projects at our customer sites. For systems integrator alliance
members, we offer benefits including discounted training fees, dedicated
account managers and access to our customers and prospects. In return, systems
integrators pay a fee, commit to train their consultants and share their own
customer and prospect lists with us. Our systems integrator alliance members
help us develop customer relationships, and similarly we recommend our systems
integrator alliance members to our customers. Our customers pay us directly for
our product and pay our systems integrator alliance members directly for their
services. By recruiting, training and managing personnel to deploy our
software, systems integrator alliance members permit us to focus on developing
and providing our software and on providing additional technical expertise
periodically required during customer deployments. Our systems integrator
alliance members are Andersen Consulting, eForce, CFT Consulting, Deloitte &
Touche, Emerald Solutions, Ernst & Young, Inforte Corporation,
marchFIRST, Inc., Techna and Viant Corporation.
Independent Software Vendors. Our ISV alliance members deliver software
products to our customers that complement our software. Our ISV alliance
members provide fulfillment, SCM and CRM software. Our ISV alliance members
help us develop customer relationships, and similarly we recommend our ISV
alliance members to our customers. Our customers pay directly for our product
and pay our ISV alliance members directly for their services. Our ISV program
is designed to facilitate the delivery of packaged adapters that connect the
CIS to our alliance members' software. Delivery of packaged adapters requires
software development and validation of the packaged software for each release
of the CIS. Our ISV alliance members are Commercialware, Cornerstone Retail
Solutions, JDA Software Group, Inc., Siebel Systems, Inc. and Yantra
Corporation.
Platform Vendors. Platform vendor alliance members provide the hardware and
software foundations to our customers for the deployment of our CIS. Our
platform vendor alliance members sell hardware, operating system and database
products. We perform all software development work to ensure that our software
supports the platforms of our alliance members. Our customers pay us directly
for our product and pay our platform vendor alliance members directly for their
products. Our platform vendor alliance members are IBM, Microsoft Corporation,
Oracle and Sun Microsystems.
Services Providers. Our services provider alliance members provide on-line
services that complement our CIS to our customers and include syndicated data
providers, Internet delivery providers, taxation providers and payment
providers. Our customers pay us directly for our product and pay our services
provider alliance members directly for their services. Some of our services
provider alliance members also pay us fees when our customers select their
products. Our services provider alliance members are Acxiom Corporation, Akamai
Technologies, Inc., Cybersource, QRS and Taxware International, Inc.
Technology
Our CIS is based on a distributed architecture that incorporates
technologies for data analysis, visualization, personalization and workflow.
Our engineering staff has focused on developing an architecture that is
optimized for a high degree of flexibility, performance, scalability and
availability. Our software incorporates technologies including a Java
application server, a full-text retrieval engine, a rules induction engine, a
rules execution engine, a workflow engine, a data transformation engine, an
OLAP engine, visualization libraries and a reporting system.
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Our software is built upon an open, three-tiered architecture designed to
deliver consistent, high performance operation in an uncertain environment
where demand imbalances and equipment failures are common. We use open software
standards, including XML, Microsoft's COM, CORBA, IBM's MQ Series and Java's
EJB. Website requests are handled by a load-balanced layer of web servers.
These web servers return and cache static content but forward dynamic web
requests to a layer of load-balanced application servers. These application
servers execute business logic that typically requires access to data stored in
read-only catalog databases. To improve performance, our architecture
automatically caches catalog and session data in memory to avoid slow database
access. These catalog databases can also be replicated to further improve
availability and scalability. Customers can easily handle increased website
volume by adding any combination of web, application or database servers. Read-
write transaction databases record customer transactions as well as updates to
end customer profiles.
Our CIS is developed in the Java programming language to take advantage of
the graphical user interface and functional libraries available in Java, as
well as the speed of development made possible by other Java features such as
pointer-less references and automatic memory management.
Blue Martini Customer Interaction System Architecture
A schematic diagram showing the relationship among two subsystems: "Operations
and Analysis & Targeting Subsystems," and "Interaction Subsystem." The
schematic shows the distributed architecture of our software.
The distributed architecture of the Interaction Subsystem enables support
for tens of thousands of concurrent users with sub-second response times. This
same distributed architecture provides fault tolerance through server failover
to enable non-stop operations.
Customers
Our customers range from Global 2000 companies that have adopted e-business
strategies to rapidly growing Internet companies. As of March 31, 2000 we had
licensed our software to
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35 customers. We have targeted a number of large, vertical markets where we
believe brand is paramount such as retail, manufacturing, financial services,
telecommunications, media and travel. Levi Strauss & Co., Deluxe Corporation
and Harley-Davidson, Inc. each accounted for more than ten percent of our total
revenues in 1999. EighteenGlobal BVI and ibeauty.com, Inc. each accounted for
more than ten percent of our total revenues for the quarter ended March 31,
2000.
The following are case studies of customers in the retail and manufacturing
industries.
Harley-Davidson, Inc. With more than 600 authorized dealers throughout the
United States, Harley-Davidson considers its dealership network to be critical
to its success. To further support this dealer channel, Harley-Davidson wanted
to leverage its existing content-based website and enhance the customer
experience through a web storefront without creating channel conflict or
cannibalization. The new Genuine Harley-Davidson RoadStore website was
conceived to provide accessories to customers, with fulfillment by local
dealers. According to Harley-Davidson, our product helps The RoadStore cross-
sell products and drive dealer traffic while protecting the interests of the
company's dealer channel.
Saks Incorporated. Saks Incorporated, the parent company of the Saks Fifth
Avenue stores, selected us to synchronize commerce across each of the company's
channels, improve customer retention and build cross-brand recognition. Saks
has announced its intent to launch its first major venture into the on-line
retail presence. Saks intends that its new website will go beyond merely
extending the company's catalog business to the Internet and will utilize our
product to provide consistent interaction with customers across multiple
synchronized channels: web store; catalog through SaksDirect, stores and call
center. Saks intends to translate its existing in-store based customer
interactions into rich on-line experiences for its customers. Sak's believes
that our product, which is being deployed by systems integrator marchFIRST,
Inc., will provide the foundation for it to transfer the company's brands
on-line while maintaining the world-class service that is a hallmark of Saks
stores.
Gymboree Corporation. The Gymboree Corporation is a retailer of products and
services for children from birth to age seven. With more than 600 stores around
the world, the company uses our product to provide a personalized on-line
shopping experience to complement its in-store service. Gymboree introduces
over thirty new lines of clothing per year, and chose our product to help
support the company's on-line merchandising and brand-building activities.
Gymboree selected our software to replace a an existing platform because of
CIS's broad functionality and rapid deployment capability. CFT Consulting is
serving as systems integrator at Gymboree for the deployment of the CIS.
Gloss.com. On-line beauty e-tailer Gloss.com, which was recently acquired by
Estee Lauder Companies, Inc., chose our product for its website. The company
currently offers a personalized on-line shopping experience tailored to the
needs and interests of each individual customer. Gloss.com features 80 brands
and 5,000 brand-name products as well as providing beauty, fashion and
entertainment information to consumers. Gloss.com delivers features like gift
registries, and personalized cross-sells and up-sells, and was integrated to
PeopleSoft's ERP application by Inforte Corporation. Our product facilitates
assortment management and e-merchandising for the company's website.
ePearle/Pearle Europe. Pearle Europe BV, associated with the U.S.
operations of Pearle Vision, operates three brands in five countries. Over 600
stores across Europe provide one-stop, total eye care. Pearle Europe teamed
with Andersen Consulting to develop ePearle, a "Clicks and Bricks" initiative
blending Pearle's off-line store fronts with a new on-line presence. Our
software, implemented by Andersen Consulting, provides the foundation on which
ePearle runs multiple websites and multiple language sites per country to
support customer demand for localized content. Our product helps bring product
assortment and eye care information for products to ePearle customers in an
easy and user-friendly manner.
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Sales and Marketing
Our sales strategy is to pursue targeted accounts through a combination of
our direct sales force and indirect selling efforts through systems integrators
and ISVs. Our principal target accounts consist of Global 2000 companies and
rapidly growing Internet companies for whom a powerful brand experience, close
customer contact and customer knowledge are critical. These accounts include
companies in the retail, manufacturing, financial services, telecommunications,
media and travel vertical markets.
As of March 31, 2000 our direct sales organization consisted of 46 managers,
account executives, product consultants and business development professionals,
divided into five regional teams. Our sales force works closely with customers
to identify client-specific requirements and to tailor appropriate and flexible
solutions. We have sales representatives throughout the United States and
Europe. We intend to increase the size of our direct sales force domestically
and internationally.
Our direct sales force is complemented by the efforts of our systems
integrator alliance members. Systems integrators have substantial influence
with prospective clients in terms of the selection of software and applications
providers, and are a significant source of lead generation for us. We intend to
augment the number of market segments and the geographies in which we operate
by expanding our relationships with our systems integrators alliance members,
adding additional systems integrator alliance members and opening other
channels such as entering relationships with application service providers to
reach mid-market companies.
In April 2000, we entered into a non-exclusive marketing and business
development agreement with a systems integrator who will promote and market our
product in Europe, the Middle East and Africa.
Our marketing efforts are conducted by a marketing organization, which as of
March 31, 2000 consisted of 15 professionals. Such efforts include management
of alliances, as well as corporate, industry and product marketing. We plan to
significantly increase such efforts in the near term.
Research and Development
Since inception, we have devoted significant resources to develop our
product and technology. We believe that our future success will depend in large
part on a strong development effort that enhances and extends the features of
our software. Our product development organization is responsible for product
architecture and technology, engineering, quality and production.
As of March 31, 2000, we had 47 employees engaged in research and
development and quality assurance. For the year ended December 31, 1999 our
research and development expenses totaled $6.9 million. For the first quarter
of 2000, research and development expenses totaled $4.4 million. We expect to
continue to devote substantial resources to our research and development
activities.
Competition
The market for our product is intensely competitive, evolving and subject to
rapid technological change. Increased competition is likely to result in price
reductions, reduced gross margins and loss of market share, any one of which
could reduce our future revenues or earnings. The intensity of competition is
expected to increase in the future. We compete with providers of stand-alone
point solutions, component vendors and ERP, CRM and SCM vendors as well as with
internal IT departments.
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Many of our competitors have greater resources and broader customer
relationships than we do. In addition, many of these competitors have extensive
knowledge of our industry. Current and potential competitors have established,
or may establish, cooperative relationships among themselves or with third
parties to offer a single solution and increase the ability of their products
to address customer needs. Furthermore, our competitors may combine with each
other and other companies may enter our markets by acquiring or entering into
strategic relationships with our competitors.
We believe that the principal competitive factors affecting our market
include:
. product functionality and features;
. availability of global support;
. incumbency of vendors;
. coverage of direct sales force;
. ease and speed of product implementation;
. vendor and product reputation;
. scalability of products; and
. price.
Although we believe that we currently compete favorably with respect to most
of these factors, our market is relatively new and is evolving rapidly. We may
not be able to maintain our competitive position against current and potential
competitors, especially those with greater financial, sales, marketing,
professional services, technical support, training and other resources.
Intellectual Property and Other Proprietary Rights
Our success depends in part on the development and protection of the
proprietary aspects of our technology as well as our ability to operate without
infringing on the proprietary rights of others. To protect our proprietary
technology, we rely primarily on a combination of trade secret, copyright,
trademark and patent laws, as well as confidentiality procedures and
contractual restrictions.
We license technologies from several software providers that are
incorporated in our product. We anticipate that we will continue to license
technology from third parties in the future. In particular, we license
application server technology from BEA Systems, Inc. and a rules engine from
Blaze Software, Inc. The license agreement with BEA expires in July 2003 and
the license agreement with Blaze expires in March 2004. We may not be able to
renew our licenses for these technologies on commercially reasonable terms, if
at all. The loss of these technologies or other technologies that we license
could prevent sales of our product and increase our costs until equivalent
technology, if available, is developed or licensed and successfully integrated
into our product.
We license the modules of our CIS and require our customers to enter into
license agreements that impose restrictions on their ability to reproduce,
distribute and utilize the modules. In addition, we seek to avoid disclosure of
our trade secrets through a number of means, including but not limited to,
generally restricting access to our source code and object code and requiring
those entities and persons with access to our proprietary information to agree
to confidentiality terms which restrict their use and disclosure. We seek to
protect our software, documentation and other written materials under trade
secret and copyright laws, which afford only limited protection. We cannot
assure you that any of our proprietary rights with respect to our CIS will be
viable, or of value, in the future since the validity, enforceability and type
of protection of proprietary rights in Internet-related industries are
uncertain and still evolving.
45
<PAGE>
We presently have two United States patent applications pending. It is
possible that either or both of the patents that we have applied for will not
be issued, and even if issued, that either or both may be successfully
defended. It is also possible that we may not develop proprietary products or
technologies that are patentable, that any patent issued to us may not provide
us with any competitive advantages or that the patents of others will harm our
ability to do business.
Despite our efforts to protect our proprietary rights and technology,
unauthorized parties may attempt to copy aspects of our products or obtain and
use information that we regard as proprietary. Policing unauthorized use of our
products is difficult, and while we are unable to determine the extent to which
piracy of our software exists, software piracy may be or become a problem.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets, to determine the validity and scope of
the proprietary rights of others or to defend against claims of infringement or
invalidity. Any such resulting litigation could result in substantial costs and
diversion of resources which could have a material adverse effect on our
business, operating results and financial condition.
There has been a substantial amount of litigation in the software and
Internet industries regarding intellectual property rights. It is possible that
in the future, third parties may claim that we or our current or future
products infringe their intellectual property. Any claims, with or without
merit, could be time-consuming to resolve, result in costly litigation, cause
product shipment delays or require us to enter into royalty or licensing
agreements. Royalty or licensing agreements, if required, may not be available
on terms acceptable to us, if at all, which could harm our business.
Employees
As of March 31, 2000, we had 235 full-time employees, of whom 233 were based
in North America and 2 were based in Europe. Of these employees, 61 are in
sales and marketing, 47 are in product development, 109 were in professional
services, technical support and training and 18 were in finance, human
resources, information systems and administrative functions. Our employees are
not represented by any collective bargaining agreements and we have never
experienced a work stoppage. We believe our employee relations are good.
Facilities
Our headquarters and principal facility is located in approximately 26,000
square feet of office space in San Mateo, California under a lease that expires
in August 2004. We conduct training in approximately 11,000 square feet of
leased space in Redwood City, California under a lease that expires in March
2003 with an option to extend for one year and lease sales offices in Atlanta,
Georgia; Milford, Massachusetts; and Newport Beach, California. We are seeking
additional space in Northern California to meet our expansion plans.
46
<PAGE>
MANAGEMENT
Directors And Executive Officers
The following table sets forth information about our directors and executive
officers as of April 15, 2000:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Monte Zweben............ 36 Chairman, President and Chief Executive Officer
John E. Calonico, Jr. .. 43 Vice President, Chief Financial Officer and Secretary
Robert E. Cell.......... 31 Vice President of Corporate Development
William H. Evans........ 41 Vice President of Marketing
Scott D. Hanham......... 49 Vice President of Product Development and Services
Jeffrey G. Johnson...... 42 Vice President of Sales
James C. Gaither(1)..... 62 Director
A. Michael Spence(2).... 56 Director
Andrew W. Verhalen(1)... 43 Director
Edward H. Vick(2)....... 56 Director
William F. Zuendt(2).... 53 Director
</TABLE>
- --------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Monte Zweben has served as our Chairman, President and Chief Executive
Officer since June 1998. From November 1997 to June 1998, Mr. Zweben was an
Entrepreneur in Residence at Matrix Partners and Institutional Venture
Partners, two venture capital firms. From October 1996 to November 1997, Mr.
Zweben was Vice President and General Manager at PeopleSoft, Inc., a provider
of enterprise applications. From 1992 to December 1996, Mr. Zweben was
Chairman, President and Chief Executive Officer of Red Pepper Software Company.
From September 1986 to December 1992, Mr. Zweben was the Deputy Branch Chief of
the NASA Ames Research Center's Artificial Intelligence Branch. Mr. Zweben
serves on the Board of Directors of Advent Software, Inc.
John E. Calonico, Jr. has served as our Vice President, Chief Financial
Officer and Secretary since March 2000. From February 1999 to February 2000,
Mr. Calonico served as Vice President and Chief Financial Officer of
GlobalCenter, Inc., a division of Global Crossing Ltd., a provider of complex
web hosting and Internet access services. From November 1997 to January 1999,
Mr. Calonico served as Vice President of Finance for BEA Systems, Inc, a
provider of middleware for enterprise software applications. From April 1990 to
November 1997, Mr. Calonico held various management positions at Autodesk,
Inc., including Vice President of Finance.
Robert E. Cell has served as our Vice President of Corporate Development
since March 2000. From November 1997 to March 2000, Mr. Cell served in various
management positions at Kellogg Company, including Vice President, Corporate
Development and Vice President, General Manager of Lender's, a division of
Kellogg. From March 1996 to November 1997, Mr. Cell served in various
management positions at Deloitte & Touche LLP, an accounting firm, including
Managing Director of Deloitte & Touche's Great Lakes Corporate Finance
practice. From June 1993 to March 1996, Mr. Cell held various management
positions at Coopers & Lybrand LLP, an accounting firm.
William H. Evans has served as our Vice President of Marketing since June
1998. From October 1997 to June 1998, Mr. Evans served as an independent
consultant in the software industry.
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<PAGE>
From April 1995 to October 1997, Mr. Evans held various positions at
Objectivity, Inc., a developer of database management software, including both
Vice President of Marketing and Vice President and General Manager of the Aziza
Business Unit.
Scott D. Hanham has served as our Vice President of Product Development and
Services since August 1998. From January 1995 to July 1998, Dr. Hanham was
Director, Quality and Process Management at Sun Microsystems, Inc.
Jeffrey G. Johnson has served as our Vice President of Sales since September
1998. From October 1997 to December 1997, Mr. Johnson was Vice President of
National Accounts for the manufacturing business unit of PeopleSoft, Inc. From
June 1996 to October 1997, Mr. Johnson was the Director of Sales for Red Pepper
Software Company. From November 1993 to June 1996, Mr. Johnson was Director of
Sales for SAP America's Western Region.
James C. Gaither has served as a Director since August 1998. Since 1971, Mr.
Gaither has been a Partner at the law firm of Cooley Godward LLP. Mr. Gaither
is a Director of Amylin Pharmaceuticals, Inc., Basic American, Inc., nVidia
Corporation, Siebel Systems, Inc. and Levi Strauss & Co.
A. Michael Spence, Ph.D. has served as a Director since August 1998. Dr.
Spence currently serves as Professor of Management in the Graduate School of
Business at Stanford University. From 1990 until 1999, Dr. Spence served as
Phillip H. Knight Professor and Dean of the Graduate School of Business at
Stanford University. Dr. Spence also serves as a Director of eGain
Communications Corp., General Mills, Inc., Nike, Inc. and Siebel Systems, Inc.
Andrew W. Verhalen has served as a Director since January 1999. Mr. Verhalen
has been a general partner of entities associated with Matrix Partners since
April 1992. From 1986 to 1991, Mr. Verhalen served as a divisional Vice
President and General Manager at 3Com Corporation. Mr. Verhalen currently
serves on the Board of Directors of Alteon WebSystems, Inc., Copper Mountain
Networks, Inc., Phone.com, Inc., Turnstone Systems, Inc. and WatchGuard
Technologies, Inc.
Edward H. Vick has served as a Director since February 2000. Since January
1992, Mr. Vick has held various positions at Young & Rubicam Inc., an
advertising company, including Chairman of the Board and Chief Creative
Officer.
William F. Zuendt has served as a Director since August 1998. Mr. Zuendt
retired as President and Chief Operating Officer of Wells Fargo & Company, a
bank holding company, and its principal subsidiary, Wells Fargo Bank in 1997
after serving in that position since 1994. Mr. Zuendt is a Director of 3Com
Corporation, Advent Software, Inc. and Be, Incorporated.
Board Composition
We have authorized six directors. Upon the closing of this offering and as
provided by the terms of our fourth amended and restated certificate of
incorporation, our board of directors will be divided into three classes and
each class will have a term of three years. As a result, a portion of our board
of directors will be elected each year. The division of the three classes,
their election dates and the directors in each class are as follows:
<TABLE>
<CAPTION>
Class of Director Date of Election Directors in Class
----------------- ---------------- ------------------
<C> <S> <C>
I 2001 annual meeting of stockholders A. Michael Spence
Andrew W. Verhalen
II 2002 annual meeting of stockholders Edward H. Vick
William F. Zuendt
III 2003 annual meeting of stockholders James C. Gaither
Monte Zweben
</TABLE>
48
<PAGE>
At each annual meeting of stockholders after the initial classification, the
successors to directors whose terms will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election. Any additional directorships resulting from an increase in
the number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one-third of the directors. This
classification of the board of directors may have the effect of delaying or
preventing changes of control or management of Blue Martini.
Board Committees
Audit Committee. Our audit committee currently consists of Dr. Spence and
Messrs. Vick and Zuendt. The audit committee reviews our internal accounting
procedures and consults with and reviews the services provided by our
independent accountants.
Compensation Committee. Our compensation committee currently consists of
Messrs. Gaither and Verhalen. The compensation committee administers our stock
option plans, reviews and approves the compensation and benefits of all our
officers and establishes and reviews general policies relating to employee
compensation and benefits.
Director Compensation
Directors currently receive no cash compensation from us for their services
as members of the board or for attendance at committee meetings. Members of the
board are reimbursed for their reasonable expenses in attending board and board
committee meetings.
Dr. Spence and Messrs. Gaither and Zuendt each purchased 381,844 shares of
our common stock at a purchase price of $0.01 per share, including 206,833
shares subject to a right of repurchase. In February 2000, Mr. Vick was granted
an option to purchase 200,000 shares of our common stock with an exercise price
of $1.50 per share that will vest 25% after 1 year of service and 1/48th per
month thereafter over three years.
According to our 2000 non-employee directors' stock option plan, each
current non-employee director will be granted an option to purchase up to
25,000 shares of our common stock on the effective date of this offering and
each new non-employee director will receive the same option on a director's
election or appointment to the board, if later. Non-employee directors will be
granted an option to purchase up to 7,500 shares of our common stock on the day
after each annual meeting of stockholders after the effective date of this
offering. Also, non-employee directors who serve as committee members will be
granted an option to purchase up to 5,000 shares of our common stock on the day
after each of our annual meeting of stockholders. The exercise price of each
option will be the fair market value of a share of our common stock on the date
of grant of the option.
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.
Messrs. Gaither and Verhalen serve as members of the compensation committee.
49
<PAGE>
Executive Compensation
The following table shows information concerning compensation earned in 1999
for our Chairman, President and Chief Executive Officer and our three other
most highly compensated executive officers, whose compensation, as defined by
the Securities and Exchange Commission, exceeded $100,000 in 1999. The
information in the table includes salaries, bonuses, stock options granted and
other miscellaneous compensation. The compensation table excludes other
compensation in the form of perquisites and other personal benefits that
constituted less than 10% of the total annual salary and bonus of each of the
named executive officers in 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual ------------
Compensation Securities
---------------- Underlying Other
Name and Principal Position Salary Bonus Options Compensation
--------------------------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Monte Zweben..................... $153,077 $75,000 -- --
Chairman, President and
Chief Executive Officer
Williams H. Evans................ 171,346 10,000 -- --
Vice President of Marketing
Scott D. Hanham.................. 155,769 42,500 400,000 --
Vice President of Product
Development and Services
Jeffrey G. Johnson............... 135,000 73,928(1) -- --
Vice President of Sales
</TABLE>
- --------
(1) Includes sales commissions of $39,628.
Option Grants in Last Fiscal Year
The following table shows each grant of stock options during 1999 to the
individuals listed on the previous table.
The exercise price of each option was equal to the fair market value of our
common stock as valued by the board of directors on the date of grant. The
exercise price may be paid in cash or by promissory notes.
The potential realizable value is calculated based on the ten-year term of
the option and the market value at the time of grant. Stock price appreciation
of 5% and 10% is assumed pursuant to rules promulgated by the Securities and
Exchange Commission and does not represent our prediction of our stock price
performance. The potential realizable values at 5% and 10% appreciation are
calculated by:
. multiplying the number of shares of common stock subject to a given
option by the assumed initial public offering price of $ per share;
. assuming that the total stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table until the
expiration of the options; and
. subtracting from that result the total option exercise price.
The shares listed in the following table under "Number of Securities
Underlying Options Granted" have a ten-year term, subject to earlier
termination if the optionee's service with us ceases.
50
<PAGE>
Percentages shown under "Percent of Total Options Granted to Employees in
1999" are based on a total of approximately 6,310,000 options granted to our
employees under our stock option plans during 1999.
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Annual Rates
of Price
Appreciation
for
Individual Grants Option Term
Number of Securities Percent of Total ------------------------- -------------
Underlying Options Options Granted to Exercise Price Expiration
Name Granted Employees in 1999 per Share Date 5% 10%
- ---- -------------------- ------------------ -------------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Monte Zweben(1)......... -- -- -- -- -- --
William H. Evans........ -- -- -- -- -- --
Scott D. Hanham......... 400,000 6.34% $0.25 11/16/09
Jeffrey G. Johnson...... -- -- -- -- -- --
</TABLE>
- --------
(1) In April 2000, Mr. Zweben received an option to purchase 600,000 shares of
our common stock at an exercise price of $6.00 per share, which the board
of directors determined to be the fair market value of our common stock.
This option will vest monthly over three years beginning June 5, 2002.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table presents the number of shares acquired and the value
realized upon exercise of stock options during 1999 and the number of shares of
our common stock subject to "exercisable" and "unexercisable" stock options
held as of December 31, 1999 by our Chairman, President and Chief Executive
Officer and each of the other executive officers on the summary compensation
table. Also presented are values of "in-the-money" options, which represent the
positive difference between the exercise price of each outstanding stock option
and an assumed initial public offering price of $ per share.
<TABLE>
<CAPTION>
Securities Value of
Underlying Unexercised
Number of Shares Unexercised In-The-Money
Acquired Upon Options at Options at
Exercise Value Realized December 31, 1999 December 31, 1999
---------------- -------------- ----------------- -----------------
Name Vested Unvested Vested Unvested
- ---- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Monte Zweben............ -- -- -- -- -- --
William H. Evans........ -- -- -- -- -- --
Scott D. Hanham......... 1,200,000(1) -- -- -- --
Jeffrey G. Johnson...... -- -- -- -- -- --
</TABLE>
- --------
(1) Includes 941,667 shares subject to a right of repurchase as of December 31,
1999.
Employee Benefit Plans
2000 Equity Incentive Plan
We adopted our 2000 equity incentive plan in April 2000. The incentive plan
is an amendment and restatement of our 1998 equity incentive plan.
Administration. The board administers the incentive plan unless it delegates
administration to a committee. The board or this committee has the authority to
construe, interpret and amend the incentive plan and determine:
. the grant recipients;
. the grant dates;
. the number of shares subject to the award;
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<PAGE>
. the exercisability and vesting of the award;
. the exercise price;
. the type of consideration; and
. the other terms of the award.
Share Reserve. We have reserved a total of 30,000,000 shares of our common
stock for issuance under the incentive plan. On January 1 of each year for 10
years, starting on January 1, 2001, the share reserve will automatically be
increased by a number of shares equal to the greater of:
. 5% of our outstanding shares on a fully-diluted basis; or
. that number of shares subject to stock awards made under the incentive
plan during the prior 12-month period.
However, the automatic increase is subject to reduction by the board, and no
more than 200,000,000 shares of the share reserve, as increased, may be used
for incentive stock options. If the recipient of a stock award does not
purchase the shares subject to the stock award before the stock award expires
or terminates, the shares that are not purchased again become available for
issuance under the incentive plan.
Eligibility. The board may grant incentive stock options that qualify under
Section 422 of the Internal Revenue Code to our employees. The board also may
grant nonstatutory stock options, stock bonuses and restricted stock purchase
awards to our employees, directors and consultants.
. A stock option is a contractual right to purchase a specified number of
our shares at a specified price, called the exercise price, for a
specified period of time.
. An incentive stock option is a stock option that has met the
requirements of Section 422 of the Internal Revenue Code. This type of
option is free from regular tax at both the date of grant and the date
of exercise. However, the difference between the fair market value on
date of exercise and the exercise price is an item of alternative
minimum tax unless there is a disqualifying disposition in the year of
exercise. If two holding period tests are met--two years between grant
date and sale date and one year between exercise date and sale date--all
profit on the sale of our shares acquired by exercising the incentive
stock option is long-term capital gain income. However, if either of the
holding periods is not met, there has been a disqualifying disposition,
and a portion of any profit will be taxed at ordinary income rates.
. A nonstatutory stock option is a stock option not meeting the Internal
Revenue Code criteria for qualifying incentive stock options and,
therefore, triggering a tax upon exercise. This type of option requires
payment of state and federal income tax and, if applicable, other taxes
on the difference between the exercise price and the fair market value
on the exercise date.
. A restricted stock purchase award is our offer to sell our shares at a
price either at or near the fair market value of the shares. A stock
bonus is a grant of our shares at no cost to the recipient in
consideration for past services performed.
The board may not grant an incentive stock option to any person who, at the
time of the grant, owns or is deemed to own stock possessing more than 10% of
our total combined voting power or the total combined voting power of an
affiliate of ours, unless the exercise price is at least 110% of the fair
market value of the stock on the grant date and the option term is five years
or less.
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<PAGE>
Limits on Option Grants. There are limits on the number of shares that the
board may grant under an option.
. Section 162(m) of the Internal Revenue Code denies a deduction to
publicly held corporations for compensation paid to the chief executive
officer and the four highest compensated officers in a taxable year to
the extent that the compensation for each officer exceeds $1,000,000.
When we become subject to Section 162(m), to prevent options granted
under the incentive plan from being included in compensation, the board
may not grant options under the incentive plan to an employee covering
an aggregate of more than 5,000,000 shares in any calendar year.
. In addition, an employee may not receive incentive stock options that
exceed the $100,000 per year limitation provide in Section 422(d) of the
Internal Revenue Code. In calculating the $100,000 per year limitation,
we determine the aggregate number of shares under all incentive stock
options granted to that employee that will become exercisable for the
first time during a calendar year. For this purpose, we include
incentive stock options granted under the incentive plan as well as
under any other stock plans that we maintain. We then determine the
aggregate fair market value of the stock as of the grant date of the
option. Taking the options into account in the order in which they were
granted, we treat only the options covering the first $100,000 worth of
stock as incentive stock options. We treat any options covering stock in
excess of $100,000 as nonstatutory stock options.
Option Terms. The board may grant incentive stock options with an exercise
price of 100% or more of the fair market value of a share of our common stock
on the grant date. It may grant nonstatutory stock options at a discount. If
the value of our shares declines after the date of grant, the board may offer
option holders the opportunity to replace their outstanding higher-priced
options with new lower-priced options. To the extent required by Section 162(m)
of the Internal Revenue Code, the repriced option is considered to be canceled
and a new option granted, but both options will be counted against the Section
162(m) limit discussed above.
The maximum option term is 10 years. The board may provide for exercise
periods of any length in individual option grants. However, generally an option
terminates three months after the option holder's service to us terminates. If
this termination is due to the option holder's disability, the exercise period
generally is extended to 12 months. If this termination is due to the option
holder's death or if the option holder dies within three months after the
option holder's service terminates, the exercise period generally is extended
to 18 months following the option holder's death.
The board may provide for the transferability of nonstatutory stock options
but not incentive stock options. However, the option holder may designate a
beneficiary to exercise either type of option following the option holder's
death. If the option holder does not designate a beneficiary, the option
holder's option rights will pass by will or by the laws of descent and
distribution.
Terms of Other Stock Awards. The board determines the purchase price of
other stock awards. However, the board may award stock bonuses in consideration
of past services without a purchase payment. Shares that we sell or award under
the incentive plan may, but need not be, restricted and subject to a repurchase
option in our favor based on with a vesting schedule that the board determines.
The board, however, may accelerate the vesting of the restricted stock.
Other Provisions. Transactions not involving our receipt of consideration,
including a merger, consolidation, reorganization, stock dividend and stock
split, may change the class and number of shares subject to the incentive plan
and to outstanding awards. In that event, the board will appropriately adjust
the incentive plan for the class and the maximum number of shares subject to
the incentive plan, to the cap on the number of shares available for incentive
stock options, and to
53
<PAGE>
the Section 162(m) limit. It also will adjust outstanding awards for the class,
number of shares and price per share subject to the awards.
If a change in control happens, the surviving entity may either assume or
replace outstanding awards under the incentive plan. If this does not occur,
then generally the vesting and exercisability of the awards will accelerate,
and unexercised awards will terminate immediately before the event. A change in
control includes the following:
. a dissolution, liquidation or sale of all or substantially all of our
assets;
. a merger or consolidation in which we are not the surviving corporation;
. a reverse merger in which we are the surviving corporation but the
shares of our common stock outstanding immediately preceding the merger
are converted by virtue of the merger into other property; and
. after this initial public offering, generally the acquisition by any
person, entity or group of the beneficial ownership of our securities
representing at least 50% of the combined voting power permitted to vote
in the election of directors.
If there is a change in control, other than a merger or consolidation for
the purpose of a change in domicile, then for options held by persons then
performing services as an employee, director, or consultant to us, the vesting
of the option will be accelerated by 50%.
Stock Awards Granted. As of April 15, 2000, we had:
. 14,443,500 shares upon the exercise of options under the incentive plan
issued and outstanding;
. options to purchase 5,906,400 shares at a weighted average exercise
price of $2.32 per share outstanding; and
. 9,650,100 shares available for future grant.
As of April 15, 2000, the board had not granted any stock bonuses or
restricted stock under the incentive plan.
Plan Termination. The incentive plan will terminate in 2010 unless the board
terminates it sooner.
2000 Non-Employee Directors' Stock Option Plan
We adopted our 2000 non-employee directors' stock option plan in April 2000.
The directors' plan provides for the automatic grant to our non-employee
directors of options to purchase shares of our common stock.
Share Reserve. We have reserved a total of 300,000 shares of our common
stock for issuance under the directors' plan. On January 1 of each year for 10
years, starting on January 1, 2001, the share reserve will automatically be
increased by a number of shares equal to the greater of:
. 0.25% of our outstanding shares on a fully-diluted basis; or
. that number of shares subject to options granted under the directors'
plan during the prior 12-month period.
However, the automatic increase is subject to reduction by the board. If an
option holder does not purchase the shares subject to their option before the
option expires or terminates, the shares that are not purchased again become
available for issuance under the directors' plan.
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<PAGE>
Administration. The board administers the directors' plan. The board has the
authority to construe, interpret and amend the directors' plan but the
directors' plan specifies the essential terms of the options, including:
. the option recipients;
. the grant dates;
. the number of shares subject to the option;
. the exercisability and vesting of the option;
. the exercise price; and
. the type of consideration.
Eligibility. We automatically will issue options to our non-employee
directors under the directors' plan as follows:
. Each person who is a non-employee director on the effective date of this
offering or who is first elected or appointed after the date of the
prospectus as a non-employee director will automatically receive an
initial option for 25,000 shares. The initial option is exercisable
immediately but one third of the shares will vest one year after the
date of grant and 1/36th of the shares will vest each month thereafter
for 2 years;
. In addition, on the day after each of our annual meetings of the
stockholders, starting with the annual meeting in 2001, each non-
employee director will automatically receive an annual option for 7,500
shares. The annual option is exercisable immediately but will vest
monthly over the next year. If the non-employee director is appointed to
the board after the annual meeting, the annual option will be adjusted
based on the time actually served by the director;
. Finally, on the day after each of our annual meetings of the
stockholders, starting with the annual meeting in 2001, each non-
employee director who is serving on a board committee will automatically
receive a committee option for 5,000 shares. The committee option is
exercisable immediately but will vest monthly over the next year. If the
non-employee director is appointed to the committee after the annual
meeting, the committee option will be pro rated.
As long as the option holder continues to serve with us, whether in the
capacity of a director, an employee or a consultant, the option will continue
to vest and be exercisable during its term. When the option holder's service
terminates, we will have the right to repurchase any unvested shares at the
original exercise price, without interest.
Option Terms. Options have an exercise price equal to 100% of the fair
market value of our common stock on the grant date. The option term is 10 years
but it terminates three months after the option holder's service terminates. If
this termination is due to the option holder's disability, the post-termination
exercise period is extended to 12 months. If this termination is due to the
option holder's death or if the option holder dies within three months after
their service terminates, the post-termination exercise period is extended to
18 months following death.
The option holder may transfer the option by gift to immediate family or for
estate-planning purposes. The option holder also may designate a beneficiary to
exercise the option following the option holder's death. Alternatively, the
option exercise rights will pass by the option holder's will or by the laws of
descent and distribution.
Other Provisions. Transactions not involving our receipt of consideration,
including a merger, consolidation, reorganization, stock dividend and stock
split, may change the class and number of
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<PAGE>
shares subject to the directors' plan and to outstanding options. In that
event, the board will appropriately adjust the directors' plan for the class
and the maximum number of shares subject to the directors' plan and to the
automatic option grants. It also will adjust outstanding options for the class,
number of shares and price per share subject to the options.
If a change in control happens, the surviving entity may either assume or
replace outstanding options under the directors' plan. If this does not occur,
then generally the vesting of the options will accelerate, and unexercised
options will terminate immediately before the event. A change in control
includes the following:
. A dissolution, liquidation or sale of all or substantially all of our
assets;
. A merger or consolidation in which we are not the surviving corporation;
. A reverse merger in which we are the surviving corporation but the
shares of our common stock outstanding immediately preceding the merger
are converted by virtue of the merger into other property;
. Generally the acquisition by any person, entity or group of the
beneficial ownership of our securities representing at least 50% of the
combined voting power permitted to vote in the election of directors;
and
. If there is a change in control, other than a merger or consolidation
for the purpose of a change in domicile, then for options held by
persons then performing services as an employee or director of, or
consultant to, us, the vesting of the option will be accelerated by 50%.
Options Issued. The directors' plan will not be effective until the
effective date of this offering. We have not issued any options under the
directors' plan.
Plan Termination. The directors' plan has no set termination date.
2000 Employee Stock Purchase Plan
We adopted our 2000 employee stock purchase plan in April 2000.
Administration. The board administers the purchase plan unless it delegates
administration to a committee. The board or this committee has the authority to
construe, interpret and amend the purchase plan and determine the terms of
rights granted under the purchase plan.
Share Reserve. We reserved 4,000,000 shares of our common stock for issuance
to eligible employees with purchase rights under the purchase plan. On January
1 of each year for 10 years, starting on January 1, 2001, the share reserve
will automatically be increased by a number of shares equal to the greater of:
. 2.5% of our outstanding shares on a fully-diluted basis; or
. that number of shares issued under the purchase plan during the prior
12-month period.
However, the automatic increase is subject to reduction by the board, and no
more than 80,000,000 shares of the share reserve, as increased, may be used
under the purchase plan.
Eligibility. The purchase plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code.
The purchase plan provides a means by which eligible employees may purchase our
common stock through payroll deductions. We implement the purchase plan by
offerings of purchase rights to eligible employees. Generally, all of our full-
time employees in the United States and in the United Kingdom who have been
employed
56
<PAGE>
for at least 10 days may participate in offerings under the purchase plan.
However, no employee may participate in the purchase plan if immediately after
we grant the employee a purchase right, the employee has voting power over 5%
or more of our outstanding capital stock.
Offerings. Under the purchase plan, the board may specify offerings of up to
27 months. Unless the board determines differently, common stock is purchased
for accounts of participating employees at a price per share equal to the lower
of:
. 85% of the fair market value of a share on the first day of the
offering; or
. 85% of the fair market value of a share on the purchase date.
The first offering will begin on the effective date of this offering, and we
expect to offer shares registered on a Form S-8 registration statement. The
fair market value of the shares on the first date of this offering will be the
price per share at which our shares are first sold to the public as specified
in the final prospectus for this offering. Otherwise, fair market value
generally means the closing sales price, rounded up where necessary to the
nearest whole cent, for these shares, or the closing bid, if no sales were
reported, as quoted on the Nasdaq National Market on the last trading day
before the relevant determination date, as reported in The Wall Street Journal.
The board may provide that employees who become eligible to participate
after the offering period begins nevertheless may enroll in the offering. These
employees will purchase our stock at the lower of:
. 85% of the fair market value of a share on the day they began
participating in the purchase plan; or
. 85% of the fair market value of a share on the purchase date.
Participating employees may authorize payroll deductions of up to 15% of
their total compensation for the purchase of stock under the purchase plan.
Employees may end their participation in the offering before a purchase period
ends. Their participation ends automatically on termination of their
employment.
Other Provisions. The board may grant eligible employees purchase rights
under the purchase plan only if the purchase rights together with any other
purchase rights granted under other employee stock purchase plans established
by us or by our affiliates, if any, do not permit the employee's rights to
purchase our stock to accrue at a rate which exceeds $25,000 of fair market
value of our stock for each calendar year in which the purchase rights are
outstanding.
Upon a change in control, the board may provide that the successor
corporation either will assume or replace outstanding purchase rights.
Alternatively, the board may shorten the ongoing offering period and provide
that our stock will be purchased for the participants immediately before the
change in control.
Shares Issued. The purchase plan will not be effective until the effective
date of this initial public offering of our stock. Therefore, as of the date of
this prospectus, no shares of common stock have been purchased under the
purchase plan.
Plan Termination. The purchase plan has no set termination date.
401(k) Plan
Effective February 1, 2000, we adopted a 401(k) plan to provide eligible
employees with a tax preferential savings and investment program. Employees
become eligible to participate in the 401(k)
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<PAGE>
plan on the first day they perform an hour of service for us, at which point we
classify them as participants. They may elect to reduce their current
compensation by up to the lesser of 20% of eligible compensation or the
statutorily prescribed annual limit, $10,500 in 2000, and have this reduction
contributed to the 401(k) plan. At the direction of each participant, the
trustee of the 401(k) plan invests the assets of the 401(k) plan in selected
investment options. Contributions by participants or by us to the 401(k) plan,
and income earned on plan contributions, are generally not taxable to the
participants until withdrawn. We have not made any contributions to the 401(k)
plan to date.
Limitation of Liability and Indemnification
Our certificate of incorporation and bylaws contain provisions permitted
under Delaware law relating to the liability of directors. These provisions
eliminate a director's personal liability for monetary damages resulting from a
breach of fiduciary duty, except in circumstances involving wrongful acts,
including:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. for any acts under section 174 of the Delaware General Corporation Law;
or
. for any transaction from which the director derives an improper personal
benefit.
These provisions do not limit or eliminate our rights or any stockholder's
rights to seek non-monetary relief, including an injunction or rescission, in
the event of a breach of the director's fiduciary duty. These provisions will
not alter a director's liability under federal securities laws. In addition, we
intend to enter into separate indemnification agreements with our directors and
executive officers that provide each of them indemnification protection in the
event the amended and restated certificate of incorporation and amended and
restated bylaws are subsequently amended. We believe that these provisions and
agreements will assist us in attracting and retaining qualified individuals to
serve as directors and officers.
Indemnification Agreements
Our certificate of incorporation includes a provision that eliminates the
personal liability of a director for monetary damages resulting from breach of
his fiduciary duty as a director, except for liability:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
. for any transaction from which the director derived an improper personal
benefit.
Our bylaws provide that:
. we are required to indemnify our directors and officers to the fullest
extent permitted by the Delaware General Corporation Law, subject to
very limited exceptions;
. we may indemnify our employees and agents to the fullest extent
permitted by the Delaware General Corporation Law, subject to very
limited exceptions;
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<PAGE>
. we are required to advance expenses, as incurred, to our directors and
executive officers in connection with a legal proceeding;
. we may advance expenses, as incurred, to our employees and agents in
connection with a legal proceeding; and
. the rights conferred in the bylaws are not exclusive.
In addition to the indemnification required in our certificate of
incorporation and bylaws, we have entered into indemnity agreements with each
of our current directors and executive officers. These agreements provide for
the indemnification of our officers and directors for all expenses and
liabilities incurred in connection with any action or proceeding brought
against them by reason of the fact that they are or were our agents. We also
intend to obtain directors' and officers' insurance to cover our directors,
officers and some of our employees for liabilities, including liabilities under
securities laws. We believe that these indemnification provisions and
agreements and this insurance are necessary to attract and retain qualified
directors and officers.
The limitation of liability and indemnification provisions in our
certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. They
may also reduce the likelihood of derivative litigation against directors and
officers, even though an action, if successful, might benefit us and other
stockholders. Furthermore, a stockholder's investment may be adversely affected
to the extent we pay the costs of settlement and damage awards against
directors and officers as required by these indemnification provisions. At
present, there is no pending litigation or proceeding involving any of our
directors, officers or employees regarding which indemnification by us is
sought, nor are we aware of any threatened litigation that may result in claims
for indemnification.
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<PAGE>
CERTAIN TRANSACTIONS
Blue Martini was established as a limited liability company in June 1998. In
January 1999, the limited liability company was merged into Blue Martini
Software, Inc., a Delaware corporation. As a result of the merger, each class B
unit of the limited liability company was converted into one share of common
stock of the corporation and each class A unit of the limited liability company
was converted into one share of series A preferred stock of the corporation.
The table below reflects the units issued by the limited liability company as
if issued by the corporation.
The following executive officers, directors, former directors or holders of
more than five percent of our voting securities purchased securities for a
purchase price in excess of $60,000 in the amounts and as of the dates set
forth below.
<TABLE>
<CAPTION>
Shares of Preferred Stock
--------------------------------
Common Series
Stock A(1) Series B Series C
----------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Directors and Executive
Officers
Monte Zweben(2)............... 20,892,000(1) 3,571,432 2,105,264 666,668
John E. Calonico, Jr.......... 66,666 -- -- --
Thomas M. Siebel(3)........... 79,552(1) 714,284 -- --
William F. Zuendt............. 381,844(1) -- 842,104 --
Entities Affiliated with
Directors
Entities affiliated with
Matrix Partners V, L.P.(4)... -- -- 6,315,788 973,332
Other 5% Stockholders
Entities affiliated with U.S.
Venture Partners............. -- -- -- 5,666,664
Price Per Share............... $0.01-$1.50 $0.28 $0.48 $1.50
Date(s) of Purchase........... Various June 1998 January 1999 July 1999
</TABLE>
- --------
(1) Represents shares issued upon the merger of Blue Martini LLC into Blue
Martini Software, Inc.
(2) Includes 2,892,000 shares of common stock held by the Zweben Family Limited
Partnership and 3,571,432 shares of series A preferred stock, 2,105,264
shares of series B preferred stock and 666,668 shares of series C preferred
stock held by the Zweben Family Revocable Trust.
(3) Former director.
(4) Andrew W. Verhalen, one of our directors, is a general partner of entities
associated with Matrix Partners.
Blue Martini and the preferred stockholders described above have entered
into an agreement, pursuant to which these and other preferred stockholders
will have registration rights with respect to their shares of common stock
following this offering.
Cooley Godward LLP performs legal services for us. James C. Gaither, one of
our directors, is a partner of Cooley Godward LLP.
In 1999, license and service revenues from Levi Strauss & Co. accounted for
19% of our total revenues. James C. Gaither, one of our directors, is a
director of Levi Strauss & Co.
In the first quarter of 2000, we have incurred expenses of $722,000 to Young
& Rubicam, Inc. for advertising services. Edward H. Vick, one of our directors,
is chairman and chief creative officer of Young & Rubicam.
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<PAGE>
In February 2000, we granted to Edward H. Vick, one of our directors, an
option to purchase 200,000 shares of our common stock at an exercise price of
$1.50.
We have entered into an agreement with John E. Calonico, Jr., our Vice
President, Chief Financial Officer and Secretary. Under this agreement we have
agreed to pay Mr. Calonico a lump sum equal to six months of his base salary if
we terminate his employment without cause.
We intend to enter into indemnification agreements with our directors and
officers for the indemnification of and advancement of expenses to these
persons to the full extent permitted by law. We also intend to execute these
agreements with our future directors and officers.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table presents information as to the beneficial ownership of
our common stock as of April 15, 2000 and as adjusted to reflect the sale of
our common stock in this offering by:
. each stockholder known by us to be the beneficial owner of more than 5%
of our common stock;
. each of our directors;
. each of the executive officers in our summary compensation table; and
. all of our directors and executive officers as a group.
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Unless indicated below, to our knowledge, the persons
and entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property laws
where applicable. Shares of common stock subject to options that are currently
exercisable or exercisable prior to August 31, 2000 are deemed to be
outstanding and to be beneficially owned by the person holding the options for
the purpose of computing the percentage ownership of that person but are not
treated as outstanding for the purpose of computing the percentage ownership of
any other person. Unless indicated below, the address for each listed
stockholder is c/o Blue Martini Software, Inc., 2600 Campus Drive, San Mateo,
CA 94403.
The percentage of common stock outstanding as of April 15, 2000 is based on
59,289,138 shares of common stock outstanding on that date, assuming that all
outstanding preferred stock has been converted into common stock.
<TABLE>
<CAPTION>
Percent Beneficially Owned
Number of Shares ------------------------------
Name of Beneficial Owner Beneficially Owned Before Offering After Offering
- ------------------------ ------------------ --------------- --------------
<S> <C> <C> <C>
Directors and Executive
Officers
Monte Zweben(1)............. 27,235,364 45.9%
William H. Evans(2)......... 1,527,372 2.6%
Scott D. Hanham(3).......... 1,200,000 2.0%
Jeffrey G. Johnson(4)....... 1,527,372 2.6%
James C. Gaither(5)......... 381,844 * *
A. Michael Spence(5)........ 381,844 * *
Andrew W. Verhalen(6)....... 7,289,120 12.3%
Edward H. Vick.............. -- *
William F. Zuendt(5)........ 1,223,948 2.1%
All Directors and Executive
Officers as a Group
(11 Persons)(6)............ 40,833,530 68.9%
Other Stockholders
Entities Affiliated with
Matrix Partners(7)......... 7,289,120 12.3%
Entities Affiliated with
U.S. Venture Partners(8)... 5,666,664 9.6%
</TABLE>
- --------
* Represents beneficial ownership of less than 1%.
(1) Includes 2,892,000 shares held by the Zweben Family Partnership and
6,343,364 shares held by the Zweben Family Revocable Trust.
(2) Includes 700,046 shares subject to a right of repurchase at the purchase
price for such shares.
(3) Includes 741,667 shares subject to a right of repurchase at the purchase
price for such shares. Includes 316,666 shares held by the Hanham Family
Trust.
(4) Includes 854,904 shares subject to a right of repurchase at the purchase
price for such shares.
(5) Includes 206,833 shares subject to a right of repurchase at the purchase
price for such shares.
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<PAGE>
(6) Includes 2,917,116 shares subject to a right of repurchase and 7,289,120
shares held by affiliates of our directors.
(7) Represents 6,560,208 shares held by Matrix Partners V, L.P. and 728,912
shares held by Matrix V Entrepreneurs Fund, L.P. Mr. Verhalen is a general
partner of entities associated with Matrix Partners and disclaims
beneficial ownership of the shares held by Matrix Partners V, L.P. except
to the extent of his pecuniary interest therein.
(8) Represents 5,184,996 shares held by U.S. Venture Partners VI, L.P., 238,000
shares held by USVP VI Affiliates Fund, L.P., 153,000 shares held by USVP
VI Entrepreneur Partners, L.P. and 90,668 shares held by 2180 Associates
Fund VI, L.P.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, our authorized capital stock will consist
of 500,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares
of preferred stock, $0.001 par value.
Common Stock
As of April 15, 2000, there were 59,289,138 shares of common stock
outstanding that were held of record by approximately 180 stockholders after
giving effect to the conversion of our preferred stock into common stock at a
four-to-one ratio. There will be shares of common stock outstanding,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options, after giving effect to the sale of the shares of common
stock offered by this prospectus.
Voting rights. The holders of common stock are entitled to one vote per
share on all matters submitted to a vote of our stockholders. In addition, our
certificate of incorporation and bylaws require the approval of two-thirds,
rather than a majority, of the shares entitled to vote for certain matters. For
a description of these matters, see "Anti-Takeover Provisions."
Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive ratably any dividends out of assets legally available
therefor as our board of directors may from time to time determine. Upon
liquidation, dissolution or winding up of Blue Martini, holders of our common
stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any then outstanding shares of
preferred stock. Holders of common stock have no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are fully paid and nonassesable.
Dividend rights. Subject to preferences that may apply to shares of
preferred stock outstanding at the time, the holders of outstanding shares of
our common stock are entitled to receive dividends out of assets legally
available at the times and in the amounts as our board of directors may
determine.
No preemptive or similar rights. Our common stock is not entitled to
preemptive rights and is not subject to conversion or redemption.
Right to receive liquidation distributions. Upon a liquidation, dissolution
or winding-up of Blue Martini, the holders of our common stock are entitled to
share ratably among themselves in all assets remaining after payment of all
liabilities and the liquidation preferences of any outstanding preferred stock.
Each outstanding share of our common stock is, and all shares of our common
stock to be outstanding upon completion of this offering will be, fully paid
and nonassessable.
Preferred Stock
Upon the closing of this offering, each outstanding share of our preferred
stock will be converted into four shares of our common stock. See Note 9 of
notes to financial statements for a description of our preferred stock.
Following the offering, we will be authorized, subject to limitations
imposed by Delaware law, to issue preferred stock in one or more series, to
establish from time to time the number of shares to be included in each series,
and to fix the rights, preferences and privileges of the shares of each wholly
unissued series and any of its qualifications, limitations or restrictions. The
board of directors can
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<PAGE>
also increase or decrease the number of shares of any series, but not below the
number of shares of such series then outstanding, without any further vote or
action by the stockholders. The board may authorize the issuance of preferred
stock with voting or conversion rights that could adversely affect the voting
power or other rights of the holders of the common stock. The issuance of
preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, have the
effect of delaying, deferring or preventing a change in control of Blue Martini
and may adversely affect the market price of the our common stock and the
voting and other rights of the holders of our common stock. We have no current
plan to issue any shares of preferred stock.
Registration Rights
As a result of an investors' rights agreement dated January 13, 1999 as
amended July 20, 1999, among us and some of our stockholders, the holders of
23,297,264 shares of our common stock will be entitled to rights with respect
to the registration of these shares under the Securities Act, as described
below.
Demand Registration Rights. At any time after six months following this
offering, the holders of at least 50% of the shares having registration rights
can request that we register all or a portion of their shares, so long as such
registration covers at least 40% of their shares and the total offering price
of the shares to the public is at least $10 million. We will only be required
to file two registration statements in response to these demand registration
rights. We may postpone the filing of a registration statement for up to 120
days twice in a 12 month period if we determine that the filing would be
seriously detrimental to us and our stockholders.
Piggyback Registration Rights. If we register any securities for public
sale, the stockholders with registration rights will have the right to include
their shares in the registration statement. The managing underwriter of any
underwritten offering will have the right to limit the number of shares
registered by these holders to be included in the registration statement due to
marketing reasons.
Form S-3 Registration Rights. The holders of the shares having registration
rights can request that we register their shares if we are eligible to file a
registration statement on Form S-3 and if the total price of the shares offered
to the public is at least $3 million. We will only be required to file two
registration statements in response to these S-3 registration rights. We may
postpone the filing of a registration statement for up to 90 days once in a 12
month period if we determine that the filing would be seriously detrimental to
us and our stockholders.
We will pay all expenses incurred in connection with the registrations
described above, except for underwriters' and brokers' discounts and
commissions, which will be paid by the selling stockholders.
The registration rights described above will expire with respect to a
particular stockholder if it can sell all of its shares in a three month period
under Rule 144 of the Securities Act. In any event, the registration rights
described above will expire three years after this offering is completed.
Holders of these registration rights have waived the exercise of these
registration rights for 180 days following the date of this prospectus.
Anti-Takeover Provisions
The provisions of Delaware law, our certificate of incorporation and our
bylaws may have the effect of delaying, deferring or discouraging another
person from acquiring control of our company.
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<PAGE>
Delaware Law
We will be subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents some
Delaware corporations from engaging, under some circumstances, in a "business
combination," which includes a merger or sale of more than 10% of the
corporation's assets with any "interested stockholder," meaning a stockholder
who owns 15% or more of the corporation's outstanding voting stock, as well as
affiliates and associates of the stockholder, for three years following the
date that the stockholder became an "interested stockholder" unless:
. the transaction is approved by the board of directors prior to the date
the interested stockholder attained that status;
. upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or
. on or subsequent to such date the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by at least two-thirds of the outstanding voting stock that
is not owned by the interested stockholder.
A Delaware corporation may opt out of this provision with an express
provision in its original certificate of incorporation or an express provision
in its certificate or incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares.
However, we have not opted out of this provision. The statute could prohibit or
delay mergers or other takeover or change-in-control attempts and, accordingly,
may discourage attempts to acquire us.
Charter and Bylaw Provisions
Our certificate of incorporation and bylaws provide that:
. following the completion of this offering, no action shall be taken by
stockholders except at an annual or special meeting of the stockholders
called in accordance with our bylaws and that stockholders may not act
by written consent;
. following the completion of this offering, the approval of holders of
two-thirds of the shares entitled to vote at an election of directors
shall be required to adopt, amend or repeal our bylaws or amend or
repeal the provisions of our certificate of incorporation regarding the
election and removal of directors and ability of stockholders to take
action;
. stockholders may not call special meetings of the stockholders without
advance notice and approval of the stockholders holding at least a
majority of the outstanding shares of stock;
. stockholders may not fill vacancies on the board;
. following the completion of this offering, our board of directors will
be divided into three classes, each serving staggered three-year terms,
which means that only one class of directors will be elected at each
annual meeting of stockholders, with the other classes continuing for
the remainder of their respective terms, and directors may only be
removed for cause by the holders of two-thirds of the shares entitled to
vote at an election of directors; and
. we will indemnify officers and directors against losses that they may
incur in investigations and legal proceedings resulting from their
services to us, which may include services in connection with takeover
defense measures.
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<PAGE>
These provisions of our certificate of incorporation and bylaws may have
the effect of delaying, deferring or discouraging another person from
acquiring control of our company.
Transfer Agent
The transfer agent and registrar for our common stock is Computershare
Investor Services, LLC.
Listing
We have applied for quotation of our common stock on the Nasdaq National
Market under the trading symbol "BLUE."
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock, and we cannot predict the effect, if any, that market sales of shares of
our common stock or the availability of shares of our common stock for sale
will have on the market price of our common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of our common stock in the public
market could adversely affect the market price of our common stock and could
impair our future ability to raise capital through the sale of our equity
securities.
Upon the completion of this offering, we will have shares of our common
stock outstanding, assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options. Of the outstanding shares, all
of the shares sold in this offering will be freely tradable, except that any
shares held by directors, officers or owners of ten percent or more of our
stock, may only be sold in compliance with the limitations described below. The
remaining 59,289,138 shares of our common stock will be deemed "restricted
securities" as defined under Rule 144. Restricted shares may be sold in the
public market only if registered or if they qualify for an exemption from
registration under Rule 144, 144(k) or 701 promulgated under the Securities
Act, which rules are summarized below. Subject to the lock-up agreements
described below, the provisions of Rules 144, 144(k) and 701 and a right of
repurchase in favor of Blue Martini applicable to some of our common stock,
additional shares will be available for sale in the public market as follows:
. no shares will be eligible for sale within 90 days from the date of this
prospectus; up to 6,744,121 shares will be eligible for sale 90 days
from the date of this prospectus in the event that the locked-up shares
are released early, as described below;
. an additional 1,769,732 shares will be eligible for sale 120 days from
the date of this prospectus in the event that the locked-up shares are
released early, as described below;
. 46,075,619 shares will be eligible for sale upon the expiration of the
180-day lock-up period; and
. 4,699,666 shares will be eligible for sale at various times after the
180-day lock-up period.
Lock-Up Agreements
Our directors, officers and substantially all of our stockholders have
entered into lock-up agreements in connection with this offering. These lock-up
agreements provide that these persons will not offer, sell, contract to sell,
grant any option to purchase or otherwise dispose of our common stock or any
securities exercisable for or convertible into our common stock owned by them
for a period of 180 days after the date of this prospectus without the prior
written consent of Goldman, Sachs & Co. or pursuant to the earlier releases
described below. These lock-up agreements do not restrict the transfer of
shares of our common stock purchased under the directed share program in
connection with this offering or in the open market following the date of this
prospectus.
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If our stock price is greater than twice the initial public offering price
per share for the time periods set forth below, then a percentage of the
securities subject to lock-up agreements will be released from the transfer
restrictions of the lock-up agreements at the time set forth below.
<TABLE>
<CAPTION>
Time Period Amount Released Time Released
- ----------------------------------------------------------------------------------
<S> <C> <C>
20 of the 40 consecutive 15% of the securities The 90th day after the
trading days ending on subject to lock-up date of this prospectus.
the last trading day agreements as of the date of
preceding the 90th day this prospectus.
after the date of this
prospectus.
- ----------------------------------------------------------------------------------
20 of the 40 consecutive An additional 20% of the The 120th day after the
trading days ending on securities subject to lock- date of this prospectus.
the last trading day up agreements as of the date
preceding the 120th day of this prospectus.
after the date of this
prospectus.
</TABLE>
However, if the securities to be released above would be released during one
of the Company's blackout periods, then if our stock price is greater than
twice the initial public offering price per share for the time periods set
forth below, a percentage of the securities subject to the lock-up agreements
will be released from the transfer restrictions of the lock-up agreements at
the time set forth below.
<TABLE>
<CAPTION>
Scheduled Release Time Period Amount Released Actual Release
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
The 90th day after the 20 of the 40 15% of the The 20th day after
date of this prospectus consecutive trading securities subject the end of the
is during a blackout days ending on the to lock-up blackout period.
period. 20th day after the agreements as of the
end of the blackout date of this
period. prospectus.
- ----------------------------------------------------------------------------------------
The 120th day after the 20 of the 40 An additional 20% of The first day after
date of this prospectus consecutive trading the securities the end of the
is during a blackout days ending on the subject to lock-up blackout period.
period. first day after the agreements as of the
end of the blackout date of this
period. prospectus.
</TABLE>
Blue Martini's blackout period begins on the last four weeks of each
calendar quarter and ends three trading days after it announces its quarterly
results. During the blackout period, we do not allow our directors, officers
and key employees to trade our stock.
Rule 144
In general, under Rule 144 as currently in effect, a person, or group of
persons whose shares are required to be aggregated, including an affiliate of
Blue Martini, who has beneficially owned shares for at least one year is
entitled to sell within any three-month period commencing 90 days after the
date of this prospectus, a number of shares that does not exceed the greater of
one percent of the then-outstanding shares of our common stock, which will be
approximately shares immediately after this offering, or the average
weekly trading volume in our common stock during the four calendar weeks
preceding the date on which notice of the sale is filed. In addition, a person
who is not deemed to have been an affiliate at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed to be sold
for at least two years would be entitled to sell these shares under Rule 144(k)
without regard to the requirements described above. To the extent
69
<PAGE>
that shares were acquired from one of our affiliates, a person's holding period
for the purpose of effecting a sale under Rule 144 would commence on the date
of transfer from the affiliate.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect, any
of our employees, consultants or advisors, other than affiliates, who purchases
or receives shares from us in connection with a compensatory stock purchase
plan or option plan or other written agreement will be eligible to resell their
shares beginning 90 days after the date of this prospectus, subject only to the
manner of sale provisions of Rule 144. Affiliates who purchase or receive
shares from us in connection with a compensatory stock purchase plan or option
plan or other written agreement will be eligible to sell their shares beginning
90 days after the date of this prospectus under Rule 701 without compliance
with the Rule 144 holding period requirements.
Registration Rights
On the date 180 days after the date of this prospectus, the holders of
23,297,264 shares or their transferees, will be entitled to rights with respect
to the registration of their shares under the Securities Act. Registration of
their shares under the Securities Act would result in the shares becoming
freely tradable without restriction under the Securities Act, except for shares
purchased by affiliates, immediately upon the effectiveness of this
registration.
Stock Options
We intend to file a registration statement under the Securities Act covering
the 30,300,000 shares reserved for issuance under our stock option plans and
4,000,000 shares reserved for issuance under our employee stock purchase plan.
The registration statement is expected to be filed and become effective as soon
as practicable after the closing of this offering. Accordingly, shares
registered under the registration statement will, subject to Rule 144 volume
limitations applicable to affiliates, be available for sale at various times as
permitted under the lock-up provisions discussed above.
70
<PAGE>
UNDERWRITING
Blue Martini and the underwriters named below have entered into an
underwriting agreement with respect to the shares being offered. Subject to
certain conditions, each underwriter has severally agreed to purchase the
number of shares indicated in the following table. Goldman, Sachs & Co., Dain
Rauscher Incorporated, Thomas Weisel Partners LLC and U.S. Bancorp Piper
Jaffray Inc. are the representatives of the underwriters:
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co. .......................................
Dain Rauscher Incorporated..................................
Thomas Weisel Partners LLC..................................
U.S. Bancorp Piper Jaffray Inc..............................
----
Total.....................................................
====
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from Blue Martini to cover such sales. They may exercise
that option for 30 days. If any shares are purchased under this option, the
underwriters will severally purchase shares in approximately the same
proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by Blue Martini. These amounts are
shown assuming both no exercise and full exercise of the underwriters' option
to purchase additional shares.
<TABLE>
<CAPTION>
Paid by Blue Martini
-------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per share.......................................... $ $
Total.............................................. $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price.
Any of these securities dealers may resell any shares purchased from the
underwriters to certain other brokers or dealers at a discount of up to $
per share from the initial public offering price. If all the shares are not
sold at the initial public offering price, the representatives may change the
offering price and the other selling terms.
Blue Martini has agreed with the underwriters not to dispose of or hedge any
of its common stock or securities convertible into or exchangeable for shares
of common stock during the period from the date of this prospectus continuing
through the 180 days after the date of this prospectus, except with the prior
written consent of the representatives. This restriction does not apply to any
existing employee benefits plans or securities issues in connection with
acquisition transactions, provided that the recipients of such securities agree
to be bound by the lock-up provisions applicable to other stockholders.
Blue Martini's directors, officers and substantially all of its stockholders
have agreed with the underwriters not to dispose of or hedge any of their
common stock or securities convertible into or exchangeable for shares of
common stock during the period from the date of this prospectus continuing
through the date 180 days after the date of this prospectus, except with the
prior written consent of the representatives. This restriction shall terminate
as to 15% of the locked-up shares after 90 days and an additional 20% of the
locked-up shares after 120 days after the date of this prospectus, subject to
delays as a result of the timing of Blue Martini's earnings releases and
compliance with insider trading policies, in the event that the reported last
sale price of Blue Martini's common stock on the Nasdaq National Market is at
least twice the initial public offering price for predetermined periods ending
on these dates. See "Shares Eligible for Future Sale" for a discussion of
transfer restrictions.
71
<PAGE>
At the request of Blue Martini, the underwriters have reserved for sale, at
the initial public offering price, up to shares of common stock for
certain directors, employees and friends of Blue Martini. There can be no
assurance that any of the reserved shares will be so purchased. The number of
shares available for sale to the general public in the offering will be reduced
by the number of reserved shares sold. Any reserved shares not so purchased
will be offered to the general public on the same basis as the other shares
offered hereby.
Prior to this offering, there has been no public market for the common
stock. The initial public offering price for the common stock will be
negotiated among Blue Martini and the representatives of the underwriters.
Among the factors to be considered in determining the initial public offering
price of the shares, in addition to prevailing market conditions, will be Blue
Martini's historical performance, estimates of Blue Martini's business
potential and earning prospects, an assessment of Blue Martini's management and
the consideration of the above factors in relation to market valuation of
companies in related businesses.
Application has been made for quotation of the common stock on the Nasdaq
National Market under the symbol "BLUE."
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offering is in progress.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners has been named as a lead or co-manager on
166 filed public offerings of equity securities, of which 112 have been
completed, and has acted as a syndicate member in an additional 91 public
offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with Blue Martini or any of its officers, directors or
other controlling persons, except with respect to its contractual relationship
with Blue Martini pursuant to the underwriting agreement entered into in
connection with this offering.
A prospectus in electronic format may be made available on the web sites
maintained by one or more underwriters. The underwriters may agree to allocate
a number of shares to underwriters for sale to their online brokerage account
holders. Internet distributions will be allocated by the lead managers to
underwriters that may make Internet distributions on the same basis as other
allocations.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
Blue Martini estimates that its share of the total expenses at the offering,
excluding underwriting discounts and commissions, will be approximately $
million.
Blue Martini has agreed to indemnify the several underwriters against
liabilities, including liabilities under the Securities Act of 1933.
72
<PAGE>
LEGAL MATTERS
Cooley Godward LLP, Palo Alto, California will pass upon the validity of the
shares of common stock offered by this prospectus. As of the date of this
prospectus, partners and associates of Cooley Godward LLP beneficially own an
aggregate of 178,568 shares of common stock through an investment partnership
and James C. Gaither, a director of Blue Martini and a partner of Cooley
Godward owns an aggregate of 381,844 shares of common stock. Shearman &
Sterling, Menlo Park, California will pass upon the validity of the shares of
common stock offered by this prospectus for the underwriters.
EXPERTS
The balance sheets of Blue Martini Software, Inc. as of December 31, 1998
and 1999, and the related statements of operations, stockholders' equity and
cash flows for the period from June 5, 1998 (Inception) to December 31, 1998
and for the year ended December 31, 1999, have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common
stock. This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules to the registration
statement. For further information with respect to us and our common stock, we
refer you to the registration statement and the exhibits and schedules filed as
a part of the registration statement. Statements contained in this prospectus
concerning the contents of any contract or any other document are not
necessarily complete. If a contract or document has been filed as an exhibit to
the registration statement, we refer you to the copy of the contract or
document that has been filed. Each statement in this prospectus relating to a
contract or document filed as an exhibit is qualified in all respects by the
filed exhibit. The registration statement, including exhibits and schedules,
may be inspected without charge at the principal office of the Securities and
Exchange Commission in Washington, D.C., and copies of all or any part of it
may be obtained from that office after payment of fees prescribed by the
Securities and Exchange Commission. The Securities and Exchange Commission
maintains a website that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Securities and Exchange Commission at http://www.sec.gov.
73
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report................................................ F-2
Balance Sheets.............................................................. F-3
Statements of Operations.................................................... F-4
Statements of Stockholders' Equity.......................................... F-5
Statements of Cash Flows.................................................... F-6
Notes to Financial Statements............................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Blue Martini Software, Inc.:
We have audited the accompanying balance sheets of Blue Martini Software,
Inc. (the Company) as of December 31, 1998 and 1999, and the related statements
of operations, stockholders' equity, and cash flows for the period from June 5,
1998 (Inception) to December 31, 1998, and for the year ended December 31,
1999. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Blue Martini Software, Inc.
as of December 31, 1998 and 1999, and the results of its operations and its
cash flows for the period from June 5, 1998 (Inception) to December 31, 1998,
and for the year ended December 31, 1999, in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
Mountain View, California
February 29, 2000, except as to
Note 12, which is as of April
24, 2000
F-2
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Balance Sheets
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity
----------------- March 31, March 31,
1998 1999 2000 2000
Assets ------- -------- --------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.......... $ 261 $ 10,362 $ 11,886
Short-term investments............. -- 2,562 1,746
Accounts receivable, net of
allowance for doubtful accounts of
$-, $225 and $459 as of
December 31, 1998 and 1999 and
March 31, 2000, respectively...... 130 3,649 6,527
Prepaid expenses and other current
assets............................ 48 656 1,513
------- -------- --------
Total current assets.............. 439 17,229 21,672
Property and equipment, net......... 136 2,761 5,152
Other assets........................ 167 370 964
------- -------- --------
Total assets...................... $ 742 $ 20,360 $ 27,788
======= ======== ========
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable................... $ 170 $ 1,874 $ 1,994
Accrued employee compensation...... 19 2,578 4,379
Other current liabilities.......... 51 1,074 4,717
Deferred revenues.................. 130 3,577 9,059
Current portion of long-term
obligations....................... 16 418 500
------- -------- --------
Total current liabilities......... 386 9,521 20,649
Long-term obligations, less current
portion............................ 39 544 602
------- -------- --------
Total liabilities................. 425 10,065 21,251
------- -------- --------
Commitments
Stockholders' equity:
Convertible preferred stock, $0.001
par value; actual--7,200 shares
authorized; 1,116 shares issued
and outstanding as of December 31,
1998 and 5,824 shares issued and
outstanding as of December 31,
1999 and March 31, 2000; aggregate
liquidation preference of $18,712
as of December 31, 1999 and March
31, 2000; pro forma--5,000 shares
authorized; no shares issued and
outstanding....................... 1 6 6 $ --
Common stock, $0.001 par value;
actual--46,000 shares authorized;
30,253, 31,411 and 35,361 shares
issued and outstanding as of
December 31, 1998 and 1999 and
March 31, 2000, respectively; pro
forma--500,000 shares authorized;
58,657 shares issued and
outstanding....................... 30 31 35 59
Additional paid-in-capital......... 1,856 29,365 67,086 67,068
Deferred stock compensation........ (425) (8,034) (38,136) (38,136)
Accumulated deficit................ (1,145) (11,073) (22,454) (22,454)
------- -------- -------- -------
Total stockholders' equity........ 317 10,295 6,537 $ 6,537
------- -------- -------- =======
Total liabilities and
stockholders' equity............. $ 742 $ 20,360 $ 27,788
======= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
June 5, 1998
(Inception) Three Months
to Year Ended Ended March 31,
December 31, December 31, -----------------
1998 1999 1999 2000
------------ ------------ ------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues:
License......................... $ -- $ 7,205 $ 25 $ 6,070
Service......................... -- 4,027 216 4,611
------- -------- ------- --------
Total revenues............... -- 11,232 241 10,681
------- -------- ------- --------
Cost of revenues:
License......................... -- 719 3 561
Service......................... -- 5,429 110 6,218
------- -------- ------- --------
Total cost of revenues....... -- 6,148 113 6,779
------- -------- ------- --------
Gross profit................. -- 5,084 128 3,902
------- -------- ------- --------
Operating expenses:
Sales and marketing............. 407 7,177 366 8,473
Research and development........ 504 6,870 947 4,361
General and administrative...... 249 1,218 208 2,509
------- -------- ------- --------
Total operating expenses..... 1,160 15,265 1,521 15,343
------- -------- ------- --------
Loss from operations......... (1,160) (10,181) (1,393) (11,441)
Interest and other, net.......... 15 253 31 60
------- -------- ------- --------
Net loss..................... $(1,145) $ (9,928) $(1,362) $(11,381)
======= ======== ======= ========
Basic and diluted net loss per
common share.................... $ (0.05) $ (0.43) $ (0.06) $ (0.45)
======= ======== ======= ========
Shares used in computing basic
and diluted net loss per common
share........................... 22,000 22,964 22,000 25,108
======= ======== ======= ========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Statements of Stockholders' Equity
June 5, 1998 (Inception) to March 31, 2000
(In thousands)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Additional Deferred Total
----------------- -------------- Paid-In Stock Accumulated Stockholders'
Shares Amount Shares Amount Capital Compensation Deficit Equity
-------- ------- ------ ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock.................. -- $ -- 22,000 $ 22 $ 48 $ -- $ -- $ 70
Issuance of common stock
for employee stock
options................ -- -- 8,253 8 43 -- -- 51
Issuance of series A
convertible preferred
stock.................. 1,116 1 -- -- 1,249 -- -- 1,250
Deferred compensation
relating to stock
option grants.......... -- -- -- -- 516 (516) -- --
Amortization of stock
compensation........... -- -- -- -- -- 91 -- 91
Net loss................ -- -- -- -- -- -- (1,145) (1,145)
-------- ------- ------ ---- ------- -------- -------- -------
Balances, December 31,
1998................... 1,116 1 30,253 30 1,856 (425) (1,145) 317
Issuance of common
stock.................. -- -- 24 -- 6 -- -- 6
Issuance of common stock
for employee stock
options................ -- -- 1,676 2 203 -- -- 205
Repurchase of common
stock.................. -- -- (542) (1) (6) -- -- (7)
Issuance of series B
convertible preferred
stock.................. 2,631 3 -- -- 4,997 -- -- 5,000
Issuance of series C
convertible preferred
stock.................. 2,077 2 -- -- 12,448 -- -- 12,450
Deferred compensation
relating to stock
option grants.......... -- -- -- -- 9,814 (9,814) -- --
Amortization of stock
compensation........... -- -- -- -- -- 2,205 -- 2,205
Non-employee stock
compensation........... -- -- -- -- 47 -- -- 47
Net loss................ -- -- -- -- -- -- (9,928) (9,928)
-------- ------- ------ ---- ------- -------- -------- -------
Balances, December 31,
1999................... 5,824 6 31,411 31 29,365 (8,034) (11,073) 10,295
Issuance of common stock
(unaudited)............ -- -- 66 -- 100 -- -- 100
Issuance of common stock
for employee stock
options (unaudited).... -- -- 3,884 4 1,768 -- -- 1,772
Warrant issued
(unaudited)............ -- -- -- -- 176 -- -- 176
Deferred compensation
relating to stock
option grants
(unaudited)............ -- -- -- -- 34,261 (34,261) -- --
Amortization of stock
compensation
(unaudited)............ -- -- -- -- -- 4,159 -- 4,159
Non-employee stock
compensation
(unaudited)............ -- -- -- -- 1,416 -- -- 1,416
Net loss (unaudited).... -- -- -- -- -- -- (11,381) (11,381)
-------- ------- ------ ---- ------- -------- -------- -------
Balances, March 31, 2000
(unaudited)............ 5,824 $ 6 35,361 $ 35 $67,086 $(38,136) $(22,454) $ 6,537
======== ======= ====== ==== ======= ======== ======== =======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
June 5, 1998
(Inception) Three Months
to Year Ended Ended March 31,
December 31, December 31, -----------------
1998 1999 1999 2000
------------ ------------ ------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss......................... $(1,145) $(9,928) $(1,362) $(11,381)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization.. 8 788 35 623
Stock compensation............. 91 2,252 114 5,575
Provision for doubtful
accounts...................... -- 225 -- 234
Changes in operating assets and
liabilities:
Accounts receivable........... (130) (3,744) (802) (3,112)
Prepaid expenses and other
current assets............... (48) (608) (549) (857)
Accounts payable, accrued
employee compensation and
other current liabilities.... 240 5,286 701 5,564
Deferred revenues............. 130 3,447 745 5,482
------- ------- ------- --------
Net cash provided by (used
in) operating activities... (854) (2,282) (1,118) 2,128
------- ------- ------- --------
Cash flows from investing
activities:
Purchases of property and
equipment....................... (82) (3,108) (300) (2,704)
Purchases of available-for-sale
short-term investments.......... -- (2,562) -- --
Sales and maturities of
available-for-sale short-term
investments..................... -- -- -- 816
Other assets..................... (167) (203) -- (462)
------- ------- ------- --------
Net cash used for investing
activities................. (249) (5,873) (300) (2,350)
------- ------- ------- --------
Cash flows from financing
activities:
Net proceeds from issuance of
convertible preferred stock..... 1,250 17,450 5,000 --
Net proceeds (payments) from
issuance (repurchases) of common
stock........................... 121 204 (2) 1,872
Proceeds from bank borrowings.... -- 750 -- --
Repayment of debt and capital
lease obligations............... (7) (148) (29) (126)
------- ------- ------- --------
Net cash provided by
financing activities....... 1,364 18,256 4,969 1,746
------- ------- ------- --------
Net increase in cash and cash
equivalents...................... 261 10,101 3,551 1,524
Cash and cash equivalents at
beginning of period.............. -- 261 261 10,362
------- ------- ------- --------
Cash and cash equivalents at end
of period........................ $ 261 $10,362 $ 3,812 $ 11,886
======= ======= ======= ========
Supplemental disclosures of
noncash investing and financing
activities:
Property and equipment acquired
under capital lease
obligations.................... $ 62 $ 305 $ 302 $ 266
======= ======= ======= ========
Deferred stock compensation..... $ 516 $ 9,814 $ 278 $ 34,261
======= ======= ======= ========
Warrant issued in connection
with lease financing........... $ -- $ -- $ -- $ 176
======= ======= ======= ========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes To Financial Statements
December 31, 1998 and 1999 and March 31, 2000
(information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
1. The Company
Blue Martini Software, Inc. (the "Company") develops, markets and supports a
suite of enterprise software applications that allow e-businesses to extend
their brands across their traditional and Internet-based sales and marketing
and merchandising efforts. The Company's customers include manufacturers,
retailers and other entities that do business on the Internet.
Blue Martini LLC, a Delaware limited liability company, was founded on June
5, 1998. On January 12, 1999, Blue Martini LLC merged into Blue Martini
Software, Inc., a Delaware corporation, with Blue Martini Software, Inc. being
the surviving entity.
2. Summary of Significant Accounting Policies
Unaudited Interim Financial Information
The accompanying unaudited balance sheet as of March 31, 2000, the
statements of operations and cash flows for the three months ended March 31,
1999 and 2000 and the statement of stockholders' equity for the three months
ended March 31, 2000 are unaudited. The unaudited interim financial statements
have been prepared in accordance with generally accepted accounting principles.
In the opinion of the Company's management, the unaudited interim financial
statements have been prepared on the same basis as the audited financial
statements and include all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the Company's results of
operations and its cash flows for the three months ended March 31, 1999 and
2000. The results for the three months ended March 31, 2000 are not necessarily
indicative of the results to be expected for the year ending December 31, 2000.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company has adopted Statement of Position ("SOP") 97-2, Software Revenue
Recognition, as amended by SOP 98-4 and SOP 98-9, since its inception.
To date, the Company has derived its revenues from licenses of its software
product and the sale of professional services, technical support and training
services. The Company sells its product primarily through a direct sales force.
F-7
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes to Financial Statements--(continued)
The Company's standard license agreement provides for an initial fee to use
the software product in perpetuity. License revenues are recognized when
persuasive evidence of an agreement exists, delivery of the product has
occurred, the fee is considered fixed or determinable and collectibility is
probable, assuming no significant future obligations or customer acceptance
rights exists. If an acceptance period is contractually provided, license
revenues are recognized upon the earlier of customer acceptance or the
expiration of that period. In instances where delivery is electronic and all
other criteria for revenue recognition has been achieved, the product is
considered to have been delivered when the customer either takes possession of
the software via a download or the access code to download the software from
the Internet has been provided to the customer. The Company's software does not
require significant production, customization or modification.
Revenues recognized from multiple-element software arrangements are
allocated to each element of the arrangement based on the relative fair values
of the elements. The fair value of professional services, technical support and
training have been determined based on the Company's specific objective
evidence of fair value based on the price charged when the elements are sold
separately. License revenues are recorded under the residual method described
in SOP 98-9 for arrangements in which licenses are sold with these elements.
However, the entire fee related to arrangements that require the Company to
deliver specified additional upgrades is deferred until delivery of the
specified upgrade has occurred, unless the Company has vendor-specific
objective evidence of fair value for the upgrade. Fees related to contracts
that require the Company to deliver unspecified additional products are
deferred and recognized ratably over the contract term.
Fees for technical support are deferred and recognized ratably over the term
of the support period. Revenues from professional services and training are
recognized when the services are performed.
The Company considers all arrangements with payment terms extending beyond
12 months not to be fixed or determinable. If the contract fee is not fixed or
determinable, revenues are recognized as payments become due from the customer.
If collectibility is not considered probable, revenues are recognized when the
fee is collected.
Deferred revenues include amounts billed to customers for which revenues
have not been recognized, which generally result from the following: deferred
technical support; professional services not yet rendered; amounts billed to
customers with extended payments terms which are not yet due; and amounts
deferred relating to arrangements where the Company is required to deliver
either specified upgrades or unspecified additional products.
Cash and Cash Equivalents
The Company considers all highly liquid investments with remaining
maturities of three months or less at the date of purchase to be cash
equivalents. Cash and cash equivalents are recorded at cost, which approximates
fair value.
Short-term Investments
Short-term investments, consisting principally of commercial paper and
corporate term notes, are stated at fair value. Short-term investments maturing
within one year that are not restricted are classified as current assets.
The Company determines the appropriate classification of its short-term
investments at the time of purchase and re-evaluates such classification as of
each balance sheet date. The Company has classified all of its short-term
investments as available-for-sale and carries such securities at fair
F-8
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes to Financial Statements--(continued)
value, with unrealized gains and losses calculated using the specific
identification method, net of tax, reported as a component of accumulated other
comprehensive income.
Concentration of Credit Risk
The Company places its cash, cash equivalents and short-term investments
with financial institutions with high credit ratings. The Company's accounts
receivable are derived from licenses and services provided to customers
principally in North America. The Company performs ongoing evaluations of its
customers' financial condition and generally requires no collateral from its
customers on accounts receivable. Revenues and accounts receivable from
significant customers are summarized in Note 11.
The Company had no write-offs of accounts receivable and, based on its
ongoing evaluation of collectibility, had allowances for doubtful accounts
receivable of $225,000 and $459,000 at December 31, 1999 and March 31, 2000,
respectively.
Property and Equipment
Property and equipment are recorded at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the respective assets, generally 18 to 60 months. Leasehold
improvements and assets recorded under capital leases are amortized over the
estimated useful lives of the assets or the lease term, whichever is shorter.
Impairment of Long-lived Assets
The Company evaluates its long-lived assets to determine whether any
impairment of these assets has occurred whenever events or changes in
circumstances indicate that the carrying amount of an asset might not be
recoverable. In making such determination, the estimated future undiscounted
cash flows associated with assets to be held and used would be compared to the
asset's carrying amount to determine if a write-down to fair value is required.
If such assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the asset exceeds the
fair value of the assets. No impairments of long-lived assets have been
experienced to date.
Income Taxes
Effective January 1999, income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities from a change in tax rates is recognized in income in the period
the change is enacted. Valuation allowances are established, when necessary, to
reduce deferred tax assets to the amounts to be recovered.
Prior to January 1999, the Company was taxed under the partnership
provisions of the Internal Revenue Code. Under those provisions, the Company
did not pay federal or state corporate income taxes on its taxable income.
Instead, the Company's unit holders were individually responsible for federal
and state income taxes.
F-9
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes to Financial Statements--(continued)
Software Development Costs
Development costs incurred in the research and development of new software
products are expensed as incurred until technological feasibility has been
established at which time such costs are capitalized, subject to
recoverability. Technology feasibility is established on the release of a beta
version of the software. To date, technological feasibility on software
releases has coincided with the general availability of such software because
no beta versions are developed. Accordingly, software development costs
qualifying for capitalization have not been significant.
Stock Compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion ("APB")
No. 25, Accounting for Stock Issued to Employees and Statement of Financial
Accounting Standard ("SFAS") Interpretation No. 28, Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award Plans, and
complies with the disclosure provisions of SFAS No. 123, Accounting for Stock-
Based Compensation.
Under APB No. 25, compensation expense is based on the difference, if any,
on the date of the grant, between the fair value of the Company's stock and the
exercise price. SFAS No. 123 defines a fair-value based method of accounting
for an employee stock option or similar equity investment. The pro forma
disclosures of the difference between compensation expense included in net loss
and the related cost measured by the fair value method are presented in Note 9.
The Company accounts for equity instruments issued to non-employees using
the fair value method in accordance with the provisions of SFAS No. 123 and
Emerging Issues Task Force Issue No. 96-18, Accounting for Equity Instruments
that are Issued to Other than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services.
Comprehensive Income (Loss)
The Company did not have any significant components of other comprehensive
income (loss) for all periods presented.
Net Loss Per Common Share
Basic net loss per common share is computed using the weighted average
number of outstanding shares of common stock during the period, excluding
shares of restricted stock subject to repurchase. Dilutive net loss per common
share is computed using the weighted average number of common shares
outstanding during the period and, when dilutive, potential common shares from
options and warrants to purchase common stock, and common stock subject to
repurchase, using the treasury stock method, and from convertible preferred
stock, using the "if-converted" method. Potential shares consist of convertible
preferred stock, unvested restricted common stock, stock options and warrants.
F-10
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes to Financial Statements--(continued)
The following potential common shares have been excluded from the
calculation of diluted net loss per share for all periods presented because the
effect would have been anti-dilutive (in thousands):
<TABLE>
<CAPTION>
June 5, 1998 Three Months
(Inception) Ended March
to Year Ended 31,
December 31, December 31, -------------
1998 1999 1999 2000
------------ ------------ ------ ------
<S> <C> <C> <C> <C>
Shares issuable under stock options... -- 4,248 448 5,308
Shares of restricted stock subject to
repurchase........................... 8,252 6,981 7,941 9,937
Shares issuable pursuant to warrants.. -- -- -- 45
Shares of convertible preferred stock
on an "as-if-converted" basis........ 4,464 23,297 14,991 23,297
</TABLE>
The weighted average exercise price of stock options was $0.21 for the year
ended December 31, 1999 and $0.08 and $1.25 for the three months ended March
31, 1999 and 2000. The weighted average purchase price of restricted stock was
$0.01 for the period ended December 31, 1998; $0.04 for the year ended December
31, 1999; and $0.01 and $0.20 for the three months ended March 31, 1999 and
2000. The exercise price of warrants was $1.50 for the three months ended March
31, 2000.
Pro forma basic and diluted net loss per common share is presented for the
year ended December 31, 1999 and the three months ended March 31, 2000 to
reflect per share data assuming the conversion of all outstanding shares of
convertible preferred stock into common stock on a four-for-one basis, as if
the conversion had taken place at the beginning of 1999, or at the date of
issuance, if later. The following data is unaudited (in thousands, except per
share data):
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended March 31,
1999 2000
------------ ---------------
<S> <C> <C>
Net loss used in computing pro forma basic and
diluted net loss per common share................. $(9,928) $(11,381)
======= ========
Shares used in computing pro forma basic and
diluted net loss per common share:................
Shares used in net loss per common share
calculation..................................... 22,964 25,108
Weighted average shares of convertible preferred
stock and warrant assuming conversion........... 18,384 23,344
------- --------
41,348 48,452
======= ========
Pro forma basic and diluted net loss per common
share............................................. $ (0.24) $ (0.23)
======= ========
</TABLE>
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivatives and Hedging Activities. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts and for hedging
activities. In July 1999, the FASB issued SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date
of FASB SFAS No. 133. SFAS No. 133, as amended by SFAS No. 137, will be
effective for fiscal years beginning after June 15, 2000. Because the Company
does not currently hold any derivative instrument and does not currently engage
in hedging activities, the Company expects that the adoption of SFAS No. 133
will not have a material impact on its financial position or operating results.
F-11
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes to Financial Statements--(continued)
3. Short-term Investments
All of the Company's investments consist of commercial paper and corporate
term notes, and are due within one year. Investments totaling $7,068,000 and
$7,964,000 as of December 31, 1999 and March 31, 2000 are included in cash and
cash equivalents. Realized and unrealized gains and losses for available-for-
sale securities were immaterial for all periods presented.
4. Accounts Receivable
Accounts receivable consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31
------------- March 31,
1998 1999 2000
------ ------ ---------
<S> <C> <C> <C>
Accounts receivable.................................. $ 130 $3,013 $4,736
Unbilled receivables................................. -- 861 2,250
------ ------ ------
130 3,874 6,986
Allowance for doubtful accounts...................... -- 225 459
------ ------ ------
$ 130 $3,649 $6,527
====== ====== ======
</TABLE>
5. Property and Equipment
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------- March 31,
1998 1999 2000
------ ------ ---------
<S> <C> <C> <C>
Computer equipment.................................. $ 99 $2,996 $5,518
Furniture and office equipment...................... 45 344 730
Leasehold improvements.............................. -- 217 279
------ ------ ------
144 3,557 6,527
Less accumulated depreciation and amortization...... 8 796 1,375
------ ------ ------
$ 136 $2,761 $5,152
====== ====== ======
</TABLE>
Equipment held under capital leases totaled $62,000, $367,000 and $633,000
as of December 31, 1998 and 1999 and March 31, 2000, respectively. Accumulated
amortization for equipment under capital leases totaled $2,000, $107,000 and
$137,000 as of December 31, 1998 and 1999, and March 31, 2000, respectively.
6. Other Current Liabilities
Other current liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------- March 31,
1998 1999 2000
------ ------ ---------
<S> <C> <C> <C>
Customer deposits.................................... $ -- $ -- $1,800
Accrued marketing expenses........................... -- -- 850
Other accrued expenses............................... 51 1,074 2,067
------ ------ ------
$ 51 $1,074 $4,717
====== ====== ======
</TABLE>
F-12
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes to Financial Statements--(continued)
At March 31, 2000, accrued marketing expenses included $376,000 of accrued
advertising expenses. The Company expenses advertising costs as incurred.
Advertising costs expensed from June 5, 1998 (Inception) through December 31,
1998, the year ended December 31, 1999 and for the three months ended March 31,
1999 and 2000 were $8,000, $409,000, $31,000 and $722,000, respectively. All
advertising expense for the three months ended March 31, 2000 were for services
provided by a company whose chairman and chief creative officer is also a
member of the Company's board of directors.
7. Borrowings
The Company had $700,000 and $625,000 outstanding under a loan agreement
with a bank as of December 31, 1999 and March 31, 2000. The loan agreement
provides for borrowings of up to $750,000 and is collateralized by certain
assets of the Company, including property and equipment and accounts
receivables. Under the terms of the loan agreement, certain transactions,
including payment of dividends, are prohibited without the bank's consent. The
loan bears interest at the bank's prime rate (8.50% as of December 31, 1999 and
8.75% as of March 31, 2000), plus 0.50% per annum. The Company is required to
make monthly payments of $25,000, plus interest, through April 2002.
In January 2000, the Company signed an agreement with a leasing company for
an equipment lease line of credit of $1,500,000. Amounts borrowed under this
agreement bear interest at 8% and are collateralized by the leased assets. No
borrowings are outstanding under this facility. In connection with this
agreement, the Company issued a warrant to the leasing company for 11,250
shares of series C convertible preferred stock at an exercise price of $6.00
per share (see Note 9).
8. Lease Commitments
The Company leases certain facilities, including its corporate headquarters,
under operating leases. Rent expense for the period from inception through
December 31, 1998, the year ended December 31, 1999 and for the three months
ended March 31, 1999 and 2000, was $72,000, $434,000, $61,000 and $411,000,
respectively.
Future minimum lease payments as of December 31, 1999 were as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ending Capital Operating
December 31, Leases Leases
------------ ------- ---------
<S> <C> <C>
2000..................................................... $160 $1,036
2001..................................................... 139 1,144
2002..................................................... 24 1,177
2003..................................................... -- 1,208
2004..................................................... -- 1,238
Thereafter............................................... -- 119
---- ------
Total.................................................... 323 $5,922
======
Less amount representing interest........................ 61
----
Present value of capital lease obligations............... 262
Less current portion..................................... 118
----
Long-term portion........................................ $144
====
</TABLE>
F-13
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes To Financial Statements--(continued)
On March 1, 2000 the Company entered into a facility lease agreement in
order to conduct employee, partner and customer training classes. The initial
term of the lease is three years with a renewal option for one additional
twelve month period. Total rent expense related to this operating lease was
$120,750, for the three month period ended March 31, 2000. Future minimum
lease payments are $988,000, $1,317,000, $1,317,000 and $329,000 for the years
ended December 31, 2000, 2001, 2002 and 2003, respectively.
The Company obtained a letter of credit from a financial institution
totaling $182,000 in lieu of a security deposit for leased office space. No
amounts have been drawn against the letter of credit. The letter is secured by
a $182,000 certificate of deposit, which is included in other assets in the
balance sheet as of December 31, 1999 and March 31, 2000.
9. Stockholders' Equity
Blue Martini LLC, a Delaware limited liability company, was formed on June
5, 1998 with two classes of ownership: class A units and class B units. On
January 12, 1999, Blue Martini LLC changed its legal form from a limited
liability company to a corporation. This change was effected through a merger
between Blue Martini Software, Inc. and Blue Martini LLC, with Blue Martini
Software, Inc. being the surviving entity. In connection with this merger, the
class A unit holders exchanged their units for an equal number of shares of
series A convertible preferred stock and the class B unit holders exchanged
their units for an equal number of shares of common stock of Blue Martini
Software, Inc. The various rights and preferences of the two classes of
ownership were identical before and after the merger. This action has been
reflected in the accompanying financial statements as if it had occurred at
the issuance of the original ownership units.
Common Stock Split
In February 2000, the Company's board of directors approved a two-for-one
stock split of the Company's common stock. All common shares and per common
share information presented in these financial statements has been adjusted to
reflect this common stock split.
Convertible Preferred Stock
Convertible preferred stock outstanding as of December 31, 1999 is as
follows (in thousands):
<TABLE>
<CAPTION>
Shares
---------------------- Liquidation Carrying
Authorized Outstanding Preference Value
---------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Series:
A............................. 2,000 1,116 $ 1,250 $ 1,250
B............................. 3,000 2,631 5,000 5,000
C............................. 2,200 2,077 12,462 12,462
----- ----- ------- -------
7,200 5,824 $18,712 $18,712
===== ===== ======= =======
</TABLE>
The rights, preferences and privileges of the holders of series A, B and C
convertible preferred stock are as follows:
Dividends
The holders of Series A, B and C convertible preferred stock are entitled
to receive dividends of $0.09, $0.15 and $0.48 per share, per annum,
respectively (subject to appropriate adjustment, as
F-14
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes to Financial Statements--(continued)
defined). Such dividends, which are in preference to any common stock
dividends, are payable whenever funds are legally available and when declared
by the board of directors. The right of the holders of the convertible
preferred stock to receive dividends is not cumulative. As of December 31, 1999
and March 31, 2000, no dividends have been declared.
Liquidation
In the event of any liquidation, dissolution or winding-up of the Company, a
merger with a change in voting control and an asset sale, the holders of
convertible preferred stock are entitled to receive a liquidation preference of
$1.12, $1.90 and $6.00 for each outstanding share of series A, B and C
convertible preferred stock, respectively, plus any declared and unpaid
dividends. If the funds available for distribution are insufficient to cover
the liquidation preference, then the entire assets and funds of the Company
legally available for distribution are to be distributed ratably among the
holders of convertible preferred stock.
Voting Rights
The holders of series A, B and C convertible preferred stock have voting
rights equal to the number of shares of common stock into which the shares of
series A, B and C convertible preferred stock are then convertible.
Holders of series A, B and C convertible preferred stock are also entitled
to vote together as a separate class to approve or reject certain transactions,
including mergers and certain changes in equity.
Conversion
Each share of convertible preferred stock, at the option of the holder, is
convertible into four shares of common stock, subject to adjustments in
accordance with anti-dilution provisions. Conversion is automatic immediately
upon the closing of a firm commitment underwritten public offering in which the
gross proceeds raised exceed $25 million.
Warrant
In January 2000, the Company granted a fully exercisable warrant to purchase
11,250 shares of series C convertible preferred stock for $6.00 per share in
connection with an equipment lease agreement (see Note 7). Such warrants were
outstanding as of March 31, 2000 and expire 10 years after issuance. The fair
value of the warrants was $176,000, calculated based upon the Black-Scholes
option pricing model using $18.75 as the fair value of the underlying
convertible preferred stock and the following weighted average assumptions: no
dividends; contractual life of 10 years; risk-free interest rate of 6.6%; and
expected volatility of 75%. This amount will be amortized ratably over the term
of the equipment lease agreement.
Stock Plans
1998 Equity Incentive Plan
The Company is authorized to issue up to 19,520,000 shares of common stock
in connection with its 1998 Equity Incentive Plan (the Incentive Plan) to
directors, employees and consultants. The Incentive Plan provides for the
issuance of stock purchase rights, incentive stock options or nonstatutory
stock options.
F-15
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes to Financial Statements--(continued)
The stock purchase rights are subject to a restricted stock purchase
agreement whereby the Company has the right to repurchase the stock upon the
voluntary or involuntary termination of the purchaser's employment from the
Company at the original issuance price. The Company's repurchase right lapses
at a rate determined by the board of directors, but at a minimum rate of 25%
per year. Through March 31, 2000, the Company has issued 13,813,000 shares
under restricted stock purchase agreements, of which 3,334,000 shares are no
longer subject to repurchase rights, 542,000 shares have been repurchased and
9,937,000 shares are subject to repurchase at a weighted average price of $0.20
per share.
Under the Incentive Plan, the exercise price for incentive stock options is
at least 100% of the stock's fair market value on the date of grant for
employees owning 10% or less of the voting power of all classes of stock, and
at least 110% of the fair market value on the date of grant for employees
owning more than 10% of the voting power of all classes of stock. For
nonstatutory stock options, the exercise price is also at least 110% of the
fair market value on the date of grant for employees owning more than 10% of
the voting power of all classes of stock and no less than 85% for employees
owning 10% or less of the voting power of all classes of stock.
The Incentive Plan is administered by the board of directors, which has the
authority to designate participants, determine the number and type of options
to be granted, the time at which options are exercisable, the method of payment
and any other terms or conditions of the options. Options generally have a term
of 10 years and become exercisable immediately, and vest at 25% upon completion
of one year of service from the vesting commencement date and ratably over the
next 36 months.
Activity under the Incentive Plan is as follows (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
June 5, 1998
(Inception) to Year Ended Three Months Ended
December 31, 1998 December 31, 1999 March 31, 2000
------------------ ------------------ ------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning
of period/year......... -- $ -- -- $ -- 4,248 $0.21
Granted................. 8,253 0.01 6,316 0.19 4,984 1.50
Exercised............... (8,253) (0.01) (1,676) 0.13 (3,884) 0.45
Canceled................ -- -- (392) 0.16 (40) 0.25
------ ------ ------
Outstanding, end of
period/year............ -- -- 4,248 0.21 5,308 1.25
====== ====== ======
Exercisable, end of
period/year............ -- -- 10 0.13 52 0.15
====== ====== ======
Weighted average fair
value of options
granted with exercise
prices equal to fair
value at date of
grant.................. 3,668 -- -- -- -- --
Weighted average fair
value of options
granted with exercise
price less than fair
value at date of
grant.................. 4,584 0.12 6,316 1.59 4,984 7.39
</TABLE>
F-16
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes to Financial Statements--(continued)
The following table summarizes information about stock options as of March
31, 2000 (option amounts in thousands):
<TABLE>
<CAPTION>
Options
Options Outstanding Exercisable
--------------------------------- -------------------
Weighted
Average
Remaining Weighted Weighted
Number Contractual Average Number Average
Exercise of Life Exercise of Exercise
Prices Options (Years) Price Options Price
-------- ------- ----------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
$0.13 386 9.29 $0.13 44 $0.13
0.25 650 9.50 0.25 8 0.25
1.50 4,272 9.92 1.50 -- --
----- ---
5,308 1.25 52 0.15
===== ===
</TABLE>
Stock Compensation
During the period from inception through December 31, 1998, the year ended
December 31, 1999, and during the three months ended March 31, 2000, the
Company issued options to certain employees under the Incentive Plan with
exercise prices below the amount subsequently determined to be the fair value
of the common stock at the date of grant for financial reporting purposes. In
accordance with the requirements of APB No. 25, the Company has recorded
deferred stock compensation for the differences between the exercise price of
the options and the deemed fair market value of the Company's stock at the date
of grant. The Company recorded deferred stock compensation of $516,000 and
$9,814,000 and $34,261,000 for the period from inception through December 31,
1998, the year ended December 31, 1999 and the three months ended March 31,
2000, respectively. The deferred stock compensation is being amortized on an
accelerated basis over the vesting period, generally four years, consistent
with the method described in FASB Interpretation No. 28.
For the year ended December 31, 1999 and the three months ended March 31,
2000, the Company granted 90,000 and 172,000 immediately vested and exercisable
common stock options, respectively, to non-employees and recorded related stock
compensation of $47,000 and $1,416,000, respectively. The recorded amounts
reflects the fair value of these stock options at their respective grant dates,
calculated based upon the Black-Scholes option pricing model using the fair
values of the underlying common stock on the grant dates and the following
weighted-average assumptions: no dividends; contractual life of 10 years; risk
free interest rate of 6.0%; and, expected volatility of 75%.
The amortization of deferred stock compensation, combined with the expense
associated with stock options granted to non-employees, relates to the
following items in the accompanying statements of operations (in thousands):
<TABLE>
<CAPTION>
Three
June 5, 1998 Months
(Inception) Ended
to Year Ended March 31,
December 31, December 31, -----------
1998 1999 1999 2000
------------ ------------ ---- ------
<S> <C> <C> <C> <C>
Cost of revenues.................... $-- $ 385 $ 4 $1,084
Sales and marketing................. 14 839 14 1,285
Research and development............ 33 882 59 2,126
General and administrative.......... 44 146 37 1,080
--- ------ ---- ------
$91 $2,252 $114 $5,575
=== ====== ==== ======
</TABLE>
F-17
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes to Financial Statements--(continued)
The Company has adopted the disclosure only provisions of SFAS No. 123. Had
compensation cost been determined based on the fair value at the grant date for
the awards for the period from inception through December 31, 1998, the year
ended December 31, 1999 and the three months ended March 31, 2000, the
Company's net loss would have been as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
June 5, 1998
(Inception) Three Months
to Year Ended Ended March 31,
December 31, December 31, -----------------
1998 1999 1999 2000
------------ ------------ ------- --------
<S> <C> <C> <C> <C>
Net loss:
As reported.................... $(1,145) $(9,928) $(1,362) $(11,381)
Pro forma...................... $(1,147) $(9,972) $(1,364) $(11,493)
Basic and diluted net loss per
common share:
As reported.................... $ (0.05) $ (0.43) $ (0.06) $ (0.45)
Pro forma...................... $ (0.05) $ (0.43) $ (0.06) $ (0.46)
</TABLE>
The fair value of each option granted was estimated on the date of grant
using the Black-Scholes option-pricing model, using the following assumptions:
no dividends, expected five year lives, and zero expected volatility for the
years ended December 31 1998 and 1999 and for the three months ended March 31,
2000; and risk-free interest rate of 4.9%, 5.7% and 6.6% for the period from
June 5, 1998 through December 31, 1998, the year ended December 31, 1999 and
the three months ended March 31, 2000, respectively.
Because the determination of the fair value of all options granted after the
Company becomes a public entity will include an expected volatility factor in
addition to the factors noted above, and because additional option grants are
expected to be made and options vest over several years, the above pro forma
disclosures are not representative of the pro forma effects on reported net
income or loss for future years.
10. Income Taxes
The differences between the income tax expense (benefit) computed at the
federal statutory rate and the Company's tax provision for all periods
presented primarily relate to net operating losses not benefited. The
individual components of the Company's deferred tax assets as of December 31,
1999 are as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets:
Accruals and reserves................................................. $ 1,353
Net operating loss carryforwards...................................... 1,693
Credit carryforwards.................................................. 579
Other................................................................. 89
-------
Total deferred tax assets........................................... 3,714
Less valuation allowance.............................................. (3,714)
-------
Net deferred tax assets............................................ $ --
=======
</TABLE>
Management has established a valuation allowance for the portion of deferred
tax assets for which realization is uncertain. The valuation allowance for
deferred tax assets as of January 19, 1999 was zero. The net change in the
total valuation allowance for the year ended December 31, 1999 was a increase
of $3,714,000.
F-18
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes to Financial Statements--(continued)
The Company has net operating loss carryforwards for federal and California
income tax purposes of approximately $4,287,000 and $2,172,000, respectively,
available to reduce future income subject to income taxes. The Company can
carryforward the net operating loss arising from the Subchapter C corporation
period, which began January 19, 1999. For the period the Company operated as a
limited liability company, the Company has elected to be treated as a
partnership for tax purposes. Therefore net operating losses incurred as a
flow-through entity prior to January 19, 1999 are not available to reduce
future income subject to income taxes.
As of December 31, 1999 the Company had research and other credit
carryforwards for federal and California income tax purposes of approximately
$374,000 and $205,000, respectively available to reduce future income taxes.
These credits expire in 2019.
The federal net operating loss carryforwards expire in 2019. The California
net operating loss carryforwards expire in 2004.
The Tax Reform Act of 1986 imposes restrictions on the utilization of net
operating loss and tax credit carryforwards in the event of an "ownership
change" as defined by the Internal Revenue Code. The Company's ability to
utilize its net operating loss and tax credit carryforwards is subject to
restriction pursuant to these provisions.
11. Significant Customer Information and Segment Reporting
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, establishes standards for the manner in which public companies
report information about operating segments in annual and interim financial
statements. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
The method for determining what information to report is based on the way
management organizes the operating segments within the Company for making
operating decisions and assessing financial performance.
The Company's chief operating decision-maker is considered to be the chief
executive officer ("CEO"). The CEO reviews financial information presented for
purposes of making operating decisions and assessing financial performance. The
financial information is identical to the information presented in the
accompanying statements of operations and the Company had no significant
foreign operations through December 31, 1999. For the three months ended March
31, 2000, revenues from a customer in the United Kingdom were $1,299,000 and
revenues from a customer in the Netherlands were $738,000. On this basis, the
Company is organized and operates in a single segment: the design, development
and marketing of software solutions.
Disaggregated product information is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months
Ended March 31,
December 31, ---------------
1999 1999 2000
------------ ------- -------
<S> <C> <C> <C>
Revenues:
License.......................................... $ 7,205 $ 25 $ 6,070
Service:
Consulting..................................... 3,664 216 4,083
Maintenance.................................... 363 -- 528
------- ------- -------
$11,232 $ 241 $10,681
======= ======= =======
</TABLE>
F-19
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes to Financial Statements--(continued)
Significant customer information is as follows:
<TABLE>
<CAPTION>
Percent of Total Revenues
----------------------------
Three Months
Ended Percent of Net
March 31, Accounts Receivable
Year Ended --------------- ----------------------
December 31, December 31, March 31,
1999 1999 2000 1999 2000
------------ ------ ------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Customer:
A......................... 19% 100%
B......................... 19%
C......................... 10%
D......................... 12% 11%
E......................... 30%
F......................... 12%
G......................... 10%
H......................... 16%
I......................... 10%
</TABLE>
One of the Company's directors sits on the board of directors of customer A
above.
12. Subsequent Events
Issuance of Warrant
On April 17, 2000, the Company issued a warrant to purchase 600,000 shares
of series C convertible preferred stock at $20.00 per share to a third party in
connection with a marketing arrangement. The warrant is exercisable at the end
of eight years. The fair value of the warrant will be capitalized and amortized
to sales and marketing expense over the four year term of the underlying
marketing agreement.
Stock Split and Amendment to Certificate of Incorporation
On April 24, 2000, the Company's board of directors authorized a two-for-one
common stock split in addition to the two-for-one common stock split described
in Note 9. All common share and per share information presented in these
financial statements have been retroactively adjusted to reflect this second
stock split.
On April 24, 2000, the Company's board of directors approved an increase to
the number of common shares authorized to 500,000,000 and to establish an
undesignated class of preferred stock with 5,000,000 authorized shares.
Amended and Restated Equity Incentive Plan
On April 24, 2000, the Company's board of directors approved the 2000 Equity
Incentive Plan, an amendment and restatement of the 1998 Equity Incentive Plan,
and increased the number of shares reserved by 9,480,000 shares of common
stock. All options available for grant under the 1998 Plan will be transferred
to the 2000 Plan on its effective date and will continue to have substantially
the same terms. The share will increase automatically to the greater of 5% of
the outstanding shares or the number of shares issued under the plan during the
prior 12 months.
F-20
<PAGE>
BLUE MARTINI SOFTWARE, INC.
Notes to Financial Statements--(Continued)
2000 Non-employee Directors' Stock Option Plan
On April 24, 2000, the Company's board of directors approved the 2000 Non-
employee Directors' Stock Option Plan under which 300,000 common shares have
been reserved for issuance. The Plan provides for non-employee director option
grants for 25,000 common shares upon the closing of the IPO or the date of
first election if later, option grants of 7,500 common shares annually and
annual option grants of 5,000 shares for committee members. The share will
increase automatically to the greater of 0.25% of the outstanding shares or the
number of shares issued under the plan during the prior 12 months.
2000 Employee Stock Purchase Plan
On April 24, 2000, the Company's board of directors approved the 2000
Employee Stock Purchase Plan under which 4,000,000 shares have been reserved
for issuance. The 2000 Employee Stock Purchase Plan contains successive six-
month offering periods and the share price of stock purchased under the plan is
85% of the lower of the fair value of the common stock either at the beginning
or the end of the period. The share reserve will increase automatically to the
greater of 2.5% of outstanding shares or the number of shares issued under this
plan during the prior 12 months.
Initial Public Offering and Unaudited Pro Forma Balance Sheet Information
On April 24, 2000, the Company's board of directors authorized the filing of
a registration statement with the Securities and Exchange Commission that would
permit the Company to sell shares of the Company's common stock in connection
with a proposed initial public offering. If the offering is consummated under
the terms presently anticipated, all the then outstanding shares of the
Company's convertible preferred stock will automatically convert into shares of
common stock on a four-for-one basis upon the closing of the proposed initial
public offering. The unaudited pro forma stockholders' equity information
presented in the historical balance sheet reflects the conversion of all of the
convertible preferred stock as if it had occurred on March 31, 2000.
F-21
<PAGE>
[INSIDE BACK COVER ART WORK]
Our software enables e-businesses to build their brands by interacting
directly with customers across multiple touch points. Our software integrates
capabilities to manage products and content, execute transactions, perform
analyses and to subsequently utilize these analyses to personalize future
customer interactions. Companies use our software to interact with customers
across traditional and Internet-enabled touch points, such as websites, call
centers, mobile wireless devices, bricks and mortar stores and on-line trading
exchanges. We target our software to customers in the retail, manufacturing,
financial services, telecom, media, and travel industries.
A diagram depicts our product features, customer touch points and industries.
in the center of a diagram is a pentagon listing our products features of
"Merchandise," "Content," "Transaction," "Analysis" and "Personalization." The
pentagon is in the middle of a square with "Websites," "Contact Centers,"
"Bricks & Mortar" and "Trading Networks" in each corner. The square is
circumscribed by an outer circle containing the word "Brand." The outer circle
has the labels "eMerchandising," "eMarketing," and "eService." The outer circle
is surrounded by ovals listing our target markets: "Retail," " Financial
Services," "Media," "Travel," "Telecom," and "Manufacturing."
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this Prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Financial Data.................................................. 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 31
Management............................................................... 47
Certain Transactions..................................................... 60
Principal Stockholders................................................... 62
Description of Capital Stock............................................. 64
Shares Eligible for Future Sale.......................................... 68
Underwriting............................................................. 71
Legal Matters............................................................ 73
Experts.................................................................. 73
Where You Can Find More Information...................................... 73
Index to Financial Statements............................................ F-1
</TABLE>
----------------
Through and including , 2000 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a
prospectus when acting as an underwriter and with respect to an unsold
allotment or subscription.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
Blue Martini Software, Inc.
Common Stock
----------------
PROSPECTUS
----------------
Goldman, Sachs & Co.
Dain Rauscher Wessels
Thomas Weisel Partners LLC
U.S. Bancorp Piper Jaffray
Representatives of the Underwriters
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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 of the
amounts shown are estimates, except for the SEC registration fee, the NASD
filing fee and the Nasdaq National Market application fee.
<TABLE>
<CAPTION>
Amount to
be Paid
----------
<S> <C>
SEC Registration Fee............................................. $ 19,800
NASD Filing Fee.................................................. 8,000
Nasdaq National Market Listing Application Fee................... 90,000
Blue Sky Qualification Fees and Expenses......................... 5,000
Printing and Engraving Expenses.................................. 300,000
Legal Fees and Expenses.......................................... 800,000
Accounting Fees and Expenses..................................... 500,000
Transfer Agent and Registrar Fees................................ 25,000
Miscellaneous.................................................... 152,200
----------
Total.......................................................... $1,900,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
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 of 1933, as amended (the "Securities Act").
The Registrant's Restated Certificate of Incorporation and Bylaws include
provisions to (i) eliminate the personal liability of its directors and
officers 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 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
II-1
<PAGE>
and the Registrant and for improper distributions to stockholders 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 intends to enter into indemnity agreements with each of its
directors and officers that require the Registrant to indemnify such persons
against expenses, judgments, fines, settlements and other amounts incurred
(including expenses of a derivative action) in connection with any 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 or an officer 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 or officer 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
Information presented in this section is on an as converted basis, and as if
issued by the Registrant. Since the Registrant's inception in June 1998, the
Company has issued and sold the following unregistered securities:
(1) From June 1998 to January 12, 1999 the Company issued an aggregate of
30,252,500 shares of its common stock at a weighted average exercise price of
$0.01 per share to employees, consultants, directors and other service
providers pursuant to its 1998 Equity Incentive Plan. These sales were made in
reliance on Rule 701 and Section 4(2).
(2) From July 1998 through November 1998, the Company issued 4,464,284
shares of its series A preferred stock at a purchase price of $0.28 per share
to Monte Zweben, Thomas M. Siebel and GC&H Investments. These sales were made
in reliance on Regulation D and Section 4(2).
(3) In January 1999, the Company issued 30,252,500 shares of its common
stock to Monte Zweben, James C. Gaither, Thomas M. Siebel, A. Michael Spence,
William F. Zuendt, William H. Evans, Scott D. Hanham, Jeffrey G. Johnson and 17
employees, consultants and directors and 4,464,284 shares of its series A
preferred stock to Monte Zweben, Thomas M. Siebel and GC&H Investments. These
issuances were made in reliance on Section 4(2).
(4) In January 1999, the Company issued 10,526,316 shares of its series B
preferred stock at a purchase price of $0.475 per share for an aggregate
purchase price of $5,000,000 to Matrix Partners V, Matrix V Entrepreneurs Fund,
the Zweben Family Revocable Trust, the Zuendt Family Trust and three other
investors. These sales were made in reliance on Rule 506 of Regulation D and
Section 4(2).
(5) In July 1999, the Company issued 8,306,664 shares of its series C
preferred stock at a purchase price of $1.50 per shares of an aggregate price
of $12,459,996 to ACII Technology (ACT II) B.V., Matrix Partners V, Matrix V
Entrepreneurs Fund, U.S. Venture Partners VI, USVP VI Affiliates Fund, USVP VI
Entrepreneur Partners and the Zweben Family Revocable Trust. These sales were
made in reliance on Rule 506 of Regulation D and Section 4(2).
II-2
<PAGE>
(6) In December 2000, the Company issued a warrant to purchase 45,000 shares
of its series C preferred stock at an exercise price of $1.50 per share to
Comdisco, Inc. This sale was made in reliance on Regulation D and Section 4(2).
(7) From January 13, 1999 through April 15, 2000, the Company granted
options to purchase 12,547,400 shares of common stock at a weighted average
exercise price of $1.29 per share to employees, consultants, directors and
other service providers pursuant to its 1998 Equity Incentive Plan and issued
an aggregate of 6,294,500 shares of its common stock at a weighted average
exercise price of $0.40 per share to employees, consultants, directors and
other service providers pursuant to exercises of options granted under the 1998
Equity Incentive Plan. These shares were made in reliance on Rule 701 and
Section 4(2).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Third Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Form of Fourth Amended and Restated Certificate of Incorporation of
the Registrant to be filed immediately following the closing of the
offering made hereby.
3.3 Bylaws of the Registrant.
3.4 Bylaws of the Registrant to be filed on the closing of the offering
made hereby.
4.1* Specimen Stock Certificate.
4.2 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4 hereof.
5.1* Opinion of Cooley Godward LLP.
10.1 2000 Equity Incentive Plan.
10.2 2000 Employee Stock Purchase Plan.
10.3 2000 Non-Employee Directors' Stock Option Plan.
10.4 Commercial Office Lease Agreement by and between Peninsula Office Park
Associates, L.P. and Blue Martini, LLC, as Amended.
10.5 Agreement and Plan of Merger by and between the Registrant and Blue
Martini LLC dated January 12, 1999.
10.6 Form of Class A Units Agreement by and between the Registrant and
certain investors of the Registrant.
10.7 Form of Restricted Class B Units Agreement by and between the
Registrant and certain investors of the Registrant.
10.8 Series B Preferred Stock Purchase Agreement by and between the
Registrant and certain investors of the Registrant dated January 13,
1999.
10.9 Series C Preferred Stock Purchase Agreement by and between the
Registrant and certain investors of the Registrant dated July 20,
1999.
10.10 Investor Rights Agreement by and between the Registrant and certain
investors of the Registrant dated July 20, 1999.
10.11 Form of Indemnity Agreement by and between the Registrant and each of
its directors and executive officers.
10.12+ License and Marketing Agreement by and between the Registrant and
Neuron Data, Inc., now Blaze Software, Inc., dated March 31, 1999.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
10.13+ ISV Software and License Agreement between the Registrant and BEA
Systems, Inc. dated January 29, 1999.
10.14 Agreement by and between the Registrant and John E. Calonico, Jr.
10.15* Blue Martini Software Training Facility Agreement between the
Registrant and Diversified Computer Consultants of California, Inc.
dated March 1, 2000.
10.16* Master Lease Agreement between the Registrant and Comdisco, Inc. dated
December 6, 1999.
23.1 Consent of KPMG LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. See Signature Page.
27.1 Financial Data Schedule.
</TABLE>
- --------
+ Confidential treatment requested with respect to certain portions of this
exhibit. Omitted portions have been filed separately with the Securities and
Exchange Commission.
* To be filed by amendment.
(b) Financial Statement Schedules
Financial statement schedules are omitted as the information called for is
not required or is shown either in the financial statements of the notes
thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to provisions described in Item 14 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 Act of
1933 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) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of San Mateo,
County of San Mateo, State of California, on May 2, 2000.
/s/ Monte Zweben
By: _________________________________
Monte Zweben
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Monte Zweben and John E. Calonico, Jr. 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, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ Monte Zweben Chairman and President, May 2, 2000
____________________________________ Chief Executive Officer
Monte Zweben (Principal Executive
Officer)
/s/ John E. Calonico, Jr. Vice President, Chief May 2, 2000
____________________________________ Financial Officer and
John E. Calonico, Jr. Secretary (Principal
Financial and Accounting
Officer)
/s/ James C. Gaither Director May 2, 2000
____________________________________
James C. Gaither
/s/ A. Michael Spence Director May 2, 2000
____________________________________
A. Michael Spence
/s/ Andrew W. Verhalen Director May 2, 2000
____________________________________
Andrew W. Verhalen
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ Edward H. Vick Director May 2, 2000
____________________________________
Edward H. Vick
/s/ William F. Zuendt Director May 2, 2000
____________________________________
William F. Zuendt
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Third Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Form of Fourth Amended and Restated Certificate of Incorporation of
the Registrant to be filed immediately following the closing of the
offering made hereby.
3.3 Bylaws of the Registrant.
3.4 Bylaws of the Registrant to be filed on the closing of the offering
made hereby.
4.1* Specimen Stock Certificate.
4.2 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4 hereof.
5.1* Opinion of Cooley Godward LLP.
10.1 2000 Equity Incentive Plan.
10.2 2000 Employee Stock Purchase Plan.
10.3 2000 Non-Employee Directors' Stock Option Plan.
10.4 Commercial Office Lease Agreement by and between Peninsula Office Park
Associates, L.P. and Blue Martini, LLC.
10.5 Agreement and Plan of Merger by and between the Registrant and Blue
Martini LLC dated January 12, 1999.
10.6 Form of Class A Units Agreement by and between the Registrant and
certain investors of the Registrant.
10.7 Form of Restricted Class B Units Agreement by and between the
Registrant and certain investors of the Registrant.
10.8 Series B Preferred Stock Purchase Agreement by and between the
Registrant and certain investors of the Registrant dated January 13,
1999.
10.9 Series C Preferred Stock Purchase Agreement by and between the
Registrant and certain investors of the Registrant dated July 20,
1999.
10.10 Investor Rights Agreement by and between the Registrant and certain
investors of the Registrant dated July 20, 1999.
10.11 Form of Indemnity Agreement by and between the Registrant and each of
its directors and executive officers.
10.12+ License and Marketing Agreement by and between the Registrant and
Neuron Data, Inc., now Blaze Software, Inc., dated March 31, 1999.
10.13+ ISV Software and License Agreement between the Registrant and BEA
Systems, Inc. dated January 29, 1999.
10.14 Agreement by and between the Registrant and John E. Calonico, Jr.
10.15* Blue Martini Software Training Facility Agreement between the
Registrant and Diversified Computer Consultants of California, Inc.
dated March 1, 2000.
10.16* Master Lease Agreement between the Registrant and Comdisco, Inc. dated
December 6, 1999.
23.1 Consent of KPMG LLP.
23.2* Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. See Signature Page.
27.1 Financial Data Schedule.
</TABLE>
- --------
+ Confidential treatment requested with respect to certain portions of this
exhibit. Omitted portions have been filed separately with the Securities and
Exchange Commission.
* To be filed by amendment.
<PAGE>
Exhibit 3.1
THIRD RESTATED CERTIFICATE OF INCORPORATION
OF
BLUE MARTINI SOFTWARE, INC.
Monte Zweben and John E. Calonico, Jr. hereby certify that:
ONE: The original name of this corporation is Blue Martini Software, Inc.
and the date of filing the original Certificate of Incorporation of this
corporation with the Secretary of State of the State of Delaware is January 12,
1999.
TWO: They are the duly elected and acting President and Secretary,
respectively, of Blue Martini Software, Inc., a Delaware corporation.
THREE: The Certificate of Incorporation of this corporation is hereby
restated to read as follows:
I.
The name of the corporation is Blue Martini Software, Inc. (the
"Corporation" or the "Company").
II.
The address of the registered office of the Corporation in the State of
Delaware is:
1013 Centre Road
City of Wilmington, DE 19805
County of New Castle
The name of the Corporation's registered agent at said address is
Corporation Service Company.
III.
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. 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 one hundred ten
million two hundred thousand (110,200,000) shares, one hundred three million
(103,000,000) shares of which shall be Common Stock (the "Common Stock") and
seven million two hundred thousand (7,200,000) shares of which shall be
Preferred Stock (the "Preferred Stock"). The Preferred Stock shall have a par
value of one tenth of one cent ($0.001) per share, and the Common Stock shall
have a par value of one tenth of one cent ($0.001) per share.
1.
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B. Upon the filing of this Third Restated Certificate of Incorporation,
each outstanding share of Common Stock shall be split and reconstituted as two
shares of Common Stock.
C. The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares of Common Stock then outstanding)
by the affirmative vote of the holders of a majority of the stock of the
Corporation (voting together on an as-if-converted basis).
D. The Preferred Stock may be issued from time to time in one or more
series. Subject to Section 2(b) below, the Board of Directors is hereby
authorized, within the limitations and restrictions stated in this Certificate
of Incorporation, to fix or alter the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock, and the number of shares constituting any such series and the designation
thereof, or any of them; and to increase or decrease the number of shares of any
series prior or subsequent to the issue of shares of that series, but not below
the number of shares of such series then outstanding. In case the number of
shares of any series shall be so decreased, the shares constituting such
decrease shall resume the status which they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
E. Two million (2,000,000) of the authorized shares of Preferred Stock
are hereby designated Series A Preferred Stock ("Series A Preferred"). Three
million (3,000,000) of the authorized shares of Preferred Stock are hereby
designated Series B Preferred Stock ("Series B Preferred"). Two million two
hundred thousand (2,200,000) of the authorized shares of Preferred Stock are
hereby designated Series C Preferred Stock ("Series C Preferred"). The Series A
Preferred, the Series B Preferred and the Series C Preferred are hereinafter
collectively referred to as the "Series Preferred."
F. The rights, preferences, privileges, restrictions and other matters
relating to the Series Preferred are as follows:
1. Dividend Rights.
(a) Subject to the rights of any series of Preferred Stock that
may from time to time come into existence, the Holders of Series Preferred, in
preference to the holders of any other stock of the Company ("Junior Stock"),
shall be entitled to receive, when and as declared by the Board of Directors,
but only out of funds that are legally available therefor, cash dividends at the
rate of eight percent (8%) of the applicable Original Issue Price (as defined
below) per annum on each outstanding share of Series Preferred (as adjusted for
any stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares). The "Original Issue Price" of the Series A Preferred
shall be one dollar and twelve cents ($1.12), the "Original Issue Price" of the
Series B Preferred shall be one dollar and ninety cents ($1.90) and the
"Original Issue Price" of the Series C Preferred shall be six dollars ($6.00).
Such dividends shall be payable only when, as and if declared by the Board of
Directors and shall be non-cumulative.
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(b) So long as any shares of Series Preferred shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Company be purchased, redeemed, or
otherwise acquired for value by the Company (except for acquisitions of Common
Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer) until
all dividends (set forth in Section 1(a) above) on the Series Preferred shall
have been paid or declared and set apart. In the event dividends are paid on any
share of Common Stock, an additional dividend shall be paid with respect to all
outstanding shares of Series Preferred in an amount equal per share (on an
as-if-converted to Common Stock basis) to the amount paid or set aside for each
share of Common Stock. The provisions of this Section 1(b) shall not, however,
apply to (i) a dividend payable in Common Stock, (ii) the acquisition of shares
of any Junior Stock in exchange for shares of any other Junior Stock, or (iii)
any repurchase of any outstanding securities of the Company that is unanimously
approved by the Company's Board of Directors.
2. Voting Rights.
(a) General Rights. Except as otherwise provided herein or as
required by law, the Series Preferred shall be voted equally with the shares of
the Common Stock of the Company and not as a separate class, at any annual or
special meeting of stockholders of the Company, and may act by written consent
in the same manner as the Common Stock, in either case upon the following basis:
each holder of shares of Series Preferred shall be entitled to such number of
votes as shall be equal to the whole number of shares of Common Stock into which
such holder's aggregate number of shares of Series Preferred are convertible
(pursuant to Section 4 hereof) immediately after the close of business on the
record date fixed for such meeting or the effective date of such written
consent.
(b) Separate Vote of Series Preferred. Subject to the rights of any
series of Preferred Stock which may from time to time come into existence, for
so long as at least twenty percent (20%) shares of the Series Preferred (subject
to adjustment for any stock split, reverse stock split or other similar event
affecting the Series Preferred) issued on or after the Original Issue Date (as
defined below) remain outstanding, in addition to any other vote or consent
required herein or by law, the vote or written consent of the holders of at
least a majority of the outstanding Series Preferred shall be necessary for
effecting or validating the following actions:
(i) Any amendment, alteration, or repeal of any provision of
the Certificate of Incorporation or the Bylaws of the Company (including any
filing of a Certificate of Designation), that adversely alters or changes the
rights, preferences, or other special privileges or restrictions of the Series
Preferred;
(ii) Any increase or decrease (other than by redemption or
conversion) in the authorized number of shares of Series Preferred;
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(iii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking senior to
the Series Preferred in right of redemption, liquidation preference, voting or
dividends or any increase in the authorized or designated number of any such new
class or series; or
(iv) Any redemption, repurchase, payment of dividends or other
distributions with respect to Junior Stock (except for acquisitions of Common
Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer).
(c) Election of Board of Directors. For so long as at least twenty
percent (20%) of the shares of the Series Preferred remain outstanding (subject
to adjustment for any stock split, reverse stock split or similar event
affecting the Series Preferred) and the authorized size of the Company's Board
of Directors is six (6) or more, (i) the holders of Series B Preferred, voting
as a separate class, shall be entitled to elect one (1) member of the Company's
Board of Directors at each meeting or pursuant to each consent of the Company's
stockholders for the election of directors, and to remove from office such
director and to fill any vacancy caused by the resignation, death or removal of
such director; (ii) the holders of Common Stock, voting as a separate class,
shall be entitled to elect one (1) member of the Board of Directors at each
meeting or pursuant to each consent of the Company's stockholders for the
election of directors, and to remove from office such director and to fill any
vacancy caused by the resignation, death or removal of such director; and (iii)
the holders of Common Stock and Series Preferred, voting together as a single
class on an as-if-converted basis, shall be entitled to elect all remaining
members of the Board of Directors at each meeting or pursuant to each consent of
the Company's stockholders for the election of directors, and to remove from
office such directors and to fill any vacancy caused by the resignation, death
or removal of such directors. 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 of the
California General Corporation Law ("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 such stockholder desires. 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.
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(d) Removal.
(i) 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.
(ii) 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 (d)(i) above shall not apply and the Board of Directors or any director
may be removed from office at any time (a) 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
(b) without cause by the affirmative vote of the holders of 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.
3. Liquidation Rights.
(a) Upon any liquidation, dissolution, or winding up of the Company,
whether voluntary or involuntary, before any distribution or payment shall be
made to the holders of any Junior Stock, subject to the rights of any series of
Preferred Stock that may from time to time come into existence, the holders of
Series Preferred shall be entitled to be paid out of the assets of the Company
an amount per share of Series Preferred equal to the applicable Original Issue
Price plus all declared and unpaid dividends on the Series Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) for each share of Series Preferred held by
them. If, upon any such liquidation, distribution, or winding up, the assets of
the Company shall be insufficient to make payment in full to all holders of
Series Preferred of the liquidation preference set forth in this Section 3(a),
subject to the rights of any series of Preferred Stock that may from time to
time come into existence, then such assets shall be distributed among the
holders of Series Preferred at the time outstanding, ratably in proportion to
the full amounts to which they would otherwise be respectively entitled.
(b) After the payment of the full liquidation preference of the
Series Preferred as set forth in Section 3(a) above, and any other distribution
that may be required with respect to any series of Preferred Stock that may from
time to time come into existence, the remaining assets of the Company legally
available for distribution, if any, shall be distributed ratably to the holders
of the Common Stock.
(c) The following events shall be considered a liquidation under this
Section:
5.
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(i) any consolidation or merger of the Company with or into
any other corporation or other entity or person, or any other corporate
reorganization or sale of voting control, in which the stockholders of the
Company immediately prior to such consolidation, merger or reorganization, own
less than fifty percent (50%) of the Company's voting power immediately after
such consolidation, merger or reorganization, or any transaction or series of
related transactions to which the Company is a party in which in excess of fifty
percent (50%) of the Company's voting power is transferred, excluding any
consolidation or merger effected exclusively to change the domicile of the
Company (an "Acquisition"); or
(ii) a sale, lease or other disposition of all or substantially
all of the assets of the Company (an "Asset Transfer").
(iii) In any of such events, if the consideration received by
this corporation is other than cash, its value will be deemed its fair market
value as determined in good faith by the Board of Directors. Any securities
shall be valued as follows:
(A) Securities not subject to investment letter or
other similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or through
the Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such quotation system over the thirty (30)
day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty (30) day period ending three (3) days
prior to the closing; and
(3) If there is no active public market, the
value shall be the fair market value thereof, as determined by the Board of
Directors.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (A) (1), (2) or (3) to reflect the approximate fair
market value thereof, as determined by the Board of Directors.
4. Conversion Rights.
The holders of the Series Preferred shall have the following rights
with respect to the conversion of the Series Preferred into shares of Common
Stock (the "Conversion Rights"):
(a) Optional Conversion. Subject to and in compliance with the
provisions of this Section 4, any shares of Series Preferred may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
applicable Series Preferred shall be entitled
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upon conversion shall be the product obtained by multiplying the applicable
"Series Preferred Conversion Rate" then in effect (determined as provided in
Section 4(b)) by the number of shares of Series Preferred being converted.
(b) Series Preferred Conversion Rate. The conversion rate in effect
at any time for conversion of the Series Preferred (the "Series Preferred
Conversion Rate") shall be the quotient obtained by dividing the applicable
Original Issue Price of the Series Preferred by the applicable "Series Preferred
Conversion Price," calculated as provided in Section 4(c).
(c) Series Preferred Conversion Price. The conversion price for the
Series Preferred shall initially be the applicable Original Issue Price of the
Series Preferred (the "Series Preferred Conversion Price"). Such initial Series
Preferred Conversion Price shall be adjusted from time to time in accordance
with this Section 4. All references to the Series Preferred Conversion Price
herein shall mean the Series Preferred Conversion Price as so adjusted.
(d) Mechanics of Conversion. Each holder of Series Preferred who
desires to convert the same into shares of Common Stock pursuant to this Section
4 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Company or any transfer agent for the Series Preferred, and
shall give written notice to the Company at such office that such holder elects
to convert the same. Such notice shall state the number of shares of Series
Preferred being converted. Thereupon, the Company shall promptly issue and
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay (i) in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board of Directors as of the date of such conversion), any
declared and unpaid dividends on the shares of Series Preferred being converted
and (ii) in cash (at the Common Stock's fair market value determined by the
Board of Directors as of the date of conversion) the value of any fractional
share of Common Stock otherwise issuable to any holder of Series Preferred. Such
conversion shall be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of Series
Preferred to be converted, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Common Stock on such date.
(e) Adjustment for Stock Splits and Combinations. If the Company
shall at any time or from time to time after the date that the first share of
Series C Preferred Stock is issued (the "Original Issue Date") effect a
subdivision of the outstanding Common Stock without a corresponding subdivision
of the Preferred Stock, the applicable Series Preferred Conversion Price in
effect immediately before that subdivision shall be proportionately decreased.
Conversely, if the Company shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock into a
smaller number of shares without a corresponding combination of the Preferred
Stock, the applicable Series Preferred Conversion Price in effect immediately
before the combination shall be proportionately increased. Any adjustment under
this Section 4(e) shall become effective at the close of business on the date
the subdivision or combination becomes effective.
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(f) Adjustment for Common Stock Dividends and Distributions. If the
Company at any time or from time to time after the Original Issue Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, in each such event the applicable Series Preferred Conversion Price that
is then in effect shall be decreased as of the time of such issuance or, in the
event such record date is fixed, as of the close of business on such record
date, by multiplying the applicable Series Preferred Conversion Price then in
effect by a fraction (i) the numerator of which is the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and (ii) the denominator
of which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in payment of
such dividend or distribution; provided, however, that if such record date is
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the applicable Series Preferred Conversion
Price shall be recomputed accordingly as of the close of business on such record
date and thereafter the applicable Series Preferred Conversion Price shall be
adjusted pursuant to this Section 4(f) to reflect the actual payment of such
dividend or distribution.
(g) Adjustment for Reclassification, Exchange and Substitution. If at
any time or from time to time after the Original Issue Date, the Common Stock
issuable upon the conversion of the Series Preferred is changed into the same or
a different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 3(c) or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 4), in any such event each holder
of Series Preferred shall have the right thereafter to convert such stock into
the kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Series
Preferred could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
(h) Reorganizations, Mergers, Consolidations or Sales of Assets. If
at any time or from time to time after the Original Issue Date, there is a
capital reorganization of the Common Stock (other than an Acquisition or Asset
Transfer as defined in Section 3(c) or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 4), as a part of such capital reorganization,
provision shall be made so that the holders of the Series Preferred shall
thereafter be entitled to receive upon conversion of the Series Preferred the
number of shares of stock or other securities or property of the Company to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization, subject to
adjustment in respect of such stock or securities by the terms thereof. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of Series
Preferred after the capital reorganization to the end that the provisions of
this Section 4 (including adjustment of the applicable Series Preferred
Conversion Price then in
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effect and the number of shares issuable upon conversion of the Series
Preferred) shall be applicable after that event and be as nearly equivalent as
practicable.
(i) Certificate of Adjustment. In each case of an adjustment or
readjustment of the applicable Series Preferred Conversion Price for the number
of shares of Common Stock or other securities issuable upon conversion of the
Series Preferred, if the Series Preferred is then convertible pursuant to this
Section 4, the Company, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of Series Preferred
at the holder's address as shown in the Company's books. The certificate shall
set forth such adjustment or readjustment, showing in detail the facts upon
which such adjustment or readjustment is based, including, as applicable, a
statement of (i) the applicable Series Preferred Conversion Price at the time in
effect and (ii) the type and amount, if any, of other property which at the time
would be received upon conversion of the Series Preferred.
(j) Notices of Record Date. Upon (i) any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or (ii) any Acquisition (as defined in Section 3(c)) or other
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company, any merger or consolidation of the Company
with or into any other corporation, or any Asset Transfer (as defined in Section
3(c)), or any voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to each holder of Series Preferred at least
ten (10) days prior to the record date specified therein (or such shorter period
approved by a majority of the outstanding Series Preferred) a notice specifying
(A) the date on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution, (B)
the date on which any such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or
winding up is expected to become effective, and (C) the date, if any, that is to
be fixed as to when the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up.
(k) Automatic Conversion.
(i) Each share of Series Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective applicable
Series Preferred Conversion Price, (A) at any time upon the affirmative election
of the holders of at least a majority of the outstanding shares of the Series
Preferred, or (B) immediately upon the closing of a firmly 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 for the
account of the Company in which the gross cash proceeds to the Company (before
underwriting discounts, commissions and fees) are at least twenty five million
dollars ($25,000,000). Upon
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such automatic conversion, any declared and unpaid dividends shall be paid in
accordance with the provisions of Section 4(d).
(ii) Upon the occurrence of either of the events specified in
Section 4(k)(i) above, the outstanding shares of Series Preferred shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; provided, however, that the Company shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless the certificates evidencing such shares of
Series Preferred are either delivered to the Company or its transfer agent as
provided below, or the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates. Upon the occurrence of such automatic
conversion of the Series Preferred, the holders of Series Preferred shall
surrender the certificates representing such shares at the office of the Company
or any transfer agent for the Series Preferred. Thereupon, there shall be issued
and delivered to such holder promptly at such office and in its name as shown on
such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of Series Preferred
surrendered were convertible on the date on which such automatic conversion
occurred, and any declared and unpaid dividends shall be paid in accordance with
the provisions of Section 4(d).
(l) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of Series Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
(m) Reservation of Stock Issuable upon Conversion. The Company 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 the Series Preferred, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series Preferred, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
(n) Notices. Any notice required by the provisions of this Section 4
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (iii) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written
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verification of receipt. All notices shall be addressed to each holder of record
at the address of such holder appearing on the books of the Company.
(o) Payment of Taxes. The Company will pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series Preferred
so converted were registered.
(p) No Dilution or Impairment. Without the consent of the holders of
then outstanding Series Preferred as required under Section 2(b), the Company
shall not amend its Second Restated Certificate of Incorporation or participate
in any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or take any other voluntary action, for the purpose
of avoiding or seeking to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but shall at all
times in good faith assist in carrying out all such action as may be reasonably
necessary or appropriate in order to protect the conversion rights of the
holders of the Series Preferred against dilution or other impairment. This
provision shall not restrict the Company's right to amend its Certificate of
Incorporation with the requisite stockholder consent.
5. No Reissuance of Series Preferred.
No share or shares of Series Preferred acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued.
V.
A. The liability of the directors for monetary damages shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of Investors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as it may be so amended.
B. This corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the CGCL) for breach of duty to the corporation
and its shareholders through bylaw provisions or through agreements with the
agents, or through shareholder resolutions, or otherwise, in excess of the
indemnification otherwise permitted by Section 317 of the CGCL, subject, at any
time or times that the corporation is subject to Section 2115(b) of the CGCL, to
the limits on such excess indemnification set forth in Section 204 of the CGCL.
C. The holders of the Series Preferred expressly waive their rights, if
any, as described in Sections 502, 503 and 506 of the CGCL as they relate to
repurchases of shares upon termination of employment or service as a consultant
or director.
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D. Any repeal or modification of this Article V shall only be prospective
and shall not effect the rights under this Article V in effect at the time of
the alleged occurrence of any action or omission to act giving rise to
liability.
VI.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by the Board
of Directors in the manner provided in the Bylaws.
B. Subject to the indemnification provisions in the Bylaws, the Board of
Directors may from time to time make, amend, supplement or repeal the Bylaws;
provided, however, that the stockholders may change or repeal any Bylaw adopted
by the Board of Directors by the affirmative vote of the percentage of holders
of capital stock as provided therein; and, provided further, that no amendment
or supplement to the Bylaws adopted by the Board of Directors shall vary or
conflict with any amendment or supplement thus adopted by the stockholders.
C. The directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide.
****
FOUR: This Third Restated Certificate of Incorporation has been duly
approved by the Board of Directors of this Corporation.
FIVE: This Third Restated Certificate of Incorporation has been duly
adopted in accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors and the
stockholders of the Corporation. The total number of outstanding shares
entitled to vote or act by written consent was Seventeen Million Nine Hundred
Sixteen Thousand Five Hundred (17,916,500) shares of Common Stock, One Million
One Hundred Sixteen Thousand Seventy-One (1,116,071) shares of Series A
Preferred, Two Million Six Hundred Thirty-One Thousand Five Hundred Seventy-Nine
(2,631,579) shares of Series B Preferred and Two Million Seventy-Six Thousand
Six Hundred Sixty-Six (2,076,666) shares of Series C Preferred. A majority of
the outstanding shares of Common Stock and a majority of the outstanding shares
of Preferred Stock approved this Third Restated Certificate of Incorporation by
written consent in accordance with Section 228 of the General Corporation Law of
the State of Delaware and written notice of such was given by the Corporation in
accordance with said Section 228.
12.
<PAGE>
In Witness Whereof, this Certificate has been subscribed this 28th day of
April, 2000 by the undersigned who affirms that the statements made herein are
true and correct.
/s/ Monte Zewben
-----------------------------------------
Monte Zweben
President
/s/ John E. Calonico Jr.
- ---------------------------------
John E. Calonico, Jr.
Secretary
13.
<PAGE>
Exhibit 3.2
FORM OF FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
BLUE MARTINI SOFTWARE, INC.
MONTE ZWEBEN and JOHN CALONICO hereby certify that:
ONE: The original name of this corporation is Blue Martini Software, Inc.
and the date of filing the original Certificate of Incorporation of
this corporation with the Secretary of State of the State of
Delaware is January 12, 1999.
TWO: They are the duly elected and acting President and Secretary,
respectively, of Blue Martini Software, Inc., a Delaware
corporation.
THREE: The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
I.
The name of the corporation is Blue Martini Software, Inc. (the
"Corporation" or the "Company").
II.
The address of the registered office of the Corporation in the State of
Delaware is:
Corporation Service Company
1013 Centre Road
Wilmington, DE 19805
County of New Castle
The name of the Corporation's registered agent at said address is
Corporation Service Company.
III.
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. 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 Five Hundred Five
Million (505,000,000) shares, Five Hundred Million (500,000,000) shares of which
shall be Common Stock (the "Common Stock") and Five Million (5,000,000) shares
of which shall be Preferred Stock (the "Preferred Stock").
1.
<PAGE>
The Preferred Stock shall have a par value of one-tenth of one cent ($0.001) per
share and the Common Stock shall have a par value of one-tenth of one cent
($0.001) per share.
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law
("DGCL"), to fix or alter from time to time the designation, powers, preferences
and rights of the shares of each such series and the qualifications,
limitations, or restrictions of any wholly unissued series of Preferred Stock,
and to establish from time to time the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. Management
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors that shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. Board of Directors
a. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
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 to the public (the "Initial
Public Offering"), the directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the Initial Public Offering, the term of
office of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
During such time or times that the corporation is subject to Section
2.
<PAGE>
2115(b) of the California General Corporation Law ("CGCL"), this Section A.2.a
of this Article V shall not be effective and Section A.2.b of this Article shall
apply.
b. In the event that the corporation is subject to Section
2115(b) of the CGCL, Section A.2.a of this Article V shall not apply and all
directors shall be shall be elected at each annual meeting of stockholders to
hold office until the next annual meeting.
c. 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 (i) is subject to Section 2115(b) of the CGCL and (ii)
is not a "listed" corporation or ceases to be a "listed" corporation under
Section 301.5 of the CGCL. During this time, 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 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.
Notwithstanding the foregoing provisions of this section, each director shall
serve until his successor is duly elected and qualified or until his death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
3. Removal of Directors
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 A.3.a. above shall no longer apply and removal shall be as provided in
Section 141(k) of the DGCL.
4. Vacancies
3.
<PAGE>
a. Subject to the rights of the holders of any series of
Preferred Stock, 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 the stockholders, except as
otherwise provided by law, 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, and not by the stockholders. 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.
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
DGCL.
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 by the
directors then in office who have been elected by stockholders shall constitute
less than a majority of the directors then in office, then
(i) 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
(ii) 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.
B.
1. Bylaw 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.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except (i) at an annual or special meeting of stockholders called in accordance
with the Bylaws or (ii) by
4.
<PAGE>
written consent of stockholders in accordance with the Bylaws prior to the
closing of the Initial Public Offering, and following the closing of the Initial
Public Offering no action shall be taken by the stockholders by written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be eliminated
to the fullest extent under applicable law.
B. This corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the CGCL) for breach of duty to the corporation and
its shareholders through bylaw provisions or through agreements with the agents,
or through shareholder resolutions, or otherwise, in excess of the
indemnification otherwise permitted by Section 317 of the CGCL, subject, at any
time or times the corporation is subject to Section 2115(b) to the limits on
such excess indemnification set forth in Section 204 of the CGCL.
C. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, following the closing of
the Initial Public Offering the affirmative vote of the holders 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, voting together as a single class,
shall be required to alter, amend or repeal Article V, VI or VII of this
Certificate of Incorporation.
* * * *
FOUR: This Fourth Amended and Restated Certificate of Incorporation has
been duly approved by the Board of Directors of this Corporation.
5.
<PAGE>
FIVE: This Fourth Amended and Restated Certificate of Incorporation has
been duly adopted in accordance with the provisions of Sections 228, 242 and 245
of the General Corporation Law of the State of Delaware by the Board of
Directors and the stockholders of the Corporation.
6.
<PAGE>
In Witness Whereof, Blue Martini Software, Inc. has caused this Fourth
Amended and Restated Certificate of Incorporation to be signed by the President
and the Secretary in San Mateo, California this _______ day of April 2000.
Blue Martini Software, Inc.
By:___________________________________
Monte Zweben
President
Attest:
By:________________________
John Calonico
Secretary
7.
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
BLUE MARTINI SOFTWARE, INC.
(A DELAWARE CORPORATION)
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I OFFICES............................................... 1
Section 1. Registered Office..................................... 1
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 Meeting........................................ 1
Section 6. Special Meetings...................................... 2
Section 7. Notice of Meetings.................................... 3
Section 8. Quorum................................................ 3
Section 9. Adjournment and Notice of Adjourned Meetings.......... 4
Section 10. Voting Rights......................................... 4
Section 11. Joint Owners of Stock................................. 4
Section 12. List of Stockholders.................................. 5
Section 13. Action Without Meeting................................ 5
Section 14. Organization.......................................... 5
ARTICLE IV DIRECTORS............................................. 6
Section 15. Number and Term of Office............................. 6
Section 16. Powers................................................ 6
Section 17. Term of Directors..................................... 6
Section 18. Vacancies............................................. 7
Section 19. Resignation........................................... 7
Section 20. Removal............................................... 8
Section 21. Meetings of the Board of Directors.................... 8
(a) Annual Meetings....................................... 8
(b) Regular Meetings...................................... 8
(c) Special Meetings...................................... 8
(d) Telephone Meetings.................................... 9
(e) Notice of Meetings.................................... 9
(f) Waiver of Notice...................................... 9
</TABLE>
i.
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 22. Quorum and Voting.................................... 9
Section 23. Action Without Meeting............................... 9
Section 24. Fees and Compensation................................ 10
Section 25. Committees........................................... 10
(a) Executive Committee.................................. 10
(b) Other Committees..................................... 10
(c) Term................................................. 10
(d) Meetings............................................. 11
Section 26. Organization......................................... 11
ARTICLE V OFFICERS................................................ 11
Section 27. Officers Designated.................................. 11
Section 28. Tenure and Duties of Officers........................ 11
(a) General.............................................. 11
(b) Duties of Chairman of the Board of Directors......... 12
(c) Duties of President.................................. 12
(d) Duties of Vice Presidents............................ 12
(e) Duties of Secretary.................................. 12
(f) Duties of Chief Financial Officer.................... 12
Section 29. Delegation of Authority.............................. 13
Section 30. Resignations......................................... 13
Section 31. Removal.............................................. 13
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF
SECURITIES OWNED BY THE CORPORATION..................... 13
Section 32. Execution of Corporate Instruments................... 13
Section 33. Voting of Securities Owned by the Corporation........ 13
ARTICLE VII SHARES OF STOCK...................................... 14
Section 34. Form and Execution of Certificates................... 14
Section 35. Lost Certificates.................................... 14
Section 36. Transfers............................................ 15
Section 37. Fixing Record Dates.................................. 15
Section 38. Registered Stockholders............................... 16
</TABLE>
ii.
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION................... 16
Section 39. Execution of Other Securities......................... 16
ARTICLE IX DIVIDENDS............................................. 17
Section 40. Declaration of Dividends.............................. 17
Section 41. Dividend Reserve...................................... 17
ARTICLE X FISCAL YEAR........................................... 17
Section 42. Fiscal Year........................................... 17
ARTICLE XI INDEMNIFICATION....................................... 17
Section 43. Indemnification of Directors, Executive Officers,
Other Officers, Employees and Other Agents............ 17
(a) Directors and Executive Officers...................... 17
(b) Other Officers, Employees and Other Agents............ 17
(c) Expenses.............................................. 18
(d) Enforcement........................................... 18
(e) Non-Exclusivity of Rights............................. 19
(f) Survival of Rights.................................... 19
(g) Insurance............................................. 19
(h) Amendments............................................ 19
(i) Saving Clause......................................... 19
(j) Certain Definitions................................... 19
ARTICLE XII NOTICES............................................... 20
Section 44. Notices............................................... 20
(a) Notice to Stockholders................................ 20
(b) Notice to Directors................................... 20
(c) Affidavit of Mailing.................................. 21
(d) Time Notices Deemed Given............................. 21
(e) Methods of Notice..................................... 21
(f) Failure to Receive Notice............................. 21
(g) Notice to Person with Whom Communication Is Unlawful.. 21
(h) Notice to Person with Undeliverable Address........... 21
</TABLE>
iii.
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE XIII AMENDMENTS............................................ 22
Section 45. Amendments.......................................... 22
ARTICLE XIV RIGHT OF FIRST REFUSAL................................ 22
Section 46. Right of First Refusal.............................. 22
ARTICLE XV LOANS TO OFFICERS..................................... 24
Section 47. Loans to Officers................................... 24
ARTICLE XVI MISCELLANEOUS......................................... 25
Section 48. Annual Report....................................... 25
</TABLE>
iv.
<PAGE>
BYLAWS
OF
BLUE MARTINI SOFTWARE, INC.
(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 Wilmington, County of New
Castle.
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 principal office of the corporation required
to be maintained pursuant to Section 2 hereof.
Section 5. Annual Meeting.
(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.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise
1.
<PAGE>
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the corporation.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not later than the close
of business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholders' meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
(c) 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
2.
<PAGE>
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 sixty (60) 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.
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 law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast in all matters other
than the election of directors, the affirmative vote of a majority of shares
present in person or represented by
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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
statute or by the Certificate of 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.
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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
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.
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 by the Board of Directors from time to time.
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 at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
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. Term of Directors.
(a) Subject to the rights of the holders of any class of Stock
to elect additional directors under specified circumstances, directors shall be
elected at each annual meeting of stockholders for a term of one year. Each
director shall serve until his successor is duly elected and qualified or until
his 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
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are otherwise entitled, or distribute the stockholder's votes on the same
principle among as many candidates as such stockholder thinks fit. No
stockholder, however, shall be entitled to so cumulate such stockholder's votes
unless (a) the names of such candidate or candidates have been placed in
nomination prior to the voting and (b) 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, all
stockholders may cumulate their votes for any candidates who have been properly
placed in nomination. 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
(S).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
(i) 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
(ii) the Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of the 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.
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
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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) Subject to any limitations imposed by applicable law (and
assuming the corporation is not subject to Section 2115 of the CGCL), 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 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.
(b) 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.
Section 21. Meetings of the Board of Directors.
(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 Directors and publicized
among all directors. No formal notice shall be required for a regular meeting 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
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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, postage 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, 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.
(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,
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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, 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 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.
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(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, 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 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
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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 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
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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.
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
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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 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.
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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 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) 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
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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.
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.
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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.
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
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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 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
officers 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
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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.
(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 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, the corporation or any other applicable law, 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 extent under 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,
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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.
(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
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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.
(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
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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 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, these Bylaws may be amended or repealed and new Bylaws adopted by a
majority of the stockholders entitled to vote. The Board of Directors shall also
have the power, if such power is conferred upon the Board of Directors by the
Certificate of Incorporation, to adopt, amend, or repeal Bylaws (including,
without limitation, the amendment of any Bylaw setting forth the number of
Directors who shall constitute the whole Board of Directors).
ARTICLE XIV
RIGHT OF FIRST REFUSAL
Section 46. Right of First Refusal. No stockholder shall sell, assign,
pledge, or in any manner transfer any of the shares of Common Stock of the
corporation or any right or interest therein, whether voluntarily or by
operation of law, or by gift or otherwise, except by a transfer which meets the
requirements hereinafter set forth in this bylaw:
(a) If the stockholder desires to sell or otherwise transfer any
of his shares of Common Stock, then the stockholder shall first give written
notice thereof to the corporation. The notice shall name the proposed transferee
and state the number of shares to be transferred, the proposed consideration,
and all other terms and conditions of the proposed transfer.
(b) For thirty (30) days following receipt of such notice, the
corporation shall have the option to purchase all (but not less than all) of the
shares specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the stockholder, the
corporation shall have the option to purchase a lesser portion of the shares
specified in said notice at the price and upon the terms set forth therein. In
the event of a gift, property settlement or other transfer in which the proposed
transferee is not paying the full price for the shares, and that is not
otherwise exempted from the provisions of this Section 46, the price shall be
deemed to be the fair market value of the stock at such time as determined in
good faith by the Board of Directors. In the event the corporation elects to
purchase all of the shares or, with consent of the stockholder, a lesser portion
of the shares, it shall give written notice to the transferring stockholder of
its election and settlement for said shares shall be made as provided below in
paragraph (d).
(c) The corporation may assign its rights hereunder.
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(d) In the event the corporation and/or its assignee(s) elect to
acquire any of the shares of the transferring stockholder as specified in said
transferring stockholder's notice, the Secretary of the corporation shall so
notify the transferring stockholder and settlement thereof shall be made in cash
within thirty (30) days after the Secretary of the corporation receives said
transferring stockholder's notice; provided that if the terms of payment set
forth in said transferring stockholder's notice were other than cash against
delivery, the corporation and/or its assignee(s) shall pay for said shares on
the same terms and conditions set forth in said transferring stockholder's
notice.
(e) In the event the corporation and/or its assignees(s) do not
elect to acquire all of the shares specified in the transferring stockholder's
notice, said transferring stockholder may, within the sixty-day period following
the expiration of the option rights granted to the corporation and/or its
assignees(s) herein, transfer the shares specified in said transferring
stockholder's notice which were not acquired by the corporation and/or its
assignees(s) as specified in said transferring stockholder's notice. All shares
so sold by said transferring stockholder shall continue to be subject to the
provisions of this bylaw in the same manner as before said transfer.
(f) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this bylaw:
(1) A stockholder's transfer of any or all shares held either
during such stockholder's lifetime or on death by will or intestacy to such
stockholder's immediate family or to any custodian or trustee for the account of
such stockholder or such stockholder's immediate family or to any limited
partnership of which the shareholder, members of such shareholder's immediate
family or any trust for the account of such shareholder or such shareholder's
immediate family will be the general of limited partner(s) of such partnership.
"Immediate family" as used herein shall mean spouse, lineal descendant, father,
mother, brother, or sister of the stockholder making such transfer.
(2) A stockholder's bona fide pledge or mortgage of any
shares with a commercial lending institution; provided that any subsequent
transfer of said shares by said institution shall be conducted in the manner set
forth in this bylaw.
(3) A stockholder's transfer of any or all of such
stockholder's shares to the corporation or to any other stockholder of the
corporation.
(4) A stockholder's transfer of any or all of such
stockholder's shares to a person who, at the time of such transfer, is an
officer or director of the corporation.
(5) A corporate stockholder's transfer of any or all of its
shares pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of shares or capital reorganization of the
corporate stockholder, or pursuant to a sale of all or substantially all of the
stock or assets of a corporate stockholder.
(6) A corporate stockholder's transfer of any or all of its
shares to any or all of its stockholders.
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(7) A transfer by a stockholder which is a limited or general
partnership to any or all of its partners or former partners.
In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this bylaw, and there
shall be no further transfer of such stock except in accord with this bylaw.
(g) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the stockholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the votes
represented by those shares to be transferred by the transferring stockholder).
This bylaw may be amended or repealed either by a duly authorized action of the
Board of Directors or by the stockholders, upon the express written consent of
the owners of a majority of the voting power of the corporation.
(h) Any sale or transfer, or purported sale or transfer, of
securities of the corporation shall be null and void unless the terms,
conditions, and provisions of this bylaw are strictly observed and followed.
(i) The foregoing right of first refusal shall terminate on either
of the following dates, whichever shall first occur:
(1) On January 11, 2009;
(2) Upon the date securities of the corporation are first
offered to the public pursuant to a registration statement filed with, and
declared effective by, the United States Securities and Exchange Commission
under the Securities Act of 1933, as amended.
(j) The certificates representing shares of stock of the
corporation shall bear on their face the following legend so long as the
foregoing right of first refusal remains in effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION
AND/OR ITS ASSIGNEE(S), AS PROVIDED IN THE BYLAWS OF THE
CORPORATION."
ARTICLE XV
LOANS TO OFFICERS
Section 47. 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
24.
<PAGE>
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.
ARTICLE XVI
MISCELLANEOUS
Section 48. Annual Report.
(a) Subject to the provisions of paragraph (b) of this Bylaw, the
Board of Directors shall cause an annual report to be sent to each stockholder
of the corporation not later than one hundred twenty (120) days after the close
of the corporation's fiscal year. Such report shall include a balance sheet as
of the end of such fiscal year and an income statement and statement of changes
in financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation. When there are more than
100 stockholders of record of the corporation's shares, as determined by Section
605 of the CGCL, additional information as required by Section 1501(b) of the
CGCL shall also be contained in such report, provided that if the corporation
has a class of securities registered under Section 12 of the 1934 Act, that Act
shall take precedence. Such report shall be sent to stockholders at least
fifteen (15) days prior to the next annual meeting of stockholders after the end
of the fiscal year to which it relates.
(b) If and so long as there are fewer than 100 holders of record
of the corporation's shares, the requirement of sending of an annual report to
the stockholders of the corporation is hereby expressly waived.
25.
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Exhibit 3.4
AMENDED AND RESTATED
BYLAWS
OF
BLUE MARTINI SOFTWARE, INC.
(A DELAWARE CORPORATION)
<PAGE>
Table Of Contents
Page
Article I. Offices.................................................... 1
Section 1. Registered Office....................................... 1
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 Meeting.......................................... 1
Section 6. Special Meetings........................................ 3
Section 7. Notice of Meetings...................................... 3
Section 8. Quorum.................................................. 3
Section 9. Adjournment and Notice of Adjourned Meetings............ 4
Section 10. Voting Rights........................................... 4
Section 11. Joint Owners of Stock................................... 4
Section 12. List of Stockholders.................................... 5
Section 13. Action Without Meeting.................................. 5
Section 14. Organization............................................ 6
Article IV. Directors.................................................. 6
Section 15. Number and Term of Office............................... 6
Section 16. Powers.................................................. 6
Section 17. Term of Directors....................................... 6
Section 18. Vacancies............................................... 7
Section 19. Resignation............................................. 7
Section 20. Removal................................................. 7
Section 21. Meetings................................................ 7
(a) Annual Meetings......................................... 7
(b) Regular Meetings........................................ 7
(c) Special Meetings........................................ 8
(d) Telephone Meetings...................................... 8
(e) Notice of Meetings...................................... 8
(f) Waiver of Notice........................................ 8
Section 22. Quorum and Voting....................................... 8
Section 23. Action Without Meeting.................................. 9
Section 24. Fees and Compensation................................... 9
Section 25. Committees.............................................. 9
(a) Executive Committee..................................... 9
(b) Other Committees........................................ 9
i.
<PAGE>
Table Of Contents
(CONTINUED)
Page
(c) Term.................................................... 10
(d) Meetings................................................ 10
Section 26. Organization............................................ 10
Article V. Officers................................................... 11
Section 27. Officers Designated..................................... 11
Section 28. Tenure and Duties of Officers........................... 11
(a) General................................................. 11
(b) Duties of Chairman of the Board of Directors............ 11
(c) Duties of President..................................... 11
(d) Duties of Vice Presidents............................... 11
(e) Duties of Secretary..................................... 12
(f) Duties of Chief Financial Officer....................... 12
Section 29. Delegation of Authority................................. 12
Section 30. Resignations............................................ 12
Section 31. Removal................................................. 12
Article VI. Execution Of Corporate Instruments And Voting Of
Securities Owned By The Corporation........................ 13
Section 32. Execution of Corporate Instruments...................... 13
Section 33. Voting of Securities Owned by the Corporation........... 13
Article VII. Shares Of Stock............................................ 14
Section 34. Form and Execution of Certificates...................... 14
Section 35. Lost Certificates....................................... 14
Section 36. Transfers............................................... 14
Section 37. Fixing Record Dates..................................... 15
Section 38. Registered Stockholders................................. 16
Article VIII. Other Securities Of The Corporation........................ 16
Section 39. Execution of Other Securities........................... 16
Article IX. Dividends.................................................. 17
Section 40. Declaration of Dividends................................ 17
Section 41. Dividend Reserve........................................ 17
Article X. Fiscal Year................................................ 17
Section 42. Fiscal Year............................................. 17
Article XI. Indemnification............................................ 17
ii.
<PAGE>
Table Of Contents
(CONTINUED)
Page
Section 43. Indemnification of Directors, Executive Officers, Other
Officers, Employees and Other Agents....................... 17
(a) Directors and Officers..................................... 17
(b) Employees and Other Agents................................. 17
(c) Expenses................................................... 18
(d) Enforcement................................................ 18
(e) Non-Exclusivity of Rights.................................. 19
(f) Survival of Rights......................................... 19
(g) Insurance.................................................. 19
(h) Amendments................................................. 19
(i) Saving Clause.............................................. 19
(j) Certain Definitions........................................ 19
Article XII. Notices...................................................... 20
Section 44. Notices.................................................... 20
(a) Notice to Stockholders..................................... 20
(b) Notice to Directors........................................ 20
(c) Affidavit of Mailing....................................... 20
(d) Time Notices Deemed Given.................................. 21
(e) Methods of Notice.......................................... 21
(f) Failure to Receive Notice.................................. 21
(g) Notice to Person with Whom Communication Is Unlawful....... 21
(h) Notice to Person with Undeliverable Address................ 21
Article XIII. Amendments................................................... 22
Section 45. Amendments................................................. 22
Article XIV. Right Of First Refusal....................................... 22
Section 46. Right of First Refusal..................................... 22
Article XV. Loans To Officers............................................ 24
Section 47. Loans to Officers.......................................... 24
Article XVI. Miscellaneous................................................ 25
Section 48. Annual Report.............................................. 25
iii.
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
BLUE MARTINI SOFTWARE, INC.
(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 Wilmington, County of New
Castle. (Del. Code Ann., tit. 8, (S) 131).
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. (Del. Code
Ann., tit. 8, (S) 122(8))
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. (Del. Code Ann., tit. 8, (S)
122(3))
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 principal office of the corporation required
to be maintained pursuant to Section 2 hereof. (Del. Code Ann., tit. 8, (S)
211(a))
Section 5. Annual Meeting.
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(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. (Del. Code Ann., tit. 8,
(S) 211(b))
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholders' meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted. (Del. Code Ann., tit. 8: (S) 211(b))
(c) 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
2
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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 Exchange 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, or (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.
(b) If a special meeting is 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 sixty (60) days after the receipt of the request, the person or
persons 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.
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. (Del. Code Ann., tit. 8, (S)(S) 222, 229)
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
3
<PAGE>
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 law,
the Certificate of Incorporation or these Bylaws, all action taken by the
holders of a majority of the vote cast, including abstentions, at any meeting at
which a quorum is present shall be valid and binding upon the corporation;
provided, however, that 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
statute or by the Certificate of Incorporation or these Bylaws, the affirmative
vote of the majority (plurality, in the case of the election of directors) of
the votes cast, including abstentions, by the holders of shares of such class or
classes or series shall be the act of such class or classes or series. (Del.
Code Ann., tit. 8, (S) 216)
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, excluding abstentions. 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. (Del. Code Ann., tit. 8,
(S) 222(c))
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. (Del. Code Ann., tit. 8, (S)(S) 211(e), 212(b))
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
4
<PAGE>
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 General Corporation Law of Delaware, 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. (Del. Code Ann., tit. 8, (S)
217(b))
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
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. (Del. Code Ann., tit. 8,
(S) 219(a))
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. (Del. Code Ann., tit. 8, (S) 228)
(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 General Corporation Law of the State of Delaware if such action had been
voted on by stockholders at a meeting thereof, then the certificate filed under
5
<PAGE>
such section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written consent
have been given as provided in Section 228 of the General Corporation Law of
Delaware.
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.
(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 by the
Board of Directors from time to time.
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 at a
special meeting of the stockholders called for that purpose in the manner
provided in these Bylaws. (Del. Code Ann., tit. 8, (S)(S) 141(b), 211(b), (c))
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. (Del. Code Ann., tit. 8, (S) 141(a))
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Section 17. Term of Directors. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, directors shall be elected at each annual meeting of stockholders
for a term of one year. Each director shall serve until his successor is duly
elected and qualified or until his death, resignation or removal. No decrease in
the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
Section 18. Vacancies. 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. (Del. Code Ann., tit. 8,
(S) 223(a), (b))
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. (Del. Code Ann., tit. 8,
(S)(S) 141(b), 223(d))
Section 20. Removal. Subject to the rights of the holders of any
series of Preferred Stock, the Board of Directors or any individual 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 the then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least a majority of the voting power of all the then-outstanding
shares of the Voting Stock. (Del. Code Ann., tit. 8, (S) 141(k))
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.
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(b) Regular Meetings. Except as hereinafter otherwise
provided, regular meetings of the Board of Directors shall be held in the office
of the corporation required to be maintained pursuant to Section 2 hereof.
Unless otherwise restricted by the Certificate of Incorporation, regular
meetings of the Board of Directors may also be held at any place within or
without the State of Delaware which has been designated by resolution of the
Board of Directors or the written consent of all directors. (Del. Code Ann.,
tit. 8, (S) 141(g))
(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.
(Del. Code Ann., tit. 8, (S) 141(g))
(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. (Del. Code
Ann., tit. 8, (S) 141(i))
(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, postage 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. (Del. Code Ann., tit. 8, (S) 229)
(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. (Del. Code Ann., tit. 8, (S) 229)
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, 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
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of the Board of Directors, without notice other than by announcement at the
meeting. (Del. Code Ann., tit. 8, (S) 141(b))
(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. (Del. Code Ann., tit.
8, (S) 141(b))
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. (Del. Code Ann., tit. 8, (S) 141(f))
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. (Del. Code
Ann., tit. 8, (S) 141(h))
Section 25. Committees.
(a) Executive Committee. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors 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, including without limitation the power or
authority to declare a dividend, to authorize the issuance of stock and to adopt
a certificate of ownership and merger, 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 amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation. (Del.
Code Ann., tit. 8, (S) 141(c))
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(b) Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, 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 such committee have the powers denied to the
Executive Committee in these Bylaws. (Del. Code Ann., tit. 8, (S) 141(c))
(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 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 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. (Del. Code Ann., tit. 8, (S)141(c))
(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. (Del. Code Ann., tit. 8,
(S)(S) 141(c), 229)
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, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a
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chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, an 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, the
Controller, all of whom shall be elected at the annual 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. (Del. Code Ann., tit. 8, (S)(S) 122(5), 142(a), (b))
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. (Del. Code Ann., tit. 8, (S) 141(b), (e))
(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. (Del. Code Ann., tit. 8, (S) 142(a))
(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
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such other powers as the Board of Directors shall designate from time to time.
(Del. Code Ann., tit. 8, (S) 142(a))
(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. (Del. Code Ann., tit. 8, (S)
142(a))
(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 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. (Del. Code Ann., tit. 8, (S) 142(a))
(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. (Del. Code Ann., tit. 8, (S) 142(a))
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
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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. (Del. Code Ann., tit. 8, (S) 142(b))
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.
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. (Del. Code
Ann., tit. 8, (S)(S) 103(a), 142(a), 158)
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock of
the corporation, shall be executed, signed or endorsed by the Chairman of the
Board of Directors, or the President or any Vice President, and by the Secretary
or Treasurer or any Assistant Secretary or Assistant Treasurer. All other
instruments and documents requiring the corporate signature, but not requiring
the corporate seal, may be executed as aforesaid or in such other manner as may
be directed by the Board of Directors. (Del. Code Ann., tit. 8, (S)(S) 103(a),
142(a), 158)
All checks and drafts drawn on banks or other depositories 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. (Del. Code
Ann., tit. 8, (S)(S) 103(a), 142(a), 158).
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
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authorization, by the Chairman of the Board of Directors, the Chief Executive
Officer, the President, or any Vice President. (Del. Code Ann., tit. 8, (S) 123)
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 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. (Del. Code Ann., tit. 8, (S) 158)
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 advertise the same 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.
(Del. Code Ann., tit. 8, (S) 167)
Section 36. Transfers.
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(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. (Del. Code Ann., tit.
8, (S) 201, tit. 6, (S) 8-401(1))
(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 General Corporation Law of Delaware. (Del. Code Ann., tit. 8,
(S) 160 (a))
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 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 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) 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 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 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 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
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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. (Del. Code Ann., tit. 8, (S) 213)
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.
(Del. Code Ann., tit. 8, (S)(S) 213(a), 219)
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.
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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,
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. (Del. Code Ann., tit. 8, (S)(S) 170, 173)
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. (Del.
Code Ann., tit. 8, (S) 171)
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 Officers. The corporation shall indemnify its
directors and officers to the fullest extent not prohibited by the Delaware
General Corporation Law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or 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 (iv) such
indemnification is required to be made under subsection (d).
(b) Employees and Other Agents. The corporation shall have power
to indemnify its employees and other agents as set forth in the Delaware General
Corporation Law.
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(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 officer, of
the corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, prior to the final disposition of the proceeding, promptly
following request therefor, all expenses incurred by any director or officer in
connection with such proceeding upon receipt of an undertaking by or on behalf
of such person 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 officer of
the corporation (except by reason of the fact that such 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 officers
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 officer. Any right to indemnification or advances granted by
this Bylaw to a director or 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 for the corporation to indemnify the claimant for the amount
claimed. In connection with any claim by an officer of the corporation (except
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such 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, nor an actual
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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.
(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 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.
(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, 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.
(j) Certain Definitions. For the purposes of this Bylaw, the
following definitions shall apply:
(i) 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.
(ii) 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.
(iii) The term the "corporation" shall include, in addition
to the resulting corporation, any constituent corporation (including any
constituent of a constituent)
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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.
(iv) 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.
(v) 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. (Del. Code Ann., tit. 8,
(S) 222)
(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 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.
(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
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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. (Del. Code Ann., tit. 8, (S) 222)
(d) Time Notices Deemed Given. All notices given by mail, 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 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
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persons to whom notice was not required to be given pursuant to this paragraph.
(Del. Code Ann, tit. 8, (S) 230)
Article XIII
Amendments
Section 45. Amendments.
Subject to paragraph (h) of Section 43 of the Bylaws, these Bylaws may be
amended or repealed and new Bylaws adopted by the stockholders entitled to vote.
The Board of Directors shall also have the power, if such power is conferred
upon the Board of Directors by the Certificate of Incorporation, to adopt,
amend, or repeal Bylaws (including, without limitation, the amendment of any
Bylaw setting forth the number of Directors who shall constitute the whole Board
of Directors). (Del. Code Ann., tit. 8, (S)(S) 109(a), 122(6)).
Article XIV
Right Of First Refusal
Section 46. Right of First Refusal. No stockholder shall sell, assign,
pledge, or in any manner transfer any of the shares of stock of the corporation
or any right or interest therein, whether voluntarily or by operation of law, or
by gift or otherwise, except by a transfer which meets the requirements
hereinafter set forth in this bylaw:
(a) If the stockholder desires to sell or otherwise transfer any
of his shares of stock, then the stockholder shall first give written notice
thereof to the corporation. The notice shall name the proposed transferee and
state the number of shares to be transferred, the proposed consideration, and
all other terms and conditions of the proposed transfer.
(b) For thirty (30) days following receipt of such notice, the
corporation shall have the option to purchase all (but not less than all) of the
shares specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the stockholder, the
corporation shall have the option to purchase a lesser portion of the shares
specified in said notice at the price and upon the terms set forth therein. In
the event of a gift, property settlement or other transfer in which the proposed
transferee is not paying the full price for the shares, and that is not
otherwise exempted from the provisions of this Section 46, the price shall be
deemed to be the fair market value of the stock at such time as determined in
good faith by the Board of Directors. In the event the corporation elects to
purchase all of the shares or, with consent of the stockholder, a lesser portion
of the shares, it shall give written notice to the transferring stockholder of
its election and settlement for said shares shall be made as provided below in
paragraph (d).
(c) The corporation may assign its rights hereunder.
(d) In the event the corporation and/or its assignee(s) elect to
acquire any of the shares of the transferring stockholder as specified in said
transferring stockholder's notice,
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the Secretary of the corporation shall so notify the transferring stockholder
and settlement thereof shall be made in cash within thirty (30) days after the
Secretary of the corporation receives said transferring stockholder's notice;
provided that if the terms of payment set forth in said transferring
stockholder's notice were other than cash against delivery, the corporation
and/or its assignee(s) shall pay for said shares on the same terms and
conditions set forth in said transferring stockholder's notice.
(e) In the event the corporation and/or its assignees(s) do not
elect to acquire all of the shares specified in the transferring stockholder's
notice, said transferring stockholder may, within the sixty-day period following
the expiration of the option rights granted to the corporation and/or its
assignees(s) herein, transfer the shares specified in said transferring
stockholder's notice which were not acquired by the corporation and/or its
assignees(s) as specified in said transferring stockholder's notice. All shares
so sold by said transferring stockholder shall continue to be subject to the
provisions of this bylaw in the same manner as before said transfer.
(f) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this bylaw:
(1) A stockholder's transfer of any or all shares held
either during such stockholder's lifetime or on death by will or intestacy to
such stockholder's immediate family or to any custodian or trustee for the
account of such stockholder or such stockholder's immediate family. "Immediate
family" as used herein shall mean spouse, lineal descendant, father, mother,
brother, or sister of the stockholder making such transfer.
(2) A stockholder's bona fide pledge or mortgage of any
shares with a commercial lending institution, provided that any subsequent
transfer of said shares by said institution shall be conducted in the manner set
forth in this bylaw.
(3) A stockholder's transfer of any or all of such
stockholder's shares to the corporation or to any other stockholder of the
corporation.
(4) A stockholder's transfer of any or all of such
stockholder's shares to a person who, at the time of such transfer, is an
officer or director of the corporation.
(5) A corporate stockholder's transfer of any or all of its
shares pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of shares or capital reorganization of the
corporate stockholder, or pursuant to a sale of all or substantially all of the
stock or assets of a corporate stockholder.
(6) A corporate stockholder's transfer of any or all of its
shares to any or all of its stockholders.
(7) A transfer by a stockholder which is a limited or
general partnership to any or all of its partners or former partners.
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In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this bylaw, and there
shall be no further transfer of such stock except in accord with this bylaw.
(g) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the stockholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the votes
represented by those shares to be transferred by the transferring stockholder).
This bylaw may be amended or repealed either by a duly authorized action of the
Board of Directors or by the stockholders, upon the express written consent of
the owners of a majority of the voting power of the corporation.
(h) Any sale or transfer, or purported sale or transfer, of
securities of the corporation shall be null and void unless the terms,
conditions, and provisions of this bylaw are strictly observed and followed.
(i) The foregoing right of first refusal shall terminate on either
of the following dates, whichever shall first occur:
(1) On October 1, 2007; or
(2) Upon the date securities of the corporation are first
offered to the public pursuant to a registration statement filed with, and
declared effective by, the United States Securities and Exchange Commission
under the Securities Act of 1933, as amended.
(j) The certificates representing shares of stock of the
corporation shall bear on their face the following legend so long as the
foregoing right of first refusal remains in effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF
FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION AND/OR ITS ASSIGNEE(S), AS
PROVIDED IN THE BYLAWS OF THE CORPORATION."
Article XV
Loans To Officers
Section 47. 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. (Del. Code Ann., tit. 8, (S)143)
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Article XVI
Miscellaneous
Section 48. Annual Report.
(a) Subject to the provisions of paragraph (b) of this Bylaw, the
Board of Directors shall cause an annual report to be sent to each stockholder
of the corporation not later than one hundred twenty (120) days after the close
of the corporation's fiscal year. Such report shall include a balance sheet as
of the end of such fiscal year and an income statement and statement of changes
in financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation. When there are more than
100 stockholders of record of the corporation's shares, as determined by Section
605 of the California Corporations Code, additional information as required by
Section 1501(b) of the California Corporations Code shall also be contained in
such report, provided that if the corporation has a class of securities
registered under Section 12 of the 1934 Act, that Act shall take precedence.
Such report shall be sent to stockholders at least fifteen (15) days prior to
the next annual meeting of stockholders after the end of the fiscal year to
which it relates.
(b) If and so long as there are fewer than 100 holders of record
of the corporation's shares, the requirement of sending of an annual report to
the stockholders of the corporation is hereby expressly waived.
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EXHIBIT 10.1
Blue Martini Software, Inc.
2000 Equity Incentive Plan
Adopted April 24, 2000
Approved By Stockholders _______________, 2000
Termination Date: April 23, 2010
1. Purposes.
(a) Amendment and Restatement of Initial Plan. The Plan initially was
established as the Amended and Restated 1998 Equity Incentive Plan (the "Initial
Plan"). The Initial Plan, as amended, hereby is amended and restated in its
entirety and renamed the 2000 Equity Incentive Plan, effective as of its
adoption.
(b) Eligible Stock Award Recipients. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(c) Available Stock Awards. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(d) General Purpose. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, 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 of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
(e) "Common Stock" means the common stock of the Company.
(f) "Company" means Blue Martini Software, Inc., a Delaware corporation.
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(g) "Consultant" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company for their services as Directors
or Directors who are merely paid a director's fee by the Company for their
services as Directors.
(h) "Continuous Service" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.
(i) "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 stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(j) "Director" means a member of the Board of Directors of the Company.
(k) "Disability" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(n) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(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 Common Stock) on the last market trading day prior to the day
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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.
(iii) Prior to the Listing Date, the value of the Common Stock shall
be determined in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations.
(o) "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.
(p) "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.
(q) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a 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 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.
(r) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(s) "Officer" means (i) before the Listing Date, any person designated by
the Company as an officer and (ii) on 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.
(t) "Option" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(u) "Option Agreement" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
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(v) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(w) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
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.
(x) "Participant" means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding Stock
Award.
(y) "Plan" means this Blue Martini Software, Inc. 2000 Equity Incentive
Plan.
(z) "April Stock Split" means the 2-for-1 stock split approved by the
Board of Directors on April 24, 2000 and effective April 28, 2000.
(aa) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(bb) "Securities Act" means the Securities Act of 1933, as amended.
(cc) "Stock Award" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(dd) "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.
(ee) "Ten Percent Stockholder" means a person who 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.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) Powers of Board. 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; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock
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Award granted (which need not be identical), including the time or times when a
person shall be permitted to receive Common Stock pursuant to a Stock Award; and
the number of shares of Common Stock 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 12.
(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) Delegation to Committee.
(i) General. The Board may delegate administration of the Plan to a
Committee or Committees of one (1) or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. 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 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
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.
(ii) Committee Composition when Common Stock is Publicly Traded. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more Non-
Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not Non-
Employee Directors the authority to grant Stock Awards to eligible persons who
are not then subject to Section 16 of the Exchange Act.
(d) Effect of Board's Decision. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.
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4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate Thirty Million
(30,000,000) shares of Common Stock upon the effectiveness of, and after giving
effect to, the April Stock Split).
(b) Evergreen Share Reserve Increase.
(i) Notwithstanding subsection 4(a) hereof, on January 1 of each
year (the "Calculation Date") for a period of ten (10) years, commencing on
January 1, 2001, the aggregate number of shares of Common Stock that is
available for issuance under the Plan shall automatically be increased by that
number of shares equal to the greater of (1) five percent (5%) of the Diluted
Shares Outstanding or (2) the number of shares of Common Stock subject to Stock
Awards granted during the prior 12-month period; provided, however, that the
Board, from time to time, may provide for a lesser increase in the aggregate
number of shares of Common Stock that is available for issuance under the Plan
(ii) Subject to the provisions of Section 11 hereof relating to
adjustments upon changes in securities, the increase in the maximum aggregate
number of shares of Common Stock that is available for issuance pursuant to
Incentive Stock Options granted under the Plan shall not exceed Two Hundred
Million (200,000,000) shares of Common Stock upon the effectiveness of, and
after giving effect to, the April Stock Split).
(iii) "Diluted Shares Outstanding" shall mean, as of any date, (1) the
number of outstanding shares of Common Stock of the Company on such Calculation
Date, plus (2) the number of shares of Common Stock issuable upon such
Calculation Date assuming the conversion of all outstanding Preferred Stock and
convertible notes, plus (3) the additional number of dilutive Common Stock
equivalent shares outstanding as the result of any options or warrants
outstanding during the fiscal year, calculated using the treasury stock method.
(c) Reversion of Shares to the Share Reserve. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such Stock
Award shall revert to and again become available for issuance under the Plan. If
the Company repurchases unvested shares acquired pursuant to a Stock Award, the
shares of Common Stock so repurchased shall revert to and again become available
for issuance under the Plan for all Stock Awards other than Incentive Stock
Options.
(d) Source of Shares. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.
(e) Share Reserve Limitation. Prior to the Listing Date and to the extent
then required by Section 260.140.45 of Title 10 of the California Code of
Regulations, the total number of shares of Common Stock issuable upon exercise
of all outstanding Options and the
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total number of shares of Common Stock provided for under any stock bonus or
similar plan of the Company shall not exceed the applicable percentage as
calculated in accordance with the conditions and exclusions of Section
260.140.45 of Title 10 of the California Code of Regulations, based on the
shares of Common Stock of the Company that are outstanding at the time the
calculation is made.
5. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants.
(b) Ten Percent Stockholders.
(i) A Ten Percent Stockholder shall not be granted an Incentive
Stock Option unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of the Common Stock at the date of
grant and the Option is not exercisable after the expiration of five (5) years
from the date of grant.
(ii) Prior to the Listing Date, a Ten Percent Stockholder shall not
be granted a Nonstatutory Stock Option unless the exercise price of such Option
is at least (i) one hundred ten percent (110%) of the Fair Market Value of the
Common Stock at the date of grant or (ii) such lower percentage of the Fair
Market Value of the Common Stock at the date of grant as is permitted by Section
260.140.41 of Title 10 of the California Code of Regulations at the time of the
grant of the Option.
(iii) Prior to the Listing Date, a Ten Percent Stockholder shall not
be granted a restricted stock award unless the purchase price of the restricted
stock is at least (i) one hundred percent (100%) of the Fair Market Value of the
Common Stock at the date of grant or (ii) such lower percentage of the Fair
Market Value of the Common Stock at the date of grant as is permitted by Section
260.140.41 of Title 10 of the California Code of Regulations at the time of the
grant of the Option.
(c) Section 162(m) Limitation. Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than [Ten Million
(10,000,000) shares of Common Stock upon the effectiveness of, and after giving
effect to, the April Stock Split)] during any calendar year. This subsection
5(c) shall not apply prior to the Listing Date and, following the Listing Date,
this subsection 5(c) shall not apply until (i) the earliest of: (1) the first
material
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modification of the Plan (including any increase in the number of shares of
Common Stock reserved for issuance under the Plan in accordance with Section 4);
(2) the issuance of all of the shares of Common Stock reserved for issuance
under the Plan; (3) the expiration of the Plan; or (4) the first meeting of
stockholders 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.
(d) Consultants.
(i) Prior to the Listing Date, a Consultant shall not be eligible
for the grant of a Stock Award if, at the time of grant, either the offer or the
sale of the Company's securities to such Consultant is not exempt under Rule 701
of the Securities Act ("Rule 701") because of the nature of the services that
the Consultant is providing to the Company, or because the Consultant is not a
natural person, or as otherwise provided by Rule 701, unless the Company
determines that such grant need not comply with the requirements of Rule 701 and
will satisfy another exemption under the Securities Act as well as comply with
the securities laws of all other relevant jurisdictions.
(ii) From and after the Listing Date, a Consultant shall not be
eligible for the grant of a Stock Award if, at the time of grant, a Form S-8
Registration Statement under the Securities Act ("Form S-8") is not available to
register either the offer or the sale of the Company's securities to such
Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or
(B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.
(iii) Rule 701 and Form S-8 generally are available to consultants and
advisors only if (i) they are natural persons; (ii) they provide bona fide
services to the issuer, its parents, its majority-owned subsidiaries or
majority-owned subsidiaries of the issuer's parent; and (iii) the services are
not in connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the issuer's securities.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
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(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Option granted prior to the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted,
and no Incentive Stock Option granted on or after the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the Common Stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Incentive 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) Exercise Price of a Nonstatutory Stock Option. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted. The Board
shall determine the exercise price of each Nonstatutory Stock Option granted on
or after the Listing Date. Notwithstanding the foregoing, 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.
(d) Consideration. The purchase price of Common 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 at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board. Unless otherwise specifically
provided in the Option, the purchase price of Common Stock acquired pursuant to
an Option that is paid by delivery to the Company of other Common Stock
acquired, directly or indirectly from the Company, shall be paid only by shares
of the Common Stock of the Company that have been held for more than six (6)
months (or such longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). At any time that the Company is
incorporated in Delaware, payment of the Common Stock's "par value," as defined
in the Delaware General Corporation Law, shall not be made by deferred payment.
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.
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(e) Transferability of an Incentive Stock Option. 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 Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder 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
Optionholder, shall thereafter be entitled to exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option granted prior to the Listing Date shall not be transferable except by
will or by the laws of descent and distribution and, to the extent provided in
the Option Agreement, to such further extent as permitted by Section
260.140.41(d) of Title 10 of the California Code of Regulations at the time of
the grant of the Option, and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. A Nonstatutory Stock Option granted on or
after the Listing Date shall be transferable to the extent provided in the
Option Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the 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 Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder 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 Optionholder, shall thereafter be
entitled to exercise the Option.
(g) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. 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. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) Minimum Vesting Prior to the Listing Date. Notwithstanding the
foregoing subsection 6(g), to the extent that the following restrictions on
vesting are required by Section 260.140.41(f) of Title 10 of the California Code
of Regulations at the time of the grant of the Option, then:
(i) Options granted prior to the Listing Date to an Employee who is
not an Officer, Director or Consultant shall provide for vesting of the total
number of shares of Common Stock at a rate of at least twenty percent (20%) per
year over five (5) years from the date the Option was granted, subject to
reasonable conditions such as continued employment; and
(ii) Options granted prior to the Listing Date to Officers, Directors
or Consultants may be made fully exercisable, subject to reasonable conditions
such as continued employment, at any time or during any period established by
the Company.
(i) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder
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may exercise his or her Option (to the extent that the Optionholder was entitled
to exercise such Option 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 Optionholder's Continuous Service (or such longer or
shorter period specified in the Option Agreement, which period shall not be less
than thirty (30) days for Options granted prior to the Listing Date unless such
termination is for cause), or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, after termination, the Optionholder does
not exercise his or her Option within the time specified in the Option
Agreement, the Option shall terminate.
(j) Extension of Termination Date. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than upon the Optionholder's death or
Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock 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 subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(k) Disability of Optionholder. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option 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 specified in
the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Listing Date) or (ii) the expiration of the term of
the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
(l) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder'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 Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Listing Date) or (2) the expiration of the term of
such Option as set forth in the Option Agreement. If, after death, the Option is
not exercised within the time specified herein, the Option shall terminate.
(m) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to
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exercise the Option as to any part or all of the shares of Common Stock subject
to the Option prior to the full vesting of the Option. Subject to the
"Repurchase Limitation" in subsection 10(h), any unvested shares of Common Stock
so purchased may be subject to a repurchase option in favor of the Company or to
any other restriction the Board determines to be appropriate.
(n) Right of Repurchase. Subject to the "Repurchase Limitation" in
subsection 10(h), 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 of Common Stock acquired by the Optionholder pursuant to the
exercise of the Option.
(o) 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 Optionholder of
the intent to transfer all or any part of the shares of Common Stock received
upon the exercise of the Option. Except as expressly provided in this subsection
6(o), such right of first refusal shall otherwise comply with any applicable
provisions of the Bylaws of the Company.
(p) Re-Load Options.
(i) Without in any way limiting the authority of the Board to make
or not to make grants of Options hereunder, the Board shall have the authority
(but not an obligation) to include as part of any Option Agreement a provision
entitling the Optionholder to a further Option (a "Re-Load Option") in the event
the Optionholder exercises the Option evidenced by the Option Agreement in whole
or in part, by surrendering other shares of Common Stock in accordance with this
Plan and the terms and conditions of the Option Agreement. Unless otherwise
specifically provided in the Option, the Optionholder shall not surrender shares
of Common Stock acquired, directly or indirectly from the Company, unless such
shares have been held for more than six (6) months (or such longer or shorter
period of time required to avoid a charge to earnings for financial accounting
purposes).
(ii) Any such Re-Load Option shall (1) provide for a number of shares
of Common Stock equal to the number of shares of Common Stock surrendered as
part or all of the exercise price of such Option; (2) have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (3) have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Options under the
Plan.
(iii) Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on the exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
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shall be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. Provisions of Stock Awards other than Options.
(a) Stock Bonus Awards. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(i) Consideration. A stock bonus may be awarded in consideration for
past services actually rendered to the Company or an Affiliate for its benefit.
(ii) Vesting. Subject to the "Repurchase Limitation" in subsection
10(h), shares of Common Stock awarded under the stock bonus agreement may, but
need not, be subject to a share repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board.
(iii) Termination of Participant's Continuous Service. Subject to the
"Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.
(iv) Transferability. For a stock bonus award made before the Listing
Date, rights to acquire shares of Common Stock under the stock bonus agreement
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. For a stock bonus award made on or after the Listing
Date, rights to acquire shares of Common Stock under the stock bonus agreement
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the stock bonus agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the stock bonus agreement
remains subject to the terms of the stock bonus agreement.
(b) Restricted Stock Awards. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
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:
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(i) Purchase Price. Subject to the provisions of subsection 5(b)
regarding Ten Percent Stockholders, the purchase price under each restricted
stock purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. For restricted stock
awards made prior to the Listing Date, the purchase price shall not be less than
eighty-five percent (85%) of the Common Stock's Fair Market Value on the date
such award is made or at the time the purchase is consummated. For restricted
stock awards made on or after the Listing Date, the Board shall determine the
purchase price.
(ii) Consideration. The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other similar arrangement with the Participant; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in 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.
(iii) Vesting. Subject to the "Repurchase Limitation" in subsection
10(h), shares of Common Stock acquired under the restricted stock purchase
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.
(iv) Termination of Participant's Continuous Service. Subject to the
"Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the restricted stock
purchase agreement.
(v) Transferability. For a restricted stock award made before the
Listing Date, rights to acquire shares of Common Stock under the restricted
stock purchase agreement shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable during the lifetime of the
Participant only by the Participant. For a restricted stock award made on or
after the Listing Date, rights to acquire shares of Common Stock under the
restricted stock purchase agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the restricted stock purchase agreement remains
subject to the terms of the restricted stock purchase agreement.
8. Covenants of the Company.
(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise of
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the Stock Awards; provided, however, that this undertaking shall not require the
Company to register under the Securities Act the Plan, any Stock Award or any
Common 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 Common Stock under the Plan, the Company
shall be relieved from any liability for failure to issue and sell Common Stock
upon exercise of such Stock Awards unless and until such authority is obtained.
9. Use of Proceeds from Stock.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. 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 in accordance
with the Plan, 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) Stockholder Rights. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all 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.
(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and
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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 (ii) to give written assurances satisfactory to the Company
stating that the Participant is acquiring Common Stock subject to the Stock
Award for the Participant's own account and not with any present intention of
selling or otherwise distributing the Common Stock. The foregoing requirements,
and any assurances given pursuant to such requirements, shall be inoperative if
(1) the issuance of the shares of Common Stock upon the exercise or acquisition
of Common Stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (2) 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 Common
Stock.
(f) Withholding Obligations. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.
(g) Information Obligation. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.
(h) Repurchase Limitation. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or at not less than the original purchase price. To the extent
required by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations at the time a Stock Award is made, any repurchase
option contained in a Stock Award granted prior to the Listing Date to a person
who is not an Officer, Director or Consultant shall be upon the terms described
below:
(i) Fair Market Value. If the repurchase option gives the Company the
right to repurchase the shares of Common Stock upon termination of employment at
not less than the Fair Market Value of the shares of Common Stock to be
purchased on the date of termination of Continuous Service, then (i) the right
to repurchase shall be exercised for cash or cancellation of
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purchase money indebtedness for the shares of Common Stock within ninety (90)
days of termination of Continuous Service (or in the case of shares of Common
Stock issued upon exercise of Stock Awards after such date of termination,
within ninety (90) days after the date of the exercise) or such longer period as
may be agreed to by the Company and the Participant (for example, for purposes
of satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right terminates when the shares
of Common Stock become publicly traded.
(ii) Original Purchase Price. If the repurchase option gives the
Company the right to repurchase the shares of Common Stock upon termination of
Continuous Service at the original purchase price, then (i) the right to
repurchase at the original purchase price shall lapse at the rate of at least
twenty percent (20%) of the shares of Common Stock per year over five (5) years
from the date the Stock Award is granted (without respect to the date the Stock
Award was exercised or became exercisable) and (ii) the right to repurchase
shall be exercised for cash or cancellation of purchase money indebtedness for
the shares of Common Stock within ninety (90) days of termination of Continuous
Service (or in the case of shares of Common Stock issued upon exercise of
Options after such date of termination, within ninety (90) days after the date
of the exercise) or such longer period as may be agreed to by the Company and
the Participant (for example, for purposes of satisfying the requirements of
Section 1202(c)(3) of the Code regarding "qualified small business stock").
11. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. In the event that any change is made in
the Common Stock subject to the Plan, or subject to any Award, without the
receipt of consideration by the Company (through merger, consolidation,
reorganization, recapitalization, incorporation, combination of stock, exchange
of stock, change in business structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of shares of Common Stock subject
to the Plan pursuant to Section 4 and the maximum number of shares of Common
Stock subject to award pursuant to subsection 5(c), and the Awards will be
appropriately adjusted in the class(es) and number of shares of Common Stock and
exercise price per share of Common Stock subject to such Awards. The Board shall
make such adjustments, and its determination 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) Change in Control. In the event of: (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 entity; or (3) a reverse
merger in which the Company is the surviving entity but the shares of 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 (individually, a "Change in Control"), then: (i) any surviving or
acquiring entity shall assume Awards outstanding under the Plan or shall
substitute similar awards (including an award to acquire the same consideration
paid to stockholders in the transaction described in this subsection 11(b)) for
those outstanding under the Plan, or (ii) in the event any surviving or
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acquiring entity refuses to assume such Awards or to substitute similar awards
for those outstanding under the Plan, (1) with respect to Awards held by persons
whose Continuous Service has not terminated, the vesting of such Awards and the
time during which such Awards may be exercised shall be accelerated prior to
such Change in Control and the Awards terminated if not exercised after such
acceleration and at or prior to such Change in Control, and (2) with respect to
any other Awards outstanding under the Plan, such Awards shall be terminated if
not exercised prior to such Change in Control.
(c) Securities Acquisition. In the event of (i) any consolidation or
merger of the Company with or into any corporation or other entity or person, or
any other reorganization, in which the stockholders of the Company immediately
prior to such consolidation, merger or reorganization, own less than 50% of the
surviving entity's voting power immediately after such consolidation, merger or
reorganization, (ii) any transaction or series of related transactions to which
the Company is a party in which in excess of fifty percent (50%) of the
Company's voting power is transferred, or (iii) a sale, lease or other
disposition of all or substantially all of the assets of the Company, then with
respect to Awards held by Participants whose Continuous Service has not
terminated, the vesting of fifty percent (50%) of the remaining unvested portion
of such Awards (and, if applicable, the time during which such Awards may be
exercised) shall be accelerated.
12. Amendment of the Plan and Stock Awards.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder 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 thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) Contemplated Amendments. 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) No Impairment of Rights. Rights 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 Participant and (ii) the Participant
consents in writing.
(e) Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under
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any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the Participant and (ii) the Participant
consents in writing.
13. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders 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) No Impairment of Rights. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.
14. Effective Date of Plan.
The Plan shall become effective upon adoption by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
15. Choice of Law.
The law of the State of Delaware shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state's conflict of laws rules.
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Exhibit 10.2
Blue Martini Software, Inc.
2000 Employee Stock Purchase Plan
Adopted April 24, 2000
Approved By Stockholders ______________, 2000
Termination Date: None
1. Purpose.
(a) The purpose of the Plan is to provide a means by which Employees of
the Company and certain designated Affiliates may be given an opportunity to
purchase Shares of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
such 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 and its Affiliates.
(c) The Company intends that the Rights to purchase Shares 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. 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 United States 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 Blue Martini Software, Inc., a Delaware corporation.
(f) "Director" means a member of the Board.
(g) "Eligible Employee" means an Employee who meets the requirements set
forth in the Offering for eligibility to participate in the Offering.
(h) "Employee" means any person, including Officers and Directors,
employed by the Company or an Affiliate of the Company. Neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
"employment" by the Company or the Affiliate.
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(i) "Employee Stock Purchase Plan" means a plan that grants rights
intended to be options issued under an "employee stock purchase plan," as that
term is defined in Section 423(b) of the Code.
(j) "Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
(k) "Fair Market Value" means the value of a security, as determined in
good faith by the Board. If the security is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
then, except as otherwise provided in the Offering, the Fair Market Value of the
security shall be the closing sales price (rounded up where necessary to the
nearest whole cent) for such security (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 relevant security of the Company) on the
trading day prior to the relevant determination date, as reported in The Wall
Street Journal or such other source as the Board deems reliable.
(l) "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
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.
(m) "Offering" means the grant of Rights to purchase Shares under the Plan
to Eligible Employees.
(n) "Offering Date" means a date selected by the Board for an Offering to
commence.
(o) "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.
(p) "Participant" means an Eligible Employee who holds an outstanding
Right granted pursuant to the Plan or, if applicable, such other person who
holds an outstanding Right granted under the Plan.
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(q) "Plan" means this 2000 Employee Stock Purchase Plan.
(r) "Purchase Date" means one or more dates established by the Board
during an Offering on which Rights granted under the Plan shall be exercised and
purchases of Shares carried out in accordance with such Offering.
(s) "Right" means an option to purchase Shares granted pursuant to the
Plan.
(t) "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.
(u) "Securities Act" means the United States Securities Act of 1933, as
amended.
(v) "Share" means a share of the common stock of the Company.
3. ADMINISTRATION.
(a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subsection 3(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 (or the Committee) 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 Shares 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.
(iv) To amend the Plan as provided in Section 14.
(v) Generally, to exercise such powers and to perform such acts as
it 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.
(c) The Board may delegate administration of the Plan to a Committee of
the Board composed of two (2) or more members, 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
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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.
4. Shares Subject to the Plan.
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in securities, the Shares that may be sold pursuant to Rights granted
under the Plan shall not exceed in the aggregate Four Million (4,000,000) shares
of Common Stock. If any Right granted under the Plan shall for any reason
terminate without having been exercised, the Shares not purchased under such
Right shall again become available for the Plan.
(b) The aggregate number of Shares that may be sold pursuant to Rights
granted under the Plan as specified in Section 4(a) hereof automatically shall
be increased as follows:
(i) On January 1 of each year (the "Calculation Date") for a period
of ten (10) years, commencing in 2001, the aggregate number of shares of Common
Stock that is available for issuance under the Plan shall automatically be
increased by that number of shares equal to the greater of (1) two and one-half
percent (2.5%) of the Diluted Shares Outstanding or (2) the number of shares of
Common Stock issued pursuant to Rights during the prior 12-month period;
provided, however, that the Board, from time to time, may provide for a lesser
increase in the aggregate number of shares of Common Stock that is available for
issuance under the Plan
(ii) Subject to the provisions of Section 13 hereof relating to
adjustments upon changes in securities, the maximum aggregate number of shares
of Common Stock that is available for issuance pursuant to Rights granted under
the Plan shall not exceed Forty Million (40,000,000) shares of Common Stock.
(iii) "Diluted Shares Outstanding" shall mean, as of any date, (1) the
number of outstanding shares of Common Stock of the Company on such Calculation
Date, plus (2) the number of shares of Common Stock issuable upon such
Calculation Date assuming the conversion of all outstanding Preferred Stock and
convertible notes, plus (3) the additional number of dilutive Common Stock
equivalent shares outstanding as the result of any options or warrants
outstanding during the fiscal year, calculated using the treasury stock method.
(c) The Shares subject to the Plan may be unissued Shares or Shares that
have been bought on the open market at prevailing market prices or otherwise.
5. Grant of Rights; Offering.
(a) The Board may from time to time grant or provide for the grant of
Rights to purchase Shares of the Company under the Plan to Eligible Employees in
an Offering on an
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Offering Date or Dates selected by the Board. Each Offering shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all Employees granted Rights to purchase Shares 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 Sections 6 through 9, inclusive.
(b) If a Participant has more than one Right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (i) each agreement or notice delivered by that Participant will be
deemed to apply to all of his or her Rights under the Plan, and (ii) an earlier-
granted Right (or a Right with a lower exercise price, if two Rights have
identical grant dates) will be exercised to the fullest possible extent before a
later-granted Right (or a Right with a higher exercise price if two Rights have
identical grant dates) will be exercised.
6. ELIGIBILITY.
(a) Rights may be granted only to Employees of the Company or, as the
Board may designated as provided in subsection 3(b), to Employees of an
Affiliate. Except as provided in subsection 6(b), an Employee 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 the Affiliate, as the case may
be, for such continuous period preceding such grant as the Board may require,
but in no event shall the required period of continuous employment be equal to
or greater than two (2) years.
(b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee will, on a date or dates specified
in the Offering which coincides with the day on which such person becomes an
Eligible Employee or which 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 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.
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(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
subsection 6(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 all Employee Stock Purchase
Plans of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such Eligible Employee's rights to purchase Shares of
the Company or any Affiliate to accrue at a rate which exceeds twenty five
thousand dollars ($25,000) of the fair market value of such Shares (determined
at the time such Rights are granted) for each calendar year in which such Rights
are outstanding at any time.
(e) The Board may provide in an Offering that Employees who are highly
compensated Employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
7. 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 purchasable either:
(i) with a percentage designated by the Board not exceeding fifteen
percent (15%) of such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board 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; or
(ii) with a maximum dollar amount designated by the Board that, as
the Board determines for a particular Offering, (1) shall be withheld, in whole
or in part, from such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board 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 and/or (2) shall be contributed, in whole or in part, by such Employee
during such period.
(b) The Board shall establish one or more Purchase Dates during an
Offering on which Rights granted under the Plan shall be exercised and purchases
of Shares carried out in accordance with such Offering.
(c) In connection with each Offering made under the Plan, the Board may
specify a maximum amount of Shares that may be purchased by any Participant as
well as a maximum aggregate amount of Shares that may be purchased by all
Participants pursuant to such Offering.
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In addition, in connection with each Offering that contains more than one
Purchase Date, the Board may specify a maximum aggregate amount of Shares which
may be purchased by all Participants 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 amount, the Board
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.
(d) The purchase price of Shares 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 Shares on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the Shares on the Purchase Date.
8. 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 deductions of up to the maximum percentage
specified by the Board of such Employee's Earnings during the Offering (as
defined in each Offering). The payroll deductions made for each Participant
shall be credited to a bookkeeping account for such Participant under the Plan
and either may be deposited with the general funds of the Company or may be
deposited in a separate account in the name of, and for the benefit of, such
Participant with a financial institution designated by the Company. To the
extent provided in the Offering, a Participant may reduce (including to zero) or
increase such payroll deductions. To the extent provided in the Offering, a
Participant may begin such payroll deductions after the beginning of 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 already had the maximum permitted 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 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 Shares for the Participant) under the
Offering, without interest unless otherwise specified in the Offering, 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.
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(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating Employee's employment with the
Company or a designated Affiliate for any reason (subject to any post-employment
participation period required by law) or other lack of eligibility. 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 Shares for the terminated Employee) under the Offering, without
interest unless otherwise specified in the Offering. If the accumulated payroll
deductions have been deposited with the Company's general funds, then the
distribution shall be made from the general funds of the Company, without
interest. If the accumulated payroll deductions have been deposited in a
separate account with a financial institution as provided in subsection 8(a),
then the distribution shall be made from the separate account, without interest
unless otherwise specified in the Offering.
(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 Section 15 and, otherwise during his
or her lifetime, shall be exercisable only by the person to whom such Rights are
granted.
9. Exercise.
(a) On each Purchase Date specified therefor 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 Shares up to the maximum amount 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 specifically provided
for in the Offering.
(b) Unless otherwise specifically provided in the Offering, the amount, if
any, of accumulated payroll deductions remaining in any Participant's account
after the purchase of Shares that is equal to the amount required to purchase
one or more whole Shares on the final Purchase Date of the Offering shall be
distributed in full to the Participant at the end of the Offering, without
interest. If the accumulated payroll deductions have been deposited with the
Company's general funds, then the distribution shall be made from the general
funds of the Company, without interest. If the accumulated payroll deductions
have been deposited in a separate account with a financial institution as
provided in subsection 8(a), then the distribution shall be made from the
separate account, without interest unless otherwise specified in the Offering.
(c) 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 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
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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 Shares) shall be distributed to
the Participants, without interest unless otherwise specified in the Offering.
If the accumulated payroll deductions have been deposited with the Company's
general funds, then the distribution shall be made from the general funds of the
Company, without interest. If the accumulated payroll deductions have been
deposited in a separate account with a financial institution as provided in
subsection 8(a), then the distribution shall be made from the separate account,
without interest unless otherwise specified in the Offering.
10. Covenants of the Company.
(a) During the terms of the Rights granted under the Plan, the Company
shall ensure that the amount of Shares required to satisfy such Rights are
available.
(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 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 and sale
of Shares under the Plan, the Company shall be relieved from any liability for
failure to issue and sell Shares upon exercise of such Rights unless and until
such authority is obtained.
11. Use of Proceeds from Shares.
Proceeds from the sale of Shares pursuant to Rights granted under the Plan
shall constitute general funds of the Company.
12. 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, Shares subject to Rights granted under
the Plan unless and until the Participant's Shares acquired upon exercise of
Rights under the Plan are recorded in the books of the Company.
13. Adjustments upon Changes in Securities.
(a) If any change is made in the Shares subject to the Plan, or subject to
any Right, without the receipt of consideration by the Company (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
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Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of Shares subject to the Plan pursuant to subsection 4(a), and the
outstanding Rights will be appropriately adjusted in the class(es), number of
Shares and purchase limits of such outstanding Rights. The Board shall make such
adjustments, and its determination shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a transaction that does not involve the receipt of consideration by the
Company.)
(b) In the event of: (i) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving corporation; or (iii) a reverse merger
in which the Company is the surviving corporation but the Shares outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then: (1)
any surviving or acquiring corporation shall assume Rights outstanding under the
Plan or shall substitute similar rights (including a right to acquire the same
consideration paid to Stockholders in the transaction described in this
subsection 13(b)) for those outstanding under the Plan, or (2) in the event any
surviving or acquiring corporation refuses to assume such Rights or to
substitute similar rights for those outstanding under the Plan, then, as
determined by the Board in its sole discretion such Rights may continue in full
force and effect or the Participants' accumulated payroll deductions (exclusive
of any accumulated interest which cannot be applied toward the purchase of
Shares under the terms of the Offering) may be used to purchase Shares
immediately prior to the transaction described above under the ongoing Offering
and the Participants' Rights under the ongoing Offering thereafter terminated.
14. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in securities and except as to minor amendments to benefit the administration of
the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for Participants or the
Company or any Affiliate, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 423 of the Code, Rule 16b-3
under the Exchange Act and any Nasdaq or other securities exchange listing
requirements. Currently under the Code, stockholder approval within twelve (12)
months before or after the adoption of the amendment is required where the
amendment will:
(i) Increase the amount of Shares reserved for Rights under the
Plan;
(ii) Modify the provisions as to eligibility for participation in
the Plan to the extent such modification 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; or
(iii) Modify the Plan in any other way if such modification 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.
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(b) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide 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 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.
15. Designation of Beneficiary.
(a) A Participant may file a written designation of a beneficiary who is
to receive any Shares and/or 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) The Participant may change such designation of beneficiary 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.
16. 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 impaired by suspension or termination of the Plan, except as
expressly provided 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.
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17. Effective Date of Plan.
The Plan shall become effective as determined by the Board, 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, which date may be prior to the
effective date set by the Board.
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Exhibit 10.3
Blue Martini Software, Inc.
2000 Non-Employee Directors' Stock Option Plan
Adopted April 24, 2000
Approved By Stockholders _______________, 2000
Effective Date: Initial Public Offering Date
Termination Date: None
1. Purposes.
(a) Eligible Option Recipients. The persons eligible to receive Options
are the Non-Employee Directors of the Company.
(b) Available Options. The purpose of the Plan is to provide a means by
which Non-Employee Directors may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of Nonstatutory
Stock Options.
(c) General Purpose. The Company, by means of the Plan, seeks to retain
the services of its Non-Employee Directors, to secure and retain the services of
new Non-Employee Directors and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "Annual Grant" means an Option granted annually to all Non-Employee
Directors who meet the specified criteria pursuant to subsection 6(b) of the
Plan.
(c) "Annual Meeting" means the annual meeting of the stockholders of the
Company.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Common Stock" means the common stock of the Company.
(g) "Committee Grant" means an Option granted to a member of the Board
pursuant to subsection 6(c) of the Plan.
(h) "Company" means Blue Martini Software, Inc., a Delaware corporation.
(i) "Consultant" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the
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term "Consultant" shall not include either Directors of the Company who are not
compensated by the Company for their services as Directors or Directors of the
Company who are merely paid a director's fee by the Company for their services
as Directors.
(j) "Continuous Service" means that the Optionholder's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Optionholder's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Optionholder renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Optionholder
renders such service, provided that there is no interruption or termination of
the Optionholder's Continuous Service. For example, a change in status from a
Non-Employee Director of the Company to a Consultant of an Affiliate or an
Employee of the Company will not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the Company, in that
party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.
(k) "Director" means a member of the Board of Directors of the Company.
(l) "Disability" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(m) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(o) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(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 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.
(p) "Initial Grant" means an Option granted to a Non-Employee Director who
meets the specified criteria pursuant to subsection 6(a) of the Plan.
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(q) "IPO Date" means the effective date of the initial public offering of
the Common Stock.
(r) "Non-Employee Director" means a Director who is not an Employee.
(s) "Nonstatutory Stock Option" means an Option not intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(t) "Officer" means 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.
(u) "Option" means a Nonstatutory Stock Option granted pursuant to the
Plan.
(v) "Option Agreement" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(w) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(x) "Plan" means this Blue Martini Software, Inc. 2000 Non-Employee
Directors' Stock Option Plan.
(y) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(z) "Securities Act" means the Securities Act of 1933, as amended.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan. The
Board may not delegate administration of the Plan to a committee.
(b) Powers of Board. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine the provisions of each Option to the extent not
specified in the Plan.
(ii) To construe and interpret the Plan and Options 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 Option 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 an Option as provided in Section 12.
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(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 that are not in conflict with the provisions of the Plan.
(c) Effect of Board's Decision. All determinations, interpretations
and constructions made by the Board in good faith shall not be subject to review
by any person and shall be final, binding and conclusive on all persons.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 11 relating to
adjustments upon changes in the Common Stock, the Common Stock that may be
issued pursuant to Options shall not exceed in the aggregate Three Hundred
Thousand (300,000) shares of Common Stock.
(b) Evergreen Share Reserve Increase.
(i) Notwithstanding subsection 4(a) hereof, on January 1 of each year
(the "Calculation Date") for a period of ten (10) years, commencing on January
1, 2001, the aggregate number of shares of Common Stock that is available for
issuance under the Plan shall automatically be increased by that number of
shares equal to the greater of (1) one-quarter of one percent (0.25%) of the
Diluted Shares Outstanding or (2) the number of shares of Common Stock subject
to Options granted during the prior 12-month period; provided, however, that the
Board, from time to time, may provide for a lesser increase in the aggregate
number of shares of Common Stock that is available for issuance under the Plan
(ii) "Diluted Shares Outstanding" shall mean, as of any date, (1) the
number of outstanding shares of Common Stock of the Company on such Calculation
Date, plus (2) the number of shares of Common Stock issuable upon such
Calculation Date assuming the conversion of all outstanding Preferred Stock and
convertible notes, plus (3) the additional number of dilutive Common Stock
equivalent shares outstanding as the result of any options or warrants
outstanding during the fiscal year, calculated using the treasury stock method.
(c) Reversion of Shares to the Share Reserve. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the shares of Common Stock not acquired under such Option
shall revert to and again become available for issuance under the Plan. If the
Company repurchases unvested shares acquired pursuant to an Option, the shares
of Common Stock so repurchased shall revert to and again become available for
issuance under the Plan.
(d) Source of Shares. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.
5. Eligibility.
The Options as set forth in section 6 automatically shall be granted under
the Plan to all Non-Employee Directors.
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6. Non-Discretionary Grants.
(a) Initial Grants. Without any further action of the Board, each Non-
Employee Director shall be granted the following Options:
(i) On the IPO Date, each person who is then a Non-Employee Director
automatically shall be granted an Initial Grant to purchase Twenty-five Thousand
(25,000) shares of Common Stock on the terms and conditions set forth herein.
(ii) After the IPO Date, each person who is elected or appointed for
the first time to be a Non-Employee Director automatically shall, upon the date
of his or her initial election or appointment to be a Non-Employee Director by
the Board or stockholders of the Company, be granted an Initial Grant to
purchase Twenty-five Thousand (25,000) shares of Common Stock on the terms and
conditions set forth herein.
(b) Annual Grants. On the day following each Annual Meeting commencing
with the Annual Meeting in 2001, each person who is then a Non-Employee Director
automatically shall be granted an Annual Grant to purchase Seven Thousand Five
Hundred (7,500) shares of Common Stock on the terms and conditions set forth
herein.
(c) Committee Grants. On the day following each Annual Meeting commencing
with the Annual Meeting in 2001, each Non-Employee Director who is then a
member of a committee, an Option to purchase Five Thousand (5,000) shares of
Common Stock on the terms and conditions set forth herein. If the Non-Employee
Director is appointed to a committee mid-term (that is, after the Annual Meeting
in question but before the next Annual Meeting), then the Five Thousand (5,000)
shares subject to the Committee Grant shall be reduced by one-twelfth (1/12) for
each full month that has elapsed between the Annual Meeting in question and the
date of appointment to such committee.
7. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as required by the Plan. Each Option shall contain such additional
terms and conditions, not inconsistent with the Plan, as the Board shall deem
appropriate. Each Option 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) Exercise Price. The exercise price of each Option shall be one
hundred percent (100%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an
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 may be paid, to the extent permitted by applicable statutes and
regulations, in any combination of (i) cash or check, (ii) delivery to the
Company of other Common Stock or (iii) pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board that, prior to the
issuance of Common Stock, results in either the receipt of cash (or check) by
the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds. The purchase price of
Common Stock acquired pursuant to an Option that is paid by delivery to the
Company of other Common Stock acquired, directly or indirectly from
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the Company, shall be paid only by shares of the Common Stock of the Company
that have been held for more than six (6) months (or such longer or shorter
period of time required to avoid a charge to earnings for financial accounting
purposes).
(d) Transferability. An Option is transferable by will or by the laws of
descent and distribution. An Option also is transferable if, at the time of
transfer, a Form S-8 registration statement under the Securities Act is
available for the exercise of the Option and the subsequent resale of the
underlying securities. In addition, Optionholder 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 Optionholder, shall thereafter be
entitled to exercise the Option.
(e) Exercise and Vesting. Options shall be exercisable immediately.
Options shall vest as follows:
(i) Initial Grants shall provide for vesting of 1/3rd of the shares
one (1) year after the date of the grant and 1/36 of the shares each month
thereafter over the next two (2) years.
(ii) Annual Grants shall provide for vesting of 1/12th of the shares
each month after the date of the grant for one (1) year.
(iii) Committee Grants generally shall provide for vesting of 1/12th
of the shares each months after the date of the grant for one (1) year. However,
if the Non-Employee Director is appointed to a committee mid-term (that is,
after the Annual Meeting in question but before the next Annual Meeting), then
the vesting schedule shall be accelerated pro rata so that the entire option is
fully vested one (1) year after the Annual Meeting in question.
(f) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder 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 Optionholder's Continuous Service, or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionholder does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate.
(g) Extension of Termination Date. If the exercise of the Option following
the termination of the Optionholder's Continuous Service (other than upon the
Optionholder'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
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the earlier of (i) the expiration of the term of the Option set forth in
subsection 7(a) or (ii) the expiration of a period of three (3) months after the
termination of the Optionholder's Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.
(h) Disability of Optionholder. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
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 (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, after termination, the Optionholder does
not exercise his or her Option within the time specified herein, the Option
shall terminate.
(i) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the three-month period after the termination of the
Optionholder's Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise the
Option as of the date of death) by the Optionholder'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 Optionholder's death, but only
within the period ending on the earlier of (1) the date eighteen (18) months
following the date of death or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.
8. Covenants of the Company.
(a) Availability of Shares. During the terms of the Options, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such Options.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Options and to issue and sell shares of Common Stock
upon exercise of the Options; provided, however, that this undertaking shall not
require the Company to register under the Securities Act the Plan, any Option or
any stock issued or issuable pursuant to any such Option. 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
Options unless and until such authority is obtained.
9. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
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10. Miscellaneous.
(a) Stockholder Rights. No Optionholder 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 Option unless and until such Optionholder has satisfied all requirements
for exercise of the Option pursuant to its terms.
(b) No Service Rights. Nothing in the Plan or any instrument executed or
Option granted pursuant thereto shall confer upon any Optionholder any right to
continue to serve the Company as a Non-Employee Director or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(c) Investment Assurances. The Company may require an Optionholder, as a
condition of exercising or acquiring stock under any Option, (i) to give written
assurances satisfactory to the Company as to the Optionholder'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 Option; and (ii) to give written assurances satisfactory
to the Company stating that the Optionholder is acquiring the stock subject to
the Option for the Optionholder'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 Option 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.
(d) Withholding Obligations. The Optionholder may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of stock under an Option by any of the following means (in addition
to the Company's right to withhold from any compensation paid to the
Optionholder by the Company) or by a combination of such means: (i) tendering a
cash payment; (ii) authorizing the Company to withhold shares from the shares of
the Common Stock otherwise issuable to the Optionholder as a result of the
exercise or acquisition of stock under the Option, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
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11. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in the stock
subject to the Plan, or subject to any Option, without the receipt of
consideration by the Company (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 class(es) and maximum number of securities subject both to the
Plan pursuant to subsection 4(a) and to the nondiscretionary Options specified
in Section 5, and the outstanding Options will be appropriately adjusted in the
class(es) and number of securities and price per share of stock subject to such
outstanding Options. The Board shall make such adjustments, and its
determination shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)
(b) Change in Control. In the event of: (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 entity; or (3) a
reverse merger in which the Company is the surviving entity but the shares of
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 (individually, a "Change in Control"), then the vesting of
outstanding Options shall be accelerated fifty percent (50%) prior to such
Change in Control and the Options terminated if not exercised after such
acceleration and at or prior to such Change in Control.
(c) Securities Acquisition. In the event of (i) any consolidation or
merger of the Company with or into any corporation or other entity or person, or
any other reorganization, in which the stockholders of the Company immediately
prior to such consolidation, merger or reorganization, own less than fifty (50%)
of the surviving entity's voting power immediately after such consolidation,
merger or reorganization, (ii) any transaction or series of related transactions
to which the Company is a party in which in excess of fifty percent (50%) of the
Company's voting power is transferred, or (iii) a sale, lease or other
disposition of all or substantially all of the assets of the Company, then the
vesting of outstanding Options shall be fully accelerated.
12. Amendment of the Plan and Options.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval.
9
<PAGE>
(c) No Impairment of Rights. Rights under any Option 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 Optionholder and (ii) the
Optionholder consents in writing.
(d) Amendment of Options. The Board at any time, and from time to time,
may amend the terms of any one or more Options; provided, however, that the
rights under any Option shall not be impaired by any such amendment unless (i)
the Company requests the consent of the Optionholder and (ii) the Optionholder
consents in writing.
13. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
No Options may be granted under the Plan while the Plan is suspended or after it
is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall
not impair rights and obligations under any Option granted while the Plan is in
effect except with the written consent of the Optionholder.
14. Effective Date of Plan.
The Plan shall become effective on the IPO Date, but no Option shall be
exercised unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.
15. Choice of Law.
All questions concerning the construction, validity and interpretation of
this Plan shall be governed by the law of the State of Delaware, without regard
to such state's conflict of laws rules.
10
<PAGE>
EXHIBIT 10.4
LEASE AGREEMENT
between
PENINSULA OFFICE PARK ASSOCIATES, L.P.
as "Landlord"
and
BLUE MARTINI, LLC
as "Tenant"
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. PREMISES......................................................... 3
2. TERM; POSSESSION................................................. 3
3. RENT............................................................. 3
4. SECURITY DEPOSIT................................................. 8
5. USE AND COMPLIANCE WITH LAWS..................................... 9
6. TENANT IMPROVEMENTS & ALTERATIONS................................ 12
7. MAINTENANCE AND REPAIRS.......................................... 13
8. TENANT'S TAXES................................................... 14
9. UTILITIES AND SERVICES........................................... 15
10. EXCULPATION AND INDEMNIFICATION.................................. 16
11. INSURANCE........................................................ 17
12. DAMAGE OR DESTRUCTION............................................ 19
13. CONDEMNATION..................................................... 20
14. ASSIGNMENT AND SUBLETTING........................................ 21
15. DEFAULT AND REMEDIES............................................. 24
16. LATE CHARGE AND INTEREST......................................... 26
17. WAIVER........................................................... 26
18. ENTRY, INSPECTION AND CLOSURE.................................... 27
19. SURRENDER AND HOLDING OVER....................................... 27
20. ENCUMBRANCES..................................................... 28
21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS................... 29
22. NOTICES.......................................................... 29
23. ATTORNEYS' FEES.................................................. 30
24. QUIET POSSESSION................................................. 30
25. SECURITY MEASURES................................................ 30
26. FORCE MAJEURE.................................................... 31
27. RULES AND REGULATIONS............................................ 31
28. LANDLORD'S LIABILITY............................................. 31
29. CONSENTS AND APPROVALS........................................... 31
30. WAIVER OF RIGHT TO JURY TRIAL.................................... 32
31. BROKERS.......................................................... 32
32. RELOCATION OF PREMISES........................................... 32
33. ENTIRE AGREEMENT................................................. 33
34. MISCELLANEOUS.................................................... 33
35. AUTHORITY........................................................ 33
</TABLE>
-i-
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Additional Rent..................................................... 7
Alterations......................................................... 13
Award............................................................... 22
Base Operating Costs................................................ 4
Base Taxes.......................................................... 4
Broker.............................................................. 35
Building............................................................ 3
Building Rules...................................................... 34
Building Systems.................................................... 10
Business Days....................................................... 16
Business Hours...................................................... 16
Claims.............................................................. 17
CommenCement Date................................................... 3
Condemnation........................................................ 22
Condemnor........................................................... 22
Controls............................................................ 15
Date of Condemnation................................................ 22
Encumbrance......................................................... 31
Environmental Losses................................................ 11
Environmental Requirements.......................................... 11
Event of Default.................................................... 26
Expiration Date..................................................... 3
Fees................................................................ 32
Handled by Tenant................................................... 11
Handling by Tenant.................................................. 11
Hazardous Materials................................................. 10
HVAC................................................................ 10
Interest Rate....................................................... 29
Landlord............................................................ 3
Mortgagee........................................................... 31
Operating Costs..................................................... 4
Parking Facility.................................................... 3
Permitted Hazardous Materials....................................... 11
Premises............................................................ 3
Project............................................................. 3
Property............................................................ 3
Property Manager.................................................... 19
Proposed Transferee................................................. 24
Rent................................................................ 9
Rental Tax.......................................................... 16
Representatives..................................................... 11
Security Deposit.................................................... 9
Service Failure..................................................... 17
Taxes............................................................... 7
Tenant.............................................................. 3
Tenant Improvements................................................. 13
Tenant's Share...................................................... 7
Tenant' s Taxes..................................................... 16
Term................................................................ 3
Trade Fixtures...................................................... 14
Transfer............................................................ 23
Transferee.......................................................... 24
Visitors............................................................ 11
</TABLE>
-ii-
<PAGE>
BASIC LEASE INFORMATION
Lease Date: For identification purposes only, the date of this
Lease is September 1, 1998
Landlord: PENINSULA OFFICE PARK ASSOCIATES, L.P., a California
limited partnership
Tenant: BLUE MARTINI, LLC
Project: Peninsula Office Park
Building Address: 2600 Campus Drive San Mateo, California
Rentable Area of Approximately 59,283 square feet
Building:
Premises: Floor: One
Suite Number: 175
Rentable Area: Approximately 6,819 rentable square feet
Term: 60 full calendar months (plus any partial month at the
beginning of the Term)
Commencement Date: The later of(a) September 15, 1998, or (b) the date
Landlord delivers possession of the Premises to Tenant
Expiration Date: September 30, 2003
Base Rent: Months 01 - 15: $3.00 per rentable square foot per month
Months 16 - 27: $3.40 per rentable square foot per month
Months 28 - 39: $3.50 per rentable square foot per month
Months 40 - 51: $3.60 per rentable square foot per month
Months 52 - 60: $3.70 per rentable square foot per month
Base Year: The calendar year 1998
Tenant's Share: 11.5%
Security Deposit: $151,381.80 (subject to possible reduction pursuant to the
provisions of Section 4 of this Lease)
Landlord's Address Peninsula Office Park
for Payment of Rent: File 72882
P.O. Box 61000
San Francisco, CA 94161-2882
-1-
<PAGE>
Business Hours: 8:00 a.m. to 6:00 p.m. Monday - Friday (excluding
Holidays)
Landlord's Address PENINSULA OFFICE PARK ASSOCIATES, L.P.
for Notices: c/o William Wilson & Associates
2929 Campus Drive, Suite 145
San Mateo, CA 94403
Attention: Property Management
with a copy to:
PENINSULA OFFICE PARK ASSOCIATES, L.P.
c/o William Wilson & Associates
2929 Campus Drive, Suite 450
San Mateo, CA 94403
Attn: General Counsel
Tenant's Address at the Premises
for Notices:
Broker(s): Wayne Mascia Associates
Guarantor(s): (none)
Property Manager: William Wilson & Associates
Additional Provisions: 36. Parking
Exhibits:
- ---------
Exhibit A: The Premises
Exhibit B: Construction Rider
Exhibit C: Building Rules
Exhibit D: Additional Provisions
The Basic Lease Information set forth above is part of the Lease. In the
event of any conflict between any provision in the Basic Lease Information and
the Lease, the Lease shall control.
-2-
<PAGE>
THIS LEASE is made as of the Lease Date set forth in the Basic Lease
Information, by and between the Landlord identified in the Basic Lease
Information ("Landlord"), and the Tenant identified in the Basic Lease
Information ("Tenant"). Landlord and Tenant hereby agree as follows:
1. PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, upon the terms and subject to the conditions of this Lease, the office
space identified in the Basic Lease Information as the Premises (the
"Premises"), in the Building located at the address specified in the Basic Lease
Information (the "Building"). The approximate configuration and location of the
Premises is shown on Exhibit A. Landlord and Tenant agree that the rentable area
---------
of the Premises for all purposes under this Lease shall be the Rentable Area
specified in the Basic Lease Information. The Building, together with the
parking facilities serving the Building (the "Parking Facility"), and the
parcel(s) of land on which the Building and the Parking Facility are situated
(collectively, the "Property"), is part of the Project identified in the Basic
Lease Information (the "Project").
2. TERM; POSSESSION. The term of this Lease (the "Term") shall commence on
the Commencement Date as described below and, unless sooner terminated, shall
expire on the Expiration Date set forth in the Basic Lease Information (the
"Expiration Date"). The "Commencement Date" shall be the later of (a) September
15, 1998, or (b) the date Landlord delivers possession of the Premises to
Tenant.
3. RENT.
3.1 Base Rent. Tenant agrees to pay to Landlord the Base Rent set forth
---------
in the Basic Lease Information, without prior notice or demand, on the first day
of each and every calendar month during the Term, except that Base Rent for the
first full calendar month in which Base Rent is payable shall be paid upon
Tenant's execution of this Lease and Base Rent for any partial month at the
beginning of the Term shall be paid on the Commencement Date. Base Rent for any
partial month at the beginning or end of the Term shall be prorated based on the
actual number of days in the month.
If the Basic Lease Information provides for any change in Base Rent by
reference to years or months (without specifying particular dates), the change
will take effect on the applicable annual or monthly anniversary of the
Commencement Date (which won't necessarily be the first day of a calendar
month).
3.2 Additional Rent: Increases in Operating Costs and Taxes.
-------------------------------------------------------
(a) Definitions.
-----------
(1) "Base Operating Costs" means Operating Costs for the
calendar year specified as the Base Year in the Basic Lease Information
(excluding therefrom, however, any Operating Costs of a nature that would not
ordinarily be incurred on an annual, recurring basis).
(2) "Base Taxes" means Taxes for the calendar year specified as
the Base Year in the Basic Lease Information.
-3-
<PAGE>
(3) "Operating Costs" means all costs of managing, operating,
maintaining and repairing the Property, including all costs, expenditures, fees
and charges for: (A) operation, maintenance and repair of the Property
(including maintenance, repair and replacement of glass, the roof covering or
membrane, and landscaping); (B) utilities and services (including
telecommunications facilities and equipment, recycling programs and trash
removal), and associated supplies and materials; (C) compensation (including
employment taxes and fringe benefits) for persons (at or below the level
equivalent to senior property manager or senior engineering manager) who perform
duties in connection with the operation, management, maintenance and repair of
the Building, such compensation to be appropriately allocated for persons who
also perform duties unrelated to the Building; (D) property (including coverage
for earthquake and flood if carried by Landlord), liability, rental income and
other insurance relating to the Property, and expenditures for deductible
amounts paid under such insurance with expenditures for deductible amounts paid
in connection with losses caused by earthquake amortized over a five year
period, including interest on the unamortized balance at the rate paid by
Landlord on funds borrowed to finance capital improvements (or, if Landlord
finances such improvements out of Landlord's funds without borrowing, the rate
that Landlord would have paid to borrow such funds, as reasonably determined by
Landlord); (E) licenses, permits and inspections; (F) complying with the
requirements of any law, statute, ordinance or governmental rule or regulation
or any orders pursuant thereto (collectively "Laws"); (G) amortization of
capital improvements required to comply with Laws, or which are intended to
reduce Operating Costs or improve the utility, efficiency or capacity of any
Building System, with interest on the unamortized balance at the rate paid by
Landlord on funds borrowed to finance such capital improvements (or, if Landlord
finances such improvements out of Landlord's funds without borrowing, the rate
that Landlord would have paid to borrow such funds, as reasonably determined by
Landlord), over such useful life as Landlord shall reasonably determine; (H) an
office in the Project for the management of the Property, including expenses of
furnishing and equipping such office and the rental value of any space occupied
for such purposes; (I) property management fees not to exceed customary and
commercially reasonable management fees for similar type properties in the
general geographic area of the Project; (J) accounting, legal and other
professional services incurred in connection with the operation of the Property
and the calculation of Operating Costs and Taxes; (K) a reasonable allowance for
depreciation on machinery and equipment used to maintain the Property and on
other personal property owned by Landlord in the Property (including window
coverings and carpeting in common areas); (L) contesting the validity or
applicability of any Laws that may affect the Property; (M) the Building's share
of any shared or common area maintenance fees and expenses (including costs and
expenses of operating, managing, owning and maintaining the Parking Facility and
the common areas of the Project and any fitness center or conference center in
the Project): and (N) any other cost, expenditure, fee or charge, whether or not
hereinbefore described, which in accordance with generally accepted property
management practices would be considered an expense of managing, operating,
maintaining and repairing the Property. Operating Costs for any calendar year
during which average occupancy of the Building is less than one hundred percent
(100%) shall be calculated based upon the Operating Costs that would have been
incurred if the Building had an average occupancy of one hundred percent (100%)
during the entire calendar year.
-4-
<PAGE>
Operating Costs shall not include:
1) capital improvements (except as otherwise provided above);
2) costs of special services rendered to individual tenants (including
Tenant) for which a special charge is made;
3) interest and principal payments, points, fees, expenses or other
charges on account of any loans or indebtedness incurred in connection
with the acquisition, ownership or operation of the Building, or
ground lease rental payments (if any);
4) costs of improvements for Tenant or other tenants of the Building;
5) costs of services or other benefits of a type which are not available
to Tenant but which are available to other tenants or occupants, and
costs for which Landlord is reimbursed by other tenants of the
Building other than through payment of tenants' shares of Operating
Costs and Taxes;
6) leasing commissions, finders' fees, marketing costs, attorneys' fees
and other expenses incurred in connection with leasing, renovating,
decorating, improving or installing leasehold improvements in tenant
space for tenants, occupants and prospective tenants in the Building
or enforcing such leases costs, attorney's fees, costs, and
disbursements and other expenses incurred in connection with
negotiations or disputes with tenants, other occupants, or legal fees
incurred in or the sale or refinancing of the Building or in
connection with this Lease;
7) depreciation or amortization, other than as specifically enumerated in
the definition of Operating Costs above;
8) costs, fines or penalties incurred due to Landlord's violation of any
Law;
9) reserves for capital items, bad debts or rental losses;
10) repairs or other work occasioned by fire, windstorm or other casualty
or hazed to the extent Landlord receives insurance proceeds;
11) repairs or rebuilding necessitated by condemnation to the extent
Landlord receives proceeds from the applicable condemning authority;
12) expenses incurred in tenant buildout or renovations or otherwise
improving or decorating, painting or redecorating space for tenants or
other occupants of space, including permits, license, design, space
planning, and inspection costs associated therewith;
13) Landlord's costs of electricity and other services sold or provided to
tenants in the Building and for which Landlord is entitled to be
reimbursed, whether or not collected, by such tenants as a separate
additional charge or rental over and above the basic rent or
escalation payment payable under the Lease with such tenant;
-5-
<PAGE>
14) expenses in connection with non-Building standard services or benefits
of a type which are not provided to Tenant but which are provided to
other tenants or occupants of the Building, or for which Tenant is
charged directly but which are provided to another tenant or occupant
of the Building without direct charge;
15) costs incurred due to violation by Landlord or any tenant or other
occupant of the terms and conditions of any Lease or other rental
arrangement covering space in the Building;
16) amounts paid to subsidiaries or other affiliates of Landlord (i.e.,
persons or companies controlled by, under common control with, or
which control, Landlord) for services on or to the Land, the Building
or the Premises (or any portion thereof), to the extent only that the
costs of such services exceed competitive costs of such services were
they not so rendered by a subsidiary, or other affiliate of Landlord;
17) all items and services for which Tenant pays third parties directly;
18) charitable or political contributions;
19) costs associated with the operation of the business of the partnership
or entity which constitutes Landlord, or the operation of any parent,
subsidiary or affiliate of Landlord, as the same are distinguished
from the costs of operation of the Building, including without
limitation partnership accounting and legal matters, costs of
defending any lawsuits with any mortgagee, and costs of selling,
syndicating, financing, mortgaging or hypothecating any of Landlord's
interest in the Building;
20) costs of signs in or on the Building (other than the Building
directory in the lobby of the Building) identifying other tenants of
the Building or their employees, divisions, subsidiaries, subtenants
or assignees; and
21) capital costs of acquisition, of painting, sculpture or other art
objects for the Project.
(4) "Taxes" means: all real property taxes and general, special
or district assessments or other governmental impositions, of whatever kind,
nature or origin, imposed on or by reason of the ownership or use of the
Properly; governmental charges, fees or assessments for transit or traffic
mitigation (including area-wide traffic improvement assessments and
transportation system management fees), housing, police, fire or other
governmental service or purported benefits to the Property; personal property
taxes assessed on the personal property of Landlord used in the operation of the
Properly; service payments in lieu of taxes and taxes and assessments of every
kind and nature whatsoever levied or assessed in addition to, in lieu of or in
substitution for existing or additional real or personal property taxes on the
Property or the personal property described above; any increases in the
foregoing caused by changes in assessed valuation, tax rate or other factors or
circumstances; and the reasonable cost of contesting by appropriate proceedings
the amount or validity of any taxes, assessments or charges described above.
Taxes shall not include any state and federal personal or corporate
-6-
<PAGE>
income taxes measured by the income of Landlord from all sources (other than
taxes on rent at the Property), as well as any franchise, inheritance, or
estate, succession, gift tax, or capital levy, or any penalties, or interest for
late payment of Taxes. To the extent paid by Tenant or other tenants as
"Tenant's Taxes" (as defined in Section 8 - Tenant's Taxes), "Tenant's Taxes"
shall be excluded from Taxes.
(5) "Tenant's Share" means the Rentable Area of the Premises
divided by the total Rentable Area of the Building, as set forth in the Basic
Lease Information. If the Rentable Area of the Building is changed or the
Rentable Area of the Premises is changed by Tenant's leasing of additional space
hereunder or for any other reason, Tenant's Share shall be adjusted accordingly.
(b) Additional Rent.
---------------
(1) Tenant shall pay Landlord as "Additional Rent" for each
calendar year or portion thereof during the Term Tenant's Share of the sum of(x)
the amount (if any) by which Operating Costs for such period exceed Base
Operating Costs, and (y) the amount (if any) by which Taxes for such period
exceed Base Taxes.
(2) Prior to the end of the Base Year and each calendar year
thereafter, Landlord shall notify Tenant of Landlord's estimate of Operating
Costs, Taxes and Tenant's Additional Rent for the following calendar year.
Commencing on the first day of January of each calendar year and continuing on
the first day of every month thereafter in such year, Tenant shall pay to
Landlord one-twelfth (1/12th) of the estimated Additional Rent. If Landlord
thereafter estimates that Operating Costs or Taxes for such year will vary from
Landlord's prior estimate, Landlord may, by notice to Tenant, revise the
estimate for such year (and Additional Rent shall thereafter be payable based on
the revised estimate).
(3) As soon as reasonably practicable after the end of the Base
Year and each calendar year thereafter, Landlord shall furnish Tenant a
statement with respect to such year, showing Operating Costs, Taxes and
Additional Rent for the year, and the total payments made by Tenant with respect
thereto. Unless Tenant raises any objections to Landlord's statement within
ninety (90) days after receipt of the same, such statement shall conclusively be
deemed correct and Tenant shall have no right thereafter to dispute such
statement or any item therein or the computation of Additional Rent based
thereon. If Tenant does object to such statement, then Landlord shall provide
Tenant with reasonable verification of the figures shown on the statement and
the parties shall negotiate in good faith to resolve any disputes. Any objection
of Tenant to Landlord's statement and resolution of any dispute shall not
postpone the time for payment of any amounts due Tenant or Landlord based on
Landlord's statement, nor shall any failure of Landlord to deliver Landlord's
statement in a timely manner relieve Tenant of Tenant's obligation to pay any
amounts due Landlord based on Landlord's statement.
(4) If Tenant's Additional Rent as finally determined for any
calendar year exceeds the total payments made by Tenant on account thereof,
Tenant shall pay Landlord the deficiency within ten (10) days of Tenant's
receipt of Landlord's statement. If the total payments made by Tenant on account
thereof exceed Tenant's Additional Rent as finally determined for such year,
Tenant's excess payment shall be credited toward the rent next due
-7-
<PAGE>
from Tenant under this Lease. For any partial calendar year at the beginning or
end of the Term, Additional Rent shall be prorated on the basis of a 365-day
year by computing Tenant's Share of the increases in Operating Costs and Taxes
for the entire year and then prorating such amount for the number of days during
such year included in the Term. Notwithstanding the termination of this Lease,
Landlord shall pay to Tenant or Tenant shall pay to Landlord, as the case may
be, within ten (10) days after Tenant's receipt of Landlord's final statement
for the calendar year in which this Lease terminates, the difference between
Tenant's Additional Rent for that year, as finally determined by Landlord, and
the total amount previously paid by Tenant on account thereof.
If for any reason Base Taxes or Taxes for any year during the Term are reduced,
refunded or otherwise changed, Tenant's Additional Rent shall be adjusted
accordingly. If Taxes are temporarily reduced as a result of space in the
Building being leased to a tenant that is entitled to an exemption from property
taxes or other taxes, then for purposes of determining Additional Rent for each
year in which Taxes are reduced by any such exemption, Taxes for such year shall
be calculated on the basis of the amount the Taxes for the year would have been
in the absence of the exemption. The obligations of Landlord to refund any
overpayment of Additional Rent and of Tenant to pay any Additional Rent not
previously paid shall survive the expiration of the Term. Notwithstanding
anything to the contrary in this Lease, if there is at any time a decrease in
Taxes below the amount of the Taxes for the Base Year, then for purposes of
calculating Additional Rent for the year in which such decrease occurs and all
subsequent periods, Base Taxes shall be reduced to equal the Taxes for the year
in which the decrease occurs.
3.3 Payment of Rent. All amounts payable or reimbursable by Tenant
---------------
under this Lease, including late charges and interest (collectively, "Rent"),
shall constitute rent and shall be payable and recoverable as rent in the manner
provided in this Lease. All sums payable to Landlord on demand under the terms
of this Lease shall be payable within ten (10) days after notice from Landlord
of the amounts due. All rent shall be paid without offset, recoupment or
deduction in lawful money of the United States of America to Landlord at
Landlord's Address for Payment of Rent as set forth in the Basic Lease
Information, or to such other person or at such other place as Landlord may from
time to time designate.
4. SECURITY DEPOSIT. On execution of this Lease, Tenant shall deposit with
Landlord the amount specified in the Basic Lease Information as the Security
Deposit, if any (the "Security Deposit"), as security for the performance of
Tenant's obligations under this Lease. Landlord may (but shall have no
obligation to) use the Security Deposit or any portion thereof to cure any Event
of Default under this Lease or to compensate Landlord for any damage Landlord
incurs as a result of Tenant's failure to perform any of Tenant's obligations
hereunder. In such event Tenant shall pay to Landlord on demand an amount
sufficient to replenish the Security Deposit. If Tenant is not in default at the
expiration or termination of this Lease, then within thirty (30) days following
the expiration or termination of this Lease Landlord shall return to Tenant the
Security Deposit or the balance thereof then held by Landlord and not applied as
provided above. Landlord may commingle the Security Deposit with Landlord's
general and other funds. Landlord shall not be required to pay interest on the
Security Deposit to Tenant.
If, and only if, (x) there has been no Event of Default under the Lease
during the eighteen (18) months prior to Reduction Date (as hereinafter defined)
and (y) during each of Tenant's four
-8-
<PAGE>
(4) most recent accounting quarters immediately prior to the Reduction Date
Tenant has audited financial statements showing positive net income equal to
three (3) times the sum of (A) the Base Rent, and (B) the actual Additional Rent
(as such Base Rent and Additional Rent may from time to time change) for each of
the same four (4) accounting quarters for which net income is being compared,
then when all of the preceding conditions contained in this paragraph have been
satisfied (the "Reduction Date"), then the amount of the Security Deposit shall
be reduced in twelve month increments, beginning twenty-four months after the
Commencement Date, so the amount Security Deposit shall be as follows:
<TABLE>
<CAPTION>
Months (counting from the Commencement Date through Amount of
applicable monthly anniversary of Commencement Date) Security Deposit
- ---------------------------------------------------- ----------------
<S> <C>
01 - 24 $151,381.80
25 - 36 $113,536.35
37 - 48 $ 75,690.90
49 - 60 $ 37,845.45
</TABLE>
5. USE AND COMPLIANCE WITH LAWS.
5.1 Use. The Premises shall be used and occupied for general business
---
office purposes and for no other use or purpose. Tenant shall comply with all
present and future Laws relating to Tenant's use or occupancy of the Premises
(and make any repairs, alterations or improvements as required to comply with
all such Laws), and shall observe the "Building Rules" (as defined in Section
27 -Rules and Regulations) except that repairs or alterations required to comply
with Laws generally applicable to the condition of the Premises for use as
office space, and not required or caused by Tenant's particular use or
activities or by any Alterations made or proposed by Tenant. shall be made by
Landlord (and the cost thereof shall be included in or excluded from Operating
Costs as provided in Section 3.2(a)(3) above). Tenant shall not do, bring, keep
or sell anything in or about the Premises that is prohibited by, or that will
cause a cancellation of or an increase in the existing premium for, any
insurance policy covering the Property or any part thereof. Tenant shall not
permit the Premises to be occupied or used in any manner that will constitute
waste or a nuisance, or disturb the quiet enjoyment of or otherwise annoy other
tenants in the Building. Without limiting the foregoing, the Premises shall not
be used for educational activities, practice of medicine or any of the healing
arts, providing social services, for any governmental use (including embassy or
consulate use), or for personnel agency, customer service office, studios for
radio, television or other media, travel agency or reservation center operations
or uses. Tenant shall not, without the prior consent of Landlord, (i) bring into
the Building or the Premises anything that may cause substantial noise, odor or
vibration, overload the floors in the Premises or the Building or any of the
heating, ventilating and air-conditioning ("HVAC"), mechanical, elevator,
plumbing, electrical, fire protection, life safety, security or other systems in
the Building ("Building Systems"), or jeopardize the structural integrity of the
Building or any part thereof; (ii) connect to the utility systems of the
Building any apparatus, machinery or other equipment other than typical office
equipment; or (iii) connect to any electrical circuit in the Premises any
equipment or other load with aggregate electrical power requirements in excess
of 80% of the rated capacity of the circuit.
-9-
<PAGE>
5.2 Hazardous Materials.
-------------------
(a) Definitions.
-----------
(1) "Hazardous Materials" shall mean any substance: (A) that now
or in the future is regulated or governed by, requires investigation or
remediation under, or is defined as a hazardous waste, hazardous substance,
pollutant or contaminant under any governmental statute, code, ordinance,
regulation, rule or order, and any amendment thereto, including the
Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C.
(S) 9601 et seq., and the Resource Conservation and Recovery Act, 42 U.S.C. (S)
-- ---
6901 et seq., or (B) that is toxic, explosive, corrosive, flammable,
-- ---
radioactive, carcinogenic, dangerous or otherwise hazardous, including gasoline,
diesel fuel, petroleum hydrocarbons, polychlorinated biphenyls (PCBs), asbestos,
radon and urea formaldehyde foam insulation.
(2) "Environmental Requirements" shall mean all present and
future Laws, orders, permits, licenses, approvals, authorizations and other
requirements of any kind applicable to Hazardous Materials.
(3) "Handled By Tenant" and "Handling By Tenant" shall mean and
refer to any installation, handling, generation, storage, use, disposal,
discharge, release, abatement, removal, transportation, or any other activity of
any type by Tenant or its agents, employees, contractors, licensees, assignees,
sublessees, transferees or representatives (collectively, "Representatives") or
its guests, customers, invitees, or visitors (collectively, "Visitors"). at or
about the Premises in connection with or involving Hazardous Materials.
(4) "Environmental Losses" shall mean all costs and expenses of
any kind, damages, including foreseeable and unforeseeable consequential
damages, fines and penalties incurred in connection with any violation of and
compliance with Environmental Requirements and all losses of any kind
attributable to the diminution of value, loss of use or adverse effects on
marketability or use of any portion of the Premises or Property.
(b) Tenant's Covenants. No Hazardous Materials shall be Handled by
------------------
Tenant at or about the Premises or Property without Landlord's prior written
consent, which consent may be granted, denied, or conditioned upon compliance
with Landlord's requirements, all in Landlord's absolute discretion.
Notwithstanding the foregoing, normal quantities and use of those Hazardous
Materials customarily used in the conduct of general office activities, such as
copier fluids and cleaning supplies ("Permitted Hazardous Materials"), may be
used and stored at the Premises without Landlord's prior written consent,
provided that Tenant's activities at or about the Premises and Property and the
Handling by Tenant of all Hazardous Materials shall comply at all times with all
Environmental Requirements. At the expiration or termination of the Lease,
Tenant shall promptly remove from the Premises and Property all Hazardous
Materials Handled by Tenant at the Premises or the Property. Tenant shall keep
Landlord fully and promptly informed of all Handling by Tenant of Hazardous
Materials other than Permitted Hazardous Materials. Tenant shall be responsible
and liable for the compliance with all of the provisions of this Section by all
of Tenant's Representatives and Visitors, and all of Tenant's obligations under
this Section (including its indemnification obligations under paragraph (e)
below) shall survive the expiration or termination of this Lease.
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<PAGE>
(c) Compliance. Tenant shall at Tenant's expense promptly take all
----------
actions required by any governmental agency or entity in connection with or as a
result of the Handling by Tenant of Hazardous Materials at or about the Premises
or Property, including inspection and testing, performing all cleanup, removal
and remediation work required with respect to those Hazardous Materials,
complying with all closure requirements and post-closure monitoring, and filing
all required reports or plans. All of the foregoing work and all Handling by
Tenant of all Hazardous Materials shall be performed in a good, safe and
workmanlike manner by consultants qualified and licensed to undertake such work
and in a manner that will not interfere with any other tenant's quiet enjoyment
of the Property or Landlord's use, operation, leasing and sale of the Property.
Tenant shall deliver to Landlord prior to delivery to any governmental agency,
or promptly after receipt from any such agency, copies of all permits,
manifests, closure or remedial action plans, notices, and all other documents
relating to the Handling by Tenant of Hazardous Materials at or about the
Premises or Property. If any lien attaches to the Premises or the Property in
connection with or as a result of the Handling by Tenant of Hazardous Materials,
and Tenant does not cause the same to be released, by payment, bonding or
otherwise, within ten (10) days after the attachment thereof, Landlord shall
have the right but not the obligation to cause the same to be released and any
sums expended by Landlord (plus Landlord's administrative costs) in connection
therewith shall be payable by Tenant on demand.
(d) Landlord's Rights. Upon reasonable oral or written notice to
-----------------
Tenant (and without notice in emergencies) Landlord shall have the right, but
not the obligation, to enter the Premises at any reasonable time (i) to confirm
Tenant's compliance with the provisions of this Section 5.2, and (ii) to perform
Tenant's obligations under this Section if Tenant has failed to do so after
reasonable notice to Tenant. Landlord shall also have the right to engage
qualified Hazardous Materials consultants to inspect the Premises and review the
Handling by Tenant of Hazardous Materials, including review of all permits,
reports, plans, and other documents regarding same. If Tenant has failed to
comply with the provisions of this Section 5.2, then Tenant shall pay to
Landlord on demand the costs of Landlord's consultants' fees and all costs
incurred by Landlord in performing Tenant's obligations under this Section.
Landlord shall use reasonable efforts to minimize any interference with Tenant's
business caused by Landlord's entry into the Premises, but Landlord shall not be
responsible for any interference caused thereby.
(e) Tenant's Indemnification. Tenant agrees to indemnify, defend,
------------------------
protect and hold harmless Landlord and its partners or members and its or their
partners, members, directors, officers, shareholders, employees and agents from
all Environmental Losses and all other claims, actions, losses, damages,
liabilities, costs and expenses of every kind, including reasonable attorneys',
experts' and consultants' fees and costs, incurred at any time and arising from
or in connection with the Handling by Tenant of Hazardous Materials at or about
the Property or Tenant's failure to comply in full with all Environmental
Requirements with respect to the Premises.
(f) Landlord's Responsibilities. Landlord shall not use any of the
---------------------------
Land or Building for any activities involving the use, generation, handling,
release, threatened release, treatment, storage, discharge, disposal or
transportation of any Hazardous Materials, except in such quantity or
concentration that is customarily used, stored or disposed in the ordinary
course of the business so long as such activity duly complies with applicable
Laws and good business
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<PAGE>
practice. If Landlord violates the foregoing covenant resulting in an
Environmental Claim (as hereinafter defined) with respect to the Premises, then
Landlord agrees to (a) notify Tenant immediately of any such Environmental Claim
and (b) clean up any contamination in to the extent required by applicable Laws,
the costs of which shall not be included in Operating Costs, except that to the
extent provided elsewhere in this Section 5.2, Tenant shall be responsible for
the costs of any Handling by Tenant of Hazardous Materials at or about the
Property or Tenant's failure to comply in full with all Environmental
Requirements with respect to the Premises. The costs for any Environmental Claim
for Hazardous Materials existing on the Project on the date of this Lease shall
not be included in Operating Costs or otherwise be the responsibility of Tenant.
"Environmental Claim" means any claim, demand, action, cause of action, suit,
damage, punitive damage, fine, penalty, expense, liability, criminal liability,
judgment, or governmental investigation relating to remediation or compliance
with requirements of Laws covering Hazardous Materials. The term "Environmental
Claim" also includes any costs incurred in responding to efforts to require
remediation and any claim based upon any asserted or actual breach or violation
of any requirements of any Laws covering Hazardous Materials.
6. TENANT IMPROVEMENTS & ALTERATIONS.
6.1 Landlord and Tenant shall perform their respective obligations with
respect to design and construction of any improvements to be constructed and
installed in the Premises (the "Tenant Improvements"), as provided in the
Construction Rider. Except for any Tenant Improvements to be constructed by
Tenant as provided in the Construction Rider, Tenant shall not make any
alterations, improvements or changes to the Premises, including installation of
any security system or telephone or data communication wiring, ("Alterations"),
without Landlord's prior written consent. Notwithstanding any other provision
contained herein, Tenant shall not be required to obtain Landlord's prior
consent for minor, non-structural Alterations that (a) do not affect any. of the
Building Systems, (b) are not visible from the exterior of the Premises, and (c)
cost less than One Thousand Five Hundred Dollars ($1,500), so long as Tenant
gives Landlord notice of the proposed Alterations at least ten (10) days prior
to commencing the Alterations and complies with all of the following provisions
(except that Tenant shall not be required to obtain Landlord's approval of any
plans or specifications therefor). Any such Alterations shall be completed by
Tenant at Tenant's sole cost and expense: (i) with due diligence, in a good and
workmanlike manner, using new materials; (ii) in compliance with plans and
specifications approved by Landlord; (iii) in compliance with the reasonable
construction rules and regulations promulgated by Landlord from time to time;
(iv) in accordance with all applicable Laws (including all work, whether
structural or non-structural, inside or outside the Premises, required to comply
fully with all applicable Laws and necessitated by Tenant's work); and (v)
subject to all conditions which Landlord may in Landlord's reasonable discretion
impose. Such conditions may include requirements for Tenant to: (i) provide
payment or performance bonds or additional insurance (from Tenant or Tenant's
contractors, subcontractors or design professionals); (ii) use contractors or
subcontractors designated by Landlord; and (iii) remove all or part of the
Alterations prior to or upon expiration or termination of the Term, as
designated by Landlord at the time Tenant installs the Alterations. If any work
outside the Premises, or any work on or adjustment to any of the Building
Systems, is required in connection with or as a result of Tenant's work, such
work shall be performed at Tenant's expense by contractors designated by
Landlord. Landlord's right to review and approve (or withhold approval of)
Tenant's plans, drawings, specifications, contractor(s) and other aspects of
construction work proposed by
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<PAGE>
Tenant is intended solely to protect Landlord, the Property and Landlord's
interests. No approval or consent by Landlord shall be deemed or construed to be
a representation or warranty by Landlord as to the adequacy, sufficiency,
fitness or suitability thereof or compliance thereof with applicable Laws or
other requirements. Except as otherwise provided in Landlord's consent; all
Alterations shall upon installation become part of the realty and be the
property of Landlord.
6.2 Before making any Alterations, Tenant shall submit to Landlord for
Landlord's prior approval reasonably detailed final plans and specifications
prepared by a licensed architect or engineer, a copy of the construction
contract, including the name of the contractor and all subcontractors proposed
by Tenant to make the Alterations and a copy of the contractor's license. Tenant
shall reimburse Landlord upon demand for any expenses incurred by Landlord in
connection with any Alterations made by Tenant, including reasonable fees
charged by Landlord's contractors or consultants to review plans and
specifications prepared by Tenant and to update the existing as-built plans and
specifications of the Building to reflect the Alterations. Tenant shall obtain
all applicable permits, authorizations and governmental approvals and deliver
copies of the same to Landlord before commencement of any Alterations.
6.3 Tenant shall keep the Premises and the Property free and clear of all
liens arising out of any work performed, materials furnished or obligations
incurred by Tenant. If any such lien attaches to the Premises or the Property,
and Tenant does not cause the same to be released by payment, bonding or
otherwise within ten (10) days after the attachment thereof, Landlord shall have
the right but not the obligation to cause the same to be released, and any sums
expended by Landlord (plus Landlord's administrative costs) in connection
therewith shall be payable by Tenant on demand with interest thereon from the
date of expenditure by Landlord at the Interest Rate (as defined in Section
16.2 -Interest). Tenant shall give Landlord at least ten (10) days' notice prior
to the commencement of any Alterations and cooperate with Landlord in posting
and maintaining notices of non-responsibility in connection therewith.
6.4 Subject to the provisions of Section 5 - Use and Compliance with Laws
and the foregoing provisions of this Section, Tenant may install and maintain
furnishings, equipment, movable partitions, business equipment and other trade
fixtures ("Trade Fixtures") in the Premises, provided that the Trade Fixtures do
not become an integral part of the Premises or the Building. Tenant shall
promptly repair any damage to the Premises or the Building caused by any
installation or removal of such Trade Fixtures.
7. MAINTENANCE AND REPAIRS.
7.1 By taking possession of the Premises Tenant agrees that the Premises
are then in a good and tenantable condition. During the Term, Tenant at Tenant's
expense but under the direction of Landlord, shall repair and maintain the
Premises, including the interior walls, floor coverings, ceiling (ceiling tile's
and grid), Tenant Improvements, Alterations, fire extinguishers, outlets and
fixtures, and any appliances (including dishwashers, hot water heaters and
garbage disposers) in the Premises, in a first class condition, and keep the
Premises in a clean, safe and orderly condition.
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<PAGE>
7.2 Landlord shall maintain or cause to be maintained in reasonably good
order, condition and repair, the structural portions of the roof, foundations,
floors and exterior walls of the Building, the Building Systems, and the public
and common areas of the Property, such as elevators, stairs, corridors and
restrooms; provided, however, that Tenant shall pay the cost of repairs for any
damage occasioned by Tenant's use of the Premises or the Property or any act or
omission of Tenant or Tenant's Representatives or Visitors, to the extent (if
any) not covered by Landlord's property insurance. Landlord shall be under no
obligation to inspect the Premises. Tenant shall promptly report in writing to
Landlord any defective condition known to Tenant which Landlord is required to
repair. As a material part of the consideration for this Lease, Tenant hereby
waives any benefits of any applicable existing or future Law, including the
provisions of California Civil Code Sections 1932(l ), 1941 and 1942, that
allows a tenant to make repairs at its landlord's expense.
7.3 Landlord hereby reserves the right, at any time and from time to time,
without liability to Tenant, and without constituting an eviction, constructive
or otherwise, or entitling Tenant to any abatement of rent or to terminate this
Lease or otherwise releasing Tenant from any of Tenant's obligations under this
Lease:
(a) To make alterations, additions, repairs, improvements to or in or
to decrease the size of area of, all or any part of the Building, the fixtures
and equipment therein, and the Building Systems (except that Landlord shall not
have any right under this provision to materially reduce the size of the
Premises, or to permanently, materially and adversely affect Tenant's access to
and use of the Premises, except only as may be required to comply with Laws or
as a result of any fire or other casualty or Condemnation);
(b) To change the Building's name or street address;
(c) To install and maintain any and all signs on the exterior and
interior of the Building;
(d) To reduce, increase, enclose or otherwise change at any time and
from time to time the size, number, location, lay-out and nature of the common
areas (including the Parking Facility) and other tenancies and premises in the
Property and to create additional rentable areas through use or enclosure of
common areas; and
(e) If any governmental authority promulgates or revises any Law or
imposes mandatory or voluntary controls or guidelines on Landlord or the
Property relating to the use or conservation of energy or utilities or the
reduction of automobile or other emissions or reduction or management of traffic
or parking on the Property (collectively "Controls"), to comply with such
Controls, whether mandatory, or voluntary, or make any alterations to the
Property related thereto.
(f) In exercising its rights under this Section 7.3, Landlord agrees
to use reasonable efforts to minimize any interruption to or disruption of
Tenant's use of the Premises.
8. TENANT'S TAXES. "Tenant's Taxes" shall mean (a) all taxes, assessments,
license fees and other governmental charges or impositions levied or assessed
against or with respect to Tenant's personal property or Trade Fixtures in the
Premises, whether any such imposition is
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<PAGE>
levied directly against Tenant or levied against Landlord or the Property, (b)
all rental, excise, sales or transaction privilege taxes arising out of this
Lease (excluding, however, state and federal personal or corporate income taxes
measured by the income of Landlord from all sources) imposed by any taxing
authority upon Landlord or upon Landlord's receipt of any rent payable by Tenant
pursuant to the terms of this Lease ("Rental Tax"), and (c) any increase in
Taxes attributable to inclusion of a value placed on Tenant's personal property,
Trade Fixtures or Alterations. Tenant shall pay any Rental Tax to Landlord in
addition to and at the same time as Base Rent is payable under this Lease, and
shall pay all other Tenant's Taxes before delinquency (and, at Landlord's
request, shall furnish Landlord satisfactory evidence thereof). If Landlord pays
Tenant's Taxes or any portion thereof, Tenant shall reimburse Landlord upon
demand for the amount of such payment, together with interest at the Interest
Rate from the date of Landlord's payment to the date of Tenant's reimbursement.
9. UTILITIES AND SERVICES.
9.1 Description of Services. Landlord shall furnish to the Premises:
-----------------------
reasonable amounts of heat, ventilation and air-conditioning during the Business
Hours specified in the Basic Lease Information ("Business Hours") on weekdays
except public holidays ("Business Days"); reasonable amounts of electricity; and
janitorial services five days a week (except public holidays). Landlord shall
also provide the Building with .normal fluorescent tube replacement, window
washing, elevator service, and common area toilet room supplies. Any additional
utilities or services that Landlord may agree to provide (including lamp or tube
replacement for other than Building Standard lighting fixtures) shall be at
Tenant's sole expense.
9.2 Payment for Additional Utilities and Services.
---------------------------------------------
(a) Upon request by Tenant in accordance with the procedures
established by Landlord from time to time for furnishing HVAC service at times
other than Business Hours on Business Days, Landlord shall furnish such service
to Tenant and Tenant shall pay for such services on an hourly basis at the then
prevailing rate established for the Building by Landlord. As of the date of this
Lease, the prevailing rate for furnishing HVAC Service at times other than
Business Hours on Business Days is $30.00 per hour per floor which may be
changed from time to time in Landlord's sole discretion.
(b) If the temperature otherwise maintained in any portion of the
Premises by the HVAC systems of the Building is materially affected as a result
of (i) any lights, machines or equipment used by Tenant in the Premises, or (ii)
the occupancy of the Premises by more than one person per 150 square feet of
rentable area, then Landlord shall have the right to install any machinery or
equipment reasonably necessary to restore the temperature, including
modifications to the standard air-conditioning equipment. The cost of any such
equipment and modifications, including the cost of installation and any
additional cost of operation and maintenance of the same, shall be paid by
Tenant to Landlord upon demand.
(c) If Tenant's usage of electricity, water or any other utility
service exceeds the use of such utility Landlord reasonably determines to be
typical, normal and customary for the Building, Landlord may determine the
amount of such excess use by any reasonable means (including the installation at
Landlord's request but at Tenant's expense of a separate meter or
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<PAGE>
other measuring device) and charge Tenant for the cost of such excess usage. In
addition, Landlord may impose a reasonable charge for the use of any additional
or unusual janitorial services required by Tenant because of any unusual Tenant
Improvements or Alterations, the carelessness of Tenant or the nature of
Tenant's business (including hours of operation).
9.3 Interruption of Services. In the event of an interruption in or
------------------------
failure or inability to provide any services or utilities to the Premises or
Building for any reason (a "Service Failure"), such Service Failure shall not,
regardless of its duration, impose upon Landlord any liability whatsoever,
constitute an eviction of Tenant, constructive or otherwise, entitle Tenant to
an abatement of rent or to terminate this Lease or otherwise release Tenant from
any of Tenant's obligations under this Lease. Tenant hereby waives any benefits
of any applicable existing or future Law, including the provisions of California
Civil Code Section 1932(1), permitting the termination of this Lease due to such
interruption, failure or inability.
10. EXCULPATION AND INDEMNIFICATION.
10.1 Landlord's Indemnification of Tenant. Landlord shall indemnify,
------------------------------------
protect, defend and hold Tenant harmless from and against any claims, actions,
liabilities, damages, costs or expenses, including reasonable attorneys' fees
and costs incurred in defending against the same ("Claims") asserted by any
third party against Tenant for loss, injury or damage, to the extent such loss,
injury or damage is caused by the willful misconduct or negligent acts or
omissions of Landlord or its authorized representatives.
10.2 Tenant's Indemnification of Landlord. Tenant shall indemnify,
------------------------------------
protect, defend and hold Landlord and Landlord's authorized representatives
harmless from and against Claims arising from (a) the acts or omissions of
Tenant or Tenant's Representatives or Visitors in or about the Property, or (b)
any construction or other work undertaken by Tenant on the Premises (including
any design defects), or (c) any breach or default under this Lease by Tenant, or
(d) any loss, injury or damage, howsoever and by whomsoever caused, to any
person or property, occurring in or about the Premises during the Term,
excepting only Claims described in this clause (d) to the extent they are caused
by the willful misconduct or negligent acts or omissions of Landlord or its
authorized representatives.
10.3 Damage to Tenant and Tenant's Property. Landlord shall not be liable
--------------------------------------
to Tenant for any loss, injury or other damage to Tenant or to Tenant's property
in or about the Premises or the Property from any cause (including defects in
the Property or in any equipment in the Property; fire, explosion or other
casualty; bursting, rupture, leakage or overflow of any plumbing or other pipes
or lines, sprinklers, tanks, drains, drinking fountains or washstands in, above,
or about the Premises or the Property; or acts of other tenants in the
Property). Tenant hereby waives all claims against Landlord for any such loss,
injury or damage and the cost and expense of defending against claims relating
thereto, including any loss, injury or damage caused by Landlord's negligence
(active or passive) or willful misconduct. Notwithstanding any other provision
of this Lease to the contrary, in no event shall Landlord be liable to Tenant
for any punitive or consequential damages or damages for loss of business by
Tenant.
10.4 Survival. The obligations of the parties under this Section 10 shall
--------
survive the expiration or termination of this Lease.
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<PAGE>
11. INSURANCE.
11.1 Tenant's Insurance.
------------------
(a) Liability Insurance. Tenant shall maintain in full force
-------------------
throughout the Term, commercial general liability insurance providing coverage
on an occurrence form basis with limits of not less than Two Million Dollars
($2,000,000.00) each occurrence for bodily injury and property damage combined,
Two Million Dollars ($2,000,000.00) annual general aggregate, and Two Million
Dollars ($2,000,000.00) products and completed operations annual aggregate.
Tenant's liability insurance policy or policies shall: (i) include premises and
operations liability coverage, products and completed operations liability
coverage, broad form property damage coverage including completed operations,
blanket contractual liability coverage including, to the maximum extent
possible, coverage for the indemnification obligations of Tenant under this
Lease, and personal and advertising injury coverage; (ii) provide that the
insurance company has the duty to defend all insureds under the policy; (iii)
provide that defense costs are paid in addition to and do not deplete any of the
policy limits; (iv) cover liabilities arising out of or incurred in connection
with Tenant's use or occupancy of the Premises or the Property; (v) extend
coverage to cover liability for the actions of Tenant's Representatives and
Visitors; and (vi) designate separate limits for the Property. Each policy of
liability insurance required by this Section shall: (i) contain a cross
liability endorsement or separation of insureds clause; (ii) provide that any
waiver of subrogation rights or release prior to a loss does not void coverage;
(iii) provide that it is primary to and not contributing with, any policy of
insurance carried by Landlord covering the same loss; (iv) provide that any
failure to comply with the reporting provisions shall not affect coverage
provided to Landlord, its partners, property managers and Mortgagees; and (v)
name Landlord, its partners, the Property Manager identified in the Basic Lease
Information (the "Property Manager"), and such other parties in interest as
Landlord may from time to time reasonably designate to Tenant in writing, as
additional insureds. Such additional insureds shall be provided at least the
same extent of coverage as is provided to Tenant under such policies. All
endorsements effecting such additional insured status shall be at least as broad
as additional insured endorsement form number CG 20 11 11 85 promulgated by the
Insurance Services Office.
(b) Property Insurance. Tenant shall at all times maintain in effect
------------------
with respect to any Alterations and Tenant's Trade Fixtures and personal
property, commercial property insurance providing coverage, on an "all risk" or
"special form" basis, in an amount equal to at least 90% of the full replacement
cost of the covered property. Tenant may carry such insurance under a blanket
policy, provided that such policy provides coverage equivalent to a separate
policy. During the Term, the proceeds from any such policies of insurance shall
be used for the repair or replacement of the Alterations, Trade Fixtures and
personal property so insured. Landlord shall be provided coverage under such
insurance to the extent of its insurable interest and, if requested by Landlord,
both Landlord and Tenant shall sign all documents reasonably necessary or proper
in connection with the settlement of any claim or loss under such insurance.
Landlord ,,viii have no obligation to carry insurance on any Alterations or on
Tenant's Trade Fixtures or personal property.
(c) Requirements For All Policies. Each policy of insurance required
-----------------------------
under this Section 11.1 shall: (i) be in a form, and written by an insurer,
reasonably acceptable to
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Landlord, (ii) be maintained at Tenant's sole cost and expense, and (iii)
require at least thirty (30) days' written notice to Landlord prior to any
cancellation, nonrenewal or modification of insurance coverage. Insurance
companies issuing such policies shall have rating classifications of "A" or
better and financial size category, ratings of "VII" or better according to the
latest edition of the A.M. Best Key Rating Guide. All insurance companies
issuing such policies shall be admitted carriers licensed to do business in the
state where the Property is located. Any deductible amount under such insurance
shall not exceed $5,000. Tenant shall provide to Landlord, upon request,
evidence that the insurance required to be carried by Tenant pursuant to this
Section, including any endorsement effecting the additional insured status, is
in full force and effect and that premiums therefor have been paid.
(d) Updating Coverage. Tenant shall increase the amounts of
-----------------
insurance as required by any Mortgagee, and, not more frequently than once every
three (3) years, as recommended by Landlord's insurance broker, if, in the
opinion of either of them, the amount of insurance then required under this
Lease is not adequate. Any limits set forth in this Lease on the amount or type
of coverage required by Tenant's insurance shall not limit the liability of
Tenant under this Lease.
(e) Certificates of Insurance. Prior to occupancy of the Premises by
-------------------------
Tenant, and not less than thirty (30) days prior to expiration of any policy
thereafter, Tenant shall furnish to Landlord a certificate of insurance
reflecting that the insurance required by this Section is in force, accompanied
by an endorsement showing the required additional insureds satisfactory to
Landlord in substance and form. Notwithstanding the requirements of this
paragraph, Tenant shall at Landlord's request provide to Landlord a certified
copy of each insurance policy required to be in force at any time pursuant to
the requirements of this Lease or its Exhibits.
11.2 Landlord's Insurance. During the Term, to the extent such coverages
--------------------
are available at a commercially reasonable cost, Landlord shall maintain in
effect insurance on the Building with responsible insurers, on an "all risk" or
"special form" basis, insuring the Building and the Tenant Improvements in an
amount equal to at least 90% of the replacement cost thereof, excluding land,
foundations, footings and underground installations. Landlord may, but shall not
be obligated to, carry insurance against additional perils and/or in greater
amounts.
11.3 Mutual Waiver of Right of Recovery & Waiver of Subrogation. Landlord
----------------------------------------------------------
and Tenant each hereby waive any right of recovery against each other and the
partners, managers, members, shareholders, officers, directors and authorized
representatives of each other for any loss or damage that is covered by any
policy of property insurance maintained by either party (or required by this
Lease to be maintained) with respect to the Premises or the Property or any
operation therein, regardless of cause, including negligence (active or passive)
of the party benefiting from the waiver. If any such policy of insurance
relating to this Lease or to the Premises or the Property does not permit the
foregoing waiver or if the coverage under any such policy would be invalidated
as a result of such waiver, the party maintaining such policy shall obtain from
the insurer under such policy a waiver of all right of recovery by way of
subrogation against either party in connection with any claim, loss or damage
covered by such policy.
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12. DAMAGE OR DESTRUCTION.
12.1 Landlord's Duty to Repair.
-------------------------
(a) If all or a substantial part of the Premises are rendered
untenantable or inaccessible by damage to all or any part of the Property from
fire or other casualty then, unless either party is entitled to and elects to
terminate this Lease pursuant to Sections 12.2 - Landlord's Right to Terminate
and 12.3 - Tenant's Right to Terminate. Landlord shall, at its expense, use
reasonable efforts to repair and restore the Premises and/or the Property, as
the case may be, to substantially their former condition to the extent permitted
by then applicable Laws; provided, however, that in no event shall Landlord have
any obligation for repair or restoration beyond the extent of insurance proceeds
received by Landlord for such repair or restoration, or for any of Tenant's
personal property, Trade Fixtures or Alterations.
(b) If Landlord is required or elects to repair damage to the
Premises and/or the Property, this Lease shall continue in effect, but Tenant's
Base Rent and Additional Rent shall be abated with regard to any portion of the
Premises that Tenant is prevented from using by reason of such damage or its
repair from the date of the casualty until substantial completion of Landlord's
repair of the affected portion of the Premises as required under this Lease. In
no event shall Landlord be liable to Tenant by reason of any injury to or
interference with Tenant's business or property arising from fire or other
casualty or by reason of any repairs to any part of the Property necessitated by
such casualty.
12.2 Landlord's Right to Terminate. Landlord may elect to terminate this
-----------------------------
Lease following damage by fire or Other casualty under the following
circumstances:
(a) If, in the reasonable judgment of Landlord, the Premises and the
Property cannot be substantially repaired and restored under applicable Laws
within one (1) year from the date of the casualty;
(b) If, in the reasonable judgment of Landlord, adequate proceeds are
not, for any reason, made available to Landlord from Landlord's insurance
policies (and/or from Landlord's funds made available for such purpose, at
Landlord's sole option) to make the required repairs;
(c) If the Building is damaged or destroyed to the extent that, in
the reasonable judgment of Landlord, the cost to repair and restore the Building
would exceed twenty-five percent (25%) of the full replacement cost of the
Building, whether or not the Premises are at all damaged or destroyed; or (d) If
the fire or other casualty occurs during the last year of the Term.
If any of the circumstances described in subparagraphs (a), (b), (c) or (d) of
this Section 12.2 occur or arise, Landlord shall give Tenant notice within one
hundred and twenty (120) days after the date of the casualty, specifying whether
Landlord elects to terminate this Lease as provided above and, if not.
Landlord's estimate of the time required to complete Landlord's repair
obligations under this Lease.
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12.3 Tenant's Right to Terminate. If all or a substantial part of the
---------------------------
Premises are rendered untenantable or inaccessible by damage to all or any part
of the Property from fire or other casualty, and Landlord does not elect to
terminate as provided above, then Tenant may elect to terminate this Lease if
Landlord's estimate of the time required to complete Landlord's repair
obligations under this Lease is greater than one ( 1 ) year following the fire
or other casualty, in which event Tenant may elect to terminate this Lease by
giving Landlord notice of such election to terminate within thirty (30) days
after Landlord's notice to Tenant pursuant to Section 12.2 - Landlord's Right to
Terminate.
12.4 Waiver. Landlord and Tenant each hereby waive the provisions of
------
California Civil Code Sections 1932(2), 1933(4) and any other applicable
existing or future Law permitting the termination of a lease agreement in the
event of damage or destruction under any circumstances other than as provided in
Sections 12.2 - Landlord's Right to Terminate and 12.3 - Tenant's Right to
Terminate.
13. CONDEMNATION.
13.1 Definitions.
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(a) "Award" shall mean all compensation, sums, or anything of value
awarded, paid or received on a total or partial Condemnation.
(b) "Condemnation" shall mean (i) a permanent taking (or a temporary
taking for a period extending beyond the end of the Term) pursuant to the
exercise of the power of condemnation or eminent domain by any public or quasi-
public authority, private corporation or individual having such power
("Condemnor"), whether by legal proceedings or otherwise, or (ii) a voluntary
sale or transfer by Landlord to any such authority, either under threat of
condemnation or while legal proceedings for condemnation are pending.
(c) "Date of Condemnation" shall mean the earlier of the date that
title to the property taken is vested in the Condemnor or the date the Condemnor
has the right to possession of the property being condemned.
13.2 Effect on Lease.
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(a) If the Premises are totally taken by Condemnation, this Lease
shall terminate as of the Date of Condemnation. If a portion but not all of the
Premises is taken by Condemnation. this Lease shall remain in effect; provided,
however, that if the portion of the Premises remaining after the Condemnation
will be unsuitable for Tenant's continued use, then upon notice to Landlord
within thirty (30) days after Landlord notifies Tenant of the Condemnation,
Tenant may terminate this Lease effective as of the Date of Condemnation.
(b) If twenty-five percent (25%) or more of the Project or of the
parcel(s) of land on which the Building is situated or of the Parking Facility
or of the floor area in the Building is taken by Condemnation, or if as a result
of any Condemnation the Building is no longer reasonably suitable for use as an
office building, whether or not any portion of the Premises is taken, Landlord
may elect to terminate this Lease, effective as of the Date of Condemnation, by
notice to Tenant within thirty (30) days after the Date of Condemnation.
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(c) If all or a portion of the Premises is temporarily taken by a
Condemnor for a period not extending beyond the end of the Term, this Lease
shall remain in full force and effect.
13.3 Restoration. If this Lease is not terminated as provided in Section
-----------
13.2- Effect on Lease, Landlord, at its expense, shall diligently proceed to
repair and restore the Premises to substantially its former condition (to the
extent permitted by then applicable Laws) and/or repair and restore the Building
to an architecturally complete office building; provided, however, that
Landlord's obligations to so repair and restore shall be limited to the amount
of any Award received by Landlord and not required to be paid to any Mortgagee
(as defined in Section 20.2 below), in no event shall Landlord have any
obligation to repair or replace any improvements in the Premises beyond the
amount of any Award received by Landlord for such repair or to repair or replace
any of Tenant's personal property, Trade Fixtures, or Alterations.
13.4 Abatement and Reduction of Rent. If any portion of the Premises is
-------------------------------
taken in a Condemnation or is rendered permanently untenantable by repairs
necessitated by the Condemnation, and this Lease is not terminated, the Base
Rent and Additional Rent payable under this Lease shall be proportionally
reduced as of the Date of Condemnation based upon the percentage of rentable
square feet in the Premises so taken or rendered permanently untenantable. In
addition, if this Lease remains in effect following a Condemnation and Landlord
proceeds to repair and restore the Premises, the Base Rent and Additional Rent
payable under this Lease shall be abated during the period of such repair or
restoration to the extent such repairs prevent Tenant's use of the Premises.
13.5 Awards. Any Award made shall be paid to Landlord, and Tenant hereby
------
assigns to Landlord, and waives all interest in or claim to, any such Award,
including any claim for the value of the unexpired Term; provided, however, that
Tenant shall be entitled to receive, or to prosecute a separate claim for, an
Award for a temporary taking of the Premises or a portion thereof by a Condemnor
where this Lease is not terminated (to the extent such Award relates to the
unexpired Term), or an Award or portion thereof separately designated for
relocation expenses or the interruption of or damage to Tenant's business or as
compensation for Tenant's personal property, Trade Fixtures or Alterations.
13.6 Waiver. Landlord and Tenant each hereby waive the provisions of
------
California Code of Civil Procedure Section t 265.130 and any other applicable
existing or future Law allowing either party to petition for a termination of
this Lease upon a partial taking of the Premises and/or the Property.
14. ASSIGNMENT AND SUBLETTING.
14.1 Landlord's Consent Required. Tenant shall not assign this Lease or
---------------------------
any interest therein, or sublet or license or permit the use or occupancy of the
Premises or any part thereof by or for the benefit of anyone other than Tenant,
or in any other manner transfer all or any part of Tenant's interest under this
Lease (each and all a "Transfer"), without the prior written consent of
Landlord, which consent (subject to the other provisions of this Section 14)
shall not be unreasonably withheld. If Tenant is a business entity, any direct
or indirect transfer of fifty percent (50%) or more of the ownership interest of
the entity (whether in a single transaction or
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in the aggregate through more than one transaction) shall be deemed a Transfer.
Notwithstanding any provision in this Lease to the contrary, Tenant shall not
mortgage, pledge, hypothecate or otherwise encumber this Lease or all or any
part of Tenant's interest under this Lease.
14.2 Reasonable Consent.
------------------
(a) Prior to any proposed Transfer, Tenant shall submit in writing to
Landlord (i) the name and legal composition of the proposed assignee, subtenant,
user or other transferee (each a "Proposed Transferee"); (ii) the nature of the
business proposed to be carried on in the Premises; (iii) a current balance
sheet, income statements for the last two years and such other reasonable
financial and other information concerning the Proposed Transferee as Landlord
may request; and (iv) a copy of the proposed assignment, sublease or other
agreement governing the proposed Transfer. Within ten (10) Business Days after
Landlord receives all such information it shall notify Tenant whether it
approves or disapproves such Transfer or if it elects to proceed under Section
14.7 - Landlord's Right to Space.
(b) Tenant acknowledges and agrees that, among other circumstances
for which Landlord could reasonably withhold consent to a proposed Transfer, it
shall be reasonable for Landlord to withhold consent where (i) the Proposed
Transferee does not intend itself to occupy the entire portion of the Premises
assigned or sublet, (ii) Landlord reasonably disapproves of the Proposed
Transferee's business operating ability or history, reputation or
creditworthiness or the character of the business to be conducted by the
Proposed Transferee at the Premises, (iii) the Proposed Transferee is a
governmental agency or unit or an existing tenant in the Project, unless, in the
case of an existing tenant, Landlord does not have contiguous space in the
Project available to lease to the existing tenant containing the same or more
square feet than the existing tenant identifies in writing that the existing
tenant requires, (iv) the proposed Transfer would violate any "exclusive" rights
of any tenants in the Project, (v) Landlord or Landlord's agent has shown space
in the Building to the Proposed Transferee or responded to any inquiries from
the Proposed Transferee or the Proposed Transferee's agent concerning
availability of space in the Building, at any time within the preceding nine
months, or (vi) Landlord otherwise determines that the proposed Transfer would
have the effect of decreasing the value of the Building or increasing the
expenses associated with operating, maintaining and repairing the Property. In
no event may Tenant publicly advertise all or any portion of the Premises for
assignment or sublease at a rental less than that then sought by Landlord for a
direct lease (non-sublease) of comparable space in the Project
14.3 Excess Consideration. If Landlord consents to the Transfer, Landlord
--------------------
shall be entitled to receive as Additional Rent hereunder, fifty percent (50%)
of all "Sublease Profits" (as defined below). "Sublease Profits" shall mean any
consideration paid by the Transferee for the assignment or sublease and, in the
case of a sublease, the excess of the rent and other consideration payable by
the subtenant over the amount of Base Rent and Additional Rent payable hereunder
applicable to the subleased space, less any and all direct, out-of-pocket
expenses and cash concessions, including costs for necessary Alterations and
brokerage commission, paid by Tenant to procure the assignee or subtenant.
Tenant shall pay to Landlord as additional rent, within ten (10) days after
receipt by Tenant, any such excess consideration paid by any transferee (the
"Transferee") for the Transfer provided any capital expenditures and
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brokerage commissions in connection with any sublease shall be amortized over
the term of the sublease.
14.4 No Release Of Tenant. No consent by Landlord to any Transfer shall
--------------------
relieve Tenant of any obligation to be performed by Tenant under this Lease,
whether occurring before or after such consent, assignment, subletting or other
Transfer. Each Transferee shall be jointly and severally liable with Tenant
(and Tenant shall be jointly and severally liable with each Transferee) for the
payment of rent (or, in the case of a sublease, rent in the amount set forth in
the sublease) and for the performance of all other terms and provisions of this
Lease. The consent by Landlord to any Transfer shall not relieve Tenant or any
such Transferee from the obligation to obtain Landlord's express prior written
consent to any subsequent Transfer by Tenant or any Transferee. The acceptance
of rent by Landlord from any other person (whether or not such person is an
occupant of the Premises) shall not be deemed to be a waiver by Landlord of any
provision of this Lease or to be a consent to any Transfer.
14.5 Expenses and Attorneys' Fees. Tenant shall pay to Landlord on demand
----------------------------
all costs and expenses (including reasonable attorneys' fees not to exceed One
Thousand Five Hundred Dollars [$1,500.00] per request for Landlord's consent to
a Transfer) incurred by Landlord in connection with reviewing or consenting to
any proposed Transfer (including any request for consent to, or any waiver of
Landlord's rights in connection with, any security interest in any of Tenant's
property at the Premises).
14.6 Effectiveness of Transfer. Prior to the date on which any permitted
-------------------------
Transfer (whether or not requiring Landlord's consent) becomes effective, Tenant
shall deliver to Landlord a counterpart of the fully executed Transfer document
and Landlord's standard form of Consent to Assignment or Consent to Sublease
executed by Tenant and the Transferee in which each of Tenant and the Transferee
confirms its obligations pursuant to this Lease. Failure or refusal of a
Transferee to execute any such instrument shall not release or discharge the
Transferee from liability as provided herein. The voluntary, involuntary or
other surrender of this Lease by Tenant, or a mutual cancellation by Landlord
and Tenant, shall not work a merger, and any such surrender or cancellation
shall, at the option of Landlord, either terminate all or any existing subleases
or operate as an assignment to Landlord of any or all of such subleases.
14.7 Landlord's Right to Space. Notwithstanding any of the above
-------------------------
provisions of this Section to the contrary, if Tenant notifies Landlord that it
desires to enter into a Transfer, Landlord, in lieu of consenting to such
Transfer, may elect (x) in the case of an assignment or a sublease of the entire
Premises, to terminate this Lease, or (y) in the case of a sublease of less than
the entire Premises, to terminate this Lease as it relates to the space proposed
to be subleased by Tenant. In such event, this Lease will terminate (or the
space proposed to be subleased will be removed from the Premises subject to this
Lease and the Base Rent and Tenant's Share under this Lease shall be
proportionately reduced) on the earlier of sixty (60) days after the date of
Landlord's notice to Tenant making the election set forth in this Section 14.7
or the date the Transfer was proposed to be effective, and Landlord may lease
such space to any party, including the prospective Transferee identified by
Tenant.
14.8 Assignment of Sublease Rents. Tenant hereby absolutely and
----------------------------
irrevocably assigns to Landlord any and all rights to receive rent and other
consideration from any sublease and
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agrees that Landlord, as assignee or as attorney-in-fact for Tenant for purposes
hereof, or a receiver for Tenant appointed on Landlord's application may (but
shall not be obligated to) collect such rents and other consideration and apply
the same toward Tenant's obligations to Landlord under this Lease; provided,
however, that Landlord grants to Tenant at all times prior to occurrence of any
breach or default by Tenant a revocable license to collect such rents (which
license shall automatically and without notice be and be deemed to have been
revoked and terminated immediately upon any Event of Default).
14.9 Transfer to Affiliate. Notwithstanding any provision contained in
---------------------
the Section 14 to the contrary, Tenant shall have the right, without the consent
of Landlord, upon ten (10) days prior written notice to Landlord, to transfer
Tenant's interest in this Lease to either (i) a successor corporation related to
Tenant by merger, consolidation, or non-bankruptcy reorganization, (ii) a
purchaser of at least ninety percent (90%) of Tenant's assets as an ongoing
concern, or (iii) an "Affiliate" of Tenant, and the provisions of Sections 14.2,
14.3 and 14.7 shall not apply with respect to the transfer to the Affiliate, but
any transfer pursuant to the provisions of this Section 14.9 shall be subject to
all other terms and conditions of this Lease, including the provisions of this
Section 14.9. Tenant shall remain liable under this Lease after any such
transfer. For the purposes of this Article 14, the term "Affiliate" of Tenant
shall mean and refer to any entity controlling, controlled by or under common
control with Tenant or Tenant's parent, as the case may be. "Control" as used
herein shall mean the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of such controlled entity;
and the ownership, or possession of the right to vote, in the ordinary direction
of its affairs, of at least fifty percent (50%) of the voting interest in any
entity. Notwithstanding Tenant's right to Transfer to an Affiliate pursuant to
the provisions of this Section 14.9, Tenant may not, through use of its rights
under this Article 14 in two or more transactions (whether separate transactions
or steps or phases of a single transaction), at one time or over time, whether
by first assigning this Lease to a subsidiary and then merging the subsidiary
into another entity or selling the stock of the subsidiary or by other means,
assign or sublease the Premises, or transfer control of Tenant, to any person or
entity which is not a subsidiary, affiliate or controlling corporation of the
original Tenant, as then constituted, existing prior to the commencement of such
transactions, without first obtaining Landlord's prior written consent pursuant
to the provisions of Section 14.2. For purposes of this Lease, a sale of
Tenant's capital stock through any public exchange shall not be deemed an
assignment, subletting or other transfer of this Lease or the Premises requiring
Landlord's consent.
15. DEFAULT AND REMEDIES.
15.1 Events of Default. The occurrence of any of the following shall
-----------------
constitute an "Event of Default" by Tenant:
(a) Tenant fails to make any payment of rent when due, or any amount
required to replenish the security deposit as provided in Section 4 above, if
payment in full is not received by Landlord within three (3) days after written
notice that it is due.
(b) Tenant abandons the Premises.
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(c) Tenant fails timely to deliver any subordination document,
estoppel certificate or financial statement requested by Landlord within the
applicable time period specified in Sections 20 - Encumbrances - and 21 -
Estoppel Certificates and Financial Statements - below.
(d) Tenant violates the restrictions on Transfer set forth in Section
14 - Assignment and Subletting.
(e) Tenant ceases doing business as a going concern; makes an
assignment for the benefit of creditors; is adjudicated an insolvent, files a
petition (or files an answer admitting the material allegations of a petition)
seeking relief under any state or federal bankruptcy or other statute, law or
regulation affecting creditors' rights; all or substantially all of Tenant's
assets are subject to judicial seizure or attachment and are not released within
30 days, or Tenant consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for Tenant or for all or any substantial part of Tenant's
assets.
(f) Tenant fails, within ninety (90) days after the commencement of
any proceedings against Tenant seeking relief under any state or federal
bankruptcy or other statute, law or regulation affecting creditors' rights, to
have such proceedings dismissed, or Tenant fails, within ninety (90) days after
an appointment, without Tenant's consent or acquiescence, of any trustee,
receiver or liquidator for Tenant or for all or any substantial part of Tenant's
assets, to have such appointment vacated.
(g) Tenant fails to perform or comply with any provision of this
Lease other than those described in (a) through (f) above, and does not fully
cure such failure within fifteen (15) days after notice to Tenant or, if such
failure cannot be cured within such fifteen (15)-day period. Tenant tails within
such fifteen (15)-day period to commence, and thereafter diligently proceed
with, all actions necessary to cure such failure as soon as reasonably possible
but in all events within ninety (90) days of such notice.
15.2 Remedies. Upon the occurrence of an Event of Default, Landlord shall
--------
have the following remedies, which shall not be exclusive but shall be
cumulative and shall be in addition to any other remedies now or hereafter
allowed by law:
(a) Landlord may terminate Tenant's right to possession of the
Premises at any time by written notice to Tenant. Tenant expressly acknowledges
that in the absence of such written notice from Landlord, no other act of
Landlord, including re-entry into the Premises, efforts to relet the Premises,
reletting of the Premises for Tenant's account, storage of Tenant's personal
property and Trade Fixtures, acceptance of keys to the Premises from Tenant or
exercise of any other rights and remedies under this Section, shall constitute
an acceptance of Tenant' s surrender of the Premises or constitute a termination
of this Lease or of Tenant's right to possession of the Premises. Upon such
termination in writing of Tenant's right to possession of the Premises, as
herein provided, this Lease shall terminate and Landlord shall be entitled to
recover damages from Tenant as provided in California Civil Code Section 1951.2
and any other applicable existing or future Law providing for recovery of
damages for such breach, including the worth at the time of award of the amount
by which the rent which would be payable by Tenant hereunder for the remainder
of the Term after the date of the award of damages,
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including Additional Rent as reasonably estimated by Landlord, exceeds the
amount of such rental loss as Tenant proves could have been reasonably avoided,
discounted at the discount rate published by the Federal Reserve Bank of San
Francisco for member banks at the time of the award plus one percent (1%).
(b) Landlord shall have the remedy described in California Civil Code
Section 1951.4 (Landlord may continue this Lease in effect after Tenant's breach
and abandonment and recover rent as it becomes due, if Tenant has the right to
sublet or assign, subject only to reasonable limitations).
(c) Landlord may cure the Event of Default at Tenant's expense. I f
Landlord pays any sum or incurs any expense in curing the Event of Default,
Tenant shall reimburse Landlord upon demand for the amount of such payment or
expense with interest at the Interest Rate from the date the sum is paid or the
expense is incurred until Landlord is reimbursed by Tenant.
(d) Landlord may remove all Tenant's property from the Premises, and
such property may be stored by Landlord in a public warehouse or elsewhere at
the sole cost and for the account of Tenant. If Landlord does not elect to store
any or all of Tenant's property left in the Premises, Landlord may consider such
property to be abandoned by Tenant, and Landlord may thereupon dispose of such
property in any manner deemed appropriate by Landlord. Any proceeds realized by
Landlord on the disposal of any such property shall be applied first to offset
all expenses of storage and sale, then credited against Tenant's outstanding
obligations to Landlord under this Lease, and any balance remaining after
satisfaction of all obligations of Tenant under this Lease shall be delivered to
Tenant.
16. LATE CHARGE AND INTEREST.
16.1 Late Charge. If any payment of rent is not received by Landlord when
-----------
due, Tenant shall pay to Landlord on demand as a late charge an additional
amount equal to four percent (4%) of the overdue payment. A late charge shall
not be imposed more than once on any particular installment not paid when due,
but imposition of a late charge on any payment not made when due does not
eliminate or supersede late charges imposed on other (prior) payments not made
when due or preclude imposition of a late charge on other installments or
payments not made when due.
16.2 Interest. In addition to the late charges referred to above, which
--------
are intended to defray Landlord's costs resulting from late payments, any
payment from Tenant to Landlord not paid when due shall at Landlord's option
bear interest from the date due until paid to Landlord by Tenant at the rate of
fifteen percent (15%) per annum or the maximum lawful rate that Landlord may
charge to Tenant under applicable laws, whichever is less (the "INTEREST RATE").
Acceptance of any late charge and/or interest shall not constitute a waiver of
Tenant's default with respect to the overdue sum or prevent Landlord from
exercising any of its other tights and remedies under this Lease.
17. WAIVER. NO provisions of this Lease shall be deemed waived by Landlord
unless such waiver is in a writing signed by Landlord. The waiver by Landlord of
any breach of any
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provision of this Lease shall not be deemed a waiver of such provision or of any
subsequent breach of the same or any other provision of this Lease. No delay or
omission in the exercise of any right or remedy of Landlord Upon any default by
Tenant shall impair such right or remedy or be construed as a waiver. Landlord's
acceptance of any payments of rent due under this Lease Shall not be deemed a
waiver of any default by Tenant under this Lease (including Tenant's recurrent
failure to timely pay rent) other than Tenant's nonpayment of the accepted sums,
and no endorsement or statement on any check or payment or in any letter or
document accompanying any check or payment shall be deemed an accord and
satisfaction. Landlord' s consent to or approval of any act by Tenant requiting
Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent to or approval of any subsequent act by Tenant.
18. ENTRY, INSPECTION AND CLOSURE. Upon reasonable oral or written notice to
Tenant (and without notice in emergencies), Landlord and its authorized
representatives may enter the Premises at all reasonable times to: (a) determine
whether the premises are in good condition, (b) determine whether Tenant is
complying with its obligations under this Lease, (c) perform any maintenance or
repair of the Premises or the Building that Landlord has the right or obligation
to perform, (d) install or repair improvements for other tenants where access to
the Premises is required for such installation or repair, (e) serve, post or
keep posted any notices required or allowed under the provisions of this Lease,
(f) show the Premises to prospective brokers, agents, buyers, transferees,
Mortgagees or tenants, or (g) do any other act or thing necessary for the safety
or preservation of the Premises or the Building. When reasonably necessary
Landlord may temporarily close entrances, doors, corridors, elevators or other
facilities in the Building without liability to Tenant by reason of such
closure. Landlord shall conduct its activities under this Section in a manner
that will minimize inconvenience to Tenant without incurring additional expense
to Landlord. In no event shall Tenant be entitled to an abatement of rent on
account of any entry by Landlord, and Landlord shall not be liable in any manner
for any inconvenience, loss of business or other damage to Tenant or other
persons arising out of Landlord's entry on the Premises in accordance with this
Section. No action by Landlord pursuant to this paragraph shall constitute an
eviction of Tenant, constructive or otherwise, entitle Tenant to an abatement of
rent or to terminate this Lease or otherwise release Tenant from any of Tenant's
obligations under this LEASE.
19. SURRENDER AND HOLDING OVER.
19.1 Surrender. Upon the expiration or termination of this Lease, Tenant
---------
shall surrender the Premises and all Tenant Improvements and Alterations to
Landlord broom-clean and in their original condition, except for reasonable wear
and tear, damage from casualty or condemnation and any changes resulting from
approved Alterations; provided, however, that prior to the expiration or
termination of this Lease Tenant shall remove all telephone and other cabling
installed in the Building by Tenant and remove from the Premises all Tenant's
personal property and any Trade Fixtures and all Alterations that Landlord has
elected to require Tenant to remove as provided in Section 6.1 - Tenant
Improvements & Alterations, and repair any damage caused by such removal. If
such removal is not completed before the expiration or termination of the Term,
Landlord shall have the right (but no obligation) to remove the same, and Tenant
shall pay Landlord on demand for all costs of removal and storage thereof and
for the rental value of the Premises for the period from the end of the Term
through the end of the time
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reasonably required for such removal. Landlord shall also have the right to
retain or dispose of all or any portion of such property if Tenant does not pay
all such costs and retrieve the property within ten (10) days after notice from
Landlord (in which event title to all such property described in Landlord's
notice shall be transferred to and vest in Landlord). Tenant waives all Claims
against Landlord for any damage or loss to Tenant resulting from Landlord's
removal, storage, retention, or disposition of any such property. Upon
expiration or termination of this Lease or of Tenant's possession, whichever is
earliest, Tenant shall surrender all keys to the Premises or any other part of
the Building and shall deliver to Landlord all keys for or make known to
Landlord the combination of locks on all safes, cabinets and vaults that may be
located in the Premises. Tenant's obligations under this Section shall survive
the expiration or termination of this Lease.
19.2 Holding Over. If Tenant (directly or through any Transferee or other
------------
successor-in-interest of Tenant) remains in possession of the Premises after the
expiration or termination of this Lease, Tenant's continued possession shall be
on the basis of a tenancy at the sufferance of Landlord. No act or omission by
Landlord, other than its specific written consent, shall constitute permission
for Tenant to continue in possession of the Premises, and if such consent is
given or declared to have been given by a court judgment, Landlord may terminate
Tenant's holdover tenancy at any time upon seven (7) days written notice. In
such event, Tenant shall continue to comply with or perform all the terms and
obligations of Tenant under this Lease, except that the monthly Base Rent during
Tenant's holding over shall be twice the Base Rent payable in the last full
month prior to the termination hereof. Acceptance by Landlord of rent after such
termination shall not constitute a renewal or extension of this Lease; and
nothing contained in this provision shall be deemed to waive Landlord's right of
re-entry or any other right hereunder or at law. Tenant shall indemnify, defend
and hold Landlord harmless from and against all Claims arising or resulting
directly or indirectly from Tenant's failure to timely surrender the Premises,
including (i) any rent payable by or any loss, cost, or damages claimed by any
prospective tenant of the Premises, and (ii) Landlord's damages as a result of
such prospective tenant rescinding or refusing to enter into the prospective
lease of the Premises by reason of such failure to timely surrender the
Premises.
20. ENCUMBRANCES.
20.1 Subordination. This Lease is expressly made subject and subordinate
-------------
to any mortgage, deed of trust, ground lease, underlying lease or like
encumbrance affecting any part of the Property or any interest of Landlord
therein which is now existing or hereafter executed or recorded ("Encumbrance");
provided, however, that such subordination shall only be effective, as to future
Encumbrances, if the holder of the Encumbrance agrees that this Lease shall
survive the termination of the Encumbrance by lapse of time, foreclosure or
otherwise so long as Tenant is not in default under this Lease. Provided the
conditions of the preceding sentence are satisfied, Tenant shall execute and
deliver to Landlord, within ten (10) Business Days after written request
therefor by Landlord and in a form reasonably requested by Landlord, any
additional documents evidencing the subordination of this Lease with respect to
any such Encumbrance and the nondisturbance agreement of the holder of any such
Encumbrance. If the interest of Landlord in the Property is transferred pursuant
to or in lieu of proceedings for enforcement of any Encumbrance, Tenant shall
immediately and automatically attorn to the new
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<PAGE>
owner, and this Lease shall continue in full force and effect as a direct lease
between the transferee and Tenant on the terms and conditions set forth in this
Lease.
20.2 Mortgagee Protection. Tenant agrees to give any holder of any
--------------------
Encumbrance covering any part of the Property ("Mortgagee"), by registered mail,
a copy of any notice of default served upon Landlord, provided that prior to
such notice Tenant has been notified in writing (by way of notice of assignment
of rents and leases, or otherwise)of the address of such Mortgagee. If Landlord
shall have failed to cure such default within thirty (30) days from the
effective date of such notice of default, then the Mortgagee shall have an
additional thirty (30) days within which to cure such default or if such default
cannot be cured within that time, then such additional time as may be necessary
to cure such default (including the time necessary to foreclose or otherwise
terminate its Encumbrance, if necessary to effect such cure), and this Lease
shall not be terminated so long as such remedies are being diligently pursued.
21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.
21.1 Estoppel Certificates. Within ten (10) Business Days after written
---------------------
request therefor, Tenant shall execute and deliver to Landlord, in a form
provided by or satisfactory to Landlord. a certificate stating that this Lease
is in full force and effect, describing any amendments or modifications hereto,
acknowledging that this Lease is subordinate or prior, as the case may be, to
any Encumbrance and stating any other information Landlord may reasonably
request, including the Term, the monthly Base Rent, the date to which Rent has
been paid, the amount of any security deposit or prepaid rent. whether either
party hereto is in default under the terms of the Lease, and whether Landlord
has completed its construction obligations hereunder (if any). Tenant
irrevocably constitutes, appoints and authorizes Landlord as Tenant's special
attorney-in-fact for such purpose to complete, execute and deliver such
certificate if Tenant fails timely to execute and deliver such certificate as
provided above. Any person or entity purchasing, acquiring an interest in or
extending financing with respect to the Property shall be entitled to rely upon
any such certificate. If Tenant fails to deliver such certificate within ten
(10) days after Landlord's second written request therefor, Tenant shall be
liable to Landlord for any damages incurred by Landlord including any profits or
other benefits from any financing of the Property or any interest therein which
are lost or made unavailable as a result, directly or indirectly, of Tenant's
failure or refusal to timely execute or deliver such estoppel certificate.
21.2 Financial Statements. Within ten (10) days after written request
--------------------
therefor, but not more than once a year, Tenant shall deliver to Landlord a copy
of the financial statements (including at least a year end balance sheet and a
statement of profit and loss) of Tenant (and of each guarantor of Tenant's
obligations under this Lease) for each of the three most recently completed
years, prepared in accordance with generally accepted accounting principles
(and, if such is Tenant's normal practice, audited by an independent certified
public accountant), all then available subsequent interim statements, and such
other financial information as may reasonably be requested by Landlord or
required by any Mortgagee.
22. NOTICES. Any notice, demand, request, consent or approval that either
party desires or is required to give to the other party under this Lease shall
be in writing and shall be served personally, delivered by messenger or courier
service, or sent by U.S. certified mail, return
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<PAGE>
receipt requested, postage prepaid, addressed to the other party at the party's
address for notices set forth in the Basic Lease Information. Any notice
required pursuant to any Laws may be incorporated into, given concurrently with
or given separately from any notice required under this Lease. Notices shall be
deemed to have been given and be effective on the earlier of(a) receipt (or
refusal of delivery or receipt); or (b) one (1) day after acceptance by the
independent service for delivery, if sent by independent messenger or courier
service, or three (3) days after mailing if sent by mail in accordance with this
Section. Either party may change its address for notices hereunder, effective
fifteen (15) days after notice to the other party complying with this Section.
If tenant sublets the Premises, notices from Landlord shall be effective on the
subtenant when given to Tenant pursuant to this Section.
23. ATTORNEYS' FEES. In the event of any dispute between Landlord and Tenant
in any way related to this Lease, and whether involving contract and/or tort
claims, the non-prevailing party shall pay to the prevailing party all
reasonable attorneys' fees and costs and expenses of any type, without
restriction by statute, court rule or otherwise, incurred by the prevailing
party in connection with any action or proceeding (including any appeal and the
enforcement of any judgment or award), whether or not the dispute is litigated
or prosecuted to final judgment (collectively, "Fees"). The "prevailing party"
shall be determined based upon an assessment of which party's major arguments or
positions taken in the action or proceeding could fairly be said to have
prevailed (whether by compromise, settlement, abandonment by the other party of
its claim or defense, final decision, after any appeals, or otherwise) over the
other party's major arguments or positions on major disputed issues. Any Fees
incurred in enforcing a judgment shall be recoverable separately from any other
amount included in the judgment and shall survive and not be merged in the
judgment. The Fees shall be deemed an "actual pecuniary loss" within the meaning
of Bankruptcy Code Section 365(b)(1)(B), and notwithstanding the foregoing, all
Fees incurred by either party in any bankruptcy case filed by or against the
other party, from and after the order for relief until this Lease is rejected or
assumed in such bankruptcy case, will be "obligations of the debtor" as that
phrase is used in Bankruptcy Code Section 365(d)(3).
24. QUIET POSSESSION. Subject to Tenant's full and timely performance of all
of Tenant's obligations under this Lease and subject to the terms of this Lease,
including Section 20 - Encumbrances, Tenant shall have the quiet possession of
the Premises throughout the Term as against any persons or entities lawfully
claiming by, through or under Landlord.
25. SECURITY MEASURES. Landlord may, but shall be under no obligation to,
implement security measures for the Property, such as the registration or search
of all persons entering or leaving the Building, requiring identification for
access to the Building, evacuation of the Building for cause, suspected cause,
or for drill purposes, the issuance of magnetic pass cards or keys for Building
or elevator access and other actions that Landlord deems necessary or
appropriate to prevent any threat of property loss or damage, bodily injury or
business interruption; provided, however, that such measures shall be
implemented in a way as not to inconvenience tenants of the Building
Unreasonably. If landlord uses an access card system, Landlord may require
Tenant to pay Landlord a deposit for each after-hours Building access card
issued to Tenant, in the amount specified in the Basic Lease Information. Tenant
shall be responsible for any loss, theft or breakage of any such cards, which
must be returned by Tenant to Landlord upon expiration or earlier termination of
the Lease. Landlord may retain the deposit for any card not so returned.
Landlord shall at all times have the right to change, alter or reduce
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<PAGE>
any such security services or measures. Tenant shall cooperate and comply with,
and cause Tenant's Representatives and Visitors to cooperate and comply with,
such security measures. Landlord, its agents and employees shall have no
liability to Tenant or its Representatives or Visitors for the implementation or
exercise of, or the failure to implement or exercise, any such security measures
or for any resulting disturbance of Tenant's use or enjoyment of the Premises.
26. FORCE MAJEURE. If either Landlord or Tenant is delayed, interrupted or
prevented from performing any of its obligations under this Lease (other than,
with respect to Tenant the payment of Base Rent, Additional Rent or any other
charge payable by Tenant to Landlord under this lease), including Landlord's
obligations under the Construction Rider and such delay, interruption or
prevention is due to fire, act of God, governmental act or failure to act, labor
dispute, unavailability of materials or any cause outside the reasonable control
of Landlord or Tenant, then the time for performance of the affected obligations
of Landlord or Tenant, as the case may be, shall be extended for a period
equivalent to the period of such delay, interruption or prevention. The
inability to pay money shall in no event constitute force majeure.
27. RULES AND REGULATIONS. Tenant shall be bound by and shall comply with the
rules and regulations attached to and made A part of this Lease as Exhibit C to
---------
the extent those rules and regulations are not in conflict with the terms of
this Lease, as well as any reasonable rules and regulations hereafter adopted by
Landlord for all tenants of the Building, upon notice to Tenant thereof
(collectively, the "Building Rules"). Landlord shall not be responsible to
Tenant or to any other person for any violation of, or failure to observe, the
Building Rules by any other tenant or other person.
28. LANDLORD'S LIABILITY. THE term "Landlord," as used in this Lease shall
mean only the owner or owners of the Building at the time in question. In the
event of any conveyance of title to the Building, then from and after the date
of such conveyance, the transferor Landlord shall be relieved of all liability
with respect to Landlord's obligations to be performed under this Lease after
the date of such conveyance. Notwithstanding any other term or provision of this
Lease, the Liability of Landlord for its obligations under this Lease is limited
solely to Landlord's interest in the building as the same may from time to time
be encumbered, and no personal liability shall at any time be asserted or
enforceable against any other assets of Landlord or against Landlord's partners
or members or its or their respective partners, shareholders, members,
directors, officers or managers on account of any of Landlord's obligations or
actions under this Lease.
29. CONSENTS AND APPROVALS.
29.1 Determination in Good Faith. Wherever the consent, approval,
---------------------------
judgment or determination of Landlord is required or permitted under this Lease,
Landlord may exercise its good faith business judgment in granting or
withholding such consent or approval or in making such judgment or determination
without reference to any extrinsic standard of reasonableness, unless the
specific provision contained in this Lease providing for such consent, approval,
judgment or determination specifies that Landlord's consent or approval is not
to be unreasonably withheld, or that such judgment or determination is to be
reasonable, or otherwise specifies the standards under which Landlord may
withhold its consent. If it is determined that Landlord failed to give its
consent where it was required to do so under this Lease, Tenant shall
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<PAGE>
be entitled to injunctive relief but shall not to be entitled to monetary
damages or to terminate this Lease for such failure.
29.2 No Liability Imposed on Landlord. The review and/or approval by
--------------------------------
Landlord of any item or matter to be reviewed or approved by Landlord under the
terms of this Lease or any Exhibits or Addenda hereto shall not impose upon
Landlord any liability for the accuracy or sufficiency of any such item or
matter or the quality or suitability of such item for its intended use. Any such
review or approval is for the sole purpose of protecting Landlord's interest in
the Property, and no third parties, including Tenant or the Representatives and
Visitors of Tenant or any person or entity claiming by, through or under Tenant,
shall have any rights as a consequence thereof.
30. WAIVER OF RIGHT TO JURY TRIAL. Landlord and Tenant waive their respective
rights to trial by jury of any contract or tort claim, counterclaim, cross-
complaint, or cause of action in any action, proceeding, or hearing brought by
either party against the other on any matter arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, or Tenant's
use or occupancy of the Premises, including any claim of injury or damage or the
enforcement of any remedy under any current or future law, statute, regulation,
code, or ordinance.
31. BROKERS. Landlord shall pay the fee or commission of the broker or brokers
identified in the Basic Lease Information (the "Broker") in accordance with
Landlord's separate written agreement with the Broker, if any. Tenant warrants
and represents to Landlord that in the negotiating or making of this Lease
neither Tenant nor anyone acting on Tenant's behalf has dealt with any broker or
finder who might be entitled to a fee or commission for this Lease other than
the Broker. Tenant shall indemnify and hold Landlord harmless from any claim or
claims, including costs, expenses and attorney's fees incurred by Landlord
asserted by any other broker or finder for a fee or commission based upon any
dealings with or statements made by Tenant or Tenant's Representatives. Landlord
agrees to indemnify and hold Tenant harmless from and against any claim by third
parties claiming by, through, or under Landlord for commissions due or alleged
to be due in connection with this Lease.
32. RELOCATION OF PREMISES. For the purpose of maintaining an economical and
proper distribution of tenants acceptable to Landlord throughout the Project,
Landlord shall have the right from time to time, not to exceed two (2) times
during the Term, to relocate the Premises within the Project, provided that (a)
the rentable and usable area of the new Premises is of equivalent size to the
existing Premises, subject to a variation of up to ten percent (10%), (b) the
new Premises shall be on the first floor of the Building, (c) Landlord shall pay
the cost of providing tenant improvements in the new Premises, which shall be
substantially comparable in layout to those in the existing Premises, (d)
Landlord shall pay reasonable costs (to the extent such costs are submitted in
writing to Landlord and approved in writing by Landlord prior to such move) of
moving Tenant's Trade Fixtures and personal property, including cabling and
wiring to the new Premises, and (e) any such relocation shall take place only
over a week-end. Landlord shall deliver to Tenant written notice of Landlord's
election to relocate the Premises, specifying the new location and the amount of
rent payable therefor, at least sixty (60) days prior to the date the relocation
is to be effective.
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<PAGE>
33. ENTIRE AGREEMENT. This Lease, including the Exhibits and any Addenda
attached hereto, and the documents referred to herein, if any, constitute the
entire agreement between Landlord and Tenant with respect to the leasing of
space by Tenant in the Building, and supersede all prior or contemporaneous
agreements, understandings, proposals and other representations by or between
Landlord and Tenant, whether written or oral, all of which are merged herein.
Neither Landlord nor Landlord's agents have made any representations or
warranties with respect to the Premises, the Building, the Project or this Lease
except as expressly set forth herein, and no rights. easements or licenses shall
be acquired by Tenant by implication or otherwise unless expressly set forth
herein. The submission of this Lease for examination does not constitute an
option for the Premises and this Lease shall become effective as a binding
agreement only upon execution and delivery thereof by Landlord to Tenant.
34. MISCELLANEOUS. This Lease may not be amended or modified except by a
writing signed by Landlord and Tenant. Subject to Section 14 - Assignment and
Subletting and Section 28 - Landlord's Liability, this Lease shall be binding on
and shall inure to the benefit of the parties and their respective successors,
assigns and legal representatives. The determination that any provisions hereof
may be void, invalid, illegal or unenforceable shall not impair any other
provisions hereof and all such other provisions of this Lease shall remain in
full force and effect. The unenforceability, invalidity or illegality of any
provision of this Lease under particular circumstances shall not render
unenforceable, invalid or illegal other provisions of this Lease, or the same
provisions under other circumstances. This Lease shall be construed and
interpreted in accordance with the laws (excluding conflict of laws
principles)of the State in which the Building is located. The provisions of this
Lease shall be construed in accordance with the fair meaning of the language
used and shall not be strictly construed against either party, even if such
party drafted the provision in question. When required by the context of this
Lease, the singular includes the plural. Wherever the term "including" is used
in this Lease, it shall be interpreted as meaning "including, but not limited
to" the matter or matters thereafter enumerated. The captions contained in this
Lease are for purposes of convenience only and are not to be used to interpret
or construe this Lease. If more than one person or entity is identified as
Tenant hereunder, the obligations of each and all of them under this Lease shall
be joint and several. Time is of the essence with respect to this Lease, except
as to the conditions relating to the delivery of possession of the Premises to
Tenant. Neither Landlord nor Tenant shall record this Lease.
35. AUTHORITY. If Tenant is a corporation, partnership, limited liability
company or other form of business entity, each of the persons executing this
Lease on behalf of Tenant warrants and represents that Tenant is a duly
organized and validly existing entity, that Tenant has full right and authority
to enter into this Lease and that the persons signing on behalf of Tenant are
authorized to do so and have the power to bind Tenant to this Lease. Tenant
shall provide Landlord upon request with evidence reasonably satisfactory to
Landlord confirming the foregoing representations. Landlord represents and
warrants that (i) Landlord is a validly formed limited liability company which
is duly authorized and existing and is qualified to do business in the State of
California; (ii) Landlord, and the individuals executing this Lease for
Landlord, have the right and authority to enter into this Lease; and (iii) this
Lease is binding upon Landlord in accordance with its terms.
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<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have entered into this Lease as of
the date first above written.
TENANT: LANDLORD:
BLUE MARTINI, LLC PENINSULA OFFICE PARK
ASSOCIATES, L.P.,
a California limited partnership
By /s/ Monte Zweben By: Peninsula Office Park Investors, LLC
------------------------- a California limited liability company
Name: Monte Zweben Sole General Partner
----------------------
Title: CEO By: Opportunity Capital Partners III,
--------------------- LLC a California limited liability
company,
By: /s/ Robert Paratte
-------------------------------
_______________________________
Manager
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<PAGE>
EXHIBIT A
---------
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF SEPTEMBER 1, 1998
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
BLUE MARTINI, INC., AS TENANT ("LEASE")
[DIAGRAM OF THE PREMISES APPEARS HERE]
6,819 RSP
--------------------------------------------------------
Peninsula Office Park - 2600 Campus Drive, San Mateo, CA
Exhibit A, Page 1
<PAGE>
EXHIBIT B
---------
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF SEPTEMBER l, 1998
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
BLUE MARTINI, LLC. AS TENANT ("LEASE")
CONSTRUCTION RIDER
------------------
1. No Work to be Performed by Landlord. Tenant has inspected and
-----------------------------------
examined the Premises and has elected to lease the Premises as provided in the
Lease on a strictly "AS IS" basis, except that Landlord shall (a) patch walls
where necessary, (b) repaint the Premises using Building standard paint, and (c)
remove the existing chain link fence within the existing storage. Except for (a)
patching walls where necessary, (b) repainting the Premises using Building
standard paint, and (c) removing the existing chain link fence in the existing
storage room, Landlord shall have no obligation to perform any work to prepare
the Premises for use or occupancy by Tenant. Tenant shall be solely responsible
for making any alterations or improvements to the Premises required or desired
by Tenant, subject to and in accordance with the provisions of Article 6 -
Alterations - of the Lease.
2. Delivery of Premises. Landlord shall use reasonable efforts to
--------------------
deliver possession of the Premises to Tenant on or before the scheduled
Commencement Date specified in the Lease. If Landlord is unable for any reason
to deliver possession of the Premises to Tenant on or before the scheduled
Commencement Date, neither Landlord nor Landlord's representatives shall be
liable to Tenant for any damage resulting from the delay in delivering
possession to Tenant and the Lease shall remain in full force and effect unless
and until it is terminated under the express provisions of this Paragraph. If
the Commencement Date has not occurred within two (2) months after the scheduled
Commencement Date, either party, by written notice to the other party given
within ten (10) days after the expiration of such two (2) month period, may
terminate the Lease without any liability to the other party.
3. Access to Premises. Landlord may allow Tenant and Tenant's
------------------
Representatives to enter the Premises prior to the Commencement Date to permit
Tenant to make the Premises ready for Tenant's use and occupancy; provided,
however, that prior to such entry of the Premises, Tenant shall provide evidence
reasonably satisfactory to Landlord that Tenant's insurance, as described in
Section 11.1 - Tenant's Insurance of the Lease, shall be in effect as of the
time of such entry. Such permission may be revoked at any time upon twenty-four
(24) hours' notice. Tenant agrees that Landlord shall not be liable in any way
for any injury, loss or damage which may occur to any of Tenant's property
placed upon or installed in the Premises prior to the Commencement Date, the
same being at Tenant's sole risk, and Tenant shall be liable for all injury,
loss or damage to persons or property arising as a result of such entry into the
Premises by Tenant or Tenant's Representatives.
Exhibit B, Page 1
<PAGE>
4. Ownership of Tenant Improvements. All Tenant Improvements, whether
--------------------------------
installed by Landlord or Tenant, shall become a part of the Premises. shall be
the property of Landlord and, subject to the provisions of the Lease, shall be
surrendered by Tenant with the Premises, without any compensation to Tenant, at
the expiration or termination of the Lease in accordance with the provisions of
the Lease.
INITIALS:
Landlord ______
Tenant ______
Exhibit B, Page 2
<PAGE>
EXHIBIT C
---------
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF SEPTEMBER 1, 1998
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
BLUE MARTINI, LLC., AS TENANT ("LEASE")
BUILDING RULES
--------------
The following Building Rules are additional provisions of the foregoing
Lease to which they are attached. The capitalized terms used herein have the
same meanings as these terms are given in the Lease.
1. Use of Common Areas. Tenant will not obstruct the sidewalks, halls,
-------------------
passages, exits, entrances, elevators or stairways of the Building ("Common
Areas"), and Tenant will not use the Common Areas for any purpose other than
ingress and egress to and from the Premises. The Common Areas, except for the
sidewalks, are not open to the general public and Landlord reserves the right to
control and prevent access to the Common Areas of any person whose presence, in
Landlord's opinion, would be prejudicial to the safety, reputation and interests
of the Building and its tenants.
2. No Access to Roof. Tenant has no right of access to the roof of the
-----------------
Building and will not install, repair or replace any antenna, aerial, aerial
wires, fan, air-conditioner or other device on the roof of the Building, without
the prior written consent of Landlord. Any such device installed without such
written consent is subject to removal at Tenant's expense without notice at any
time. In any event Tenant will be liable for any damages or repairs incurred or
required as a result of its installation, use, repair, maintenance or removal of
such devices on the roof and agrees to indemnify and hold harmless Landlord from
any liability, toss, damage, cost or expense, including reasonable attorneys'
fees, arising from any activities of Tenant or of Tenant's Representatives on
the roof of the Building.
3. Signage. No sign, placard, picture, name, advertisement or notice
-------
visible from the exterior of the Premises will be inscribed, painted, affixed or
otherwise displayed by Tenant on or in any part of the Building without the
prior written consent of Landlord. Landlord reserves the right to adopt and
furnish Tenant with general guidelines relating to signs in or on the Building.
All approved signage will be inscribed, painted or affixed at Tenant's expense
by a person approved by Landlord, which approval will not be unreasonably
withheld.
4. Prohibited Uses. The Premises will not be used for manufacturing,
---------------
for the storage of merchandise held for sale to the general public, for lodging
or for the sale of goods to the general public. Tenant will not permit any food
preparation on the Premises except that Tenant may use Underwriters' Laboratory
approved microwave ovens and equipment for brewing coffee, tea, hot chocolate
and similar beverages so long as such use is in accordance with ail applicable
federal, state and city laws, codes, ordinances, rules and regulations.
Exhibit C, Page 1
<PAGE>
5. Janitorial Services. Tenant will not employ any person for the
-------------------
purpose of cleaning the Premises or permit any person to enter the Building for
such purpose other than Landlord's janitorial service, except with Landlord's
prior written consent. Tenant will not necessitate, and will be liable for the
cost of, any undue amount of janitorial labor by reason of Tenant's carelessness
in or indifference to the preservation of good order and cleanliness in the
Premises. Janitorial service will not be furnished to areas in the Premises on
nights when such areas are occupied after 9:30 p.m., unless such service is
extended by written agreement to a later hour in specifically designated areas
of the Premises.
6. Keys and Locks. Landlord will furnish Tenant, free of charge, two
--------------
keys to each door or lock in the Premises. Landlord may make a reasonable charge
for any additional or replacement keys. Tenant will not duplicate any keys,
alter any locks or install any new or additional lock or bolt on any door of its
Premises or on any other part of the Building without the prior written consent
of Landlord and, in any event, Tenant will provide Landlord with a key for any
such lock. On the termination of the Lease, Tenant will deliver to Landlord all
keys to any locks or doors in the Building which have been obtained by Tenant.
7. Freight. Upon not less than twenty-four hours prior notice to
-------
Landlord, which notice may be oral, an elevator will be made available for
Tenant's use for transportation of freight, subject to such scheduling as
Landlord in its discretion deems appropriate. Tenant shall not transport freight
in loads exceeding the weight limitations of such elevator. Landlord reserves
the right to prescribe the weight, size and position of all equipment,
materials, furniture or other property brought into the Building, and no
property will be received in the Building or carried up or down the freight
elevator or stairs except during such hours and along such routes and by such
persons as may be designated by Landlord. Landlord reserves the right to require
that heavy objects will stand on wood strips of such length and thickness as is
necessary to properly distribute the weight. Landlord will not be responsible
for loss of or damage to any such property from any cause, and Tenant will be
liable for all damage or injuries caused by moving or maintaining such property.
8. Nuisances and Dangerous Substances. Tenant will not conduct itself or
----------------------------------
permit Tenant's Representatives or Visitors to conduct themselves, in the
Premises or anywhere on or in the Property in a manner which is offensive or
unduly annoying to any other Tenant or Landlord's property managers. Tenant will
not install or operate any phonograph, radio receiver, musical instrument, or
television or other similar device in any part of the Common Areas and shall not
operate any such device installed in the Premises in such manner as to disturb
or annoy other tenants of the Building. Tenant will not use or keep in the
Premises or the Property any kerosene, gasoline or other combustible fluid or
material other than limited quantities thereof reasonably necessary for the
maintenance of office equipment, or, without Landlord's prior written approval,
use any method of heating or air conditioning other than that supplied by
Landlord. Tenant will not use or keep any foul or noxious gas or substance in
the Premises or permit or suffer the Premises to be occupied or used in a manner
offensive or objectionable to Landlord or other occupants of the Building by
reason of noise, odors or vibrations, or interfere in any way with other tenants
or those having business therein. Tenant will not bring or keep any, animals in
or about the Premises or the Property.
Exhibit C, Page 2
<PAGE>
9. Building Name and Address. Without Landlord's prior written consent,
-------------------------
Tenant will not use the name of the Building in connection with or in promoting
or advertising Tenant's business except as Tenant's address.
10. Building Directory. A directory for the Building will be provided
------------------
for the display of the name and location of tenants. Landlord reserves the right
to approve any additional names Tenant desires to place in the directory and, if
so approved, Landlord may assess a reasonable charge for adding such additional
names.
11. Window Coverings. No curtains, draperies, blinds, shutters, shades,
----------------
awnings, screens or other coverings, window ventilators, hangings, decorations
or similar equipment shall be attached to, hung or placed in, or used in or with
any window of the Building without the prior written consent of Landlord, and
Landlord shall have the right to control all lighting within the Premises that
may be visible from the exterior of the Building.
12. Floor Coverings. Tenant will not lay or otherwise affix linoleum,
---------------
tile, carpet or any other floor covering to the floor of the Premises in any
manner except as approved in writing by Landlord. Tenant will be liable for the
cost of repair of any damage resulting from the violation of this rule or the
removal of any floor covering by Tenant or its contractors, employees or
invitees.
13. Wiring and Cabling Installations. Landlord will direct Tenant's
--------------------------------
electricians and other vendors as to where and how data, telephone, and
electrical wires and cables are to be installed. No boring or cutting for wires
or cables will be allowed without the prior written consent of Landlord. The
location of burglar alarms, smoke detectors, telephones, call boxes and other
office equipment affixed to the Premises shall be subject to the written
approval of Landlord.
14. Office Closing; Procedures. Tenant will see that the doors of the
--------------------------
Premises are closed and locked and that all water faucets, water apparatus and
utilities are shut off before Tenant or its employees leave the Premises, so as
to prevent waste or damage. Tenant will be liable for all damage or injuries
sustained by other tenants or occupants of the Building or Landlord resulting
from Tenant's carelessness in this regard or violation of this rule. Tenant will
keep the doors to the Building corridors closed at all times except for ingress
and egress.
15. Plumbing Facilities. The toilet rooms, toilets, urinals, wash bowls
-------------------
and other apparatus shall not be used for any purpose other than that for which
they were constructed and no foreign substance of any kind whatsoever shall be
disposed of therein. Tenant will be liable for any breakage, stoppage or damage
resulting from the violation of this rule by Tenant, its employees or invitees.
16. Use of Hand Trucks. Tenant will not use or permit to be used in the
------------------
Premises or in the Common Areas any hand trucks, carts or dollies except those
equipped with rubber tires and side guards or such other equipment as Landlord
may approve.
17. Refuse. Tenant shall store all Tenant's trash and garbage within the
------
Premises or in other facilities designated By Landlord for such purpose. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary
Exhibit C, Page 3
<PAGE>
manner of removing and disposing of trash and garbage in the city in which the
Building is located without being in violation of any law or ordinance governing
such disposal. All trash and garbage removal shall be made in accordance with
directions issued from time to time by Landlord, only through such Common Areas
provided for such purposes and at such times as Landlord may designate. Tenant
shall comply with the requirements of any recycling program adopted by Landlord
for the Building.
18. Soliciting. Canvassing, peddling, soliciting and distribution of
----------
handbills or any other written materials in the Building are prohibited, and
Tenant will cooperate to prevent the same.
19. Parking. Tenant will use, and cause Tenant's Representatives and
-------
Visitors to use, any parking spaces to which Tenant is entitled under the Lease
in a manner consistent with Landlord's directional signs and markings in the
Parking Facility. Specifically, but without limitation, Tenant will not park, or
permit Tenant's Representatives or Visitors to park, in a manner that impedes
access to and from the Building or the Parking Facility or that violates space
reservations for handicapped drivers registered as such with the California
Department of Motor Vehicles. Landlord may use such reasonable means as may be
necessary to enforce the directional signs and markings in the Parking Facility,
including but not limited to towing services, and Landlord will not be liable
for any damage to vehicles towed as a result of non-compliance with such parking
regulations.
20. Fire, Security and Safety Regulations. Tenant will comply with all
-------------------------------------
safety, security, fire protection and evacuation measures and procedures
established by Landlord or any governmental agency.
21. Responsibility for Theft. Tenant assumes any and all responsibility
------------------------
for protecting the Premises from theft, robbery and pilferage, which includes
keeping doors locked and other means of entry to the Premises closed.
22. Sales and Auctions. Tenant will not conduct or permit to be conducted
------------------
any sale by auction in, upon or from the Premises or elsewhere in the Property,
whether said auction be voluntary, involuntary, pursuant to any assignment for
the payment of creditors or pursuant to any bankruptcy or other insolvency
proceeding.
23. Waiver of Rules. Landlord may waive any one or more of these Building
---------------
Rules for the benefit of any particular tenant or tenants, but no such waiver by
Landlord will be construed as a waiver of such Building Rules in favor of any
other tenant or tenants nor prevent Landlord from thereafter enforcing these
Building Rules against any or all of the tenants of the Building.
24. Effect on Lease. These Building Rules are in addition to, and shall
---------------
not be construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease. Violation of these Building
Rules constitutes a failure to fully perform the provisions of the Lease, as
referred to in Section 15.1 - "Events of Default".
25. Non-Discriminatory Enforcement. Subject to the provisions of the
------------------------------
Lease (and the provisions of other leases with respect to other tenants),
Landlord shall use reasonable efforts to
Exhibit C, Page 4
<PAGE>
enforce these Building Rules in a non-discriminatory manner, but in no event
shall Landlord have any liability for any failure or refusal to do so (and
Tenant's sole and exclusive remedy for any such failure or refusal shall be
injunctive relief preventing Landlord from enforcing any of the Building Rules
against Tenant in a manner that discriminates against Tenant).
26. Additional and Amended Rules. Landlord reserves the right to rescind
----------------------------
or amend these Building Rules and/or adopt any other and reasonable rules and
regulations as in its judgment may from time to time be needed for the safety,
care and cleanliness of the Building and for the preservation of good order
therein.
INITIALS:
Landlord ______
Tenant ______
Exhibit C, Page 5
<PAGE>
EXHIBIT D
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF SEPTEMBER 1, 1998
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
BLUE MARTINI, LLC. AS TENANT ("LEASE")
ADDITIONAL PROVISIONS RIDER
---------------------------
36. PARKING.
(a) Tenant's Parking Rights. Landlord shall provide Tenant, on an
-----------------------
unassigned and non-exclusive basis, for use by Tenant and Tenant's
Representatives and Visitors, at the users' sole risk, twenty (20) parking
spaces in the Parking Facility. If Tenant leases additional office space
pursuant to this Lease, Landlord shall provide Tenant, also on an unassigned,
non-exclusive and unlabelled basis, one (1) additional parking space in the
Parking Facility for each three hundred thirty-three (333) rentable square feet
of additional office space leased to Tenant. The parking spaces to be made
available to Tenant hereunder may contain a reasonable mix of spaces for compact
cars and up to ten percent (10%) of the unassigned spaces may also be designated
by Landlord as Building visitors' parking.
(b) Availability of Parking Spaces. Landlord shall take reasonable actions
------------------------------
to ensure the availability of the parking spaces leased by Tenant, but Landlord
does not guarantee the availability of those spaces at all times against the
actions of other tenants of the Building and users of the Parking Facility.
Access to the Parking Facility may, at Landlord's option, be regulated by card,
pass, bumper sticker, decal or other appropriate identification issued by
Landlord. Landlord retains the right to revoke the parking privileges of any
user of the Parking Facility who violates the rules and regulations governing
use of the Parking Facility (and Tenant shall be responsible for causing any
employee of Tenant or other person using parking spaces allocated to Tenant to
comply with all parking rules and regulations).
(c) Assignment and Subletting. Notwithstanding any other provision of the
-------------------------
Lease to the contrary, Tenant shall not assign its rights to the parking spaces
or any interest therein, or sublease or otherwise allow the use of all or any
part of the parking spaces to or by any other person, except with Landlord's
prior written consent, which may be granted or withheld by Landlord in its sole
discretion. In the event of any separate assignment or sublease of parking
space rights that is approved by Landlord, Landlord shall be entitled to
receive, as additional Rent hereunder, one hundred percent (100%) of any profit
received by Tenant in connection with such assignment or sublease.
(d) Condemnation, Damage or Destruction. In the event the Parking Facility
-----------------------------------
is the subject of a Condemnation, or is damaged or destroyed, and this Lease is
not terminated, and if in such event the available number of parking spaces in
the Parking Facility is permanently reduced, then Tenant's rights to use parking
spaces hereunder may, at the election of Landlord,
Exhibit D, Page 1
<PAGE>
thereafter be reduced in proportion to the reduction of the total number of
parking spaces in the Parking Facility. In such event, Landlord reserves the
right to reduce the number of parking spaces to which Tenant is entitled or to
relocate some or all of the parking spaces to which Tenant is entitled to other
areas in the Parking Facility.
INITIALS:
Landlord ______
Tenant /s/ MZ
------
Exhibit D, Page 2
<PAGE>
FIRST AMENDMENT TO LEASE
------------------------
This First Amendment to Lease (the "Agreement") is made and entered into as
of May 12, 1999 by and between PENINSULA OFFICE PARK ASSOCIATES, L.P., a
California limited partnership ("Landlord") and BLUE MARTINI, INC., a California
limited liability company ("Tenant").
Recitals
--------
A. Landlord and Tenant entered into a Lease Agreement dated September 1,
1998 (the "Lease") by which Tenant leases from Landlord Suite 175 (the "Existing
Premises") containing approximately 6,819 rentable square feet on the first
floor of the building known as Peninsula Office Park 6 located at 2600 Campus
Drive, San Mateo, California (the "Building"). Capitalized terms not otherwise
defined in this Agreement shall have the meaning given them in the Lease.
B. The Term of the Lease is scheduled to expire September 30, 2003 (the
"Expiration Date").
C. Landlord and Tenant desire to amend the Lease to provide for (i) Tenant
to lease Suite 180 (the "Expansion Premises") containing approximately 5,108
rentable square feet on the first floor of the Building, and (ii) an extension
of the Term of the Lease, all upon and subject to the terms and conditions set
forth in this Agreement. The approximate configuration and location of the
Expansion Premises is shown on Exhibit A attached hereto.
NOW THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1 Leasing. Landlord leases to Tenant and Tenant leases from Landlord the
-------
Expansion Premises commencing on the date (the "Expansion Premises
Commencement Date," also referred to as "EPCD") which is the earlier of (a)
twenty (20) days after the date Landlord delivers possession of the Expansion
Premises to Tenant after Landlord has obtained possession of the Expansion
Premises from the Existing Tenant, or (b) the date upon which Tenant, with
Landlord's written permission, actually occupies and conducts business in any
portion of the Expansion Premises, and continuing until the Expiration Date
(as hereinafter amended). Commencing on the Expansion Premises Commencement
Date and continuing through the Term, as extended herein, the Expansion
Premises shall be included in the "Premises" for all purposes under the Lease
(and the "Premises" shall consist of both the Original Premises and the
Expansion Premises, totaling approximately 11,927 rentable square feet).
45
<PAGE>
2 Existing Tenant. The Expansion Premises are occupied by a tenant (the
---------------
"Existing Tenant") pursuant to a lease which expires June 30, 1999. Landlord
agrees to use good faith efforts to obtain possession of the Expansion
Premises from the Existing Tenant upon expiration of the lease with the
Existing Tenant, but shall not be liable for any claims, damages or
liabilities if the Existing Tenant does not vacate the Expansion Premises
upon expiration of the term of its lease, and Landlord is unable to deliver
possession of the Expansion Premises to Tenant upon expiration of the lease
with the Existing Tenant.
3 Term and Expiration Date. The Term of the Lease is hereby extended by
-------------------------
approximately ten (10) calendar months to be sixty (60) full calendar months
following the Expansion Premises Commencement Date. The Expiration Date shall
be the last day of the sixtieth (60th) calendar month following the Expansion
Premises Commencement Date.
4 Condition of Expansion Premises. Tenant hereby accepts the Expansion
--------------------------------
Premises in their existing "AS IS" condition, agrees that the Expansion
Premises is in good and tenantable condition, and acknowledges that Landlord
has no obligation to improve or alter the Expansion Premises. Any Alterations
Tenant makes to the Expansion Premises shall be made only in accordance with
the provisions of Section 6 of the Lease. Tenant shall contract with
Commercial Interior Contractors ("CIC") to construct any Alterations desired
by Tenant in the Expansion Premises. Tenant acknowledges and agrees that CIC
is an affiliate of Landlord. Landlord shall contribute up to $5.00 per
rentable square foot in the Expansion Premises (the "Allowance") toward the
cost of the design (including preparation of space plans and construction
documents), construction and installation of the Alterations. The balance, if
any, of the cost of the Alterations ("Additional Cost"), including, but not
limited to, customary and reasonable usual markups for overhead, supervision
and profit, shall be paid by Tenant to CIC. Upon completion of the
Alterations, and upon Tenant presenting evidence to Landlord that the
Alterations have been completed, and that Tenant has paid the Additional Cost
to CIC, Landlord shall pay the Allowance to CIC.
5 Base Rent for Expansion Premises. In addition to the Base Rent payable by
---------------------------------
Tenant for the Existing Premises, Tenant shall pay the following Base Rent
for the Expansion Premises:
Months Base Rent
------ ---------
EPCD - 12/31/99: $3.20 per rentable square foot per month
01/01/00 - 12/31/00: $3.40 per rentable square foot per month
01/01/01 - 12/31/01: $3.50 per rentable square foot per month
01/01/02 - 12/31/02: $3.60 per rentable square foot per month
01/01/03 - 12/31/03: $3.70 per rentable square foot per month
01/01/04 - Expiration Date: $3.80 per rentable square foot per month
46
<PAGE>
6. Base Rent for Existing Premises. Tenant shall pay Base Rent for the
--------------------------------
Existing Premises through September 30, 2003 in accordance with the
provisions of the Lease. Commencing October 1, 2003 and continuing until the
Expiration Date Tenant shall pay $3.80 per rentable square foot per month as
Base Rent for the Existing Premises.
7. Base Year and Tenant's Share. Effective on the Expansion Premises
-----------------------------
Commencement Date the Base Year for the Premises shall be calendar year
1999. From and after the Expansion Premises Commencement Date Tenant's Share
shall be 20.12%.
8. Additional Security Deposit. Upon execution and delivery of this Agreement
----------------------------
to by Tenant to Landlord, Tenant shall deposit with Landlord the sum of
$16,345.60 to be held by Landlord as a Security Deposit, in addition to the
existing Security Deposit, in accordance with the provisions of Section 4 of
the Lease.
9. Sign on Existing Monument. So long as Blue Martini, Inc. has not assigned
-------------------------
this Lease or sublet any of the Premises (it being intended that all rights
pursuant to this provision are and shall be personal to the original Tenant
under this Lease and shall not be transferable or exercisable for the
benefit of any Transferee), and so long as Blue Martini, Inc. occupies at
least 11,927 rentable square feet in the Building, Blue Martini, Inc. shall
have the right to install and maintain in a first class condition a sign on
the existing sign monument located adjacent to the Building, for no
additional rent, subject to governmental approval of a separate signage
application and subject to review and approval by Landlord, in Landlord's
sole discretion, of the size, design, materials, color, illumination, and
all other aspects of any proposed sign. All costs and expenses of processing
governmental applications, permits, construction, installation and
maintenance of Tenant's sign shall be borne by Tenant.
10. Broker. Tenant warrants and represents to Landlord that in the negotiating
-------
or making of this Agreement neither Tenant nor anyone acting on Tenant's
behalf has dealt with any broker or finder who might be entitled to a fee
or commission for this Agreement. Tenant shall indemnify and hold Landlord
harmless from any claim or claims, including costs, expenses and attorney's
fees incurred by Landlord asserted by any broker or finder for a fee or
commission based upon any dealings with or statements made by Tenant or
Tenant's Representatives. Landlord agrees to indemnify and hold Tenant
harmless from and against any claim by third parties claiming by, through,
or under Landlord for commissions due or alleged to be due in connection
with this Agreement.
11. Ratification of Lease. The Lease, as modified by this Agreement, remains
----------------------
in full force and effect, and Landlord and Tenant ratify the same. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns.
If Tenant is a corporation or a partnership, each of the persons
executing this Agreement on behalf of Tenant warrants and represents that Tenant
is a duly authorized and existing entity that Tenant has full right and
authority to enter into this Agreement and that the persons signing on behalf of
Tenant are authorized to do so and have the power to bind
47
<PAGE>
Tenant to this Agreement. Tenant shall provide Landlord, upon request, with
evidence reasonably satisfactory to Landlord confirming the foregoing
representations.
Except as herein amended, the Lease remains unchanged and is in full
force and effect in accordance with the terms and provisions contained therein.
This First Amendment is hereby executed and delivered in multiple
counterparts, each of which shall have the force and effect of an original.
<TABLE>
<CAPTION>
LANDLORD: TENANT:
<S> <C>
PENINSULA OFFICE PARK ASSOCIATES, L.P., BLUE MARTINI, INC.,
a California limited partnership a California limited liability company
By: CORNERSTONE HOLDINGS, INC., By: /s/ Monte Zweben
Delaware limited liability company, ---------------------------
general partner Name:______________________
Title:______________________
By: /s/ Robert Paratte By:
-------------------------- --------------------------
Name: Robert Paratte Name:
------------------------ ------------------------
Title: Title:
----------------------- -----------------------
</TABLE>
48
<PAGE>
EXHIBIT A
---------
ATTACHED TO AND FORMING A PART OF
FIRST AMENDMENT TO LEASE
DATED AS OF MAY 12, 1999
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
BLUE MARTINI, INC.., AS TENANT ("AGREEMENT")
THE EXPANSION PREMISES
----------------------
[Floor plan showing location
and configuration of Expansion Premises
to be inserted.]
INITIALS:
Landlord ______
Tenant MZ
------
49
<PAGE>
SECOND AMENDMENT TO LEASE
-------------------------
This Second Amendment to Lease (the "Agreement") is made and entered into
as of August 5, 1999 by and between PENINSULA OFFICE PARK ASSOCIATES, L.P., a
California limited partnership ("Landlord") and BLUE MARTINI, INC., a California
corporation ("Tenant").
Recitals
--------
A. Landlord and Tenant entered into a Lease Agreement (the "Original
Lease") dated September 1, 1998 and a First Amendment to Lease (the "First
Amendment") dated as of May 12, 1999 (as so amended, the "Amended Lease").
Under the terms of the Amended Lease, Tenant leases from Landlord Suite 175 (the
"Initial Premises") containing approximately 6,819 rentable square feet on the
first floor and Suite 180 (the "First Expansion Premises") containing
approximately 5,108 rentable square feet on the first floor of the of the
building known as Peninsula Office Park 6 located at 2600 Campus Drive, San
Mateo, California (the "Building"). As of the date of this Agreement the
Premises contain approximately 11,927 rentable square feet, consisting of the
Initial Premises and the First Expansion Premises (together, the "Existing
Premises").
B. The Term of the Amended Lease is scheduled to expire June 30, 2004 (the
"Expiration Date").
C. Landlord and Tenant desire to amend the Amended Lease to provide for
(i) Tenant to lease Suite 280 (the "Second Expansion Premises") containing
approximately 7,370 rentable square feet on the second floor of the Building,
(ii) an extension of the Term, and (iii) to make certain other changes in the
Amended Lease, all upon and subject to the terms and conditions set forth in
this Agreement. The approximate configuration and location of the Second
Expansion Premises is shown on Exhibit A attached hereto.
NOW THEREFORE, in consideration of the foregoing recitals, and mutual
agreements contained herein, the parties hereto agree as follows:
1. Capitalized Terms. All capitalized terms not otherwise defined in this
------------------
Agreement shall have the meaning given them in the Amended Lease.
2. Definition of Lease. The Amended Lease, as further amended by this
--------------------
Agreement, is herein called the "Lease."
3. Leasing of Second Expansion Premises. Landlord leases to Tenant and Tenant
-------------------------------------
leases from Landlord the Second Expansion Premises commencing on September
1, 1999 (the "Second Expansion Premises Commencement Date"). Commencing on
the Second Expansion Premises Commencement Date and continuing through the
Term, as extended herein, the Second Expansion Premises shall be included in
the "Premises" for all purposes under the Lease (and the "Premises" shall
consist of both the Existing Premises and the Second Expansion Premises,
totaling approximately 19,297 rentable square feet).
50
<PAGE>
4. Existing Tenant. The Second Expansion Premises are occupied by a tenant
----------------
(the "Existing Tenant") pursuant to a lease which expires December 31, 1999.
Landlord agrees to use good faith efforts to enter into a lease termination
agreement with the Existing Tenant and to deliver possession of the Second
Expansion Premises to Tenant on the Second Expansion Premises Commencement
Date, but Landlord shall not be liable for any claims, damages or
liabilities if Landlord does not enter into a lease termination agreement
for the Second Expansion Premises with the Existing Tenant, and Landlord is
unable to deliver possession of the Second Expansion Premises to Tenant
prior to the Second Expansion Premises Commencement Date.
5. Term and Expiration Date. The Term of the Lease is hereby extended by
-------------------------
approximately two (2) calendar months to be sixty (60) full calendar months
following the Second Expansion Premises Commencement Date. The Expiration
Date shall August 31, 2004 (the revised "Expiration Date").
6. Condition of Second Expansion Premises. Tenant hereby accepts the Second
---------------------------------------
Expansion Premises in their existing "AS IS" condition, agrees that the
Second Expansion Premises is in good and tenantable condition, and
acknowledges that Landlord has no obligation to improve or alter the Second
Expansion Premises. Any Alterations Tenant makes to the Second Expansion
Premises shall be made only in accordance with the provisions of Section 6
of the Original Lease. Tenant shall contract with Commercial Interior
Contractors ("CIC") to construct any Alterations desired by Tenant in the
Second Expansion Premises. Tenant acknowledges and agrees that CIC is an
affiliate of Landlord. Landlord shall contribute up to $8.00 per rentable
square foot in the Second Expansion Premises (the "Allowance") toward the
cost of the design (including preparation of space plans and construction
documents), construction and installation of the Alterations (which may be
used for Alterations in the Existing Premises). The balance, if any, of the
cost of the Alterations ("Additional Cost"), including, but not limited to,
customary and reasonable usual markups for overhead, supervision and profit,
shall be paid by Tenant to CIC. Upon completion of the Alterations, and upon
Tenant presenting evidence to Landlord that the Alterations have been
completed, and that Tenant has paid the Additional Cost to CIC, Landlord
shall pay the Allowance to CIC.
7. Base Rent for Second Expansion Premises. In addition to the Base Rent
----------------------------------------
payable by Tenant for the Existing Premises, Tenant shall pay the following
Base Rent for the Expansion Premises:
Months Base Rent
------ ---------
09/01/99 - 12/31/99: $3.20 per rentable square foot per month
01/01/00 - 12/31/00: $3.45 per rentable square foot per month
01/01/01 - 12/31/01: $3.65 per rentable square foot per month
01/01/02 - 12/31/02: $3.75 per rentable square foot per month
01/01/03 - 08/31/04: $3.85 per rentable square foot per month
8. Base Rent for Existing Premises. Tenant shall pay Base Rent for the
--------------------------------
Existing Premises through June 30, 2004 in accordance with the provisions of
the Amended Lease. Commencing July 1, 2004 and continuing until the
Expiration Date Tenant shall pay $3.85 per rentable square foot per month as
Base Rent for the Existing Premises.
51
<PAGE>
9. Base Year and Tenant's Share. The Base Year for the Second Expansion
-----------------------------
Premises shall be calendar year 1999. From and after the Second Expansion
Premises Commencement Date Tenant's Share shall be 32.55%.
10. Amendment of Section 4 of the Original Lease and Additional Security
--------------------------------------------------------------------
Deposit. Effective as of the date of this Agreement, Section 4 of the
-------
Original Lease is hereby deleted in its entirety and replaced with the
following:
"4. SECURITY DEPOSIT. On execution of this Agreement, Tenant shall
deposit with Landlord the letter of credit identified in Paragraph 12
below and Landlord shall hold the cash amount specified in Paragraph 11
below as the Security Deposit (collectively, the "Security Deposit",
which term shall include amounts drawn on the letter of credit), as
security for the performance of Tenant's obligations under this Lease.
Landlord may (but shall have no obligation to) use the Security Deposit
or any portion thereof to cure any breach or default by Tenant under
the Lease, to fulfill any of Tenant's obligations under the Lease, or
to compensate Landlord for any damage it incurs as a result of Tenant's
failure to perform any of Tenant's obligations under the Lease. In such
event, Tenant shall pay to Landlord on demand an amount sufficient to
replenish the Security Deposit to the full amount of the cash specified
in the Basic Lease Information and the applicable Face Amount (defined
in Section 12 below) of the letter of credit. If at the expiration or
termination of this Lease, Tenant is not in default, has otherwise
fully performed all of Tenant's obligations under this Lease, and there
are no outstanding Claims (defined in Section 10.1 of the Original
Lease, and including all existing and potential Claims) for which
Tenant is responsible, Landlord shall return to Tenant the Security
Deposit or the balance thereof then held by Landlord and not applied as
provided above. Landlord may commingle the Security Deposit with
Landlord's general and other funds. Landlord shall not be required to
pay interest on the Security Deposit to Tenant. Tenant acknowledges
that Landlord has agreed to accept a letter of credit in lieu of an
additional cash deposit as an accommodation to Tenant and Tenant agrees
that the letter of credit and all amounts drawn thereunder shall be
treated for all purposes under this Lease as if a cash deposit had been
tendered to Landlord upon the execution of this Lease."
11. Amount of Cash Security Deposit. As of the date of this Agreement Landlord
--------------------------------
is holding a cash Security Deposit totaling $167,727.40 (the "Existing
Security Deposit"). Upon Tenant's delivery of the L/C described in
Paragraph 12 below, in the Face Amount shown in Paragraph 12 below, (a)
Landlord shall continue to hold the sum of $65,620.00 as the cash portion
of the Security Deposit, and (b) Landlord shall refund to Tenant the sum of
$102,107.40 out of such existing Security Deposit.
12. Letter of Credit.
-----------------
(a) Upon execution of this Agreement, Tenant shall deliver to Landlord
an unconditional, irrevocable, transferable and negotiable standby letter
of credit (the "L/C") in an amount equal to $182,107.40 ("Face Amount"),
issued by a bank or trust company ("Issuer") and in form
52
<PAGE>
and content acceptable to Landlord, in its sole and absolute discretion, as
additional security for the performance of Tenant's obligations under this
Lease. An L/C in the form attached hereto as Exhibit B is hereby approved
---------
by Landlord. The L/C shall name Landlord as beneficiary thereunder and
provide that draws, including partial draws, at Landlord's election, will
be honored upon the delivery to the Issuer of a certificate signed by
Landlord, or its authorized agent, that Tenant has failed to perform its
obligations under the Lease. The L/C shall also provide that it will be
automatically extended upon each renewal date unless the Issuer thereof
delivers to Landlord, no later than forty-five (45) days prior to the
stated expiration date of the L/C, written notice of Issuer's intent not to
extend or renew the L/C. During any period that Tenant is required to
maintain the L/C, Tenant shall, at least thirty (30) days prior to any
expiration or termination of the L/C, provide Landlord either with written
confirmation that the existing L/C will be automatically extended and
renewed or with a new L/C that satisfies all of the requirements for the
L/C in this Paragraph 12. In addition, upon a proposed sale or other
transfer of any interest in the Building, the Land, this Lease or Landlord
(including consolidations, mergers, or other entity changes), Tenant, at
its sole cost and expense and upon ten (10) Business Days' notice, shall,
concurrent with Landlord's delivery to Tenant of the then outstanding L/C,
deliver to any such transferees, successors, or assigns a replacement L/C
on identical terms (except for the stated beneficiary) from the same Issuer
or another bank or trust company acceptable to Landlord, in Landlord's sole
discretion, naming the new landlord as the beneficiary thereof. Tenant's
failure to perform or observe any of the covenants set forth in this
Paragraph 12 for any reason shall entitle Landlord to draw on the full
amount of the L/C and shall constitute an Event of Default under this Lease
without the requirement of any notice from Landlord. Any amount(s) drawn
under the L/C shall be held or used by Landlord in accordance with the
terms of Section 4 of the Lease.
(b) If as of the first (1st), second (2nd), third (3rd) and fourth
(4th) anniversary dates following the Second Expansion Premises
Commencement Date, (i) no prior or current Event of Default has occurred,
and no event or condition exists or has occurred which with the passage of
time or delivery of notice by Landlord, or both, would constitute an Event
of Default, and (ii) Tenant has delivered to Landlord, on or before such
anniversary dates, audited financial statements prepared in accordance with
generally accepted accounting principles consistently applied and certified
by Tenant's chief financial officer as being complete and accurate which
confirm that Tenant has achieved and sustained positive net earnings for
each of the four consecutive calendar quarters immediately preceding each
applicable anniversary date, the Face Amount of the L/C may be immediately
reduced to (A) $145,685.92 on the first (1st) anniversary date of the
Second Expansion Premises Commencement Date, (B) $109,264.41 on the second
(2nd) anniversary date of the Second Expansion Premises Commencement Date,
(C) $72,842.92 on the third (3rd) anniversary date of the Second Expansion
Premises Commencement Date, and (D) $36,421.48 on the fourth (4th)
anniversary date of the Second Expansion Premises Commencement Date, as
applicable (the "L/C Burnoff")..
13. Broker. Tenant warrants and represents to Landlord that in the negotiating
------
or making of this Agreement neither Tenant nor anyone acting on Tenant's
behalf has dealt with any broker or finder who might be entitled to a fee
or commission for this Agreement. Tenant shall indemnify and hold Landlord
harmless from any claim or claims, including costs, expenses and
53
<PAGE>
attorney's fees incurred by Landlord asserted by any broker or finder for a
fee or commission based upon any dealings with or statements made by Tenant
or Tenant's Representatives. Landlord agrees to indemnify and hold Tenant
harmless from and against any claim by third parties claiming by, through,
or under Landlord for commissions due or alleged to be due in connection
with this Agreement.
14. Ratification of Amended Lease. The Amended Lease, as modified by this
------------------------------
Agreement, remains in full force and effect, and Landlord and Tenant ratify
the same. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns.
If Tenant is a corporation or a partnership, each of the persons
executing this Agreement on behalf of Tenant warrants and represents that Tenant
is a duly authorized and existing entity that Tenant has full right and
authority to enter into this Agreement and that the persons signing on behalf of
Tenant are authorized to do so and have the power to bind Tenant to this
Agreement. Tenant shall provide Landlord, upon request, with evidence reasonably
satisfactory to Landlord confirming the foregoing representations.
Except as herein amended, the Amended Lease remains unchanged and is in
full force and effect in accordance with the terms and provisions contained
therein.
This Second Amendment is hereby executed and delivered in multiple
counterparts, each of which shall have the force and effect of an original.
<TABLE>
<CAPTION>
LANDLORD: TENANT:
<S> <C>
PENINSULA OFFICE PARK ASSOCIATES, L.P., BLUE MARTINI, INC.,
a California limited partnership a California corporation
By: CORNERSTONE HOLDINGS, INC., By: /s/ Monte Zweben
a Delaware limited liability company, --------------------------
general partner Name: Monte Zweben
----------------------
Title: CEO
---------------------
By: /s/ Robert Paratte By:
--------------------------- ---------------------------
Name: Robert Paratte Name:
------------------------- -------------------------
Title: Title:
------------------------ ------------------------
</TABLE>
54
<PAGE>
EXHIBIT A
---------
ATTACHED TO AND FORMING A PART OF
SECOND AMENDMENT TO LEASE
DATED AS OF AUGUST 5, 1999
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
BLUE MARTINI, INC.., AS TENANT ("AGREEMENT")
THE SECOND EXPANSION PREMISES
-----------------------------
[Floor plan showing location
and configuration of Second Expansion Premises
to be inserted.]
INITIALS:
Landlord ______
Tenant ______
55
<PAGE>
THIRD AMENDMENT TO LEASE
------------------------
This Third Amendment to Lease (the "Agreement") is made and entered into as
of January 11, 2000 by and between PENINSULA OFFICE PARK ASSOCIATES, L.P., a
California limited partnership ("Landlord") and BLUE MARTINI, INC., a California
corporation ("Tenant").
Recitals
--------
A. Landlord and Tenant entered into a Lease Agreement (the "Original
Lease") dated September 1, 1998, a First Amendment to Lease (the "First
Amendment") dated as of May 12, 1999, and a Second Amendment to Lease (the
"Second Amendment") dated as of August 5, 1999 (as so amended, the "Amended
Lease"). Under the terms of the Amended Lease, Tenant leases from Landlord
Suite 175 (the "Initial Premises") containing approximately 6,819 rentable
square feet on the first floor, Suite 180 (the "First Expansion Premises")
containing approximately 5,108 rentable square feet on the first floor, and
Suite 280 (the "Second Expansion Premises") containing approximately 7,370
rentable square feet on the second floor of the of the building known as
Peninsula Office Park 6 located at 2600 Campus Drive, San Mateo, California (the
"Building"). As of the date of this Agreement the Premises contain
approximately 19,297 rentable square feet, consisting of the Initial Premises,
the First Expansion Premises and Second Expansion Premises (collectively, the
"Existing Premises").
B. The Term of the Amended Lease is scheduled to expire August 31, 2004
(the "Expiration Date").
C. Landlord and Tenant desire to amend the Amended Lease to provide for
(i) Tenant to lease Suite 285 (the "Third Expansion Premises") containing
approximately 8,342 rentable square feet on the second floor of the Building,
(ii) an extension of the Term, and (iii) to make certain other changes in the
Amended Lease, all upon and subject to the terms and conditions set forth in
this Agreement. The approximate configuration and location of the Third
Expansion Premises is shown on Exhibit A attached hereto.
NOW THEREFORE, in consideration of the foregoing recitals, and mutual
agreements contained herein, the parties hereto agree as follows:
1. Capitalized Terms. All capitalized terms not otherwise defined in this
------------------
Agreement shall have the meaning given them in the Amended Lease.
2. Definition of Lease. The Amended Lease, as further amended by this
--------------------
Agreement, is herein called the "Lease."
3. Leasing of Third Expansion Premises. Subject to Landlord obtaining
------------------------------------
possession of the Third Expansion Premises from the Existing Tenant (as
defined below), Landlord leases
56
<PAGE>
to Tenant and Tenant leases from Landlord the Third Expansion Premises
commencing on the date Landlord delivers possession of the Third Expansion
Premises to Tenant (herein called either the "Third Expansion Premises
Commencement Date" or "TEPCD") after Landlord has (a) obtained possession of
the Third Expansion Premises from the Existing Tenant, and (b) constructed
the Demising Wall (as defined below). Commencing on the Third Expansion
Premises Commencement Date and continuing through the Term, as extended
herein, the Third Expansion Premises shall be included in the "Premises" for
all purposes under the Lease (and the "Premises" shall consist of both the
Existing Premises and the Third Expansion Premises, totaling approximately
27,639 rentable square feet).
4. Existing Tenant. As of the date of this Agreement the Third Expansion
----------------
Premises are occupied by a tenant (the "Existing Tenant") pursuant to a
lease which expires April 30, 2001. Landlord agrees to use good faith
efforts to enter into a partial lease termination agreement with the
Existing Tenant and to deliver possession of the Third Expansion Premises to
Tenant on or before January 31, 2000 (the "Scheduled Third Expansion
Premises Commencement Date"), but Landlord shall not be liable for any
claims, damages or liabilities if Landlord does not enter into a partial
lease termination agreement for the Third Expansion Premises with the
Existing Tenant, and Landlord is unable to deliver possession of the Third
Expansion Premises to Tenant prior to the Scheduled Third Expansion Premises
Commencement Date. Notwithstanding anything to the contrary contained in
this Agreement, if Landlord has not delivered possession of the Third
Expansion Premises to Tenant on or before February 29, 2000, then Tenant may
terminate this Agreement by written notice to Landlord, such notice of
termination to be given, if at all, on or before March 10, 2000. If Tenant
terminates this Agreement pursuant to the provisions of the immediately
preceding sentence, then the L/C (as defined below) delivered by Tenant to
Landlord in connection with this Agreement shall immediately become invalid,
and within ten (10) days after Landlord receives such notice from Tenant
terminating this Agreement, Landlord shall return to Tenant (a) the original
L/C, and (b) all Base Rent paid by Tenant to Landlord under this Agreement.
5. Term and Expiration Date. If this Agreement is not terminated pursuant to
-------------------------
the provisions of Paragraph 4 above, then the Term of the Lease is hereby
extended by approximately five (5) calendar months to be sixty (60) full
calendar months following the Third Expansion Premises Commencement Date.
The Expiration Date is hereby changed to be January 31, 2005 (the "Revised
Expiration Date").
6. Condition of Third Expansion Premises. Tenant hereby accepts the Third
--------------------------------------
Expansion Premises in their existing "AS IS" condition, agrees that the
Third Expansion Premises is in good and tenantable condition, and
acknowledges that Landlord has no obligation to improve or alter the Third
Expansion Premises. Any Alterations Tenant makes to the Third Expansion
Premises shall be made only in accordance with the provisions of Section 6
of the Original Lease. Tenant shall contract with Commercial Interior
Contractors ("CIC") to construct any Alterations desired by Tenant in the
Third Expansion Premises. The sums charged by CIC for any such Alterations
shall be
57
<PAGE>
competitive in the marketplace. Tenant acknowledges and agrees that CIC is
an affiliate of Landlord. The cost of any Alterations shall be paid by
Tenant to CIC.
7. Demising Wall. Landlord shall contribute up to $44,000.00 (the "Allowance")
--------------
toward the cost of constructing and installing a demising wall (the
"Demising Wall") between the Third Expansion Premises and Suite 200 in a
good and workmanlike manner using Building standard materials. CIC shall
construct such Demising Wall. Unless this Agreement is terminated by Tenant
pursuant to the provisions of Paragraph 4 above, then Tenant shall be
responsible for all costs in excess of the Allowance ("Additional Costs") to
construct and install the Demising Wall. Tenant shall pay any Additional
Costs to Landlord within ten (10) Business Days following Tenant's receipt
of (a) an invoice for any such Additional Costs, and (b) evidence from
Landlord that Landlord has paid to CIC the total costs of constructing and
installing the Demising Wall.
8. Base Rent for Third Expansion Premises. In addition to the Base Rent
---------------------------------------
payable by Tenant for the Existing Premises, Tenant shall pay the following
Base Rent for the Third Expansion Premises:
Months Base Rent
------ ---------
TEPCD - 01/14/01: $3.45 per rentable square foot per month
01/15/01 - 01/14/02: $3.80 per rentable square foot per month
01/15/02 - 01/14/03: $3.90 per rentable square foot per month
01/15/03 - 01/14/04: $4.00 per rentable square foot per month
01/15/04 - 01/31/05: $4.10 per rentable square foot per month
9. Base Rent for Existing Premises. Tenant shall pay Base Rent for the
--------------------------------
Existing Premises through August 31, 2004 in accordance with the provisions
of the Amended Lease. Commencing September 1, 2004 and continuing until the
Revised Expiration Date Tenant shall pay $4.10 per month per rentable square
foot in the Existing Premises as Base Rent for the Existing Premises.
10. Base Year and Tenant's Share. The Base Year for the Third Expansion
-----------------------------
Premises shall be calendar year 2000. From and after the Third Expansion
Premises Commencement Date Tenant's Share shall be 46.62%.
11. Letter of Credit.
-----------------
(a). Upon execution of this Agreement, Tenant shall deliver to
Landlord an unconditional, irrevocable, transferable and negotiable standby
letter of credit (the "L/C") in an amount equal to $96,350.10 ("Face
Amount"), issued by a bank or trust company ("Issuer") and in form and
content acceptable to Landlord, in its sole and absolute discretion, as
additional security for the performance of Tenant's obligations under this
Lease. An L/C in the form attached hereto as Exhibit B is hereby approved
---------
by Landlord. The L/C shall name Landlord as beneficiary thereunder and
provide that draws, including partial draws, at Landlord's election, will
be honored upon the delivery
58
<PAGE>
to the Issuer of a certificate signed by Landlord, or its authorized agent,
that Tenant has failed to perform its obligations under the Lease. The L/C
shall also provide that it will be automatically extended upon each renewal
date unless the Issuer thereof delivers to Landlord, no later than forty-
five (45) days prior to the stated expiration date of the L/C, written
notice of Issuer's intent not to extend or renew the L/C. During any period
that Tenant is required to maintain the L/C, Tenant shall, at least thirty
(30) days prior to any expiration or termination of the L/C, provide
Landlord either with written confirmation that the existing L/C will be
automatically extended and renewed or with a new L/C that satisfies all of
the requirements for the L/C in this Paragraph 12. In addition, upon a
proposed sale or other transfer of any interest in the Building, the Land,
this Lease or Landlord (including consolidations, mergers, or other entity
changes), Tenant, at its sole cost and expense and upon ten (10) Business
Days' notice, shall, concurrent with Landlord's delivery to Tenant of the
then outstanding L/C, deliver to any such transferees, successors, or
assigns a replacement L/C on identical terms (except for the stated
beneficiary) from the same Issuer or another bank or trust company
acceptable to Landlord, in Landlord's sole discretion, naming the new
landlord as the beneficiary thereof. Tenant's failure to perform or observe
any of the covenants set forth in this Paragraph 12 for any reason shall
entitle Landlord to draw on the full amount of the L/C and shall constitute
an Event of Default under this Lease without the requirement of any notice
from Landlord. Any amount(s) drawn under the L/C shall be held or used by
Landlord in accordance with the terms of Section 4 of the Lease.
(b). If as of the first (1st), second (2nd), third (3rd) and fourth
(4th) anniversary dates following the Third Expansion Premises Commencement
Date, (i) no prior or current Event of Default has occurred, and no event
or condition exists or has occurred which with the passage of time or
delivery of notice by Landlord, or both, would constitute an Event of
Default, and (ii) Tenant has delivered to Landlord, on or before such
anniversary dates, audited financial statements prepared in accordance with
generally accepted accounting principles consistently applied and certified
by Tenant's chief financial officer as being complete and accurate which
confirm that Tenant has achieved and sustained positive net earnings for
each of the four consecutive calendar quarters immediately preceding each
applicable anniversary date, the Face Amount of the L/C may be immediately
reduced to (A) $77,080.10 on the first (1st) anniversary date of the Third
Expansion Premises Commencement Date, (B) $57,810.06 on the second (2nd)
anniversary date of the Third Expansion Premises Commencement Date, (C)
$38,540.10 on the third (3rd) anniversary date of the Third Expansion
Premises Commencement Date, and (D) $19,270.02 on the fourth (4th)
anniversary date of the Third Expansion Premises Commencement Date, as
applicable (the "L/C Burnoff").
12. Broker. Tenant warrants and represents to Landlord that in the negotiating
-------
or making of this Agreement neither Tenant nor anyone acting on Tenant's
behalf has dealt with any broker or finder who might be entitled to a fee
or commission for this Agreement. Tenant shall indemnify and hold Landlord
harmless from any claim or claims, including costs, expenses and attorney's
fees incurred by Landlord asserted by any broker or finder for a fee or
commission based upon any dealings with or statements made by
59
<PAGE>
Tenant or Tenant's Representatives. Landlord agrees to indemnify and hold
Tenant harmless from and against any claim by third parties claiming by,
through, or under Landlord for commissions due or alleged to be due in
connection with this Agreement.
13. Ratification of Amended Lease. The Amended Lease, as modified by this
------------------------------
Agreement, remains in full force and effect, and Landlord and Tenant ratify
the same. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns.
If Tenant is a corporation or a partnership, each of the persons
executing this Agreement on behalf of Tenant warrants and represents that
Tenant is a duly authorized and existing entity that Tenant has full right
and authority to enter into this Agreement and that the persons signing on
behalf of Tenant are authorized to do so and have the power to bind Tenant
to this Agreement. Tenant shall provide Landlord, upon request, with
evidence reasonably satisfactory to Landlord confirming the foregoing
representations.
Except as herein amended, the Amended Lease remains unchanged and is in
full force and effect in accordance with the terms and provisions contained
therein.
This Third Amendment is hereby executed and delivered in multiple
counterparts, each of which shall have the force and effect of an original.
<TABLE>
<CAPTION>
LANDLORD: TENANT:
<S> <C>
PENINSULA OFFICE PARK ASSOCIATES, L.P., BLUE MARTINI, INC.,
a California limited partnership a California corporation
By: CORNERSTONE HOLDINGS, INC., By: /s/ Monte Zweben
a Delaware limited liability company, --------------------------
general partner Name: Monte Zweben
----------------------
Title: CEO
----------------------
By: /s/ Robert Paratte By:__________________________
------------------------------------ Name:______________________
Name: Robert Paratte Title:______________________
----------------------------------
Title: Authorized Signature
---------------------------------
</TABLE>
(For corporate entities, signature by TWO corporate officers is required: one
by (x) the chairman of the board, the president, or any vice president; and the
other by (y) the secretary, any assistant secretary, the chief financial
officer, or any assistant treasurer.)
60
<PAGE>
EXHIBIT A
---------
ATTACHED TO AND FORMING A PART OF
THIRD AMENDMENT TO LEASE
DATED AS OF JANUARY 11, 2000
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
BLUE MARTINI, INC., AS TENANT ("AGREEMENT")
THE THIRD EXPANSION PREMISES
----------------------------
[Floor plan showing location
and configuration of Third Expansion Premises
to be inserted.]
INITIALS:
Landlord AM
------
Tenant MZ
------
61
<PAGE>
EXHIBIT B
---------
ATTACHED TO AND FORMING A PART OF
THIRD AMENDMENT TO LEASE
DATED AS OF JANUARY 11, 2000
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
BLUE MARTINI, INC., AS TENANT ("AGREEMENT")
APPROVED LETTER OF CREDIT FORM
------------------------------
[Letterhead of Issuing Bank]
[must be a Bank whose location, credit and practices Landlord has approved]
RE: IRREVOCABLE COMMERCIAL LETTER OF CREDIT NO. _________
TO: [Name of project owner] ("Landlord"), ____________________________________
__________________ [Landlord's address]
Gentlemen:
We hereby issue our Irrevocable Commercial Letter of Credit in your favor, for
the account of _____________________________ [name of tenant and type of entity
(e.g. "ABC Corporation, a California corporation")] ("Tenant"), in the amount of
______________________________ Dollars ($__________). This amount is available
to you on presentation of your sight draft drawn upon us referring to the above
letter of credit number, date and amount being drawn hereunder, accompanied by
the signed statement of you or your authorized agent, Cornerstone Properties
Limited Partnership dba Wilson Cornerstone Properties Limited Partnership, that
the amount drawn hereunder is being drawn pursuant to the terms of the
_______________ [title of lease document (e.g. Office Lease, Lease Agreement,
etc.)] dated as of __________, between Tenant, as tenant, and Landlord, as
landlord, for certain premises located at _______________
__________________________ (the "Lease").
Any draft presented for payment must be presented on or before ________________
[term should be at least one year], the date this Letter of Credit expires.
Partial drawings are permitted.
If you sell or otherwise transfer any interest in the "Building" (as defined in
the Lease) [be sure to use the defined terms used in the Lease (e.g. if the
building is called the "Property" in the Lease, then use that term here)], in
the land upon which the same is located, in the Lease, or in
62
<PAGE>
Landlord (including consolidations, mergers or other entity changes), you shall
have the right to transfer this Letter of Credit to your transferee(s),
successors or assigns.
We hereby certify that this is an unconditional and irrevocable Letter of Credit
and agree that a draft drawn under and in compliance with the terms hereof will
be honored upon presentation at our office at _________________________________
[it must be a location easily accessible to us (e.g. no country banks located in
some tiny town in the Southeastern corner of Texas].
This Letter of Credit shall automatically be extended and renewed for successive
one year periods at the end of the stated expiration date and each anniversary
thereof unless we notify you in writing, no later than forty-five (45) days
prior to the then applicable expiration date, that we will not extend and renew
the Letter of Credit for another one year term.
Except to the extent inconsistent with the express provisions hereof, this
Letter of Credit is subject to and governed by Uniform Customs and Practice for
Documentary Credits (1993 Revision) International Chamber of Commerce
publication number 500.
[Name of Bank]
_________________________________
Authorized Signature
INITIALS:
Landlord AM
------
Tenant MZ
------
63
<PAGE>
Exhibit 10.5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of January 12, 1999 (this
"Agreement"), is entered into between BLUE MARTINI SOFTWARE, INC., a Delaware
corporation ("Blue Corp.") and BLUE MARTINI LLC, a Delaware limited liability
company ("Blue LLC") (Blue LLC and Blue Corp. are collectively referred to
herein as the "Constituent Entities").
W I T N E S S E T H
WHEREAS, Blue LLC is a limited liability company duly organized and
existing under the laws of the State of Delaware;
WHEREAS, Blue Corp. is a corporation duly organized and existing under the
laws of the State of Delaware;
WHEREAS, the Board of Directors of Blue Corp. and the Managers of Blue LLC
deem it advisable and in the best interests of their respective entities and
stockholders or members, as applicable, that Blue LLC be merged with and into
Blue Corp. with Blue Corp. being the Surviving Entity (as defined below); and
WHEREAS, it is intended that the Merger (as defined below) qualify as a
tax-free transaction within the meaning of Section 351 of the Internal Revenue
Code of 1986, as amended;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants and subject to the conditions herein set forth, the Constituent
Entities agree as follows:
1. Merger. At the Effective Time of the Merger (hereinafter defined),
Blue LLC shall be merged with and into Blue Corp. in a merger (the "Merger") to
be consummated pursuant to and on the terms and conditions set forth in this
Agreement and in accordance with the laws of the State of Delaware. Blue Corp.
shall be the surviving entity of the Merger (the "Surviving Entity"), and shall
continue its corporate existence as a corporation governed by the laws of the
State of Delaware under the name "Blue Martini Software, Inc." Its principal
office in the State of Delaware is located at 1209 Orange Street, Wilmington,
Delaware.
2. Effective Time of the Merger. The time when the Merger shall become
effective (the "Effective Time of the Merger") shall be at the time and date
when a copy of a Certificate of Merger has been filed with the Secretary of
State of the State of Delaware pursuant to Section 264 of the Delaware General
Corporation Law (the "Delaware Act").
3. Certificate of Incorporation and Bylaws. From and after the Effective
Time of the Merger, the Certificate of Incorporation and Bylaws of Blue Corp.,
as in effect immediately prior to the Effective Time of the Merger, shall be the
Certificate of Incorporation and Bylaws of the Surviving Entity, until changed
or amended as provided herein.
4. Directors and Officers. From and after the Effective Time of the
Merger, the directors on the Board of Directors and officers of Blue Corp. as of
the Effective Time of the
1
<PAGE>
Merger shall continue to serve as the directors on the Board of Directors and
officers of the Surviving Entity, each of whom shall hold office subject to the
provisions of the Delaware Act and the Certificate of Incorporation and Bylaws
of the Surviving Entity from and after the Effective Time of the Merger.
5. Treatment of Membership Interests of Blue LLC. On or after the
Effective Date, each membership interest designated as a Class A Unit of Blue
LLC shall be exchanged for one (1) share of Series A Preferred Stock of Blue
Corp. and shall be so registered on the books and records of the Surviving
Entity or its transfer agents. On or after the Effective Date, each membership
interest designated as a Class B Unit of Blue LLC shall be exchanged for one (1)
share of Common Stock of Blue Corp. and shall be so registered on the books and
records of the Surviving Entity or its transfer agent.
6. Effects of the Merger. At the Effective Time of the Merger:
(i) the Constituent Entities shall be merged into a single
entity, which shall be the Surviving Entity;
(ii) the separate existence of Blue LLC shall cease;
(iii) the Surviving Entity shall have all of the rights,
privileges, immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under the Delaware Act;
(iv) the Surviving Entity shall possess all the rights,
privileges, immunities and franchises, of a public as well as of a private
nature, of each of the Constituent Entities;
(v) all property, real, personal and mixed, and all debt due
on whatever account, if any, and all other choses in action, due to each of the
Constituent Entities, shall be taken and deemed to be transferred to and vested
in the Surviving Entity without further act or deed;
(vi) title to any real estate, or any interest therein vested
in any of the Constituent Entities shall not revert or be in any way impaired by
reason of the Merger;
(vii) the Surviving Entity shall be responsible and liable for
all of the liabilities and obligations of each of the Constituent Entities;
(viii) any existing claim or pending action or proceeding by or
against any of the Constituent Entities may be prosecuted as if the merger had
not taken place or the Surviving Entity may be substituted in its place, and any
judgment rendered against any of the Constituent Entities may be enforced
against the Surviving Entity; and
(ix) neither the rights of creditors nor any liens upon any
property of any of the Constituent Entities shall be impaired by the Merger.
2
<PAGE>
7. Termination.
(a) Circumstances of Termination. This Agreement may be terminated
(notwithstanding approval by the members or stockholders of any party hereto):
(i) By the mutual consent in writing of the Managers or Board of
Directors of the Constituent Entities hereto prior to the Effective Time of the
Merger; or
(ii) By the Board of Directors of any Constituent Entity if the
Effective Time of the Merger has not occurred by February 28, 1999.
(b) Effect of Termination. In the event of a termination of this
Agreement pursuant to Section 7(a) hereof, each party shall pay the costs and
expenses incurred by it in connection with this Agreement and no party (or any
of its officers, directors and stockholders, managers or members) shall have any
further liability to any other party for any costs, expenses, damages or loss of
anticipated profits hereunder.
8. General Provisions.
(a) Further Assurances. If at any time the Surviving Entity shall
consider or be advised that any further assignment or assurance in law or other
action is necessary or desirable to vest, perfect or confirm, of record or
otherwise, in the Surviving Entity the title to any property or rights of Blue
LLC acquired or to be acquired as a result of the Merger, the proper officers
and directors of Blue LLC and officers and directors of the Surviving Entity,
shall be and they hereby are, severally and fully authorized to execute and
deliver such deeds, assignments and assurances in law and to take such other
action as may be necessary or proper in the name of Blue LLC or the Surviving
Entity and otherwise to carry out the purpose of this Agreement.
(b) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered in person or sent
by prepaid first class registered or certified mail, return receipt requested at
the principal executive offices of such person.
(c) Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes and cancels any other agreement,
representation or communication, whether oral or written, between the parties
hereto relating to the transactions contemplated herein or the subject matter
hereof.
(d) Headings. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(e) Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware.
(f) Assignment. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns; provided,
however, that any assignment
3
<PAGE>
by any party of its rights under this Agreement without the written consent of
the other parties shall be void.
(g) Amendment. This Agreement may not be amended except pursuant to
an instrument in writing signed on behalf of each of the parties hereto.
(h) Counterparts. This Agreement may be executed simultaneously 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.
(i) Tax Consequences. For federal income purposes, the Merger is
intended to constitute a transaction within the meaning of Section 351 of the
Internal Revenue Code of 1986, as amended.
4
<PAGE>
IN WITNESS WHEREOF, pursuant to authority duly given by their respective
Board of Directors, the Constituent Entities have caused this Agreement to be
signed in their respective corporate names by their respective corporate
officers, as of the date first above written.
BLUE MARTINI SOFTWARE, INC.,
a Delaware corporation
By: /s/ Monte Zweben
--------------------------------------
Monte Zweben
President
By: /s/ Eric Jensen
-----------------------------------------
Eric Jensen
Secretary
BLUE MARTINI LLC,
a Delaware limited liability company
By: /s/ Monte Zweben
-----------------------------------------
Monte Zweben
President
By: /s/ Eric Jensen
-----------------------------------------
Eric Jensen
Secretary
5
<PAGE>
Exhibit 10.6
THE SECURITIES ACQUIRED UNDER THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"). THEY MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT OR AN
EXEMPTION THEREFROM IS AVAILABLE.
CLASS A UNITS AGREEMENT
This Class A Units Agreement (the "Agreement") is made as of the _____ day
of __________, 199_, by and among Blue Martini LLC, a Delaware limited liability
company (the "Company"), those individuals and entities whose names are set
forth on Schedule I to this Agreement and such other persons who hereafter shall
be admitted as additional purchasers ("Purchasers").
Witnesseth:
Whereas, the Company desires to issue, and Purchasers desire to acquire
Class A Units of the Company ("Units") of the Company as herein described, on
the terms and conditions hereinafter set forth.
Now, Therefore, it is agreed between the parties as follows:
1. Purchaser hereby agrees to acquire from the Company, and the Company
agrees to issue to such Purchaser that certain number of Units at an agreed fair
market value per Unit as set forth on Schedule I hereto. The purchase price for
each Unit shall be payable in cash concurrently with the execution of this
Agreement.
2. Each Purchaser acknowledges that he is aware that the Units to be
issued to him by the Company pursuant to this Agreement have not been registered
under the Securities Act of 1933, as amended (the "Act"), and that the Units are
deemed to constitute "restricted securities" under Rule 144 promulgated under
the Act. In this connection, each Purchaser warrants and represents to the
Company that he is purchasing the Units for his own account and that he has no
present intention of distributing or selling said Units except as permitted
under the Act and Section 25102(f) of the California Corporations Code. Each
Purchaser further warrants and represents that he has either (i) preexisting
personal or business relationships with the Company or any of its members,
officers, directors or controlling persons, or (ii) the capacity to protect his
own interests in connection with the purchase of the Units by virtue of the
business or financial expertise of any professional advisors to such Purchaser
who are unaffiliated with and who are not compensated by the Company or any of
its affiliates, directly or indirectly. Each Purchaser further acknowledges that
the exemption from registration under Rule 144 will not be available for at
least two years from the date of sale of the Units unless at least one year from
the date of sale (i) a public trading market then exists for securities of the
Company, (ii) adequate information concerning the Company is then available to
the public, and (iii) other terms and conditions of Rule 144 are complied with;
and that any sale of the Units may be made only in limited amounts in accordance
with such terms and conditions.
1
<PAGE>
3. Each Purchaser agrees that he shall in no event make any disposition of
all or any portion of the Units issued hereunder unless and until:
(i) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or
(ii) (a) Each Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, (b) each
Purchaser shall have furnished the Company with an opinion of Purchaser's own
counsel to the effect that such disposition will not require registration of
such Units under the Act, and (c) such opinion of Purchaser's counsel shall have
been concurred in by counsel for the Company, such concurrence not to be
unreasonably withheld, and the Company shall have advised Purchaser of such
concurrence; and
(iii) any such disposition complies with any and all restrictions on
Transfer of Units contained in the Operating Agreement of the Company, effective
as of June 5,1998 (the "Operating Agreement"). Each Purchaser acknowledges that
he is aware that, under the terms of the Operating Agreement, certain
restrictions may limit Purchaser's ability to transfer the Units.
4. The Company shall not be required (i) to transfer on its books any
Units which shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement or (ii) to treat as owner of such Units
or to accord the right to vote as such owner or to make any distributions to any
transferee to whom such Units shall have been so transferred.
5. Each Purchaser hereby agrees that for a period of not less than ninety
(90) days and up to a maximum of one hundred eighty (180) days following the
effective date of the first registration statement of the Company or any
successor entity covering securities of the Company or such successor entity to
be sold on its behalf in an underwritten public offering, Purchaser shall not,
to the extent requested by the Company and any underwriter, sell or otherwise
transfer or dispose of (other than to donees who agree to be similarly bound)
any securities of the Company (or securities of any successor entity) held by
Purchaser at any time during such period except securities included in such
registration; provided, however, that all members of the Company or successor
entity who hold securities of the Company or options to acquire securities of
the Company or successor entity enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose stop-
transfer instructions with respect to the Units (or securities of any successor
entity) held by Purchaser (and the securities of every other person subject to
the foregoing restriction) until the end of such period.
6. The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.
7. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or delivery by
express courier, or four (4) days after deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid, addressed
to the other party hereto at its address hereinafter shown below its
2
<PAGE>
signature or at such other address as such party may designate by ten (10) days'
advance written notice to the other party hereto.
8. This Agreement shall be governed by the laws of the State of California
and interpreted and determined in accordance with the laws of the State of
California, as such laws are applied by California courts to contracts made and
to be performed entirely in California by residents of that state.
9. This Agreement may be executed in any number of counterparts and when
so executed, all of such counterparts shall constitute a single instrument
binding upon all parties notwithstanding the fact that all parties are not
signatory to the original or to the same counterpart.
10. This Agreement shall inure to the benefit of the successors and assigns
of the Company and, subject to the restrictions on transfer herein set forth,
shall be binding upon Purchaser, Purchaser's heirs, executors, administrators,
successors and assigns.
11. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof.
3
<PAGE>
In Witness Whereof, the parties hereto have executed this Agreement as of
the day and year first above written.
Blue Martini LLC Purchasers
________________________ ________________________
Monte Zweben, President Name:
Address:
<PAGE>
Schedule I
Schedule of Purchasers
<TABLE>
<CAPTION>
Aggregate
Name & Address of Purchaser Date of Purchase Purchase Price Number of Class A Units
======================================================================================================
<S> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 10.7
THE MEMBERSHIP INTERESTS ("UNITS") ARE SUBJECT TO AN OPTION SET FORTH IN THIS
AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS LIMITED
LIABILITY COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY UNITS SUBJECT TO
SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF THE ISSUER OF
THESE UNITS.
THE SECURITIES ACQUIRED UNDER THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"). THEY MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT OR AN
EXEMPTION THEREFROM IS AVAILABLE.
RESTRICTED CLASS B UNITS AGREEMENT
This Restricted Units Agreement (the "Agreement") is made as of the ____
day of __________, 1998, by and between Blue Martini LLC (the "Company") and the
undersigned purchaser ("Purchaser").
Witnesseth:
Whereas, the Company desires to issue, and Purchaser desires to acquire,
Class B Units of the Company ("Units") of the Company as herein described, on
the terms and conditions hereinafter set forth; and
Whereas, the issuance of the Units hereunder is in connection with and in
furtherance of the Company's compensatory benefit plan for participation of the
Company's employees, directors, officers, consultants and advisors and is
intended to comply with the provisions of Rule 701 promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Act").
Now, Therefore, it is agreed between the parties as follows:
1. Purchaser hereby agrees to acquire from the Company, and the Company
agrees to issue to Purchaser _______________ (__________) of the Company's
Units, at an agreed fair market value of __________ ($_____) per Unit. The
purchase price for each Unit shall be __________ ($_____) and shall be payable
in cash concurrently with the execution of this Agreement.
2. (a) All of the Units being acquired by Purchaser pursuant to this
Agreement shall be subject to the option set forth in this paragraph 2
("Purchase Option"). In the event Purchaser shall cease to provide services as
an employee, director, officer, consultant or advisor of the Company (as the
case may be) as determined by a majority of the Managers of the Company in their
sole discretion, to the Company (a "Termination") at any time on or after _____,
1998 (the "Commencement Date") through __________________, 2002, the fourth
anniversary of the Commencement Date, for any reason, or no reason, the Company
shall have the right, at any
1
<PAGE>
time within ninety (90) days after the date of a Termination, to exercise the
Purchase Option, which consists of the right to purchase from Purchaser or
Purchaser's personal representative, as the case may be, at a purchase price in
an amount equal to the purchase price initially paid by Purchaser as described
in paragraph 1 ("the Option Price"), up to but not exceeding the number of Units
which have not vested under the provisions of subparagraph (b) below, upon the
terms hereinafter set forth.
(b) The Company may exercise the Purchase Option as to the maximum
portion of the Units specified in the following table:
<TABLE>
<CAPTION>
Portion of the Units
If Termination Occurs Subject to Purchase Option
--------------------- --------------------------
<S> <C>
Prior to the first anniversary 75%
of the Commencement Date
After the first anniversary and prior 75% - (x/48) 100%
to the fourth anniversary of the x = whole number of months following
Commencement Date the first anniversary of the
Commencement Date prior to a
Termination
On or after the fourth anniversary of 0%
the Commencement Date
</TABLE>
3. The Purchase Option shall be exercised by written notice signed by an
authorized officer of the Company and delivered or mailed as provided in
paragraph 13. The Option Price shall be payable in cash.
4. The Company may assign its rights under paragraph 2 hereof.
5. Purchaser acknowledges that Purchaser is aware that the Units to be
issued to Purchaser by the Company pursuant to this Agreement have not been
registered under the Act, and that the Units are deemed to constitute
"restricted securities" under Rule 701 and Rule 144 promulgated under the Act.
In this connection, Purchaser warrants and represents to the Company that
Purchaser is purchasing the Units for Purchaser's own account and that Purchaser
has no present intention of distributing or selling said Units except as
permitted under the Act and Section 25102(o) of the California Corporations
Code. Purchaser further acknowledges that the exemption from registration under
Rule 144 will not be available for at least two years from the date of sale of
the Units unless at least one year from the date of sale (i) a public trading
market then exists for securities of the Company, (ii) adequate information
concerning the Company is then available to the public, and (iii) other terms
and conditions of Rule 144 are complied with; and that any sale of the Units may
be made only in limited amounts in accordance with such terms and conditions,
and that exemption from registration under Rule 701 will not be available until
ninety (90) days after the Company becomes subject to the reporting requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934 and that after
such date the Units may be resold by persons other than affiliates in reliance
on Rule 144 without
2
<PAGE>
compliance with paragraphs (c), (d), (e) and (h) thereof, and by affiliates
without compliance with paragraph (d) thereof.
6. As security for Purchaser's faithful performance of the terms of this
Agreement and to insure the availability for delivery of Purchaser's Units upon
exercise of the Purchase Option herein provided for, Purchaser agrees, at the
closing hereunder (or as soon thereafter as practicable), to deliver to and
deposit with the Company three (3) assignments duly endorsed (with date and
number of Units left blank) in the form attached hereto as Exhibit A.
7. Purchaser shall not sell, transfer, assign or otherwise dispose of any
of the Units then subject to the Purchase Option. Without in any way limiting
the foregoing, Purchaser further agrees that Purchaser shall in no event make
any disposition of all or any portion of the Units issued hereunder unless and
until:
(i) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or
(ii) (a) Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, (b) Purchaser shall have
furnished the Company with an opinion of Purchaser's own counsel to the effect
that such disposition will not require registration of such Units under the Act,
and (c) such opinion of Purchaser's counsel shall have been concurred in by
counsel for the Company, such concurrence not to be unreasonably withheld, and
the Company shall have advised Purchaser of such concurrence; and
(iii) any such disposition complies with any and all restrictions on
Transfer of Units contained in the Operating Agreement of the Company, effective
as of June ___, 1998 (the "Operating Agreement"); and
(iv) Member approval of the Agreement within 12 months before or
after the execution of the Agreement is obtained. (The purchase of any Units
pursuant the Agreement shall be rescinded if Member approval is not obtained
within such period. Such Units shall not be counted in determining whether such
approval is obtained.)
8. The Company shall not be required (i) to transfer on its books any
Units which shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement or (ii) to treat as owner of such Units
or to accord the right to vote as such owner or to make any distributions to any
transferee to whom such Units shall have been so transferred.
9. Some of the federal and California income tax consequences relating to
the grant of the Units under this Agreement are set forth below. This summary is
necessarily incomplete and the tax laws and regulations are subject to change.
Purchaser should consult a tax adviser with respect to the specific tax
consequences of the grant of the Units.
Federal and California income tax consequences arising by reason of the
grant by the Company of Units to Purchaser are governed by Section 83 of the
Internal Revenue Code of 1986, as amended, (the "Code") and as incorporated into
California law.
3
<PAGE>
To the extent Purchaser acquires Units subject to the Company's Purchase
Option, Purchaser will not be subject to income tax with respect to such Units
at the time of grant unless Purchaser makes the election discussed below.
Instead, as and when the Units vest, Purchaser will recognize ordinary income
(subject to withholding) equal to the then fair market value of the Units.
Practically speaking, this means that, unless Purchaser elects otherwise, each
year at the time a portion of the Units vest during the term of the Purchase
Option, Purchaser will be treated as having received taxable ordinary income,
measured as just described.
If Purchaser makes a proper and timely election under Section 83(b) of the
Code WITHIN 30 DAYS OF THE DATE OF THIS AGREEMENT pursuant to a notice
substantially in the form attached hereto as Exhibit B, Purchaser will not be
taxed at the time the Units vest. However, if the fair market value of the
Units at the date of this Agreement (determined without regard to the Company's
Purchase Option) exceeds the price paid by Purchaser for the Units, such excess
will be ordinary income subject to tax (and withholding).
Thus, by making a Section 83(b) election, any appreciation in the value of
the Units between the date of this Agreement and the date the Units vest will be
taxed as capital gain at the time the Units are disposed of, rather than
ordinary income at the time of vesting. Any such capital gain, or any loss,
will be long-term, mid-term or short-term depending on how long Purchaser holds
the Units from the date of their issuance to Purchaser. However, should the
Company repurchase any of the Units pursuant to the Purchase Option, Purchaser
will not be entitled to deduct any income recognized or taxes paid by reason of
the Section 83(b) election.
Purchaser acknowledges that the Company's determination of the fair market
value of the Units is not binding on the Internal Revenue Service or California
Franchise Tax Board and that if the Units are determined to have a greater
value, Purchaser shall be responsible for the additional taxes, and, in any
event, Purchaser shall be responsible for all taxes incurred by Purchaser in
connection with the Units.
10. Subject to the provisions of paragraphs 6 and 7 above, Purchaser
shall, during the term of this Agreement, exercise all rights and privileges of
a Member, as defined in the Operating Agreement, with respect to the Units
subject to the Purchase Option. Purchaser acknowledges that Purchaser is aware
that, under the terms of the Operating Agreement, certain restrictions will
limit Purchaser's ability to transfer the Units. Purchaser shall receive
financial statements of the Company at least annually unless Purchaser is a
person whose duties in connection with the Company assures Purchaser access to
equivalent information.
11. Purchaser hereby agrees that for a period of not less than ninety (90)
days and up to a maximum of one hundred eighty (180) days following the
effective date of the first registration statement of the Company or any
successor entity covering securities of the Company or such successor entity to
be sold on its behalf in an underwritten public offering, Purchaser shall not,
to the extent requested by the Company and any underwriter, sell or otherwise
transfer or dispose of (other than to donees who agree to be similarly bound)
any securities of the Company (or securities of any successor entity) held by
Purchaser at any time during such period except securities included in such
registration; provided, however, that all members of the Company or successor
entity who hold securities of the Company or options to acquire securities of
the Company or successor entity enter into similar agreements.
4
<PAGE>
In order to enforce the foregoing covenant, the Company may impose stop-
transfer instructions with respect to the Units (or securities of any successor
entity) held by Purchaser (and the securities of every other person subject to
the foregoing restriction) until the end of such period.
12. The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.
13. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or delivery by
express courier, or four (4) days after deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid, addressed
to the other party hereto at its address hereinafter shown below its signature
or at such other address as such party may designate by ten (10) days' advance
written notice to the other party hereto.
14. This Agreement shall be governed by the laws of the State of
California and interpreted and determined in accordance with the laws of the
State of California, as such laws are applied by California courts to contracts
made and to be performed entirely in California by residents of that state.
15. This Agreement may be executed in any number of counterparts and when
so executed, all of such counterparts shall constitute a single instrument
binding upon all parties notwithstanding the fact that all parties are not
signatory to the original or to the same counterpart.
16. This Agreement shall inure to the benefit of the successors and
assigns of the Company and, subject to the restrictions on transfer herein set
forth, shall be binding upon Purchaser, Purchaser's heirs, executors,
administrators, successors and assigns.
17. This Agreement, together with the Exhibits hereto, constitutes the
entire agreement of the parties with respect to the subject matter hereof.
5
<PAGE>
In Witness Whereof, the parties hereto have executed this Agreement as of
the day and year first above written.
Blue Martini LLC Purchaser
___________________________________ ____________________________________
Monte Zweben, President Name:
Address:
____________________________________
____________________________________
Attachments:
Exhibit A Assignment of Units
Exhibit B 83(b) Election Notice
6
<PAGE>
Exhibit A
Assignment of Units
For Value Received and pursuant to that certain Restricted Units Purchase
Agreement dated as of ____________, 1998 (the "Agreement"), the undersigned
hereby sells, assigns and transfers unto Blue Martini LLC, a Delaware limited
liability company (the "Company"), _________________________________ (_______)
Units of the Company standing in the undersigned's name on the books of the
Company herewith, and does hereby irrevocably constitute and appoint
__________________________ attorney to transfer the said Units on the books of
the Company with full power of substitution in the premises. This Assignment
may be used only in accordance with and subject to the terms and conditions of
the Agreement, in connection with the repurchase of Units issued to the
undersigned pursuant to the Agreement, and only to the extent that such Units
remain subject to the Company's Purchase Option under the Agreement.
Dated:_____________________________
Signature:____________________________
Name:_________________________________
i
<PAGE>
Exhibit B
83(b) Election Notice
ii
<PAGE>
_______________________, 1998
Via Certified Mail - Return Receipt Requested
- ---------------------------------------------
Director of Internal Revenue
Internal Revenue Service Center
Fresno, CA 93888
Re: Election under Section 83(b)
Ladies and Gentlemen:
This statement constitutes an election pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended from time to time.
Pursuant to Treasury Regulation Section 1.83-2, the following information is
submitted:
1. Name: _____________________________________
("Purchaser")
Address: _____________________________________
_____________________________________
Social Security No.: _____________________________________
2. Property Description: _____________________ (_____ Units of
Blue Martini LLC (the "Company")
3. The date on which property was transferred is ________________, 1998.
4. The taxable year for which the election is made is the calendar year 1998.
5. Restrictions:
"In the event Purchaser shall cease to provide services as a __________, as
determined by a majority of the Managers of the Company in their sole
discretion, to the Company (a "Termination") at any time on or after, 1998
(the "Commencement Date") through ____, 2002, the fourth anniversary of the
Commencement Date, for any reason, or no reason, the Company shall have the
right, at any time within one hundred twenty (120) days after the date of a
Termination, to exercise the Purchase Option, which consists of the right to
purchase from Purchaser or Purchaser's personal representative, as the case
may be, at a purchase price in an amount equal to the purchase price
initially paid by Purchaser as
1
<PAGE>
described in paragraph 1 ("the Option Price"), up to but not exceeding the
number of Units which have not vested under the provisions of subparagraph
(b) below, upon the terms hereinafter set forth."
6. The fair market value at the time of transfer of the property with respect
to which this election is being made, determined without regard to any
restriction other than a restriction which by its terms will never lapse,
is _____ cents ($0._____) per Unit.
7. The amount paid by the undersigned taxpayer for the property is __________
($_____) ($_____ per Unit).
8. A copy of this statement has been furnished to Blue Martini LLC and the
transferee of the property if different from the Purchaser.
Dated: ______________, 1998
Very truly yours,
_________________________________
Name:
2
<PAGE>
EXHIBIT 10.8
BLUE MARTINI SOFTWARE, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
1. Agreement To Sell And Purchase........................................ 1
1.1 Authorization of Shares......................................... 1
1.2 Sale and Purchase............................................... 1
2. Closing, Delivery And Payment......................................... 1
2.1 Closing......................................................... 1
2.2 Delivery........................................................ 2
2.3 Subsequent Sales of Shares...................................... 2
3. Representations And Warranties Of The Company......................... 2
3.1 Organization, Good Standing and Qualification................... 2
3.2 Subsidiaries.................................................... 2
3.3 Capitalization; Voting Rights................................... 2
3.4 Authorization; Binding Obligations.............................. 3
3.5 Liabilities..................................................... 3
3.6 Obligations to Related Parties.................................. 4
3.7 Title to Properties and Assets; Liens, Etc...................... 4
3.8 Patents and Trademarks.......................................... 4
3.9 Compliance with Other Instruments............................... 5
3.10 Litigation...................................................... 5
3.11 Tax Returns and Payments........................................ 5
3.12 Employees....................................................... 6
3.13 Proprietary Information and Inventions Agreements............... 6
3.14 Registration Rights............................................. 6
3.15 Offering Valid.................................................. 6
4. Representations And Warranties Of The Purchasers...................... 7
4.1 Requisite Power and Authority................................... 7
4.2 Investment Representations...................................... 7
4.3 Transfer Restrictions........................................... 8
</TABLE>
i
<PAGE>
Table Of Contents
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
5. Conditions To Closing................................................ 8
5.1 Conditions to Purchasers' Obligations at the Closing........... 8
5.2 Conditions to Obligations of the Company....................... 10
6. Miscellaneous........................................................ 10
6.1 Governing Law.................................................. 10
6.2 Survival....................................................... 10
6.3 Successors and Assigns......................................... 11
6.4 Entire Agreement............................................... 11
6.5 Severability................................................... 11
6.6 Amendment and Waiver........................................... 11
6.7 Delays or Omissions............................................ 11
6.8 Waiver of Conflicts............................................ 12
6.9 Notices........................................................ 12
6.10 Expenses....................................................... 12
6.11 Attorneys' Fees................................................ 12
6.12 Titles and Subtitles........................................... 12
6.13 Counterparts................................................... 12
6.14 Broker's Fees.................................................. 12
6.15 Exculpation Among Purchasers................................... 13
6.16 Confidentiality................................................ 13
6.17 Pronouns....................................................... 13
6.18 California Corporate Securities Law............................ 13
</TABLE>
ii
<PAGE>
BLUE MARTINI SOFTWARE, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Series B Preferred Stock Purchase Agreement (the "Agreement") is
entered into as of January 13, 1999, by and among Blue Martini Software, Inc., a
Delaware corporation (the "Company") and each of those persons and entities,
severally and not jointly, whose names are set forth on the Schedule of
Purchasers attached hereto as Exhibit A (which persons and entities are
hereinafter collectively referred to as "Purchasers" and each individually as a
"Purchaser").
Recitals
Whereas, the Company has authorized the sale and issuance of an aggregate
of two million six hundred thirty-one thousand five hundred seventy-nine
(2,631,579) shares of its Series B Preferred Stock (the "Shares");
Whereas, Purchasers desire to purchase the Shares on the terms and
conditions set forth herein; and
Whereas, the Company desires to issue and sell the Shares to Purchasers on
the terms and conditions set forth herein;
Now, Therefore, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. Agreement To Sell And Purchase.
1.1 Authorization of Shares. On or prior to the Closing (as defined
in Section 2 below), the Company shall have authorized (a) the sale and issuance
to Purchasers of the Shares and (b) the issuance of such shares of Common Stock
to be issued upon conversion of the Shares (the "Conversion Shares"). The Shares
and the Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Certificate of Incorporation of the Company, in
the form attached hereto as Exhibit B (the "Charter").
1.2 Sale and Purchase. Subject to the terms and conditions hereof, at
the Closing (as hereinafter defined) the Company hereby agrees to issue and sell
to each Purchaser, severally and not jointly, and each Purchaser agrees to
purchase from the Company, severally and not jointly, the number of Shares set
forth opposite such Purchaser's name on Exhibit A, at a purchase price of one
dollar and ninety cents ($1.90) per share.
2. Closing, Delivery And Payment.
2.1 Closing. The closing of the sale and purchase of the Shares under
this Agreement (the "Closing") shall take place at 5:00 p.m. on the date hereof,
at the offices of Cooley Godward llp, 3000 Sand Hill Road, Building 3, Suite
230, Menlo Park, California 94025
1.
<PAGE>
or at such other time or place as the Company and Purchasers may mutually agree
(such date is hereinafter referred to as the "Closing Date").
2.2 Delivery. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to each Purchaser a certificate representing
the number of Shares to be purchased at the Closing by such Purchaser, against
payment of the purchase price therefor by check, wire transfer made payable to
the order of the Company, cancellation of indebtedness or any combination of the
foregoing.
2.3 Subsequent Sales of Shares. At any time on or before the 120th
day following the Closing, the Company may sell up to the balance of the
authorized shares of Series B Preferred Stock not sold at the Closing to such
persons as may be approved by the Board of Directors of the Company. All such
sales shall be made on the terms and conditions set forth in this Agreement,
including, without limitation, the representations and warranties by such
Purchasers as set forth in Section 4. Any Shares of Series B Preferred Stock
sold pursuant to this Section 2.3 shall be deemed to be "Shares" for all
purposes under this Agreement and any purchasers thereof shall be deemed to be
"Purchasers" for all purposes under this Agreement.
3. Representations And Warranties Of The Company.
Except as set forth on a Schedule of Exceptions delivered by the
Company to the Purchasers at the Closing, the Company hereby represents and
warrants to each Purchaser as of the date of this Agreement as follows:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Investor Rights Agreement in the form attached hereto as
Exhibit C (the "Investor Rights Agreement") and the Co-Sale Agreement in the
form attached hereto as Exhibit D (the "Co-Sale Agreement") (collectively, the
"Related Agreements"), to issue and sell the Shares and the Conversion Shares,
and to carry out the provisions of this Agreement, the Related Agreements and
the Charter and to carry on its business as presently conducted and as presently
proposed to be conducted.
3.2 Subsidiaries. The Company does not own or control any equity
security or other interest of any other corporation, limited partnership or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
3.3 Capitalization; Voting Rights. The authorized capital stock of
the Company, immediately prior to the Closing, will consist of twenty million
(20,000,000) shares of Common Stock, (par value $0.001) per share, seven million
five hundred sixty-three thousand one hundred twenty-five (7,563,125) shares of
which are issued and outstanding and four million one hundred thirty thousand
(4,130,000) shares of which are reserved for issuance to employees pursuant to
the Company's Amended and Restated 1998 Equity Incentive Plan (the "Plan") and
five million (5,000,000) shares of Preferred Stock (par value $0.001) per share,
two million (2,000,000) shares of which are designated Series A Preferred Stock,
one million one hundred
2.
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sixteen thousand seventy-one (1,116,071) of which are issued and outstanding and
three million (3,000,000) shares of which are designated Series B Preferred
Stock, none of which are issued and outstanding. All issued and outstanding
shares of the Company's Common Stock and Preferred Stock (a) have been duly
authorized and validly issued and (b) are fully paid and nonassessable. The
rights, preferences, privileges and restrictions of the Shares are as stated in
the Charter. Each series of Preferred Stock is convertible into Common Stock on
a one-for-one basis. The Conversion Shares have been duly and validly reserved
for issuance. Other than the four million one hundred thirty thousand
(4,130,000) shares reserved for issuance under the Plan, and except as may be
granted pursuant to the Related Agreements, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or shareholder agreements, or agreements of any kind for the
purchase or acquisition from the Company of any of its securities. Of such
reserved shares of Common Stock under the Plan, (i) two million sixty-three
thousand one hundred twenty-five (2,063,125) shares have been issued pursuant to
restricted stock purchase agreements and (ii) two million sixty-six thousand
eight hundred seventy-five (2,066,875) shares of Common Stock remain available
for issuance to officers, directors, employees and consultants pursuant to such
Plan. When issued in compliance with the provisions of this Agreement and the
Charter, the Shares and the Conversion Shares will be validly issued, fully paid
and nonassessable, and will be free of any liens or encumbrances other than
liens and encumbrances created by or imposed upon the Purchasers; provided,
however, that the Shares and the Conversion Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is proposed.
3.4 Authorization; Binding Obligations. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder and thereunder at the Closing and the
authorization, sale, issuance and delivery of the Shares pursuant hereto and the
Conversion Shares pursuant to the Charter has been taken or will be taken prior
to the Closing. The Agreement and the Related Agreements, when executed and
delivered, will be valid and binding obligations of the Company enforceable in
accordance with their terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights, (b) general principles of equity
that restrict the availability of equitable remedies, and (c) to the extent that
the enforceability of the indemnification provisions in Section 2.9 of the
Investor Rights Agreement may be limited by applicable laws. The sale of the
Shares and the subsequent conversion of the Shares into Conversion Shares are
not and will not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with.
3.5 Liabilities. The Company has no material liabilities and, to the
best of its knowledge, knows of no material contingent liabilities, except
current liabilities incurred in the ordinary course of business subsequent which
have not been, either in any individual case or in the aggregate, materially
adverse.
(a) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise)
3.
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of, or payments to, the Company in excess of ten thousand dollars ($10,000)
(other than obligations of, or payments to, the Company arising from purchase or
sale agreements entered into in the ordinary course of business), or (ii) the
transfer or license of any patent, copyright, trade secret or other proprietary
right to or from the Company (other than licenses arising from the purchase of
"off the shelf" or other standard products), or (iii) indemnification by the
Company with respect to infringements of proprietary rights (other than
indemnification obligations arising from purchase or sale or license agreements
entered into in the ordinary course of business).
(b) For the purposes of subsection (a) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Company has reason to believe are affiliated therewith) shall be aggregated
for the purpose of meeting the individual minimum dollar amounts of such
subsections.
3.6 Obligations to Related Parties. There are no obligations of the
Company to officers, directors, shareholders, or employees of the Company other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company and (c) for other standard
employee benefits made generally available to all employees (including stock
option or purchase agreements outstanding under any stock option plan approved
by the Board of Directors of the Company).
3.7 Title to Properties and Assets; Liens, Etc. The Company has good
and marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet, and good title to its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (a) those resulting from taxes which have not
yet become delinquent, (b) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company, and (c) those that have otherwise arisen in the
ordinary course of business.
3.8 Patents and Trademarks. To the best of its knowledge, the Company
owns or possesses sufficient legal rights to all patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes necessary for its business as now conducted and
as presently proposed to be conducted, without any known infringement of the
rights of others. 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 and other proprietary rights and processes of any other person or
entity other than such licenses or agreements arising from the purchase of "off
the shelf" or standard products. The Company has not received any communications
alleging that the Company has violated or, by conducting its business as
presently proposed in the Business Plan provided to the Purchasers (the
"Business Plan"), would violate 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 is
obligated under any contract (including licenses, covenants or commitments of
any
4.
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nature) or other agreement, or subject to any judgment, decree or order of any
court or administrative agency, that would interfere with their duties to the
Company or that would conflict with the Company's business as presently proposed
to be conducted in the Business Plan. Neither the execution nor delivery of this
Agreement or the Related Agreements, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as presently proposed in the Business Plan, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any employee is now obligated. The Company does not
believe it is or will be necessary to utilize any inventions, trade secrets or
proprietary information of any of its employees made prior to their employment
by the Company, except for inventions, trade secrets or proprietary information
that have been assigned to the Company.
3.9 Compliance with Other Instruments. The Company is not in
violation or default of any term of its Charter or Bylaws, or of any provision
of any mortgage, indenture, contract, agreement, instrument or contract to which
it is party or by which it is bound or of any judgment, decree, order, writ. The
execution, delivery, and performance of and compliance with this Agreement, and
the Related Agreements, and the issuance and sale of the Shares pursuant hereto
and of the Conversion Shares pursuant to the Charter, will not, with or without
the passage of time or giving of notice, result in any such material violation,
or be in conflict with or constitute a default under any such term, or result in
the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of the Company or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.
3.10 Litigation. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently threatened in writing against
the Company that questions the validity of this Agreement, or the Related
Agreements or the right of the Company to enter into any of such agreements, or
to consummate the transactions contemplated hereby or thereby, or which might
result, either individually or in the aggregate, in any material adverse change
in the assets, condition, affairs or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for any of the foregoing. The
foregoing includes, without limitation, actions pending or threatened in writing
(or any basis therefor known to the Company) involving the prior employment of
any of the Company's employees, their use in connection with the Company's
business of any information or techniques allegedly proprietary to any of their
former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
3.11 Tax Returns and Payments. The Company has filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be due
and payable on such returns, any assessments imposed, and to the Company's
knowledge all other taxes due and payable by the Company on or before the
Closing, have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised (a) that any of its returns,
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federal, state or other, have been or are being audited as of the date hereof,
or (b) of any deficiency in assessment or proposed judgment to its federal,
state or other taxes. The Company has no knowledge of any liability of any tax
to be imposed upon its properties or assets as of the date of this Agreement
that is not adequately provided for.
3.12 Employees. The Company has no collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company. To the
Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to the Company's knowledge the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has occurred. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate his, her or their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any officer, key employee or group of key employees.
3.13 Proprietary Information and Inventions Agreements. Each employee,
officer and consultant of the Company has executed a Proprietary Information and
Inventions Agreement. No current employee, officer or consultant of the Company
has excluded works or inventions made prior to his or her employment with the
Company from his or her assignment of inventions pursuant to such employee,
officer or consultant's Proprietary Information and Inventions Agreement.
3.14 Registration Rights. Except as required pursuant to the Investor
Rights Agreement, the Company is presently not under any obligation, and has not
granted any rights, to register (as defined in Section 1.1 of the Investor
Rights Agreement) any of the Company's presently outstanding securities or any
of its securities that may hereafter be issued.
3.15 Offering Valid. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4.2 hereof, the offer, sale
and issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the Shares
to any person or persons so as to bring the sale of such Shares by the Company
within the registration provisions of the Securities Act or any state securities
laws.
6.
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4. Representations And Warranties Of The Purchasers.
Each Purchaser hereby represents and warrants to the Company as
follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 Requisite Power and Authority. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions. All
action on Purchaser's part required for the lawful execution and delivery of
this Agreement and the Related Agreements have been or will be effectively taken
prior to the Closing. Upon their execution and delivery, this Agreement and the
Related Agreements will be valid and binding obligations of Purchaser,
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, (b) general principles
of equity that restrict the availability of equitable remedies, and (c) to the
extent that the enforceability of the indemnification provisions of Section 2.9
of the Investor Rights Agreement may be limited by applicable laws.
4.2 Investment Representations. Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the Securities
Act. Purchaser also understands that the Shares are being offered and sold
pursuant to an exemption from registration contained in the Securities Act based
in part upon Purchaser's representations contained in the Agreement. Purchaser
hereby represents and warrants as follows:
(a) Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Conversion Shares) are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that the Company has no present intention of
registering the Shares, the Conversion Shares or any shares of its Common Stock.
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any portion
of the Shares or the Conversion Shares under the circumstances, in the amounts
or at the times Purchaser might propose.
(b) Acquisition for Own Account. Purchaser is acquiring the
Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.
(c) Purchaser Can Protect Its Interest. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, and the Related Agreements.
Further, Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement.
7.
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(d) Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) Company Information. Purchaser has received and read the
Company's financial statements and Business Plan and has had an opportunity to
discuss the Company's business, management and financial affairs with directors,
officers and management of the Company and has had the opportunity to review the
Company's operations and facilities. Purchaser has also had the opportunity to
ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
(f) Rule 144. Purchaser acknowledges and agrees that the Shares,
and, if issued, the Conversion Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
(g) Residence. If the Purchaser is an individual, then the
Purchaser resides in the state or province identified in the address of the
Purchaser set forth on Exhibit A; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located at
the address or addresses of the Purchaser set forth on Exhibit A.
4.3 Transfer Restrictions. Each Purchaser acknowledges and agrees
that the Shares and, if issued, the Conversion Shares are subject to
restrictions on transfer as set forth in the Investor Rights Agreement.
5. Conditions To Closing.
5.1 Conditions to Purchasers' Obligations at the Closing. Purchasers'
obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:
(a) Representations and Warranties True; Performance of
Obligations. The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if they had been made as of the Closing Date,
and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing.
(b) Legal Investment. On the Closing Date, the sale and issuance
of the Shares and the proposed issuance of the Conversion Shares shall be
legally permitted by all laws and regulations to which Purchasers and the
Company are subject.
8.
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(c) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
(d) Filing of Charter. The Charter shall have been filed with
the Secretary of State of the State of Delaware and shall continue to be in full
force and effect as of the Closing Date.
(e) Corporate Documents. The Company shall have delivered to
Purchasers or their counsel, copies of all corporate documents of the Company as
Purchasers shall reasonably request.
(f) Reservation of Conversion Shares. The Conversion Shares
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
(g) Compliance Certificate. The Company shall have delivered to
Purchasers a Compliance Certificate, executed by the President of the Company,
dated the Closing Date, to the effect that the conditions specified in
subsections (a), (c), (d) and (f) of this Section 5.1 have been satisfied.
(h) Investor Rights Agreement. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit C shall have been executed
and delivered by the parties thereto.
(i) Co-Sale Agreement. The Co-Sale Agreement substantially in
the form attached hereto as Exhibit D shall have been executed and delivered by
the parties thereto. The stock certificates representing the shares subject to
the Co-Sale Agreement shall have been delivered to the Secretary of the Company
and shall have had appropriate legends placed upon them to reflect the
restrictions on transfer set forth on the Co-Sale Agreement.
(j) Board of Directors. Upon the Closing, the authorized size of
the Board of Directors of the Company shall be six (6) members and the Board
shall consist of James Gaither, Thomas Siebel, A. Michael Spence, Andrew
Verhalen, William Zuendt and Monte Zweben.
(k) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers and their
special counsel, and the Purchasers and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
(l) Agreement and Plan of Merger. The Agreement and Plan of
Merger substantially in the form attached hereto as Exhibit E shall have been
executed and
9.
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delivered by the parties thereto and the Certificate of Merger shall have been
filed with the Secretary of State of the State of Delaware.
5.2 Conditions to Obligations of the Company. The Company's
obligation to issue and sell the Shares at each Closing is subject to the
satisfaction, on or prior to such Closing, of the following conditions:
(a) Representations and Warranties True. The representations and
warranties in Section 4 made by those Purchasers acquiring Shares hereof shall
be true and correct in all material respects at the date of the Closing, with
the same force and effect as if they had been made on and as of said date.
(b) Performance of Obligations. Such Purchasers shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by such Purchasers on or before the Closing.
(c) Filing of Charter. The Charter shall have been filed with
the Secretary of State of the State of Delaware.
(d) Investor Rights Agreement. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit C shall have been executed
and delivered by the Purchasers.
(e) Co-Sale Agreement. The Co-Sale Agreement substantially in
the form attached hereto as Exhibit D shall have been executed and delivered by
the parties thereto.
(f) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
6. Miscellaneous.
6.1 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 performed entirely in California.
6.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby for a period of one (1) year
following the Closing. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the Company hereunder solely as
of the date of such certificate or instrument.
6.3 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,
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heirs, executors and administrators of the parties hereto and shall inure to the
benefit of and be enforceable by each person who shall be a holder of the Shares
from time to time.
6.4 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto, the Related Agreements 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 no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
6.5 Severability. In case any provision of the 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 thereby.
6.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
(b) The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under the Agreement may be waived only
with the written consent of the holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
6.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Related
Agreements or the Charter, shall impair any such right, power or remedy, nor
shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character on any Purchaser's
part of any breach, default or noncompliance under this Agreement, the Related
Agreements or under the Charter or any waiver on such party's part of any
provisions or conditions of the Agreement, the Related Agreements, or the
Charter must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, the Related Agreements, the Charter, by law, or otherwise afforded to
any party, shall be cumulative and not alternative.
6.8 Waiver of Conflicts. Each party to this Agreement acknowledges
that legal counsel for the Company, Cooley Godward LLP ("Cooley Godward"), has
in the past performed and may continue in the future to perform legal services
for one or more of the Purchasers or their affiliates in matters unrelated to
the transactions contemplated by this Agreement, including, but not limited to,
the representation of the Purchasers in matters of a similar nature to the
transactions contemplated herein. Each party to this Agreement hereby (a)
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acknowledges that they have had an opportunity to ask for and have obtained
information relevant to such representation, including disclosure of the
reasonably foreseeable adverse consequences of such representation; (b)
acknowledges that with respect to the transactions contemplated herein, Cooley
Godward has represented the Company and not any individual Purchaser or any
individual shareholder, director or employee of the Company; and (c) gives its
informed consent to Cooley Godward's representation of the Company in the
transactions contemplated by this Agreement and Cooley Godward's previous or
continuing representation of one or more of the Purchasers or their affiliates
in matters unrelated to such transactions.
6.9 Notices. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at the address as set forth on the signature page hereof and to Purchaser at the
address set forth on Exhibit A attached hereto or at such other address as the
Company or Purchaser may designate by ten (10) days advance written notice to
the other parties hereto.
6.10 Expenses. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement.
6.11 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.12 Titles and Subtitles. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.13 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.
6.14 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 6.14 being untrue.
12.
<PAGE>
6.15 Exculpation Among Purchasers. Each Purchaser acknowledges that
it is not relying upon any person, firm, or corporation, other than the Company
and its officers and directors, in making its investment or decision to invest
in the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable to any other Purchaser for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Shares and Conversion Shares.
6.16 Confidentiality. Each party hereto agrees that, except with the
prior written consent of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement or the Related Agreements,
discussions or negotiations relating to this Agreement or the Related
Agreements, the performance of its obligations hereunder or the ownership of the
Shares purchased hereunder. The provisions of this Section 6.16 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by the parties hereto.
6.17 Pronouns. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
6.18 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 OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
13.
<PAGE>
In Witness Whereof, the parties hereto have executed this Series B
Preferred Stock Purchase Agreement as of the date set forth in the first
paragraph hereof.
Company: Purchasers:
Blue Martini Software, Inc.
By: /s/ Monte Zweben By: /s/ All Series B Investors
------------------------------- ------------------------------------
President
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
NAME AND ADDRESS
- ---------------------------------------
Marc Benioff
Daniel T. Doles
Peter Friedland and Rosalind Grymes-
Friedland, Trustees FBO Peter Friedland
and Rosalind Grymes-Freidland UTA
Dated July 26, 1995
Matrix Partners V, L.P.
2500 Sand Hill Road, Suite 113
Menlo Park, CA 94025
Attn: Andrew Verhalen
Matrix V Entrepreneurs Fund, L.P.
2500 Sand Hill Road, Suite 113
Menlo Park, CA 94025
Attn: Andrew Verhalen
Zuendt Family Trust, UTA
August 28, 1996
Zweben Family Revocable Trust Dated
October 17, 1997
- --------------------------------------------------------------------------------
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
EXHIBIT 10.9
BLUE MARTINI SOFTWARE, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
Page
<S> <C>
1. Agreement To Sell And Purchase............................................... 1
1.1 Authorization of Shares............................................ 1
1.2 Sale and Purchase.................................................. 1
2. Closing, Delivery and Payment................................................ 1
2.1 Closing............................................................ 1
2.2 Delivery........................................................... 2
2.3 Subsequent Sales of Shares......................................... 2
3. Representations And Warranties Of The Company................................ 2
3.1 Organization, Good Standing and Qualification...................... 2
3.2 Subsidiaries....................................................... 2
3.3 Capitalization; Voting Rights...................................... 2
3.4 Authorization; Binding Obligations................................. 3
3.5 Financial Statements............................................... 3
3.6 Liabilities........................................................ 4
3.7 Agreements; Action................................................. 4
3.8 Obligations to Related Parties..................................... 4
3.9 Changes............................................................ 4
3.10 Title to Properties and Assets; Liens, Etc......................... 6
3.11 Patents and Trademarks............................................. 6
3.12 Compliance with Other Instruments.................................. 6
3.13 Litigation......................................................... 7
3.14 Tax Returns and Payments........................................... 7
3.15 Employees.......................................................... 7
3.16 Proprietary Information and Inventions Agreements.................. 8
3.17 Registration Rights................................................ 8
3.18 Offering Valid..................................................... 8
3.19 Qualified Small Business Stock..................................... 8
4. Representations And Warranties Of The Purchasers............................. 8
4.1 Requisite Power and Authority...................................... 8
</TABLE>
i.
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
(Continued)
Page
<S> <C>
4.2 Investment Representations......................................... 9
4.3 Transfer Restrictions.............................................. 10
5. Conditions To Closing........................................................ 10
5.1 Conditions to Purchasers' Obligations at the Closing............... 10
5.2 Conditions to Obligations of the Company........................... 11
6. Miscellaneous................................................................ 12
6.1 Governing Law...................................................... 12
6.2 Survival........................................................... 12
6.3 Successors and Assigns............................................. 12
6.4 Entire Agreement................................................... 12
6.5 Severability....................................................... 13
6.6 Amendment and Waiver............................................... 13
6.7 Delays or Omissions................................................ 13
6.8 Waiver of Conflicts................................................ 13
6.9 Notices............................................................ 14
6.10 Expenses........................................................... 14
6.11 Attorneys' Fees.................................................... 14
6.12 Titles and Subtitles............................................... 14
6.13 Counterparts....................................................... 14
6.14 Broker's Fees...................................................... 14
6.15 Exculpation Among Purchasers....................................... 14
6.16 Confidentiality.................................................... 15
6.17 Pronouns........................................................... 15
6.18 California Corporate Securities Law................................ 15
</TABLE>
ii.
<PAGE>
BLUE MARTINI SOFTWARE, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This Series C Preferred Stock Purchase Agreement (the "Agreement") is
entered into as of July 20, 1999, by and among Blue Martini Software, Inc., a
Delaware corporation (the "Company") and each of those persons and entities,
severally and not jointly, whose names are set forth on the Schedule of
Purchasers attached hereto as Exhibit A (which persons and entities are
hereinafter collectively referred to as "Purchasers" and each individually as a
"Purchaser").
Recitals
Whereas, the Company has authorized the sale and issuance of an aggregate
of two million seventy six thousand six hundred sixty seven (2,076,667) shares
of its Series C Preferred Stock (the "Shares");
Whereas, Purchasers desire to purchase the Shares on the terms and
conditions set forth herein; and
Whereas, the Company desires to issue and sell the Shares to Purchasers on
the terms and conditions set forth herein;
Now, Therefore, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. Agreement To Sell And Purchase.
1.1 Authorization of Shares. On or prior to the Closing (as defined
in Section 2 below), the Company shall have authorized (a) the sale and issuance
to Purchasers of the Shares and (b) the issuance of such shares of Common Stock
to be issued upon conversion of the Shares (the "Conversion Shares"). The Shares
and the Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Restated Certificate of Incorporation of the
Company, in the form attached hereto as Exhibit B (the "Charter").
1.2 Sale and Purchase. Subject to the terms and conditions hereof,
at the Closing (as hereinafter defined) the Company hereby agrees to issue and
sell to each Purchaser, severally and not jointly, and each Purchaser agrees to
purchase from the Company, severally and not jointly, the number of Shares set
forth opposite such Purchaser's name on Exhibit A, at a purchase price of six
dollars ($6.00) per share.
2. Closing, Delivery And Payment.
2.1 Closing. The closing of the sale and purchase of the Shares
under this Agreement (the "Closing") shall take place at 5:00 p.m. on the date
hereof, at the offices of Cooley Godward LLP, 3000 Sand Hill Road, Building 3,
Suite 230, Menlo Park, California 94025
<PAGE>
or at such other time or place as the Company and Purchasers may mutually agree
(such date is hereinafter referred to as the "Closing Date").
2.2 Delivery. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to each Purchaser a certificate representing
the number of Shares to be purchased at the Closing by such Purchaser, against
payment of the purchase price therefor by check, wire transfer made payable to
the order of the Company, cancellation of indebtedness or any combination of the
foregoing.
2.3 Subsequent Sales of Shares. At any time on or before the 120th
day following the Closing, the Company may sell up to the balance of the
authorized shares of Series C Preferred Stock not sold at the Closing to such
persons as may be approved by the Board of Directors of the Company. All such
sales shall be made on the terms and conditions set forth in this Agreement,
including, without limitation, the representations and warranties by such
Purchasers as set forth in Section 4. Any Shares of Series C Preferred Stock
sold pursuant to this Section 2.3 shall be deemed to be "Shares" for all
purposes under this Agreement and any purchasers thereof shall be deemed to be
"Purchasers" for all purposes under this Agreement.
3. Representations And Warranties Of The Company.
Except as set forth on a Schedule of Exceptions delivered by the
Company to the Purchasers at the Closing, the Company hereby represents and
warrants to each Purchaser as of the date of this Agreement as follows:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Investor Rights Agreement in the form attached hereto as
Exhibit C (the "Investor Rights Agreement") and the Co-Sale Agreement in the
form attached hereto as Exhibit D (the "Co-Sale Agreement") (collectively, the
"Related Agreements"), to issue and sell the Shares and the Conversion Shares,
and to carry out the provisions of this Agreement, the Related Agreements and
the Charter and to carry on its business as presently conducted and as presently
proposed to be conducted.
3.2 Subsidiaries. The Company does not own or control any equity
security or other interest of any other corporation, limited partnership or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
3.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company, immediately
prior to the Closing, will consist of:
(i) Twenty three million (23,000,000) shares of Common
Stock (par value $0.001 per share), seven million five hundred sixty eight
thousand one hundred twenty five (7,568,125) shares of which are issued and
outstanding; and
<PAGE>
(ii) Seven million two hundred thousand (7,200,000) shares
of Preferred Stock (par value $0.001 per share),
(1) two million (2,000,000) shares of which are
designated Series A Preferred Stock, one million one hundred sixteen thousand
seventy-one (1,116,071) of which are issued and outstanding,
(2) three million (3,000,000) shares of which are
designated Series B Preferred Stock, two million six hundred thirty one thousand
five hundred seventy nine (2,631,579) of which are issued and outstanding, and
(3) two million two hundred thousand (2,200,000)
shares of which are designated Series C Preferred Stock, none of which were
issued and outstanding prior to the Closing.
(b) Four million one hundred thirty thousand (4,130,000)
shares of shares of Common Stock have been reserved for issuance to employees
pursuant to the Company's Amended and Restated 1998 Equity Incentive Plan (the
"Plan"). Of such reserved shares of Common Stock under the Plan, (i) two million
sixty-eight thousand one hundred twenty-five (2,068,125) shares have been issued
pursuant to restricted stock purchase agreements and are included within the
number of shares of Common Stock specified as being outstanding in subsection
(a)(i) above, and (ii) two million sixty-one thousand eight hundred seventy five
(2,061,875) shares of Common Stock remain available for issuance to officers,
directors, employees and consultants pursuant to such Plan.
(c) Other than outstanding options granted under the Plan for
the purchase of up to three hundred seventy-two thousand five hundred (372,500)
shares of Common Stock, and other than the balance of one million six hundred
eighty-nine thousand three hundred seventy-five (1,689,375) shares of Common
Stock still reserved for issuance under the Plan beyond those options, and
except as may be granted pursuant to the Related Agreements, there are no
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal), proxy or shareholder agreements, or agreements of
any kind for the purchase or acquisition from the Company of any of its
securities.
(d) All issued and outstanding shares of the Company's Common
Stock and Preferred Stock (i) have been duly authorized and validly issued and
(ii) are fully paid and nonassessable. The rights, preferences, privileges and
restrictions of the Shares are as stated in the Charter. Each series of
Preferred Stock is convertible into Common Stock on a one-for-one basis. The
Conversion Shares have been duly and validly reserved for issuance. When issued
in compliance with the provisions of this Agreement and the Charter, the Shares
and the Conversion Shares will be validly issued, fully paid and nonassessable,
and will be free of any liens or encumbrances other than liens and encumbrances
created by or imposed upon the Purchasers; provided, however, that the Shares
and the Conversion Shares may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein or as otherwise required by
such laws at the time a transfer is proposed.
<PAGE>
3.4 Authorization; Binding Obligations. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder and thereunder at the Closing and the
authorization, sale, issuance and delivery of the Shares pursuant hereto and the
Conversion Shares pursuant to the Charter has been taken or will be taken prior
to the Closing. The Agreement and the Related Agreements, when executed and
delivered, will be valid and binding obligations of the Company enforceable in
accordance with their terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights, (b) general principles of equity
that restrict the availability of equitable remedies, and (c) to the extent that
the enforceability of the indemnification provisions in Section 2.9 of the
Investor Rights Agreement may be limited by applicable laws. The sale of the
Shares and the subsequent conversion of the Shares into Conversion Shares are
not and will not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with.
3.5 Financial Statements. The Company has made available to each
Purchasers (a) its unaudited balance sheet as at March 31, 1999 and unaudited
statement of income and cash flows for the three months ending March 31, 1999
(the "Statement Date") (collectively, the "Financial Statements"). The Financial
Statements, together with the notes thereto, are complete and correct in all
material respects, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated, except as disclosed therein, and present fairly the financial
condition and position of the Company as of the Statement Date; provided,
however, that the unaudited financial statements are subject to normal recurring
year-end audit adjustments (which are not expected to be material), and do not
contain all footnotes required under generally accepted accounting principles.
3.6 Liabilities. The Company has no material liabilities and, to
the best of its knowledge, knows of no material contingent liabilities, except
current liabilities incurred in the ordinary course of business subsequent to
the Statement Date which have not been, either in any individual case or in the
aggregate, materially adverse.
3.7 Agreements; Action.
(a) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of ten thousand dollars ($10,000) (other than obligations of,
or payments to, the Company arising from purchase or sale agreements entered
into in the ordinary course of business), or (ii) the transfer or license of any
patent, copyright, trade secret or other proprietary right to or from the
Company (other than licenses arising from the purchase of "off the shelf" or
other standard products), or (iii) indemnification by the Company with respect
to infringements of proprietary rights (other than indemnification obligations
arising from purchase or sale or license agreements entered into in the ordinary
course of business).
<PAGE>
(b) For the purposes of subsection (a) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
3.8 Obligations to Related Parties. There are no obligations of the
Company to officers, directors, shareholders, or employees of the Company other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company and (c) for other standard
employee benefits made generally available to all employees (including stock
option or purchase agreements outstanding under any stock option plan approved
by the Board of Directors of the Company).
3.9 Changes. Since the Statement Date, there has not been to the
Company's knowledge:
(a) Any change in the assets, liabilities, financial condition
or operations of the Company from that reflected in the Financial Statements,
other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is expected to have a material
adverse effect on such assets, liabilities, financial condition, operations or
prospects of the Company;
(b) Any resignation or termination of any officer or key
employee 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 of key employee;
(c) Any material change, except the ordinary course of
business, in the contingent obligations or the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise.
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and aversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
(f) Any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(g) Any material change in any compensation arrangement of
agreement with any employee, officer, director or shareholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
<PAGE>
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company
is a party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects of
the Company;
(m) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects of
the Company; or
(n) Any arrangement or commitment by the Company to do any of
the acts described in subsection (a) through (m) above.
3.10 Title to Properties and Assets; Liens, Etc. The Company has
good and marketable title to its properties and assets, including the properties
and assets reflected in the most recent balance sheet, and good title to its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (a) those resulting from taxes which have not
yet become delinquent, (b) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company, and (c) those that have otherwise arisen in the
ordinary course of business.
3.11 Patents and Trademarks. To the best of its knowledge, the
Company owns or possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information and
other proprietary rights and processes necessary for its business as now
conducted and as presently proposed to be conducted, without any known
infringement of the rights of others. 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 and other proprietary rights and processes of any other
person or entity other than such licenses or agreements arising from the
purchase of "off the shelf" or standard products. The Company has not received
any communications alleging that the Company has violated or, by conducting its
business as presently proposed, would violate 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 is 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
their duties to the Company or that would conflict with the Company's business
as presently proposed to be
<PAGE>
conducted. Neither the execution nor delivery of this Agreement or the Related
Agreements, nor the carrying on of the Company's business by the employees of
the Company, nor the conduct of the Company's business as presently proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company.
3.12 Compliance with Other Instruments. The Company is not in
violation or default of any term of its Charter or Bylaws, or of any provision
of any mortgage, indenture, contract, agreement, instrument or contract to which
it is party or by which it is bound or of any judgment, decree, order, writ. The
execution, delivery, and performance of and compliance with this Agreement, and
the Related Agreements, and the issuance and sale of the Shares pursuant hereto
and of the Conversion Shares pursuant to the Charter, will not, with or without
the passage of time or giving of notice, result in any such material violation,
or be in conflict with or constitute a default under any such term, or result in
the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of the Company or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.
3.13 Litigation. There is no action, suit, proceeding or
investigation pending or to the Company's knowledge currently threatened in
writing against the Company that questions the validity of this Agreement, or
the Related Agreements or the right of the Company to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for any of the
foregoing. The foregoing includes, without limitation, actions pending or
threatened in writing (or any basis therefor known to the Company) involving the
prior employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
prior employers. The Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
3.14 Tax Returns and Payments. The Company has filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be due
and payable on such returns, any assessments imposed, and to the Company's
knowledge all other taxes due and payable by the Company on or before the
Closing, have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised (a) that any of its returns,
federal, state or other, have been or are being audited as of the date hereof,
or (b) of any deficiency in assessment or proposed judgment to its federal,
state or other taxes. The Company has no knowledge of any liability of any tax
to be imposed upon its properties or assets as of the date of this Agreement
that is not adequately provided for.
<PAGE>
3.15 Employees. The Company has no collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company. To the
Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to the Company's knowledge the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has occurred. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate his, her or their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any officer, key employee or group of key employees.
3.16 Proprietary Information and Inventions Agreements. Each
employee, officer and consultant of the Company has executed a Proprietary
Information and Inventions Agreement. No current employee, officer or consultant
of the Company has excluded works or inventions made prior to his or her
employment with the Company from his or her assignment of inventions pursuant to
such employee, officer or consultant's Proprietary Information and Inventions
Agreement.
3.17 Registration Rights. Except as required pursuant to the
Investor Rights Agreement, the Company is presently not under any obligation,
and has not granted any rights, to register (as defined in Section 1.1 of the
Investor Rights Agreement) any of the Company's presently outstanding securities
or any of its securities that may hereafter be issued.
3.18 Offering Valid. Assuming the accuracy of the representations
and warranties of the Purchasers contained in Section 4.2 hereof, the offer,
sale and issuance of the Shares and the Conversion Shares will be exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the Shares
to any person or persons so as to bring the sale of such Shares by the Company
within the registration provisions of the Securities Act or any state securities
laws.
3.19 Qualified Small Business Stock. Upon the Closing, the Shares
will be "qualified small business stock" as that term is defined in Section 1202
of the Internal Revenue Code. The Company covenants that for so long as any of
the Shares or the Conversion Shares are held by a Purchaser (or a transferee in
whose hands such shares would be eligible to qualify as "qualified small
business stock"), it will comply with any applicable filing and reporting
requirements imposed on issuers of "qualified small business stock."
<PAGE>
4. Representations And Warranties Of The Purchasers.
Each Purchaser hereby represents and warrants to the Company as
follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 Requisite Power and Authority. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Related Agreements and to carry out their
provisions. All action on Purchaser's part required for the lawful execution and
delivery of this Agreement and the Related Agreements have been or will be
effectively taken prior to the Closing. Upon their execution and delivery, this
Agreement and the Related Agreements will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, (b) general
principles of equity that restrict the availability of equitable remedies, and
(c) to the extent that the enforceability of the indemnification provisions of
Section 2.9 of the Investor Rights Agreement may be limited by applicable laws.
4.2 Investment Representations. Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the Securities
Act. Purchaser also understands that the Shares are being offered and sold
pursuant to an exemption from registration contained in the Securities Act based
in part upon Purchaser's representations contained in the Agreement. Purchaser
hereby represents and warrants as follows:
(a) Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Conversion Shares) are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that the Company has no present intention of
registering the Shares, the Conversion Shares or any shares of its Common Stock.
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any portion
of the Shares or the Conversion Shares under the circumstances, in the amounts
or at the times Purchaser might propose.
(b) Acquisition for Own Account. Purchaser is acquiring the
Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.
(c) Purchaser Can Protect Its Interest. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, and the Related Agreements.
Further, Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement.
<PAGE>
(d) Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) Company Information. Purchaser has received and read the
Company's financial statements and has had an opportunity to discuss the
Company's business, management and financial affairs with directors, officers
and management of the Company and has had the opportunity to review the
Company's operations and facilities. Purchaser has also had the opportunity to
ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
(f) Rule 144. Purchaser acknowledges and agrees that the
Shares, and, if issued, the Conversion Shares must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
(g) Residence. If the Purchaser is an individual, then the
Purchaser resides in the state or province identified in the address of the
Purchaser set forth on Exhibit A; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located at
the address or addresses of the Purchaser set forth on Exhibit A.
4.3 Transfer Restrictions. Each Purchaser acknowledges and agrees
that the Shares and, if issued, the Conversion Shares are subject to
restrictions on transfer as set forth in the Investor Rights Agreement.
5. Conditions To Closing.
5.1 Conditions to Purchasers' Obligations at the Closing.
Purchasers' obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:
(a) Representations and Warranties True; Performance of
Obligations. The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if they had been made as of the Closing Date,
and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing.
(b) Legal Investment. On the Closing Date, the sale and
issuance of the Shares and the proposed issuance of the Conversion Shares shall
be legally permitted by all laws and regulations to which Purchasers and the
Company are subject.
<PAGE>
(c) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
(d) Filing of Charter. The Charter shall have been filed with
the Secretary of State of the State of Delaware and shall continue to be in full
force and effect as of the Closing Date.
(e) Corporate Documents. The Company shall have delivered to
Purchasers or their counsel, copies of all corporate documents of the Company as
Purchasers shall reasonably request.
(f) Reservation of Conversion Shares. The Conversion Shares
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
(g) Compliance Certificate. The Company shall have delivered
to Purchasers a Compliance Certificate, executed by the President of the
Company, dated the Closing Date, to the effect that the conditions specified in
subsections (a), (c), (d) and (f) of this Section 5.1 have been satisfied.
(h) Investor Rights Agreement. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit C shall have been executed
and delivered by the parties thereto.
(i) Co-Sale Agreement. The Co-Sale Agreement substantially in
the form attached hereto as Exhibit D shall have been executed and delivered by
the parties thereto. The stock certificates representing the shares subject to
the Co-Sale Agreement shall have been delivered to the Secretary of the Company
and shall have had appropriate legends placed upon them to reflect the
restrictions on transfer set forth on the Co-Sale Agreement.
(j) Board of Directors. Upon the Closing, the authorized size
of the Board of Directors of the Company shall be six (6) members and the Board
shall consist of James Gaither, Thomas Siebel, A. Michael Spence, Andrew
Verhalen, William Zuendt and Monte Zweben.
(k) Management Rights Letter. A letter relating to management
rights in the form heretofore delivered to the Company's counsel by counsel for
U.S. Venture Partners shall have been executed and delivered by the Company to
U.S. Venture Partners VI, L.P.
(l) Company Representation re Investors. A representation by
the Company relating to the identity of existing and proposed investors in the
Company in the form heretofore delivered to the Company's counsel by counsel for
U.S. Venture Partners shall have been executed and delivered by the Company to
U.S. Venture Partners VI, L.P.
<PAGE>
(m) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers and their
special counsel, and the Purchasers and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
5.2 Conditions to Obligations of the Company. The Company's
obligation to issue and sell the Shares at each Closing is subject to the
satisfaction, on or prior to such Closing, of the following conditions:
(a) Representations and Warranties True. The representations and
warranties in Section 4 made by those Purchasers acquiring Shares hereof shall
be true and correct in all material respects at the date of the Closing, with
the same force and effect as if they had been made on and as of said date.
(b) Performance of Obligations. Such Purchasers shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by such Purchasers on or before the Closing.
(c) Filing of Charter. The Charter shall have been filed with
the Secretary of State of the State of Delaware.
(d) Investor Rights Agreement. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit C shall have been executed
and delivered by the Purchasers.
(e) Co-Sale Agreement. The Co-Sale Agreement substantially in
the form attached hereto as Exhibit D shall have been executed and delivered by
the parties thereto.
(f) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing) .
6. Miscellaneous.
6.1 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 performed entirely in California.
6.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby for a period of one (1) year
following the Closing. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby
<PAGE>
shall be deemed to be representations and warranties by the Company hereunder
solely as of the date of such certificate or instrument.
6.3 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 and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.4 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto, the Related Agreements 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 no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
6.5 Severability. In case any provision of the 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 thereby.
6.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
(b) The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under this Agreement may be waived only
with the written consent of the holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
6.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Related
Agreements or the Charter, shall impair any such right, power or remedy, nor
shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character on any Purchaser's
part of any breach, default or noncompliance under this Agreement, the Related
Agreements or under the Charter or any waiver on such party's part of any
provisions or conditions of this Agreement, the Related Agreements, or the
Charter must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, the Related Agreements, the Charter, by law, or otherwise afforded to
any party, shall be cumulative and not alternative.
<PAGE>
6.8 Waiver of Conflicts. Each party to this Agreement acknowledges
that legal counsel for the Company, Cooley Godward llp ("Cooley Godward"), has
in the past performed and may continue in the future to perform legal services
for one or more of the Purchasers or their affiliates in matters unrelated to
the transactions contemplated by this Agreement, including, but not limited to,
the representation of the Purchasers in matters of a similar nature to the
transactions contemplated herein. Each party to this Agreement hereby (a)
acknowledges that they have had an opportunity to ask for and have obtained
information relevant to such representation, including disclosure of the
reasonably foreseeable adverse consequences of such representation; (b)
acknowledges that with respect to the transactions contemplated herein, Cooley
Godward has represented the Company and not any individual Purchaser or any
individual shareholder, director or employee of the Company; and (c) gives its
informed consent to Cooley Godward's representation of the Company in the
transactions contemplated by this Agreement and Cooley Godward's previous or
continuing representation of one or more of the Purchasers or their affiliates
in matters unrelated to such transactions.
6.9 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on Exhibit A attached hereto or at such other
address as the Company or Purchaser may designate by ten (10) days advance
written notice to the other parties hereto.
6.10 Expenses. The Company shall, promptly after the Closing,
reimburse the reasonable fees of and expenses of one special counsel for the
Purchasers, not to exceed ten thousand dollars ($10,000).
6.11 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.12 Titles and Subtitles. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.13 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.
<PAGE>
6.14 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 6.14 being untrue.
6.15 Exculpation Among Purchasers. Each Purchaser acknowledges that it
is not relying upon any person, firm, or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable to any other Purchaser for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Shares and Conversion Shares.
6.16 Confidentiality. Each party hereto agrees that, except with the
prior written consent of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement or the Related Agreements,
discussions or negotiations relating to this Agreement or the Related
Agreements, the performance of its obligations hereunder or the ownership of the
Shares purchased hereunder. The provisions of this Section 6.16 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by the parties hereto.
6.17 Pronouns. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
6.18 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 OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
In Witness Whereof, the parties hereto have executed this Series C
Preferred Stock Purchase Agreement as of the date set forth in the first
paragraph hereof.
Company: Purchasers:
Blue Martini Software, Inc.
By: /s/ Monte Zweben By: /s/ All Series C Investors
----------------------------- --------------------------------
President
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
NAME AND ADDRESS
- ------------------------------------
AC II Technology (ACT II) B.V.
c/o Anderson Consulting
1661 Page Mill Road
Palo Alto, CA 94304
Attn: Chief Financial Officer
Matrix Partners V, L.P.
2500 Sand Hill Road, Suite 113
Menlo Park, CA 94025
Attn: Andrew Verhalen
Matrix V Entrepreneurs Fund, L.P.
2500 Sand Hill Road, Suite 113
Menlo Park, CA 94025
Attn: Andrew Verhalen
U.S. Venture Partners VI, L.P.
Attn: Chief Financial Officer
2180 Sand Hill Road, #300
Menlo Park, CA 94025
USVP VI Entrepreneur Partners, L.P.
Attn: Chief Financial Officer
2180 Sand Hill Road, #300
Menlo Park, CA 94025
Zweben Family Revocable Trust Dated October
17, 1997
A-1
<PAGE>
Exhibit 10.10
BLUE MARTINI SOFTWARE, INC.
INVESTOR RIGHTS AGREEMENT
July 20, 1999
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. GENERAL......................................................................... 1
1.1 Definitions..................................................................... 1
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.......................................... 2
2.1 Restrictions on Transfer........................................................ 3
2.2 Demand Registration............................................................. 4
2.3 Piggyback Registrations......................................................... 5
2.4 Form S-3 Registration........................................................... 6
2.5 Expenses of Registration........................................................ 7
2.6 Obligations of the Company...................................................... 8
2.7 Termination of Registration Rights.............................................. 9
2.8 Delay of Registration; Furnishing Information................................... 9
2.9 Indemnification................................................................. 9
2.10 Assignment of Registration Rights............................................... 11
2.11 Amendment of Registration Rights................................................ 11
2.12 "Market Stand-Off" Agreement; Agreement to Furnish Information.................. 12
2.13 Rule 144 Reporting.............................................................. 12
SECTION 3. COVENANTS OF THE COMPANY........................................................ 13
3.1 Basic Financial Information and Reporting....................................... 13
3.2 Inspection Rights............................................................... 13
3.3 Confidentiality of Records...................................................... 13
3.4 Reservation of Common Stock..................................................... 14
3.5 Stock Vesting................................................................... 14
3.6 Visitation Rights............................................................... 14
3.7 Proprietary Information and Inventions Agreement................................ 14
3.8 Termination of Covenants........................................................ 14
SECTION 4. RIGHTS OF FIRST REFUSAL......................................................... 14
4.1 Subsequent Offerings............................................................ 14
4.2 Exercise of Rights.............................................................. 15
4.3 Issuance of Equity Securities to Other Persons.................................. 15
4.5 Termination and Waiver of Rights of First Refusal............................... 15
</TABLE>
i
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
4.6 Transfer of Rights of First Refusal............................................. 16
4.7 Excluded Securities............................................................. 16
SECTION 5. MISCELLANEOUS................................................................... 16
5.1 Governing Law................................................................... 17
5.2 Survival........................................................................ 17
5.3 Successors and Assigns.......................................................... 17
5.4 Entire Agreement................................................................ 17
5.5 Severability.................................................................... 17
5.6 Amendment and Waiver............................................................ 17
5.7 Delays or Omissions............................................................. 18
5.8 Notices......................................................................... 18
5.9 Attorneys' Fees................................................................. 18
5.10 Titles and Subtitles............................................................ 18
5.11 Additional Investors............................................................ 18
5.12 Counterparts.................................................................... 18
5.13 Amendment of Prior Agreement.................................................... 18
</TABLE>
ii
<PAGE>
BLUE MARTINI SOFTWARE, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "Agreement") is entered into as of the
20/th/ day of July, 1999, by and among Blue Martini Software, Inc., a Delaware
corporation (the "Company"), the holders of the Company's Series A Preferred
Stock ("Series A Stock") set forth on Exhibit A, the holders of the Company's
Series B Preferred Stock ("Series B Stock") set forth on Exhibit A and the
purchasers of the Company's Series C Preferred Stock ("Series C Stock") set
forth on Exhibit A of that certain Series C Preferred Stock Purchase Agreement
of even date herewith (the "Purchase Agreement") (such purchasers referred to as
the "Series C Investors") and Exhibit A hereto. The holders of the Series A
Stock, the holders of the Series B Stock, and the Series C Investors shall be
referred to hereinafter as the "Investors" and each individually as an
"Investor."
Recitals
Whereas, the Company granted certain purchasers (the "Prior Investors") of
its Series A Preferred Stock (the "Series A Stock") and Series B Preferred Stock
(the "Series B Stock") certain registration and other rights pursuant to the
Restated Investor Rights Agreement, dated January 13, 1999 between the Company
and the Prior Investors (the "Prior Agreement"); and
Whereas, the Company proposes to sell and issue shares of its Series C
Stock pursuant to the Purchase Agreement; and
Whereas, as a condition of entering into the Purchase Agreement, the Series
C Investors have requested that the Company extend to them registration rights,
information rights and other rights as set forth below; and
Whereas, the Company and the Prior Investors desire to amend the Prior
Agreement to grant such rights to the Series C Purchasers.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 Definitions. As used in this Agreement the following terms shall
have the following respective meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Form S-3" means such form under the Securities Act as in effect
on the date hereof or any successor registration form under the Securities Act
subsequently adopted by the
1.
<PAGE>
SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
"Holder" means any person owning of record Registrable Securities
that have not been sold to the public or any assignee of record of such
Registrable Securities in accordance with Section 2.10 hereof.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"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
effectiveness of such registration statement or document.
"Registrable Securities" means (a) Common Stock of the Company
issued or issuable upon conversion of the Shares; and (b) 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, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under Section 2 of this Agreement
are not assigned.
"Registrable Securities then outstanding" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed fifteen thousand dollars ($15,000) of a single special counsel for the
Holders, 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).
"SEC" or "Commission" means the Securities and Exchange
Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale.
"Shares" shall mean the Company's Series A Stock, Series B Stock
and Series C Stock issued pursuant to the Purchase Agreement and held by the
Investors listed on Exhibit A hereto and their permitted assigns.
2.
<PAGE>
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound
by the terms of this Agreement, (B) such Holder shall have notified the Company
of the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a limited
liability company to its members or former members in accordance with their
interest in the limited liability company, (C) to the Holder's family member or
trust for the benefit of an individual Holder or (D) AC II Technology (ACT II)
B.V. or an AC Affiliate to any AC Affiliate (as defined below); provided that in
each case the transferee will be subject to the terms of this Agreement to the
same extent as if he were an original Holder hereunder. For the purposes of this
Section 2.1 "AC Affiliate" means any entity which is a member of the Andersen
Consulting world-wide organization or any entity which is at the relevant time
directly or indirectly controlled by any such entity or any entity which is
otherwise part of the Andersen Consulting world-wide organization.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT")
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.
3.
<PAGE>
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) Subject to the conditions of this Section 2.2, if the
Company shall receive a written request from the Holders of a majority of the
Registrable Securities then outstanding (the "Initiating Holders") that the
Company file a registration statement under the Securities Act covering the
registration of at least forty percent (40%) of the Registrable Securities then
outstanding and having an aggregate offering price, net of underwriting
discounts and commissions, of not less than ten million dollars ($10,000,000) (a
"Qualified Public Offering"), then the Company shall, within thirty (30) days of
the receipt thereof, give written notice of such request to all Holders, and
subject to the limitations of this Section 2.2, use its best efforts to effect,
as soon as practicable, the registration under the Securities Act of all
Registrable Securities that the Holders request to be registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 or any request pursuant to Section 2.4 and the Company shall
include such information in the written notice referred to in Section 2.2(a) or
Section 2.4(a), as applicable. In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders). Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
4.
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(i) prior to one hundred eighty (180) days following the
effective date of the registration statement pertaining to the Initial Offering;
(ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective;
(iii) during the period starting with the date of filing
of, and ending on the date one hundred eighty (180) days following the effective
date of the registration statement pertaining to a public offering; provided
that the Company makes reasonable good faith efforts to cause such registration
statement to become effective;
(iv) if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 2.2(a), the Company gives
notice to the Holders of the Company's intention to make a public offering
within ninety (90) days;
(v) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than one hundred twenty (120) days after receipt of the request of
the Initiating Holders; provided that such right to delay a request shall be
exercised by the Company not more than twice in any twelve (12) month period; or
(vi) if the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 2.4 below.
2.3 Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) Underwriting. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise
5.
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the Holders of Registrable Securities. In such event, the right of any such
Holder to be included in a registration pursuant to this Section 2.3 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 Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of the
Agreement, if the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting shall be allocated, first, to
the Company; second, to the Holders on a pro rata basis based on the total
number of Registrable Securities held by the Holders; and third, to any
shareholder of the Company (other than a Holder) on a pro rata basis. No such
reduction shall reduce the securities being offered by the Company for its own
account to be included in the registration and underwriting. 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,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration. For any
Holder which is a partnership or corporation, the partners, retired partners and
shareholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing person shall be deemed to be a single "Holder", and any pro rata
reduction with respect to such "Holder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "Holder," as defined in this sentence.
(b) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.
2.4 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders of Registrable Securities a written request or requests
that the Company effect a registration on Form S-3 (or any successor to Form S-
3) or any similar short-form registration statement and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
6.
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(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than three million dollars ($3,000,000), or
(iii) if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 2.2(a), the Company gives
notice to the Holders of the Company's intention to make a public offering
within ninety (90) days; or
(iv) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 2.4; provided, that such
right to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period, or
(v) if the Company has already effected two (2)
registrations on Form S-3 for the Holders pursuant to this Section 2.4, or
(vi) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.2 or 2.3, respectively.
2.5 Expenses of Registration. Except as specifically provided
herein, all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to one requested registration pursuant to Section
2.2 or Section 2.4, as applicable, in which event such right shall be forfeited
by all Holders). If the Holders are required to pay the Registration Expenses,
such expenses shall be borne by the holders of
7.
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securities (including Registrable Securities) requesting such registration in
proportion to the number of shares for which registration was requested. If the
Company is required to pay the Registration Expenses of a withdrawn offering
pursuant to clause (a) above, then the Holders shall not forfeit their rights
pursuant to Section 2.2 or Section 2.4 to a demand registration.
2.6 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable 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 thirty (30) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto. The
Company shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement that contemplates a distribution of
securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
(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 for the period set forth in
paragraph (a) above.
(c) Furnish to the Holders such number 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 reasonable 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(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters,
8.
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(i) an opinion, dated as of such date, of the counsel representing the Company
for the purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and (ii) a letter dated as of such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering addressed to the underwriters.
2.7 Termination of Registration Rights. All registration rights
granted under this Section 2 shall terminate and be of no further force and
effect three (3) years after the date of the Company's Initial Offering. In
addition, a Holder's registration rights shall expire if (a) the Company has
completed its Initial Offering and is subject to the provisions of the Exchange
Act, and (b) all Registrable Securities held by and issuable to such Holder (and
its affiliates, partners, former partners, members and former members) may be
sold under Rule 144 during any ninety (90) day period.
2.8 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 Indemnification. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers and directors of each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any
9.
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amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will pay as incurred to
each such Holder, partner, officer, director, underwriter or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the
10.
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indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability 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 Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law 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; provided, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and Holders under this
Section 2.9 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this agreement. 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.
2.10 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned by a Holder to a transferee or assignee of Registrable Securities which
(a) is a subsidiary, parent, general partner, limited partner, retired partner,
member, or retired member of a Holder, (b) is a Holder's family member or trust
for the benefit of an individual Holder, or (c) acquires at least ten percent
(10%) of the then outstanding Registrable Securities (as adjusted for stock
splits and combinations); provided, however, (i) the transferor shall, within
ten (10) days after such transfer, furnish to the Company written notice of the
name and address of such transferee or assignee and the securities with respect
to which such registration rights are being assigned and (ii) such transferee
shall agree to be subject to all restrictions set forth in this Agreement.
11.
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2.11 Amendment of Registration Rights. Any provision of this Section
2 may be amended and the observance thereof may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the Holders of at least a majority of the
Registrable Securities then outstanding, provided all Holders are affected
substantially the same by such amendment or waiver. Any amendment or waiver
effected in accordance with this Section 2.11 shall be binding upon each Holder
and the Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 "Market Stand-Off" Agreement; Agreement to Furnish Information.
Each Holder hereby agrees that such Holder shall not sell, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act in
connection with the Initial Offering and not to exceed ninety (90) days
following the effective date of a registration statement of the Company filed
under the Securities Act other than in connection with the Initial Offering;
provided that in each case all officers and directors of the Company enter into
similar agreements. Each Holder agrees to execute and deliver such other
agreements as may be reasonably requested by the Company or the underwriter
which are consistent with the foregoing or which are necessary to give further
effect thereto. In addition, if requested by the Company or the representative
of the underwriters of Common Stock (or other securities) of the Company, each
Holder shall provide, within ten (10) days of such request, such information as
may be required by the Company or such representative in connection with the
completion of any public offering of the Company's securities pursuant to a
registration statement filed under the Securities Act. The obligations described
in this Section 2.12 shall not apply to a registration relating solely to
employee benefit plans on Form S-1 or Form S-8 or similar forms that may be
promulgated in the future, or a registration relating solely to a Commission
Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the
future. The Company may impose stop-transfer instructions with respect to the
shares of Common Stock (or other securities) subject to the foregoing
restriction until the end of said one hundred eighty (180) day period.
2.13 Rule 144 Reporting. With a view to making available to the
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 to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times 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 Exchange Act; and
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(c) So long as a Holder owns any Registrable Securities, 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 of the Securities
Act, and of 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 as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY
3.1 Basic Financial Information and Reporting.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, the Company will
furnish each Investor an audited balance sheet of the Company, as at the end of
such fiscal year, and an audited statement of income and statement of cash flows
of the Company, for such year, all prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail. Such financial statements shall be accompanied by a report
and opinion thereon by independent public accountants of national standing
selected by the Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as practicable
after the end of the first, second and third quarterly accounting periods in
each fiscal year of the Company, and in any event within thirty (30) days
thereafter, a balance sheet of the Company as of the end of each such quarterly
period, and a statement of income and a statement of cash flows of the Company
for such period and for the current fiscal year to date, prepared in accordance
with generally accepted accounting principles, with the exception that no notes
need be attached to such statements and year-end audit adjustments may not have
been made.
(d) So long as an Investor (with its affiliates) shall own not less
than three hundred thousand (300,000) shares of Registrable Securities (as
adjusted for stock splits and combinations) (a "Major Investor"), the Company
will furnish each such Major Investor as soon as practicable after the end of
each month, and in any event within twenty (20) days following the end of each
such month, a balance sheet of the Company as of the end of each such month, and
a statement of income and a statement of cash flows of the Company for such
month, prepared in accordance with generally accepted accounting principles
consistently applied, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.
3.2 Inspection Rights. Each Investor shall have the right to visit and
inspect any of the properties of the Company or any of its subsidiaries, and to
discuss the affairs, finances and
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accounts of the Company or any of its subsidiaries with its officers, and to
review such information as is reasonably requested all at such reasonable times
and as often as may be reasonably requested; provided, however, that the Company
shall not be obligated under this Section 3.2 with respect to a competitor of
the Company or with respect to information which the Board of Directors
determines in good faith is confidential and should not, therefore, be
disclosed.
3.3 Confidentiality of Records. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
such Investor for the purpose of evaluating its investment in the Company as
long as such partner, subsidiary or parent is advised of the confidentiality
provisions of this Section 3.3.
3.4 Reservation of Common Stock. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 Stock Vesting. Unless otherwise approved by the Board of Directors,
all stock options and other stock equivalents issued after the date of this
Agreement to employees, directors, consultants and other service providers shall
be subject to vesting as follows: (a) twenty-five percent (25%) of such stock
shall vest at the end of the first year following the earlier of the date of
issuance or such person's services commencement date with the company, and (b)
seventy-five percent (75%) of such stock shall vest over the remaining three (3)
years. With respect to any shares of stock purchased by any such person, the
Company's repurchase option shall provide that upon such person's termination of
employment or service with the Company, with or without cause, the Company or
its assignee (to the extent permissible under applicable securities laws and
other laws) shall have the option to purchase at cost any unvested shares of
stock held by such person.
3.6 Visitation Rights. The Company shall allow one representative
designated by the U.S. Venture Partners from time to time 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 reserves
the right to exclude such representative from access to any material or meeting
or portion thereof if the Company believes upon advice of counsel that such
exclusion is reasonable necessary to preserve the attorney-client privilege, to
protect highly confidential proprietary information or for other similar
reasons.
3.7 Proprietary Information and Inventions Agreement. The Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement.
14.
<PAGE>
3.8 Termination of Covenants. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor upon
the earlier of (i) the effective date of the registration statement pertaining
to the Initial Offering, or (ii) upon (a) the sale, lease or other disposition
of all or substantially all of the assets of the Company or (b) an acquisition
of the Company by another corporation or entity by consolidation, merger or
other reorganization in which the holders of the Company's outstanding voting
stock immediately prior to such transaction own, immediately after such
transaction, securities representing less than fifty percent (50%) of the voting
power of the corporation or other entity surviving such transaction, provided
that this Section 3.8(ii)(b) shall not apply to a merger effected exclusively
for the purpose of changing the domicile of the Company (a "Change in Control").
SECTION 4. RIGHTS OF FIRST REFUSAL
4.1 Subsequent Offerings. So long as an Investor (with its affiliate)
shall own not less than two hundred fifty thousand (250,000) share of
Registrable Securities (as adjusted for stock splits and contributions) (a
"Significant Investor"), each Significant Investor shall have a right of first
refusal to purchase its pro rata share of all Equity Securities, as defined
below, that the Company may, from time to time, propose to sell and issue after
the date of this Agreement, other than the Equity Securities excluded by Section
4.7 hereof. Each Significant Investor's pro rata share is equal to the ratio of
(a) the number of shares of the Company's Common Stock (including all shares of
Common Stock issued or issuable upon conversion of the Shares) which such
Significant Investor is deemed to be a holder immediately prior to the issuance
of such Equity Securities to (b) the total number of shares of the Company's
outstanding Common Stock (including all shares of Common Stock issued or
issuable upon conversion of the Shares or upon the exercise of any outstanding
warrants or options) immediately prior to the issuance of the Equity Securities.
The term "Equity Securities" shall mean (i) any Common Stock, Preferred Stock or
other security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
4.2 Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give each Significant Investor written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. Each Significant
Investor shall have fifteen (15) days from the giving of such notice to agree to
purchase its pro rata share of the Equity Securities for the price and upon the
terms and conditions specified in the notice by giving written notice to the
Company and stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Significant Investor who would cause the
Company to be in violation of applicable federal securities laws by virtue of
such offer or sale.
4.3 Issuance of Equity Securities to Other Persons. If not all of the
Significant Investors elect to purchase their pro rata share of the Equity
Securities, then the Company shall promptly notify in writing the Significant
Investors who do so elect and shall offer such Significant Investors the right
to acquire such unsubscribed shares. The Significant Investors
15.
<PAGE>
shall have five (5) days after receipt of such notice to notify the Company of
its election to purchase all or a portion thereof of the unsubscribed shares. If
the Significant Investors fail to exercise in full the rights of first refusal,
the Company shall have ninety (90) days thereafter to sell the Equity Securities
in respect of which the Significant Investor's rights were not exercised, at a
price and upon general terms and conditions materially no more favorable to the
purchasers thereof than specified in the Company's notice to the Significant
Investors pursuant to Section 4.2 hereof. If the Company has not sold such
Equity Securities within ninety (90) days of the notice provided pursuant to
Section 4.2, the Company shall not thereafter issue or sell any Equity
Securities, without first offering such securities to the Significant Investors
in the manner provided above.
4.4 [Intentionally Omitted]
4.5 Termination and Waiver of Rights of First Refusal. The rights of
first refusal established by this Section 4 shall not apply to, and shall
terminate upon the earlier of (i) effective date of the registration statement
pertaining to the Company's Initial Public Offering or (ii) a Change in Control.
The rights of first refusal established by this Section 4 may be amended, or any
provision waived with the written consent of Significant Investors holding a
majority of the Registrable Securities held by all Significant Investors
provided all Significant Investors are affected substantially the same by such
amendment or waiver, or as permitted by Section 5.6.
4.6 Transfer of Rights of First Refusal. The rights of first refusal of
each Significant Investor under this Section 4 may be transferred to the same
parties, subject to the same restrictions as any transfer of registration rights
pursuant to Section 2.10.
4.7 Excluded Securities. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other Common
Stock purchase rights issued pursuant to such options, warrants or other rights)
issued or to be issued after the Original Issue Date (as defined in the
Company's Certificate of Incorporation) to employees, officers or directors of,
or consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
(b) stock issued pursuant to any rights or agreements outstanding as
of the date of this Agreement, options and warrants outstanding as of the date
of this Agreement; and stock issued pursuant to any such rights or agreements
granted after the date of this Agreement; provided that the rights of first
refusal established by this Section 4 applied with respect to the initial sale
or grant by the Company of such rights or agreements;
(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
16.
<PAGE>
(e) shares of Common Stock issued upon conversion of the Shares;
(f) any Equity Securities issued pursuant to any equipment leasing
or loan arrangement, or debt financing from a bank or similar financial or
lending institution approved by the Board of Directors;
(g) any Equity Securities that are issued by the Company pursuant to
a registration statement filed under the Securities Act;
(h) shares of the Company's Common Stock or Preferred Stock issued
in connection with strategic transactions involving the Company and other
entities, including (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements; provided
that such strategic transactions and the issuance of shares therein, has been
approved by the Company's Board of Directors; and
(i) bona fide gifts of securities to persons or entities unrelated
to the Company not exceeding fifty thousand (50,000) shares of capital stock;
provided that such gifts shall have been unanimously approved by the Company's
Board of Directors.
SECTION 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 entered into and to be performed entirely within
California.
5.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 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 and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 Entire Agreement. This Agreement, the Exhibits and Schedules hereto,
the Purchase Agreement and the other documents delivered pursuant thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
17.
<PAGE>
5.5 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.
5.6 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least a majority of the Registrable Securities, provided all Holders are
affected substantially the same by such amendment or waiver.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least a majority of the
Registrable Securities, provided all Holders are affected substantially the same
by such amendment or waiver.
(c) Notwithstanding the foregoing, this Agreement may be amended
with only the written consent of the Company to include additional purchasers of
Shares as "Investors," "Holders" and parties hereto.
5.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
5.9 Attorneys' Fees. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and
18.
<PAGE>
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals.
5.10 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.
5.11 Additional Investors. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Preferred
Stock pursuant to the Purchase Agreement, any purchaser of such shares of
Preferred Stock may become a party to this Agreement by executing and delivering
an additional counterpart signature page to this Agreement and shall be deemed
an "Investor" hereunder.
5.12 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.
5.13 Amendment of Prior Agreement. Effective upon the execution of this
Agreement by the Company and the Holders of a majority of the Registrable
Securities covered by the Prior Agreement, the Prior Agreement shall be null and
void and shall be superseded by the provisions of this Agreement. Each Investor
that was a party to the Prior Agreement hereby waives all rights of the first
refusal contained in Section 4 of the Prior Agreement with respect to the sale
and issuance of the Series C Stock and the Common Stock issuable upon conversion
thereof, including any notice requirements related to such rights of first
refusal.
[THIS SPACE INTENTIONALLY LEFT BLANK]
19.
<PAGE>
In Witness Whereof, the parties hereto have executed this Investor Rights
Agreement as of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
Blue Martini Software, Inc.
By: /s/ Monte Zweben By: /s/ All Preferred Stock Investors
------------------------ ----------------------------------
President Member
INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE
<PAGE>
EXHIBIT 10.11
FORM OF INDEMNIFICATION AGREEMENT
This Agreement is made and entered into this _____ day of ________________,
2000 by and between Blue Martini Software, Inc., a Delaware corporation (the
"Corporation"), and ______________________ ("Agent"). This Agreement terminates
any and all previous indemnification agreements entered into by and between the
Corporation and Agent.
Recitals
Whereas, Agent performs a valuable service to the Corporation in the
capacity as _________ of the Corporation;
Whereas, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
Whereas, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
Whereas, in order to induce Agent to continue to serve as director of the
Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
Now, Therefore, in consideration of Agent's continued service as director
after the date hereof, the parties hereto agree as follows:
Agreement
1. Services to the Corporation. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as director
of the Corporation or as a director, officer or other fiduciary of an affiliate
of the Corporation (including any employee benefit plan of the Corporation)
faithfully and to the best of his ability so long as he is duly elected and
qualified in accordance with the provisions of the Bylaws or other applicable
charter documents of the Corporation or such affiliate; provided, however, that
Agent may at any time and for any reason resign from such position (subject to
any contractual obligation that Agent may have assumed apart from this
Agreement) and that the Corporation or any affiliate shall have no obligation
under this Agreement to continue Agent in any such position.
2. Indemnity of Agent. The Corporation hereby agrees to hold harmless and
indemnify Agent to the fullest extent authorized or permitted by the provisions
of the Bylaws and the Code, as the same may be amended from time to time (but,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than the Bylaws or the Code permitted prior to
adoption of such amendment).
1.
<PAGE>
3. Additional Indemnity. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Agent becomes legally obligated to pay because of any claim or
claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Agent by
the Corporation under the non-exclusivity provisions of the Code and the Bylaws.
4. Limitations on Additional Indemnity. No indemnity pursuant to Section
3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent solely for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(b) on account of Agent's conduct that is established by a final
judgment as knowingly fraudulent or deliberately dishonest or that constituted
willful misconduct;
(c) on account of Agent's conduct that is established by a final
judgment as constituting a breach of Agent's duty of loyalty to the Corporation
or resulting in any personal profit or advantage to which Agent was not legally
entitled;
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect, both the
Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof) initiated by
Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, 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
2.
<PAGE>
vested in the Corporation under the Code, or (iv) the proceeding is initiated
pursuant to Section 9 hereof.
5. Continuation of Indemnity. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. Partial Indemnification. Agent shall be entitled under this Agreement
to indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Corporation shall indemnify Agent for the portion thereof to which Agent
is entitled.
7. Notification and Defense of Claim. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at its
own expense;
(b) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded, and so notified the Corporation, that
there is an actual conflict of interest between the Corporation and Agent in the
conduct of the defense of such action or (iii) the Corporation shall not in fact
have employed counsel to assume the defense of such action, in each of which
cases the fees and expenses of Agent's separate counsel shall be at the expense
of the Corporation. The Corporation shall not be entitled to assume the defense
of any action, suit or proceeding brought by or on behalf of the Corporation or
as to which Agent shall have made the conclusion provided for in clause (ii)
above; and
3.
<PAGE>
(c) the Corporation shall not be liable to indemnify Agent under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. Expenses. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. Enforcement. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent 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. Agent, in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim for
indemnification is made under Section 3 hereof (other than an action brought to
enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.
10. Subrogation. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. Non-Exclusivity of Rights. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
12. Survival of Rights.
(a) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.
4.
<PAGE>
(b) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. Separability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement. Only
one such counterpart need be produced to evidence the existence of this
Agreement.
17. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature page
hereof.
(b) If to the Corporation, to:
Blue Martini Software, Inc.
2600 Campus Drive, Suite #100
San Mateo, CA. 94403
or to such other address as may have been furnished to Agent by the Corporation.
19. This Agreement supercedes and terminates any previous agreement
between Agent and the Corporation regarding the subject matter hereof.
5.
<PAGE>
In Witness Whereof, the parties hereto have executed this Agreement on and as of
the day and year first above written.
BLUE MARTINI SOFTWARE, INC.
By: ____________________________________
Monte Zweben
President and Chief Executive Officer
Agent
By: ____________________________________
Name:___________________________________
Address:________________________________
6.
<PAGE>
Exhibit 10.12
ISV LICENSE AND MARKETING AGREEMENT
-----------------------------------
This License and Marketing Agreement ("Agreement"), is entered into as of [March
-----
3lst], 1999 ("Effective Date"), by and between [Blue Martini Software, Inc.]
- ---- ---------------------------
("ISV"), located at [2600 Campus Drive, Suite 175, San Mateo, California,
---------------------------------------------------
94403], and Neuron Data, Inc. ("ND"), located at 13 I0 Villa Street, Mountain
View, California, 94041 (each, a "Party"; collectively, the "Parties"), includes
the terms hereof as well as those of the Exhibits attached hereto.
WHEREAS, ND seeks to have certain of its software embedded in specified
application programs and marketed and distributed as part of a complete package
to third parties; and
WHEREAS, ND shall not provide any support or maintenance services to end users,
but shall only provide direct support and maintenance services to ISV:
NOW, THEREFORE, in consideration of the foregoing and covenants below, it is
agreed:
1. Certain Definitions.
-------------------
"Application" means that computer software code, programs and/or
applications created, enhanced, or modified by Developers and into which
Licensed Software shall be embedded.
"Application License Agreement" means a legally binding, executed, written
agreement between each ISV Licensee and ISV, pursuant to which such ISV Licensee
is granted certain rights to specified Application(s), and which contains each
of the provisions required by ND as set forth in Exhibit B.
"Confidential Information" means proprietary and other valuable
information, regardless of form, communicated by one Party ("Disclosing Party")
to the other Party ("Receiving Party), including, without limitation, technical
information, trade secrets, know how, specifications, financial and pricing
information, market research, and computer code. When marked as such or recorded
as such within [...***...] of the initial disclosure.
"Developer" means a professional computer application developer designated
and engaged by ISV and authorized, pursuant to this Agreement, to develop
Applications using the Licensed Software. If applicable, the total number of
Developers is specified in Exhibit A.
"Documentation" means the standard materials (regardless of format or
medium), made available by ND in conjunction with Licensed Software.
Documentation will be delivered in a FrameMaker format.
"ISV Licensee" means an authorized Application end user to whom rights to
Application(s) are granted pursuant to an Application License Agreement and this
Agreement:
"Export Laws" means applicable export laws and regulations (whether U.S.
and foreign),
[...***...]= CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
1.
<PAGE>
prohibiting or restricting export of any item hereunder, including, without
limitation, as to Group D! and E! countries (and/or nationals thereof) as
defined by U.S. Export Administration Regulations, Part 746 (as updated or
amended) as well as exemptions thereto such as U.S. Department of Commerce
licenses, authorizations or otherwise.
"License Fees" means fees paid to ND in consideration of rights granted to
ISV with respect to Licensed Product as set forth in Exhibit A.
"Licensed Products" means a software product developed by ND and licensed
to ISV subject to this Agreement and is intended by the Parties to be embedded
in the Applications listed in Exhibit A.
"ND Trademarks" means such trademarks, service marks, trade names and/or
logos adopted by ND in conjunction with the Licensed Products as listed in
Exhibit D.
"Solution" means a technology combination designed to meet the needs of ISV
Licensees, which includes one or more Applications (into which Licensed Product
is embedded), all designed by ISV subject to this Agreement.
"Support and Maintenance Fee" means any fees paid by ISV in consideration
for services provided by ND for Licensed Software and with respect to specified
Supported Platforms, all in accordance with the Support and Maintenance Program.
"Support and Maintenance Program" means the binding understanding between
ND and ISV, pursuant to which ND is to provide certain services to ISV relative
to Licensed Products for the Supported Platforms substantially in the form of
Exhibit C.
"Target Market(s)" means the category of potential ISV Licensees and/or
Applications on which ISV shall focus its efforts hereunder, as described in
Exhibit A.
"Version" means the most recent, complete Version of a software product
including the relevant softcopy Documentation appropriate to integration in
ISV's own documentation [typically denoted: 1.0, 2.0, 3.0, etc.] as of the
Effective Date.
"Version Update" means any Version of any Licensed Product (including
editions designed for new/revised Supported Platforms) released subsequent to
the Effective Date.
2. Appointment; License.
--------------------
2.1 ISV Appointment. Subject to this Agreement, ND appoints ISV the
---------------
nonexclusive, value-added reseller of Licensed Products to be embedded in
Applications developed for and promoted to the Target Market(s).
2.
<PAGE>
2.2 License Grant. Subject to this Agreement, ND hereby grants to ISV a
-------------
non exclusive, non-transferable, non-sublicensable license to use, copy and
distribute Licensed Products (including softcopy documentation) to be used on
all Supported Platform(s) and according to the Documentation, and subject to
payment of all current License Fees and Support and Maintenance Fees set forth
in Exhibit A, and only for the following purposes: (a) to develop, market and
---------
distribute Applications for the Target Market(s), and (b) to allow ISV to
provide support services to ISV Licensees with respect to Applications
(particularly, as to embedded Licensed Product). Other than as expressly provide
in this Section 2, no grant of any right or license to any Licensed Product, ND
Trademark, Confidential Information or other ND property is made or implied.
2.3 Trade Secret Protection. Recognizing that protection of ND trade
-----------------------
secrets is in its best interests, ISV agrees not to utilize any Licensed Product
or Confidential Information or any other material licensed, disclosed, or
otherwise made available hereunder for any purpose not expressly permitted in
this Agreement. In particular, ISV shall not, and shall not allow any third
party, to: (a) reverse engineer, disassemble, de-compile or attempt to derive
any source code or trade secrets contained in Licensed Product; (b) timeshare or
lease rights to Licensed Product; or (c) copy, manufacture, adapt, create
derivative works of, translate, localize, port, or otherwise improperly modify
Licensed Product.
2.4 ND Trademarks. During the term of this Agreement, ND hereby grants
-------------
to ISV, a non-exclusive, non-transferable, non-sublicensable, royalty-free
license to use the ND Trademarks for the purpose of promoting and supporting
Licensed Products and Applications (including with respect to any ISV website);
provided that all use shall comply with the trademark requirements set forth in
- --------
Exhibit D.
- ---------
2.5 Ownership. As between the Parties, ND and its suppliers retain all
---------
rights, title and interest in and to the Licensed Products and to any and all
modifications and improvements thereto by whomever made, as well as to all
copies and portions thereof, whether or not incorporated or embedded with other
products. This Agreement does not constitute a sale of any Licensed Product, nor
of any portion or copy thereof. As between the Parties, except for portions of
Licensed Products which may be directly modified or otherwise incorporated into
an Application (which belong to ND), ISV retains ownership of the Applications
and all related documents, copies and portions thereof.
3. ISV Covenants.
-------------
3.1 ISV shall not distribute Licensed Product to an ISV Licensee on a
stand alone basis; rather only embedded in an Application. Further, ISV shall
not distribute Licensed Product, except pursuant to an Application License
Agreement
3.2 At any point in time, over the life of this contract and consistent
with Exhibit C, ND shall support and maintain software released in the past
twelve months.
3.
<PAGE>
3.3 ISV shall promptly report suspected defects in Licensed Product as
well as customer complaints, demands and suggestions. ISV shall not make
misleading or untrue statements with respect to Licensed Product.
3.4 On or before the thirtieth (30th) calendar day following the end of
each quarter, ISV shall present a report (each, a "Quarterly Report") to ND
containing, at a minimum a list of licenses of Applications granted by ISV in
which Licensed Product is embedded. ISV and ND shall conduct regular technical
meetings (at least twice annually) to review technical matters, develop
technology, and continuously improve the Parties' working relationship.
3.5 The Parties, as mutually agreed, may engage in joint marketing efforts
including, without limitation, joint press releases, joint materials and joint
marketing campaigns, and as suggested in Exhibit F.
----------
4. Confidentiality.
---------------
4.1 "Confidential Information" means the Software and all other non-public
information which is marked as confidential or which should reasonably be
expected to be treated as confidential, including without limitation,
development plans, and non-public financial, customer and market information.
Confidential Information does not include information (a) already lawfully known
to the recipient prior to disclosure by the other party or developed by or for
the recipient independently of and without access to the Confidential
Information, (b) generally known to the public or (c) lawfully obtained by the
recipient from any third party without breach of any confidentiality
obligations.
4.2 Each party will safeguard Confidential Information with reasonable
security means at least equivalent to measures that it uses to safeguard its own
proprietary information. Each party will use the Confidential Information only
as needed to fulfill its obligations hereunder.
4.3 If either party is required to disclose the other's Confidential
Information by law, regulation or court order, the party will notify the owner
promptly of the requirement, and will work with the owner to attempt to minimize
the scope of required disclosure.
5. Discount; Payments.
------------------
Payment terms are specified in Exhibit I.
4.
<PAGE>
6. Support and Maintenance.
-----------------------
Support and Maintenance terms are specified in Exhibit C.
7. Limitation of Liability; Indemnification.
----------------------------------------
7.1 NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT, EXCEPT FOR PAYMENTS
UNDER SECTION 7.2, ND SHALL NOT BE LIABLE WITH RESPECT TO ANY CONTRACT, TORT, OR
OTHER LEGAL OR EQUITABLE THEORY: (A) FOR ANY AMOUNTS IN EXCESS OF THE PRICE
ACTUALLY PAD BY ISV WITH RESPECT TO ANY ALLEGEDLY DEFECTIVE LICENSED PRODUCT,
(B) FOR ANY INCIDENTAL, DIRECT, INDIRECT, OR CONSEQUENTIAL DAMAGES, LOST DATA OR
LOST PROFITS, OR (C) FOR PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR
SERVICES. In particular, ND shall have no liability for damage to any
Application or as to any damage or harm suffered by any ISV Licensee or third
party caused directly or indirectly by Licensed Product, including personal
injury and/or property damage.
7.2 Subject to the terms and conditions of this Agreement, ND shall hold
ISV, its officers, directors, agents and employees harmless from liability
resulting from: (i) infringement of any United States patent or copyright by any
Licensed Product; provided that ND is promptly notified of any and all threats,
--------
claims and actions, (ii) is given all reasonable assistance requested, and (iii)
ND controls the defense and all settlement or compromise; ND shall not be
responsible for any settlement it does not approve in writing. THE FOREGOING IS
IN LIEU OF ANY WARRANTY OF NON-INFRINGEMENT OF THIRD PARTY RIGHTS, WHICH ARE
HEREBY FULLY DISCLAIMED.
8. Warranty Disclaimers and Limitations.
------------------------------------
8.1 Subject to the following ND warrants for a period of [...***...]
from delivery of the first copy of each Licensed Product (the "Warranty
Period") that the media containing such Licensed Product shall be free from
material defect. This warranty covers only problems reported to ND during the
Warranty Period EXCEPT AS EXPRESSLY PROVIDED BELOW, ANY LIABILITY OF ND WITH
RESPECT TO ANY LICENSED PRODUCT OR PERFORMANCE THEREOF SHALL BE LIMITED
EXCLUSIVELY TO PRODUCT REPLACEMENT OR, IF IN THE SOLE OPINION OF ND, PRODUCT
REPLACEMENT IS AN INADEQUATE OR IMPRACTICAL REMEDY, TO REFUND ALL OR A PORTION
OF THE LICENSE FEES ACTUALLY PAD TO ND IN ANY GIVEN ANNUAL PERIOD DIRECTLY
RELATED THERETO. EXCEPT FOR THE FOREGOING, LICENSED PRODUCTS ARE PROVIDED ON
AN "AS IS" BASIS, WITHOUT WARRANTY OF ANY KIND, INCLUDING, WITHOUT LIMITATION,
AS TO ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
NON-INFRINGEMENT OF THIRD PARTY RIGHTS. FURTHER, ND DOES NOT WARRANT,
GUARANTEE, OR
[...***...]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
5.
<PAGE>
MAKE ANY REPRESENTATION REGARDING THE USE OR THE RESULTS OF THE USE OF ANY
LICENSED PRODUCT OR MATERIALS SUPPLIED HEREUNDER AS TO CORRECTNESS, ACCURACY
RELIABILITY, OR OTHERWISE. ND is not responsible for and shall assume no
liability for hardware, software, or other items not directly sold or licensed
by ND hereunder nor for services provided other than by ND.
8.2 Year 2000 Compliance Warranty. Year 2000 compliance is defined as
-----------------------------
operating prior to, during, and after the calendar year 2000 AD without error
relating to date data, specifically including but not limited to any error
relating to calculations, sorting, interpretation, processing or acceptance of
date data which represents or references different centuries or more than one
century. Neuron Data represents and warrants that the Software listed in Exhibit
G hereto when used with year 2000 compliant hardware, operating systems,
compilers, interfaces and other related components, is year 2000 compliant. This
representation and warranty is with respect to the Software listed in Exhibit G
only and is not a representation or warranty that software applications using
the Software are or will be year 2000 compliant. This Year 2000 Compliance
Warranty shall begin as of the date of the License Agreement and end on the date
after January I, 2000 subsequent to which the Software has operated without a
breach of this Year 2000 Compliance Warranty for a consecutive six month period.
Neuron Data recognizes the criticality of Year 2000 Compliance. In the event of
any defect in the Software relating to Year 2000 compliance, Neuron Data, when
notified of such defect through normal Technical Support procedures, will assign
such defect the highest priority and will assign all necessary resources to
correct the problem.
9. Term and Termination.
--------------------
9.1 Term; Renewal. This Agreement shall remain in force for five (5)
-------------
years from the Effective Date, and be automatically renewed for a subsequent two
(2) year term unless a Party notifies the other of its contrary intention at
--
least sixty (60) days prior to the date this Agreement would otherwise expire.
- ----------------
9.2 Termination. The Agreement may be terminated: (a) By either Party:
-----------
(i) in the event the other Party breaches any material obligation and such
breach remains uncured thirty (30) days following receipt of appropriate written
notice, or (ii) in the event that a Party declares bankruptcy, becomes
insolvent, or the equivalent.
6.
<PAGE>
9.3 Effects of Termination. Upon termination for any reason of this
----------------------
Agreement: (a) ISV shall immediately return all materials provided to it by ND
hereunder, including, without limitation, Golden Master CDs, Confidential
Information, Licensed Products, manuals, customer lists, license agreements, and
marketing materials; (b) Licenses granted to ISV shall terminate immediately and
ISV shall immediately cease use of all such rights; (c) ISV Licensee rights
properly granted shall be unaffected; and (d) ISV has no expectation that the
relationship with ND will continue beyond expiration or termination of this
Agreement nor as to anticipated revenues or profits.
9.4 Survival. The following provisions shall survive termination of this
--------
Agreement: Sections 2.3, 2.5, 4, 7, 8, 9.3, 10.5, 10.6, 10.7, 10.8, 10.9, 10.10
arid this Section 9.4.
10. General Provisions.
------------------
10.1 The Parties are independent entities; nothing in this Agreement
creates or implies any employment, agency or other legal relationship. Neither
Party has the right or authority to bind the other. This Agreement is entered
into by the Parties on a non-exclusive basis; nothing restricts either Party
from entering into any business relationship with any third party.
10.2 This Agreement constitutes the entire agreement between the Parties
as to the subject matter hereof and supersedes all prior and contemporaneous
communications and agreements, written or oral, relating to such subject.
Amendments shall be in writing and executed by each Party. Waiver of performance
required by this Agreement shall not constitute a subsequent waiver, unless so
waived in writing. Neither Party may assign any portion of this Agreement
without prior written consent of the non-assigning Party, except, in connection
------
with a merger or sale of substantially all of its assets.
10.3 Neither Party shall be responsible for any failure to perform
obligations to the extent such failure is cause by natural disasters, wars,
labor unrest, or other causes beyond its reasonable control. Obligations
hereunder shall not be excused, but shall be suspended until the cessation of
such cause. Should such cause persist for longer than thirty (30) days, the
Parties shall meet to determine whether this Agreement should be modified.
10.4 Neither Party shall make any public disclosure of the terms of this
Agreement without the prior approval of the other Party. Notwithstanding, the
Parties shall cooperate to issue a joint press release and/or complementary
press releases as soon as practicable after the Effective Date. Each Party
mutually grants the other the right to use their respective trademarks,
corporate names and logos (as necessary) in conjunction with the Parties'
respective website(s). The Parties also agree to establish mutual links between
their respective websites as soon as practicable and in a mutually acceptable
form.
10.5 Should a provision be declared illegal or unenforceable, it shall be
eliminated or replaced to preserve, wherever possible, the Parties' intent; all
other provisions remain in force.
7.
<PAGE>
occur, according to the procedure described in the Escrow Deposit Agreement of
Vendor: a, ceases doing business, or b, discontinues offering technical support
for the Software and does not offer comparable support through a third, party
under substantially similar terms.
10.6 Notices or other communications required or made hereunder shall be
in writing and sent via express courier service (with tracking capabilities) or
certified mail (return receipt requested) to the above address or as
subsequently notified.
10.7 Both Parties shall, at all times, comply with all applicable laws,
regulations and similar rules. Further, ISV shall obtain and maintain any and
all permits, licenses, authorizations, and/or certificates which may be required
in connection with the import, export, sale, or use of the Licensed Products as
may be required by any legitimate government authority, agency or subdivision
thereof including, without limitation all applicable Export Laws.
10.8 This Agreement shall be governed by California and U.S. federal law,
without regard to conflicts of law principles. Except with respect to any
injunctive action which may be brought by ND, any dispute arising hereunder
shall be submitted to arbitration which shall take place in Mountain View,
California, according to the Rules of the American Arbitration Association by a
single arbitrator appointed in accordance with such rules. Such arbitration
decision shall be final and may be enforced in any court of competent
jurisdiction. The prevailing party may, in addition to its other remedies,
recover its costs, including attorneys' and other professional fees, incurred to
enforce this Agreement.
10.9 EACH PARTY AGREES THAT THE WARRANTY DISCLAIMERS AND LIABILITY
LIMITATIONS IN THIS AGREEMENT ARE MATERIAL, BARGAINED FOR BASES HEREOF AND HAVE
BEEN TAKEN INTO ACCOUNT BY EACH PARTY IN DECIDING WHETHER AND ON WHAT TERMS TO
ENTER INTO THIS AGREEMENT.
10.10 The Parties agree that any substantial threat to the legal and/or
practical protection of those trade secrets and other proprietary material
underlying the Licensed Products (particularly with regard to source or object
code and sensitive Confidential Information disclosed hereunder) would cause
irreparable injury to ND for which monetary damages would be inadequate. In
such event, ND shall be entitled to seek equitable relief (e.g., injunctive
relief) in addition to its other remedies at law or in equity.
11. Source Code Escrow.
------------------
11.1 ND maintains and will continue to maintain during the term of this
Agreement a source code escrow deposit for its Software, as described in the
Escrow Deposit Agreement attached as Exhibit H and incorporated herein. Within
---------
30 days after the execution of this Agreement, Vendor will add ISV as a
beneficiary of the Escrow Deposit Agreement. ISV will pay the escrow agents
fees to be added and maintained as a beneficiary.
11.2 If ISV discontinues paying for product support for a Software
product, ISV will immediately be removed as a beneficiary of the Escrow Deposit
Agreement for such Software. The source code will be released from escrow if any
of the following events
8.
<PAGE>
occur, according to the procedure described in the Escrow Deposit Agreement of
Vendor:
a. ceases doing business, or
b. discontinues offering technical support for the Software and does not
offer comparable support through a third party under substantially
similar terms.
IN WITNESS WHEREOF, each Party has caused this Agreement to be duly executed by
its authorized representative as of the Effective Date.
Neuron Data, Inc. [ Blue Martini Software]
(as "ND") ------------------------------------
(As "ISV")
By: /s/ Gary Shroyer By: /s/ William Evans
--------------------------------- ----------------------------------
(Signature) (Signature)
Name: Gary Shroyer Name: William Evans
------------------------------- --------------------------------
(Printed or Typed) (Printed or Typed)
Title: CFO Title: VP, Marketing
------------------------------ -------------------------------
Date: 3-31-99 Date: March 31, 1999
------------------------------- --------------------------------
9.
<PAGE>
Exhibit A
---------
AGREEMENT PARTICULARS INCLUDING:
ND Product, ISV Application(s) and
Target Market(s),
ISV License Fees, ISV Support Fees
Neuron Data Product(s)
- ----------------------
- --------------------------------------------------------------------------------
Name of Application Description/Functionality
- --------------------------------------------------------------------------------
Neuron Data Elements Advisor Builder Rules Development Environment
- --------------------------------------------------------------------------------
Neuron Data Elements Advisor Run-Time Rules Run-Time Environment
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Neuron Data commits to supporting these products for the Sun Microsystems
delivered Java Virtual Machine (JVM) on the Windows NT 4.0 and later, Solaris
2.6 and later, HP/UX 10.0 and later, IBM RS/6000, and SGI Irix platforms, if Sun
provides commercial support for a JVM on these platforms.
ISV Application(s)
<TABLE>
- --------------------------------------------------------------------------------------------
Name of Application Description/Functionality
- --------------------------------------------------------------------------------------------
<S> <C>
Blue Martini Merchandising Management Module Manages merchandise: products and services
- --------------------------------------------------------------------------------------------
Blue Martini Customer Management Module Manager customers and customer relationships
- --------------------------------------------------------------------------------------------
Blue Martini Micro Marketing Module Manages data analysis
- --------------------------------------------------------------------------------------------
Blue Martini WebStore Operations Module Manages commerce store
- --------------------------------------------------------------------------------------------
Blue Martini Tools Module Provides tools to support other modules
- --------------------------------------------------------------------------------------------
</TABLE>
Blue Martini may introduce new modules from time-to-time and, at the time that
the new modules are introduced, may elect to append these new modules to the
list of covered ISV applications of this appendix.
Target Markets
- --------------
-----------------------------------------------------
Target Markets
-----------------------------------------------------
E-Commerce
-----------------------------------------------------
-----------------------------------------------------
ISV License & Support Fees
- --------------------------
See Exhibit I.
----------
10.
<PAGE>
Exhibit B
---------
Required Provision to be included in each
End User License Agreement
(this exact wording is not required)
. Government Matters
------------------
Licensee shall comply with all export laws, restrictions and regulations of
the U.S. Department of Commerce or other U.S. or foreign agency or
authority, and shall not export, or allow the export or re-export of any
material licensed hereunder or any portion thereof, in violation of any
such restrictions, laws or regulations, or to any D: 1 or E:2 country (or
any national thereof) specified in the then current Supplement No. I to
Part 740, or in violation of the then current Part 740 or 746 of the U.S.
Export Administration Regulations (or any successor regulations or
supplement), except in compliance with all licenses and approvals required
under applicable export laws and regulations. End User shall hold harmless
and indemnify Neuron Data, Inc. for any damages from breach of this
provision.
. Restricted Use
--------------
The Neuron Data, Inc. software licensed hereunder ("ND Software") shall be
used by the Licensee(s) for internal purposes only and is not intended for
resale. With respect to ND Software, Licensee agrees not to do any of the
following, directly or through any third party: (i) decompile, disassemble,
or otherwise reverse engineer or attempt to reconstruct or discover any
source code, algorithm or programming or other interfaces by any means, or
(iii) load or use it on any machine or system other than the specifically
authorized platform(s).,
. Limitation of Remedies and Damages
----------------------------------
Neuron Data, Inc. shall not be responsible or liable under any contract,
tort, or other legal or equitable theory for: (a) loss or inaccuracy of
data, (b) cost of procurement of substitute goods or services, (c) any
indirect, incidental, or consequential damages, including, without
limitation, loss of profits, (d) for any matter beyond its reasonable
control, or (e) for any software or other product or services not provided
directly by Neuron Data, Inc. Any liability of Neuron Data. Inc. shall be
limited exclusively to replacement of ND Software.
. Limitation of Warranties
------------------------
Neuron Data Software is provided on an "AS IS" basis and all warranties,
express or implied, are hereby disclaimed, including, without limitation,
any and all warranties of merchantability, fitness for particular purposes,
and non-infringement of third party intellectual property rights. Further,
Neuron Data. Inc. does not warrant, guarantee, or make any representations
regarding the use, or the results of the use, of the-licensed material or
written materials provided in terms of correctness. accuracy, reliability
or otherwise.
11.
<PAGE>
Exhibit C
---------
Support Services
This Exhibit defines Level 3 Support and provides the statement of work
required for this support level.
1. DEFINITIONS
1.1 Level 1 Support Services.
Level I Support Services include call receipt and entitlement
verification, call screening, product identification.
1.2 Level 2 Support Services.
For incidents escalated beyond Level 1, Level 2 Support Services will
include efforts to create a repeatable demonstration of the defect or error and
to resolve all problem for which source code modification is not required.
1.3 Level 3 Support Services.
Incidents not resolved through Level I and Level 2 will be escalated
to Level 3 Support Services. These services will include efforts to identify the
source code which is defective and provide correction, work-arounds and/or
patches to correct the defect or errors. Blue Martini will use its commercially
reasonable efforts to identify and resolve all errors and defect through Level I
and Level 2 Support Services.
2. LEVEL 1, LEVEL 2 SUPPORT
Level 1 and/or Level 2 support will be provided by Blue Martini and/or its
Authorized Service Providers ("ASP"). ND shall not be obligated to provided
Level I and Level 2 support services unless otherwise agreed to by the Parties.
3. LEVEL 3 SUPPORT
3.1 Priority Levels.
Defects which are reported by Blue Martini to ND shall be classified,
for the purposes of this agreement, in accordance with the following
definitions:
(a) Critical. (Priority 1) major System Impact (System down).
This classification corresponds to "Severity I Defect", which is a reported
defect in the ND product which cannot be reasonably circumvented, and which is
an emergency condition that significantly restricts the use of the ND product by
the customer to perform necessary business functions. Additionally, an
escalation may be designated a meltdown if 1) Blue Martini may lose a
significant amount of business if the problem is not resolved in a timely
manner, 2) there
12.
<PAGE>
is a potential for a public relations disaster if the problem is not resolved in
a timely manner, 3) or the problem is seriously impacting the customer's
business.
(b) High (Priority 2), Moderate System Impact (System
crashing/hanging). This classification corresponds to "Severity 2 Defect", which
is a reported defect in the ND product which restricts the use of one or more
portions of features of the ND product by the customer to perform necessary
business functions but does not completely restrict use of the ND product.
(c) Medium (Priority 3) Minor System Impact
(Performance/Operational Impact). This classification corresponds to "Severity 3
Defect" and/or "Severity 4 Defect". A Severity Level 3 Defect is reported defect
in the ND product which restricts the use of one or more portions or features of
the ND product by the customer to perform necessary business functions, but the
defect can be reasonably circumvented; and Severity Level 4 Defect is reported
defect in the ND product which does not substantially restrict the use of one or
more portions or feature of the ND product by the customer to perform necessary
business functions.
(d) Low (Priority 4), Minor problem, observation, or `how to'
inquiry.
Blue Martini will establish, if possible, the priority level of each
escalation based on their perception of the needs of each customer. As part of
its initial action plan, ND will (i) respond as to whether it agrees with Blue
Martini's defect classification, or (ii) classify the defect in accordance with
the definitions set forth above.
3.2 Defect Reporting by Blue Martini ("Escalations").
ND will respond to all defects reported by Blue Martini.
Escalations from Blue Martini Engineering will be communicated to ND
via the following process:
Escalations are reported to Blue Martini Engineering through the Blue
Martini escalation tracking system. These escalations are submitted form the
various Blue Martini Answer Centers and Authorized Support Providers (ASP's) and
Blue Martini records them in a Blue Martini database ("Scopus" or equivalent,
hereinafter referred to as "Scopus") and assigns each one a unique Scopus
reference number (ID). Problems which Engineering is unable to resolve are given
to the Blue Martini Designated Support Contact who reviews and communicates
them, if appropriate, to ND for resolution. In all cases the Designated Support
Contact (or alternate Designated Support contact) will initiate the Level 3
Support process by notifying ND that a problem is being escalated.
In all cases the person notified by Blue Martini will be the ND
designated Support Contact for Blue Martini (or Alternate Designated Support
Contact). Notification may be by e-
13.
<PAGE>
mail or phone. The initial notification will include the Scopus reference
number and a description of the problem being escalated.
3.3 Acknowledgement by ND.
ND will acknowledge escalations by contacting the Blue Martini
Designated Support Contact(s) via e-mail or phone. All incoming escalations
shall be logged for tracking purposes by ND and the time of acknowledgement of
each escalation will be logged by the Blue Martini Designated Support
Contact(s).
3.4 Acceptance by ND.
After acknowledging receipt of each escalation, ND will examine the
contents of the Scopus escalation provided by Blue Martini Engineering to
determine whether the information provided is sufficient for ND to begin work
toward providing Blue Martini Engineering with a resolution. The Scopus
escalation shall contain:
(a) a reasonably detailed description of the problem, together
with any supporting information which Blue Martini Engineering believes may
assist ND in its diagnostic process;
(b) ND product and version (including patch updates) against
which of the escalation is being raised;
(c) the operating system version (including patch updates)
against which the escalation is being raised;
(d) the hardware configuration required to reproduce the
problem;
(e) a test case or instructions necessary to demonstrate the
problem;
(f) the current priority and status proposed by Blue Martini;
(g) an indication as to whether additional information such as
dumps, logs, etc. are, or can be made, available; and
(h) the date and time of assignment to ND.
If ND determines that there is insufficient information to begin work on
resolving the escalation, the Scopus escalation will be promptly assigned back
to Blue Martini Engineering via notification to the Blue Martini Designated
Support Contact(s).
When a problem escalated to ND is found to consist of more than one
customer problem or the Scopus escalation describes more than one customer
problem, ND will report the situation to Blue Martini. If Blue Martini agrees
with ND analysis, Blue Martini will determine which is
14.
<PAGE>
the primary problem to be worked by ND and Blue Martini may, at its option,
report the second problem(s) to ND as a new escalation(s).
ND will [...***...] establish an automatic acknowledgement of escalations
for which Blue Martini is notified via phone, e-mail or access to NDDN.
In the event that ND assesses the escalated call to be non vendor defect or
failure, ND will contact Blue Martini Engineering with a detailed explanation so
the escalation can properly be redirected within Blue Martini.
3.5 Response Times. ND will respond to Blue Martini with a corrective
action and implementation in accordance with the following, which represent the
response goals ND will strive to achieve using all cost-effective, reasonable
standard practices:
Priority Initial Action Plan Implementation of Fix
[...***...] [...***...] [...***...]
Note: Within [...***...] of escalated call, from Blue Martini, ND will
acknowledge receipt of call. ND will provide initial assessment of
the call within [...***...] of escalation from Blue Martini. The
initial Action Plan is due [...***...] after its current assessment.
[...***...]
If the Customer's system is still down after [...***...] from the
initial escalated call, ND will arrange to provide their resources on site at
Blue Martini's request if no apparent progress is being made.
Should Blue Martini decide that on-site resources are required, then Blue
Martini will be billed at [...***...] or ND's then current consulting rate,
whichever is greater, for travel within North America. Travel outside North
America may take [...***...] to arrange and will be charged at then current
consulting rates.
Priority Initial Action Plan Implementation of Fix
[...***...] [...***...] [...***...]
Note: Within [...***...] of escalated call from Blue Martini, ND will
acknowledge receipt of call. ND will provide initial assessment of
the call within [...***...] of escalation from Blue Martini. The
initial Action Plan is due [...***...] after
[...***...]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
15.
<PAGE>
its current assessment. ND will work on a continuous effort based on
the agreed to current Action Plan.
If the Customer's system is still down after [...***...] from the
initial escalated call, ND will arrange to provide their resource on site at
Blue Martini's request if no apparent progress is being made.
Should Blue Martini decide that on-site resources are required, then Blue
Martini will be billed at [...***...] or ND's then current consulting rate,
whichever is greater, for travel within North America. Travel outside North
America may take [...***...] to arrange and will be charged at then current
consulting rates.
Priority Initial Action Plan Implementation of Fix
[...***...] [...***...] [...***...]
Note: Within [...***...] of escalated call from Blue Martini, ND will
acknowledge receipt of call. ND will provide initial assessment of
the call within [...***...] of escalation from Blue Martini. The
initial Action Plan is due [...***...] after its current
assessment. ND will work on a continuous effort based on the agreed
to current Action Plan.
Any on-site attendance by ND support personnel to resolve escalation must
be requested by Blue Martini and will be managed by Blue Martini. ND must be
able to provide on-site support both domestically and internationally and have
at least [...***...] who can visit customer sites outside the U.S. on reasonable
notice.
In the vent where problem resolution cannot comply with the above time
frames, ND will contact Blue Martini and both parties will use reasonable
efforts to assist each other in resolving these escalations to the satisfaction
of Blue Martini's customers.
The times for response on individual escalations are defined in terms of ND
normal business hours, as follows:
8:00 AM - 5:00 PM U.S. Pacific Standard Time
Monday through Friday, excluding Blue Martini holidays which shall be
published in advance at least annually and which in 1999 are:
New Year's Day
President's Day
[...***...]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
16.
<PAGE>
Memorial Day
Independence Day
Labor Day
Thanksgiving
Christmas
New Year's Eve
3.6 Action Plan.
If ND determines that sufficient information has been provided and has
notified Blue Martini that the escalation has been accepted, work on resolving
the escalation that begins in accordance to ND standard business practices and
an action plan ("action Plan") will be provided by ND to Blue Martini within the
response times which have been set forth in the Agreement. Each Action Plan
should include the following information.
(a) problem statement, including early evaluation;
(b) confirmation, when possible, that ND has reproduced the
problem;
(c) problem status;
(d) action required;
(e) who needs to perform the actions (where "how" may refer to
ND Engineering, Blue Martini, etc. i.e. it does not necessarily require the
identification of a specific engineer);
(f) when the actions should occur and when they are expected to
be completed; and
(g) Projected date for resolution and confidence level, if
possible, for such date (stated in percent form).
ND will promptly notify Blue Martini of significant exceptions to each
Action Plan, and will provide updates to specific Action Plans as reasonably
requested by Blue Martini.
In the event that an escalation must be returned to Blue Martini for
more information, a revised Action Plan will be provided by ND when the
escalation is re-assigned to ND with the requested information.
3.7 Escalation Status.
The current status of each escalation will be tracked by ND in accordance
with its standard business practices. Blue Martini will assign an escalation
status category for its internal tracking purposes. Blue Martini's initial
escalation status categories are as follows:
17.
<PAGE>
(a) OPEN AWAITING ENGINEERING: Acknowledged by Support
Engineering, escalated to Development Engineering and waiting for a response.
(b) OPEN - AWAITING FIELD INFO: ND has requested additional
information from the field to continue working the problem.
(c) OPEN - ON SITE SUPPORT: An engineer from ND is working on
site to resolve the customer problem.
(d) OPEN - UNDER INVESTIGATION: Accepted and being worked by a
ND Engineer.
(e) PENDING - FIELD ACTION: A proposed resolution has been
supplied by ND, which must be related to the customer in order to close the
escalation. Any such changes will be given to Blue Martini Engineering for
passing on to the relevant site. Blue Martini Engineering is also responsible
for conveying the test results back to ND.
(f) PENDING FIX VERIFICATION: ND has provided a resolution to
the escalations and is awaiting feedback. Any such fixes will be given to Blue
Martini Engineering for passing on to the relevant site. Blue Martini
Engineering is also responsible for conveying the test results back to ND.
(g) CLOSED: Blue Martini Engineering has confirmed that the
solution provided by ND resolves the customer's problem.
3.8 Resolution
Within the specified response times, ND will [...***...] to resolve
each reported defect, by providing either (i) a reasonable work around, which
may consist of specific administrative steps or alternative programming calls,
(ii) an object code patch to the ND products, or (iii) a specific Action Plan
for how it will address the defect and an estimate on how long it will take to
rectify the defect.
Blue Martini Designated Support contact(s) will [...***...] to
assist ND Designated Support Contact(s) to resolve escalation where problem
determination is unclear and impacts the resolution time frames noted above.
3.9 Resolution Categories
Blue Martini will assign a resolution category for its internal
tracking purposes. Blue Martini's initial escalation resolution categories are
as follows:
(a) CODE CHANGE: revised Source Code is require and a patch kit
will be made available to Blue Martini Engineering.
[...***...]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
18.
<PAGE>
(b) DUPLICATE: the escalation is a duplicate of an existing one.
(c) DOCUMENTATION: the relevant documentation is in error and no
Source Code change is needed. On-line documentation changes would be handled as
source code changes.
(d) USE: the problem was caused by incorrect usage. Blue Martini
may request that a code change be made to resolve such escalation.
(e) PERMANENT RESTRICTION: the escalation can be traced to a
problem in the ND products which cannot be corrected in this version.
(f) SUGGESTION: the software is operating to specification and
the reported escalation is really an enhancement or a (non-compliant) suggest
change.
(g) NOT SUPPORTED: the problem has been determined to be caused
by a defect in a portion of the ND products which is not supported by ND.
(h) CONFIGURATION: the problem has been caused by the use of the
ND products on an unsupported or invalid configuration.
3.10 Permanent Restrictions, Enhancements and Suggestions.
ND may advise Blue Martini that for a particular escalation the
resolution is likely to cause regression, break a standard, cause some other
part of the ND products to fail, or for any
other reason is ill advised. Blue Martini may either accept ND's recommendation
or request that ND provide the resolution, and ND will consider such requests in
good faith. Should Blue Martini require such a resolution it will be completed
for [...***...].
Similarly, ND may advise Blue Martini that the resolution to a
particular escalation would involve redesigning and/or rewriting a portion of
the ND products. If ND determines not to carry out the resolution, Blue Martini
shall have an option to require ND to carry out the resolution for [...***...].
3.11 Resolution Testing
Defect resolutions will be tested according to ND standard business
practices, which includes unit testing on the release level of the ND products
against which the escalation was reported and regression testing at the time the
defect is resolved for all currently supported releases of the ND products. If a
problem or regression is found to be caused by a patch previously created by ND
such problem or regression will be corrected by ND and reported to Blue Martini.
[...***...]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
19.
<PAGE>
For each release of the licensed product, ND will provide to the Blue
Martini Designated Support Contact(s) a list of the platforms and configurations
on which ND tests defects and resolutions.
3.12 Patch Delivery
ND shall provide all Patches to Blue Martini as soon as they are
available, but in any event within the specified time frames set forth in
Section 3.5. In all cases where possible, ND shall provide Patches on-line. ND
shall conduct bug fix validation test (on standard base level system) and
regression testing for Patch compatibility prior to sending the same to Blue
Martini; unless such testing would cause ND to not comply with the relevant time
frames require under Section 3.2 in which case ND shall inform Blue Martini and
Blue Martini shall have the option to either waive the testing requirement,
waive the time requirement or require that ND proceed under its obligations and
pursue its available remedies should ND not meet its obligations. Whenever
possible, ND shall send a test case or test procedure used to verify all
Patches.
Defect resolutions which are provided via patches shall be provided by
ND to Blue Martini Engineering in a mutually agreement format for duplication
and distribution.
Each patch will consist of:
(a) a README file describing the escalation and solution, and
giving instructions for installing the correction;
(b) a shell script to apply the correction or other appropriate
instructions; and
(c) the corrected object/binary file/libraries/scripts.
3.13 Documentation of Closed Escalations
When an escalation is resolved and closed, ND will update its internal
records in accordance with its standard business practices in order to provide a
long-term audit trail. ND will provide Blue Martini with a reasonably detailed
explanation of the resolution and any differences in hardware or software
configuration which are relevant to the resolution.
3.14 Project Management
Blue Martini will measure responsiveness and quality with respect to
ND provision of Level 3 Support services by recording and monitoring a three-
month rolling average of ND performance against the following criteria:
(a) Responsiveness: acknowledges will be made, Action Plans will
be provided, regular updates will be submitted and resolutions will be completed
within the
20.
<PAGE>
response times set forth in Paragraph 3.5 of this Exhibit for at least
[...***...] of the escalations in each Priority category.
(b) Quality; at least [...***...] of resolutions will work
first time.
3.14.1 Quality Objectives
ND will [...***...] to supply Blue Martini with resolutions of
escalations that work first time. Working first time is defined as:
(a) Correcting the reported problem as described in the Scopus
escalation;
(b) Not introducing any regression following ND periodic
regression testing; and
(c) Not causing any performance degradation.
Patches that fail to work first time will be reworked by ND. Any
additional Services requested by Blue Martini will be processed by ND in all
respects as new escalations.
3.14.2 Corrective Action Plan
In the event that ND consistently fails to meet the response
time, quality or consultation goals defined above, Blue Martini may request
that ND provide a plan to address the causes of such failure (a "Corrective
Action Plan"). Upon receipt of written notice of Blue Martini, wherein Blue
Martini shall describe such failure in reasonable detail, ND shall have
[...***...] to provide a Corrective Action Plan to Blue Martini and
[...***...] to correct the failure. During the [...***...], progress in
implementing the Corrective Action Plan shall be monitored on a weekly basis
by senior management at Blue Martini and ND. If ND fails to achieve the
performance, quality or consultation goals set forth in the Corrective Action
Plan, Blue Martini may invoke the termination procedures set forth in Section
9 of the ISV License and Marketing Agreement.
3.14.3 Reports
ND will use [...***...] to provide Blue Martini with the
following status report:
(a) Weekly Escalation Status: a detailed listing showing the
current status and action plan for all open escalations and all escalations
resolved for the week; and
(b) Monthly Escalation Statistics: a summary report of all
Escalations resolved by ND for the preceding months, by Release level and
Component.
[...***...]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
21.
<PAGE>
(c) Daily Escalation Status: for Meltdown Escalations, a daily
status report will be required in order to keep the customer up to date on
progress of resolution. (Weekly escalation status required for Hot and Warm)
3.14.4 Meetings
Blue Martini requires the following regular meetings or
teleconferences as a guideline:
(a) Daily Meltdown Escalation (Priority 1) status meetings, if
specified in the escalation Action Plan inclusive of conference calls with the
customer if necessary.
(b) Weekly Escalation Status: teleconference held with ND
Designated Support Contact and the Blue Martini Designated Support Contact to
report on and discuss progress on all currently open escalations.
3.14.5 Late Resolutions
When a resolution is more than [...***...] late, i.e., the
normal resolution delivery goal for the priority of the escalation in question
has been exceeded by more than [...***...], Blue Martini has the following
options:
(a) escalate the defect to the next higher Priority (e.g. High
to Critical), and track progress daily and work the issue with ND senior
management;
(b) convene a meeting with ND to establish a Corrective Action
Plan; and
(c) if neither (a) or (b) resolves the escalation, then Blue
Martini shall have the options set forth in Section 7.2(a) of the Agreement.
3.15 End of Life Support (EOL)
ND will provide Blue Martini with product support for the duration of
the Software Products' service life. This is defined as product support provided
by ND to Blue Martini from commencement of the Software Product's warranty
period through a period of not less than [...***...]. ND shall notify Blue
Martini of a planned EOL announcement of its Software Products [...***...]
before the published date or assignment of backline support of Software Products
is planned to be transitioned to a third party company. In the latter event, ND
will select a recognized company with a proven track record of success in
providing EOL software support & maintenance. Vendor will provide Blue Martini
with backline support from the commencement of the published EOL date of the
Software Products as follows:
[...***...]: Full support (respond to all escalated calls from Blue
Martini, provide fixes and error corrections.
[...***...]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
22.
<PAGE>
[...***...]: Support (respond to Priority I and 2 escalated calls from
Blue Martini provide fixes and error corrections; work-arounds may be used.
[...***...]: Time and Material Support, [...***...].
3.16 Software in Escrow
In the event of (i) ND bankruptcy as provided in Section 11 of the ISV
License and Marketing Agreement or (ii) ND inability to perform its support
obligations after [...***...] prior written notice and an opportunity to
correct such deficient support services, the deposited Escrow Material will be
delivered to Blue Martini by the escrow agent, stating grounds upon which the
request is made.
On receipt of the request form from Blue Martini, the escrow agent
shall mail a copy of the request to ND and shall then deliver the Escrowed
Materials to Blue Martini [...***...] after the copy of the request is mailed
to ND.
Blue Martini may at its option use, copy and modify the Escrowed
Material only to provide backline support to Customers. Blue Martini
acknowledges and agrees that all Escrowed Material are confidential and
proprietary to ND. Source Code may not be transferred to a third party under any
circumstances. ND will own the sole, exclusive rights to any and all changes
made by Blue Martini. The source code may be accessed only for providing Blue
Martini customers with fixes to bugs which have been acknowledged as such in
writing by ND. Blue Martini may make no enhancement or feature changes.
Should ND elect to EOL the product(s) it has licensed to Blue Martini,
Blue Martini will be give the opportunity to purchase the source code to these
product(s) under terms no more or less favorable than those ND offers to it's
best customers of the same product(s).
3.17 Distribution Binaries
ND will deliver to Blue Martini two (2) copies of the Software (as
defined in Exhibit A of the Agreement) and updates and upgrades thereto in
binary form so that Blue Martini can make them available for its customers on
distribution servers maintained by Blue Martini.
3.18 Vendor Documentation
ND will provide, free of charge, an electronic version of the
Documentation (such as, but not limited to, installation, programmer/developer,
and support manuals) that is readable on Blue Martini workstations, which Blue
Martini may copy and distribute to Blue Martini's service providers. This
material will not, however, include training manuals and documentation, which
will be made available as specified in Section 5.1.
[...***...]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
23.
<PAGE>
4. MISCELLANEOUS
4.1 Shipment of Supported Updates and Upgrades
ND shall promptly deliver Upgrades to Blue Martini as soon as
commercial available, but in no event later than first customer shipment of
Upgrades to the Software Product. ND shall supply Beta Versions Upgrades to Blue
Martini prior to commercial shipment to permit Blue Martini to prepare to
integrate the Upgrade into its products. Blue Martini shall have the right, but
not the obligation, to provide input to ND regarding the content and
characteristics of future versions and releases of the products; provided that
ND shall have no obligation to incorporate any such suggestion.
ND shall provide Upgrades to Blue Martini in separate shippable
packages as follows:
(a) Right to Use (RTU) licenses
(b) Media (CDs)
(c) Upgrade documentation
4.2 Secure Communications Link
ND will be required to set up a secure communications link between ND
and Blue Martini for the purposes of sending all non-disclosure information,
patches, files, documentation as well as e-mail correspondence.
5. TRAINING AND CONSULTATION
5.1 Transfer of Information (TOI)
This Section 5.1 shall not apply to Maintenance Releases. For each
'new Enhancement Release, ND shall ensure Blue Martini receives Transfer of
Information (TOI) [...***...] prior to product release. The initial TOI
will be completed by FCS Code Freeze. ND shall offer to train-the-trainer
session at a central Blue Martini designated facility and agrees to allow Blue
Martini to videotape the session for Blue Martini internal duplication and
distribution. Blue Martini will be billed [...***...]. The initial TOI will be
ready within [...***...] following FCS Code Freeze. Content of the final TOI
must include the following to a sufficient level of detail:
Product Overview
Features
Limitations
[...***...]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
24.
<PAGE>
File Descriptions
External Specification (Functional Spec)
Theory of Operation - detail of installation, configuration
Walk through of product install, config, deinstall
Troubleshooting/Diagnostics Known Bugs & Work
Arounds Common User Errors Troubleshooting
Tools and Diagnostic Techniques
Recommended Support Strategy
5.2 Customer Training Upon Blue Martini specific request with ND
agreement, ND shall be available to participate in training of Blue Martini's
distributors and resellers in providing support services for the Supported
Products. Such training may include both creating and conducting training
programs. Blue Martini will be billed at [...***...].
5.3 E-mail and Phone Technical Support
ND shall answer any related technical questions on the Supported
Products from Blue Martini "support" alias, or other such restricted access
aliases for support purposes. Until Blue Martini is provided access to such
aliases Blue Martini shall monitor such aliases and provide ND the questions
that require answers. ND agrees to use [...***...] to meet
such response time guidelines that might exist for such aliases. On-line access
to NDDN, [email protected] and any access to ND's Customer Support Staff is
- -----------------------
specifically limited to Blue Martini Tier Three support personnel.
ND will maintain and make available to Blue Martini, telephone
support accessible through a toll free line. ND support service center will be
staffed by properly trained ND personnel between 8:00 a.m. and 5:00 p.m.,
Pacific Standard/Daylight Savings Time, Monday through Friday (excluding
holidays). ND will use [...***...] to arrange for a qualified support engineer
or support manager to return calls to Blue Martini within [...***...] of Blue
Martini's first call to ND. ND shall provide a list of designated contacts,
phone numbers, and pager numbers to Blue Martini.
5.4 Vendor Bug Reports
ND shall permit Blue Martini to have access to ND's bug reports,
[...***...] relevant to the Licensed Products. Access to the bug reports shall
be limited by Blue Martini to its employees with a need to know and the
information in the bug reports shall be considered and treated by Blue Martini
as Proprietary Information in accordance with the provisions of Section 4
[...***...]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
25.
<PAGE>
(Confidential Information). ND grants Blue Martini the right to use, copy and
distribute such data internally for purposes of resolving Customer Support
requests with respect to the Supported Products.
5.5 Vendor Development Process Audit
Blue Martini will provide at its option, rating feedback quarterly to
which ND will take all reasonable actions to improve where deficiencies have
been noted. A follow up audit will be scheduled for a later date to determine if
the deficiencies have been corrected.
26.
<PAGE>
Attachment A
------------
Supported Software: Neuron Data Elements Advisor Builder & Run-Time
Supported Platforms: All
Application(s): See Exhibit A
Support and Maintenance Fees: [...***...]
Number of Authorized Named Contacts (Development Licenses):
3
Telephone Support Authorized: (Y/N) Yes.
[...***...]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
27.
<PAGE>
Exhibit D
---------
ND Trademarks
(C) 1998 Neuron Data, Inc. All rights reserved. Elements, Elements Enterprise,
Elements Messenger, Elements Converter, Elements Accessor, Elements Tester,
Elements Presenter, Elements Advisor, Elements Expert and OOScript
28.
<PAGE>
Exhibit E
---------
Has been omitted.
29.
<PAGE>
Exhibit F
---------
Marketing Efforts
(Check appropriate boxes)
Public Relations & Advertising
- ------------------------------
[_] . Press Releases
[_] . Speaking Engagements
[_] . Mutual Press/Analyst Reference
[_] . Joint Advertising Programs
Events (Mutual Participation)
- -------------------------------
[_] . Trade shows
[_] . User Group Meetings
[_] . Sales Meetings
[_] . Seminars
Other
- -------------------------------
[_] . Exchange of Sales Account Manager Contacts
[_] . Exchange of Collateral
[_] . Development of Joint Collateral
[_] . Mutual Web site Presence and Links
[_] . Mutual Partner Catalog listing
[_] . Integrated Demo(s) of parties products
30.
<PAGE>
EXHIBIT G
---------
YEAR 2000 COMPLIANT SOFTWARE
- ------------------------------------------------------------------------------
Product Previous Y2K- Release
Name Name Compliant Date
Release
Level
- ------------------------------------------------------------------------------
Elements Accessor/C & C++ Data Access Element 2.1 & later 06/1997
- ------------------------------------------------------------------------------
Elements Advisor Jewels 1.0 & later 05/1997
- ------------------------------------------------------------------------------
Elements Enterprise/C & C++ Elements Environment 2.1 & later 06/1997
- ------------------------------------------------------------------------------
Elements Expert/C & C++ Intelligent Rules Element 4.1 & later 06/1997
- ------------------------------------------------------------------------------
Distributed Messaging
* Elements Messenger/C & Element 3.1 & later 06/1997
- ------------------------------------------------------------------------------
Elements Presenter/C & C++ en Interface Element 4.1 & later 06/1997
- ------------------------------------------------------------------------------
Elements Presenter/J Joy 1.0 & later 05/1997
- ------------------------------------------------------------------------------
Microline MCT, MVT & MWL None 3.0 & later 02/1997
- ------------------------------------------------------------------------------
Note: Information on Elements Messenger is provided for the convenience of
customers using older releases. Neuron Data no longer markets or supports this
product. For assistance with Messenger, please contact Modulus Technologies.
31.
<PAGE>
EXHIBIT H
---------
Escrow Agreement
----------------
As of the effective date of this Agreement, Neuron Data has an escrow deposit
agreement for the Source Code in place with Data Securities International, Inc.,
("DSF') dated October 29, 1996 (the "Escrow Agreement"). Within 30 days after
the execution of this Agreement, Neuron Data will add Blue Martini Software as a
---------------------
beneficiary to the Escrow Agreement. Neuron Data will provide a copy of the
Escrow Agreement to Blue Martini Software, with confidential information
removed, upon written request.
Neuron Data will maintain Blue Martini Software as a beneficiary of the Escrow
---------------------
Agreement (or of a substantially similar successor escrow deposit agreement with
a commercial source code escrow agent) at Blue Martini Software's expense, at
-----------------------
all times for as long as source code escrow is required by Section 1 of the
-
Agreement.
32.
<PAGE>
EXHIBIT I
---------
Pricing and Additional Terms
----------------------------
1. The following terms are incorporated into the Agreement:
1.1. A five-year term from date of execution.
1.2. An unlimited license (as set forth in the Agreement} for internal use
of Advisor Builder (a.k.a. the development environment) by your
development and consulting organizations.
1.3. A limited license (as set forth in the Agreement) for external
deployment of Advisor Engine (a.k.a. the run-time environment} in the
named application.
1.4. A limited license (as set forth in the Agreement) for external
deployment of Advisor Builder for the sole purpose of adding or
modifying the rules that are an integral part of your application
software.
1.5. A limited license (as set forth in the Agreement} for external
deployment of Advisor Technical and Training material for the sole
purpose of facilitating the use of the above licensed material within
your application software.
2. Blue Martini will pay ND an initial, nonrefundable, license fee (the
"Initial License Fee") of [...***...] due in two equal payments Net
[...***...] and [...***...] from execution of this contract.
3. Blue Martini will calculate and pay royalties as a percentage of
[...***...] for products containing the Licensed Product per the
schedule outlined below:
<TABLE>
<S> <C> <C> <C> <C> <C>
Contract year [...***...] [...***...] [...***...] [...***...] [...***...]
% of [...***...] [...***...] [...***...] [...***...] [...***...] [...***...]
</TABLE>
No royalties shall be due on licenses used for purposes of demonstration,
evaluation, development, testing, or quality assurance.
4. ND understands that Blue Martini may require up to eight 1/2 day sessions
with an ND architect to review various issues concerning the integration of
ND's Advisor with the Blue Martini product suite. These sessions will be
billed under separate PO's and scheduled at mutually convenient times as
required. Consulting Services are available at ND's then current consulting
rates.
5. Blue Martini will begin quarterly royalty payments to ND once the aggregate
royalty & support, fees due ND under this agreement exceed the initial
license & support fees. Royalty & Support fees are due ND as a result of
Blue Martini' s revenue recognition of an application that embeds the
software product(s} licensed from ND.
6. Royalty payments will be calculated and paid quarterly with an annual
audited reconciliation. ND will pay the expense of these audits unless a
discrepancy of [...***...] or more is found, in which case Blue Martini
will bear the audit costs. The audit shall be conducted by an independent,
nationally-recognized accounting firm and shall be limited to those records
required for the auditor to determine the correctness of payments to ND
hereunder. The auditor shall be required to sign a confidentiality
agreement acceptable to Blue Martini.
[...***...]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
33.
<PAGE>
7. ND will provide an Annual Support & Maintenance Agreement that will cover
the current Advisor Builder (development environment) and Run-Time. This
agreement will provide phone & web-based technical support, patches,
maintenance (point) releases as well as upgrade (version) releases.
8. Support & Maintenance services for one year are calculated at [...***...]
of the royalty fee paid to ND. Only licenses with an active Blue Martini
Support & Maintenance agreement will be included in the calculation of
Support & Maintenance renewals. Support & Maintenance renewal fees will be
calculated and paid quarterly with an annual audited reconciliation, under
the same procedures as set forth in paragraph 7.
9. Blue Martini will limit its support contacts to no more than three
authorized Blue Martini employees. These names will be provided to ND and
stored in ND's support database. Blue Martini will have the right to update
and change these authorized contacts as necessary.
10. ND will be given mutually agreeable co-marketing and attribution within the
Blue Martini product suite, consistent with what Blue Martini provides
others technology providers.
11. Blue Martini will advise its customers of ND's offer to sell ND developer's
licenses to Blue Martini customers for a reduced fee. It is acceptable that
this be accomplished via a url to ND's website that will be placed in the
`About' box of Blue Martini's applications.
12. With respect to press and public exposure the parties agree: 12.1. Blue
Martini will provide quotes or select and acknowledge statements from ND's
prepared copy for a joint press release announcing ND as a technology
provider (due within 30 days of contract signing). Blue Martini shall have
approval rights over the contents of the statement.
12.2. Blue Martini grants ND the right to publish a customer profile
outlining the application in which ND's tools are employed (due when
the product enters beta shipment, please see the examples on our Web
site).
12.3. Blue Martini will [...***...] to participate in the development
and placement of trade journal articles discussing the business
benefits of ND's technology in your application.
13. This information represents a confidential disclosure between ND and Blue
Martini Software and is not to be disclosed by either party outside their
company without the other party's prior written consent.
[...***...]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
34.
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EXHIBIT 10.13
ISV SOFTWARE LICENSE AGREEMENT
This ISV Software License Agreement is entered into this 29th day of
January, 1999 (the "Effective Date") by and between BEA WebXpress, Inc., a
Delaware corporation with principal offices at 550 California Street, 10/th/
Floor, San Francisco, California 94104 ("WebXpress") and Blue Martini Software,
a Delaware corporation with principal offices at 2600 Campus Drive, Suite 175,
San Mateo, California 94403 ("Licensee").
Recitals
Whereas, WebXpress desires to grant to Licensee, and Licensee desires to
receive from WebXpress, a worldwide, non-exclusive license to integrate
WebXpress's proprietary software in object code format into Integrated Products
(as hereinafter defined), and to distribute such WebXpress software as
integrated into Integrated Products, all in accordance with the terms of this
Agreement.
Now, Therefore, in consideration of the foregoing and the mutual covenants
contained herein, the parties agree as follows:
Agreement
1. Definitions.
For purposes of this Agreement the following terms shall have the meanings
set forth below:
1.1 "Affiliate" means an entity controlling, controlled by, or under
common control with Licensee. For purposes of this definition, "control" or any
correlative form thereof, means the ownership of more than fifty percent of the
voting stock of such entity, or if such entity is not a corporation, the ability
to control the day-to-day operations and business of such entity.
1.2 "Distributor" means an Affiliate, or third party distributor or
reseller, appointed by Licensee under the terms of this Agreement, who acquires
Integrated Products from Licensee solely for the purpose of distributing such
Integrated Products to End-Users, and not for such party's internal business
purposes. Any Distributor who seeks to make use of any Integrated Product for
its own internal business purposes must do so under the terms of an End-User
License Agreement.
1.3 "Distribution Agreement" means a written agreement between Licensee
and a Distributor, signed by both parties, covering the distribution by such
Distributor of any Integrated Product to End-Users, which agreement is
consistent with, and no less protective of WebXpress's proprietary and
intellectual property rights, than the terms of this Agreement.
1.4 "End-User" means a person or entity who acquires Integrated Products
from Licensee or a Distributor for such person or entity's internal business
purposes, and not for sale, resale, lease or any other form of distribution to
third parties.
[...***...] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
1.
<PAGE>
1.5 "End-User License Agreement" means a written agreement between either
Licensee or a Distributor, and an End-User, which agreement is either signed by
both parties or is in "shrinkwrap" or "clickwrap" form, covering the licensing
of an Integrated Product to such End-User. Such agreement must be consistent
with, and no less protective of WebXpress's proprietary and intellectual
property rights in the WebXpress Software, than the terms of this Agreement.
Without limitation, an End-User License Agreement must contain terms consistent
with the applicable provisions of Section 2 of this Agreement.
1.6 "Integrated Product" means an application software product created by
Licensee through the integration of WebXpress Software with application software
programs proprietary to or licensed by Licensee ("Licensee Applications"). All
Integrated Products are subject to the restrictions on development, use and
distribution set forth in Section 2 of this Agreement. The Integrated Products
covered by this Agreement are described in greater detail in Schedule B,
attached hereto and made a part hereof.
1.7 "WebXpress Software" means the machine-readable, compiled, object code
form of WebXpress's proprietary software and associated documentation. The
specific WebXpress Software covered by this Agreement is set forth on Schedule
A, attached hereto and made a part hereof. Provided that Licensee is not in
material breach of this Agreement and is current in its payment of annual
support fees, the WebXpress Software covered by this Agreement shall also
include the object code form of any subsequent releases or successor products of
the WebXpress Software set forth, on Schedule A, and any modifications
(including bug fixes, error corrections, enhancements and updates) to which
Licensee may be entitled pursuant to the terms Schedule E.
2. License Grant.
2.1 License To Reproduce And Distribute. Subject to the terms and
conditions of this Agreement, WebXpress hereby grants to Licensee, under
WebXpress's intellectual property rights in and to the WebXpress Software, a
worldwide, non-exclusive, non-transferable license: (i) to integrate the
WebXpress Software into Integrated Products; (ii) to reproduce the WebXpress
Software as so integrated into Integrated Products; and (iii) to distribute the
WebXpress Software as integrated into Integrated Products solely to End-Users
who are subject to an End-User License Agreement. Licensee shall make no use of
any copies of the WebXpress Software except as provided in this Section 2.1.
Licensee may sublicense the distribution rights granted under this Section 2.1
solely as described in Section 2.2. WebXpress shall deliver to Licensee all
license keys, consistent with Schedules A and C on the effective date. All
rights not specifically granted herein shall be retained by WebXpress.
2.2 Sublicensing. WebXpress grants to Licensee the right to appoint
Distributors to distribute the Integrated Products to End-Users. All
Distributors appointed by Licensee must execute a Distribution Agreement.
Licensee will use reasonable commercial efforts to ensure that such Distributors
comply with the terms of their respective Distribution Agreements and will
inform WebLogic promptly of any known violation, infringement or breach.
2.3 Restrictions. Licensee's rights under Section 2.1 are, without
limitation on any other restrictions set forth in this Agreement, subject to the
following limitations and restrictions:
2.
<PAGE>
(i) Each Integrated Product made available for distribution to End-
Users must be developed so that the WebXpress Software and any of its API's are
not directly accessible to the End-User, i.e. an End-User using the Integrated
Product will have direct access only to the Licensee Application portion of such
product;
(ii) Each and every End-User Agreement and each and every Distributor
Agreement shall provide that the End-User or Distributor, as the case may be,
may not under any circumstances attempt, or knowingly permit or encourage others
to attempt to decompile, decipher, disassemble, reverse engineer or otherwise
decrypt or discover the source code of all or any portion of the Integrated
Product, including the WebXpress Software embedded therein;
(iii) Each and every End-User Agreement shall provide that the End-
User may not under any circumstances use the WebXpress Software or any of its
API's in any manner except indirectly in connection with the use of the Licensee
Application portion of the Integrated Product, and that the End User may not run
any third party software applications on the WebXpress Software or any of its
API's, without first purchasing a license for such use from WebXpress;
(iv) Licensee may not, under any circumstances, distribute the
WebXpress Software or any of its API's as standalone products;
(v) Licensee shall not integrate the WebXpress Software with any
products other than the Integrated Products without first obtaining WebXpress's
prior written consent.
2.4 Licensee Certification. Licensee represents and warrants to and
for the benefit of WebXpress that each Integrated Product contains a significant
enhancement of features and/or functionality to the WebXpress Software embedded
therein, and that each Integrated Product is substantially different from any of
WebXpress's products and does not compete with any WebXpress products.
2.5 Proprietary Notices. Licensee shall not remove, efface or obscure any
copyright notices or other proprietary notices or legends from any WebXpress
Software or WebXpress material provided hereunder, and shall reproduce all such
notices and legends when incorporating the WebXpress Software into the
Integrated Products.
2.6 Branding and Quality Control Provisions.
2.61 "WebXpress Charged" Seal. Licensee shall insert and maintain the
"WebXpress Charged" seal (the "Seal") within the Integrated Product such that
users of the Integrated Product are exposed to the Seal during normal use of the
product. The Seal shall at least be featured under any "About" menu item
describing the Integrated Product's release details. Licensee shall insert and
maintain the Seal within related marketing materials for the Integrated Product
including Licensee's website. The Seal is available to the Licensee from the
WebXpress website at http://www.weblogic.com.
------------------------
2.62 Quality Control Provisions. The use of WebXpress's marks
pursuant to Sections 2.5 and 2.6 in the Licensee Application(s) shall be of at
least the same quality as Licensee's use in their other products of
3.
<PAGE>
a similar nature, or, if Licensee has no other products of a similar nature, the
use of WebXpress's marks pursuant to Sections 2.5 and 2.6 in the Licensee's
Applications shall be of at least the same quality as the average quality of
other products of a similar nature which are generally available to the public.
2.63 Licensee agrees to include a referral to the WebXpress website
on the Licensee's website.
2.7 Ownership. The WebXpress Software is licensed, not sold to Licensee.
Except as specifically licensed to Licensee hereunder, WebXpress retains all
right, title and interest, including all intellectual property rights, in and to
the WebXpress Software.
2.8 Evidence of Compliance. Upon reasonable request of WebLogic, Licensee
shall promptly, and in any event within thirty (30) days, provide WebLogic with
any and all evidence reasonably necessary to confirm Licensee's compliance with
the provisions of Sections 2.1 through 2.6.
3. Royalties and Support Fees.
3.1 Royalty and Support Fees. Licensee shall owe to WebXpress royalties
and support fees as set forth on Schedule C. All royalties and support fees will
be paid on a calendar quarterly basis within 30 days after the end of the
quarter. Included with the payment, Licensee will provide WebXpress a report
containing the number of customers (including End-Users, ISV's and Distributors)
receiving the Integrated Product and the quantity shipped in the previous
quarter.
3.2 Audit. Licensee shall maintain complete and accurate accounting and
distribution records, in accordance with generally accepted accounting
practices, to support and document royalties payable in connection with this
Agreement. Such records shall be retained for a period of three (3) years after
the royalties which relate to such records have been accrued and paid. Licensee
shall, upon written request from WebXpress, provide access to such records to an
independent auditor chosen by WebXpress and reasonably acceptable to Licensee
for the purposes of audit. If any such audit discloses a shortfall in payment to
WebXpress of more than [...***...] for any quarter, Licensee agrees to pay or
reimburse WebXpress for the expenses of such audit. If any such audit discloses
a shortfall in payment to WebLogic, which is not related to an accounting error,
of more than [...***...] and [...***...] for any quarter, WebLogic may terminate
this Agreement.
3.3 Taxes. Licensee shall complete the Resale Certificate attached in
Schedule D. Licensee agrees to provide WebXpress with further documentation, as
reasonably necessary, supporting such status at WebXpress's expense. Licensee
shall be responsible for any sales or use or other taxes (other than taxes based
on WebXpress's net income) to the extent that any such taxes may arise in
connection with this Agreement. Licensee agrees that the amounts to be remitted
to WebXpress are to be the actual amounts due without withholding taxes or other
assessments by authorities anywhere in the foreign location. If any withholding
tax is imposed under the laws of a country or other taxing jurisdiction outside
of the United States on any amounts paid to the WebXpress, such amounts will be
increased by the amount of the withholding tax. Licensee shall be solely
responsible for and shall pay any and all amounts
[...***...] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
4.
<PAGE>
required in the foreign location to be withheld, charged, deducted, or assessed
against such payment amounts, and will promptly furnish WebXpress with
certificates evidencing payment of such amounts.
4. Warranties and Support.
4.1 Limited Warranty. WebXpress warrants that for a period of ninety (90)
days following delivery to Licensee, the WebXpress Software will perform
substantially in accordance with the accompanying WebXpress Documentation.
WebXpress does not warrant that the WebXpress Software will be error-free or
will operate without interruption. Licensee's exclusive remedy for breach of the
warranty contained in this Section 4.1 shall be the prompt correction of any
such failure to perform.
4.2 WebXpress Warranty Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN
SECTION 4.1, WEBLOGIC HEREBY DISCLAIMS ALL OTHER WARRANTIES EXPRESS, IMPLIED, OR
STATUTORY, WITH RESPECT TO THE WEBLOGIC SOFTWARE, INCLUDING BUT NOT LIMITED TO
IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NONINFR1NGEMENT.
4.3 Service and Support. Subject to payment of any applicable support fees
set forth in Schedule C by Licensee, WebXpress agrees to provide support and
software upgrades as described in Schedule E.
4.4 End-User Support. Licensee shall, at its own expense, be solely
responsible for providing technical support (including without limitation
warranty service) and training to its Distributors and End-Users for the
Integrated Products. Licensee shall ensure that all questions from Distributors
or End-Users regarding the use or operation of the Integrated Products are
addressed to and answered by Licensee. WebXpress shall provide second-line
support to Licensee as set forth on Schedule E.
5. Indemnification.
5.1 WebXpress Indemnity. WebXpress shall indemnify, defend and hold
Licensee harmless from and against any claim that the WebXpress Software as used
within the scope of this Agreement infringes the copyright, trademark, trade
secret or patent issued as of the Effective Date of any third party, provided
that (i) Licensee notifies WebXpress promptly in writing of the claim; (ii)
WebXpress has sole control of the defense and all related settlement
negotiations; and (iii)Licensee provides WebXpress with all necessary
assistance, information, and authority to perform the above..
5.2 Exclusions. WebXpress shall have no liability for any claim of
infringement based on (i) use of other than a then currently supported version
of the WebLogic Software provided to Licensee, to the extent the infringement
would have been avoided by use of such version; (ii) modification of the
WebXpress Software by Licensee to the extent the infringement would have been
avoided without such modification; or (ii)the combination or use of the
WebXpress Software furnished hereunder with materials not furnished by WebXpress
to the extent such infringement would have been avoided by use of the WebXpress
materials alone..
5.
<PAGE>
5.3 Alternatives. In the event the WebXpress Software is held to, or
WebXpress believes is likely to be held to, infringe any third party copyright,
trademark, trade secret or United States patent issued as of the Effective Date,
WebXpress shall have the right at its sole option and expense to (i) substitute
or modify the WebXpress Software so that it is non-infringing, while retaining
equivalent features and functionality; or (ii)obtain for Licensee a license to
continue using the WebXpress Software under commercially reasonable terms; or
(iii) if (i) and (ii) are not reasonably practicable, terminate this Agreement
as to the infringing WebXpress Software and return to Licensee any license fees
paid by Licensee hereunder with respect thereto, amortized over a period of
three years, which period the parties agree is represents the useful life of the
WebXpress Software.
5.4 Sole Obligation. The foregoing states the sole obligation and
exclusive liability of WebXpress, and Licensee's sole recourse and remedy for
any infringements or claims of copyright and patent infringement by the
WebXpress Software.
5.5 Licensee Indemnity. Licensee agrees to indemnify, defend and hold
WebXpress harmless from and against any costs, losses, liabilities, claims or
expenses (including attorneys' fees) arising out of: (i) any claim that any
Integrated Product infringes upon the intellectual property or proprietary
rights of any third party, except to the extent such arises from infringement of
such rights by the WebLogic Software: (ii) the distribution of any Integrated
Product by Licensee or its Distributors; or (iii) the use of any Integrated
Product by any End- User, Distributor or third party. Notwithstanding the
foregoing, Licensee will not have any , ,, indemnification liability to
WebXpress to extent that a claim by a third party is based on a failure of the
WebXpress Software to operate in accordance with the WebXpress Documentation.
Nothing in this Section 5.5 shall be construed to be an extension of WebXpress's
warranty obligations set forth in Section 5.1. The foregoing indemnity states
the sole obligation and exclusive liability of Licensee, and WebXpress's sole
recourse and remedy for any infringements or claims of copyright and patent
infringement by the Integrated Products.
6. Term and Termination.
6.1 Initial Term. This Agreement shall become effective on the Effective
Date and shall remain in effect for a period of three (3) years and six (6)
months thereafter unless the Agreement is terminated as provided below.
6.2 Termination.
6.2.1 Breach. 'If either party defaults in a payment or other material
obligation under this Agreement and, in the case of breaches capable of cure,
fails to completely cure such default for a period of thirty (30) days after
written notice of default from the non-breaching party, the non-breaching party
may terminate this Agreement, in accordance with the provisions of this Section
6, upon written notice of termination given to the defaulting party.
6.2.2 Insolvency. Notwithstanding anything contained herein to the
contrary, either party may terminate this Agreement immediately by notice to the
other if:
(i) the other ceases to carry on its business; or (ii) a
receiver or similar officer is appointed for the other and is not discharged
within thirty (30) days; or
6.
<PAGE>
(ii) the other becomes insolvent, admits in writing its
inability to pay debts as they mature, is adjudicated bankrupt, or makes an
assignment for the benefit or its creditors or another arrangement of similar
import; or
(iii) proceedings under bankruptcy or insolvency laws are
commenced by or against the other and are not dismissed within (30) days.
6.3 Effect Of Termination. Upon termination of this Agreement, (i) the
rights and licenses granted to Licensee pursuant to this Agreement shall
automatically terminate, (ii) Licensee shall certify to WebXpress that all
WebXpress Software subject to this Agreement and in Licensee's possession has
been destroyed or removed from Licensee's equipment and (iii) Licensee shall
cease to use all intellectual property of WebXpress. Within thirty (30) days of
termination, Licensee shall provide to WebXpress a royalty report and pay all
royalties accruing as of the date of termination, in accordance with Section
3.1. All licenses granted to End-User pursuant to appropriate End-User License
Agreements shall survive expiration or termination. Sections I, 2.7, 3, 4.2,
4.4, 5, 6.3, 7, 8 and 9 shall survive the expiration or earlier termination of
this Agreement.
7. Confidentiality.
7.1 Definition. For purposes of this Agreement, "Confidential Information"
of a party means information or materials disclosed or otherwise provided by
such party ("Disclosing Party") to the other party ("Receiving Party") that are
identified as confidential or proprietary. "Confidential Information" does not
include that which (i)was known to the Receiving Party, without restriction and
without duty of confidentiality, at the time of disclosure, as evidenced by the
written records of Receiving Party, (ii) is or becomes part of public knowledge
other than as a result of any action or inaction of the Receiving Party, (iii)
is obtained by the Receiving Party from an unrelated third party without a duty
of confidentiality, or (iv) is independently developed by the Receiving Party
without reliance upon or use of the Confidential Information of the Disclosing
Party. Without limiting the generality of the foregoing, and notwithstanding the
exclusions hereinbefore set forth, "Confidential Information" of WebXpress
includes the WebXpress Software and any information relating to the development,
design, manufacture and specifications of WebXpress Software.
7.2 Restrictions on Use and Disclosure. The Receiving Party shall
not use Confidential Information of the Disclosing Party for any purpose other
than in furtherance of this Agreement and the activities described herein. The
Receiving Party shall not disclose Confidential Information of the Disclosing
Party to any third parties except as otherwise permitted hereunder. The
Receiving Party may disclose Confidential Information of the Disclosing Party
only to those employees, consultants or sub-Licensees who have a need to know
such Confidential Information and who are bound to retain the confidentiality
thereof under provisions (including, without limitation, provisions relating to
nonuse and nondisclosure) no less restrictive than those required by the
Receiving Party for its own comparable Confidential Information. The Receiving
Party shall maintain Confidential Information of the Disclosing Party with at
least the same degree of care it uses to protect its own proprietary information
of a similar nature or sensitivity, but no less than reasonable care under the
7.
<PAGE>
circumstances. Any copies of the Disclosing Party's Confidential Information
shall be identified as belonging to the Disclosing Party and prominently marked
"Confidential."
7.3 Legal Obligation to Disclose. This Agreement will not prevent the
Receiving Party from disclosing Confidential Information of the Disclosing Party
to the extent required by a judicial order or other legal obligation, provided
that, in such event, the Receiving Party shall promptly notify the Disclosing
Party to allow intervention, and shall cooperate with the Disclosing Party to
contest or minimize the scope of the disclosure (including application for a
protective order). Each party shall advise the other party in writing of any
misappropriation or misuse of Confidential Information of the other party of
which the notifying party becomes aware.
7.4 Injunctive Relief. Each party acknowledges that the Confidential
Information of the Disclosing Party are valuable trade secrets the Disclosing
Party and that any unauthorized use or disclosure of such information would
cause the Disclosing Party irreparable harm for which its remedies at law would
be inadequate. Accordingly, the Receiving Party acknowledges and agrees that the
Disclosing Party shall be entitled, in addition to any other remedies available
to it at law or in equity, to seek the issuance of injunctive or other equitable
relief.
7.5 Return of Confidential Information. Upon the expiration or earlier
term of this Agreement, each party (as Receiving Party) shall immediately return
to the Disclosing Party all Confidential Information of the Disclosing Party
embodied in tangible form, or certify in writing to the Disclosing Party that
all such Confidential Information has been destroyed. The terms of this Section
7 shall survive the expiration or earlier termination of this Agreement for a
period of five (5) years.
7.6 Source Code Protections. Licensee shall not under any circumstances
attempt, or knowingly permit or encourage any End-User, Distributor or third
party to decompile, decipher, disassemble, reverse engineer or otherwise decrypt
or discover the source code for the WebXpress Software.
8. Limitation of Liability.
EXCEPT FOR BREACHES OF SECTION 2 OR SECTION 7, IN NO EVENT SHALL EITHER
PARTY HAVE ANY LIABILITY FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES IN ANY WAY ARISING OUT OF THIS AGREEMENT AND HOWEVER CAUSED AND UNDER
ANY THEORY OF LIABILITY, INCLUDING BUT NOT LIMITED TO LOSS OF PROFITS OR LOSS OF
DATA, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
EXCEPT FOR BREACHES OF SECTION 2 OR SECTION 7 AND BOTH PARTIES OBLIGATIONS
PURSUANT TO SECTION 5, IN NO EVENT SHALL EITHER PARTY'S CUMULATIVE LIABILITY
ARISING OUT OF THIS AGREEMENT EXCEED THE AMOUNTS ACTUALLY PAID BY LICENSEE TO
WEBLOGIC PURSUANT TO THIS AGREEMENT. THESE LIMITATIONS SHALL APPLY
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY REMEDY.
8.
<PAGE>
9. Miscellaneous.
9.1 Confidentiality of Agreement. Both WebXpress and Licensee agree that
the terms and conditions of this Agreement shall be treated as Confidential
Information and that no reference to the terms and conditions of this Agreement
or to activities pertaining thereto can be made in any form without the prior
written consent of the other party; provided, however, that the existence of
this Agreement shall not be treated as Confidential Information and that either
party may disclose the terms and conditions of this Agreement:
(i) as required by any court or other governmental body;
(ii) as otherwise required by law;
(iii) to legal counsel of the parties;
(iv) in confidence, to accountants, banks, proposed investors, and
financing sources and their advisors;
(v) in confidence, in connection with the enforcement of this
Agreement or rights under this Agreement; or
(vi) in confidence, in connection with a merger or acquisition or
proposed merger or acquisition, or the like.
(vii) to the extent permitted by Licensee's labeling requirement and
marketing obligations under this Agreement.
9.2 Press Release. Upon mutual agreement, WebXpress and Licensee shall
issue a joint press release announcing the relationship contemplated by this
Agreement with mutual endorsements for Integrated Products and WebXpress
Software.
9.3 Customer Reference. The Licensee agrees that WebXpress may disclose
the name of the Licensee as a customer on the WebXpress web site and on other
promotional materials. Licensee further agrees to provide WebXpress with the
following customer reference information for possible use on WebXpress's web
site and on other promotional material in conjunction with the Licensee's name a
brief marketing summary of the Licensee's Integrated Products under this
Agreement. Licensee agrees to discuss the WebXpress Software with the press,
industry analysts and prospective (non-competitive) customers on a limited basis
to be mutually agreed upon by both parties.
9.4 Assignment. Licensee may not assign this Agreement or any rights or
obligations hereunder, by operation of law or otherwise, without the prior
written consent of WebXpress, which shall not be unreasonably withheld.
Notwithstanding the foregoing, Licensee may assign this Agreement in connection
with a merger or sale of substantially all its assets.
9.5 Notices. All notices between the parties shall be in writing and shall
be deemed to have been given if personally delivered or sent by certified or
registered mail (return receipt)
9.
<PAGE>
or telecopy to the addresses set forth as follows, or such other address as is
provided by notice as set forth herein:
If to WebXpress to: Contract Administrator
550 California Street
San Francisco, CA ,94104
If to Licensee to: Chief Financial Officer
Blue Martini Software, Inc.
2600 Campus Drive, Suite 175
San Mateo, CA 94403
Notices shall be deemed effective upon receipt or, if delivery is not effected
by reason of some fault of the addressee, when tendered.
9.6 Governing Law; Forum Selection. This Agreement shall be governed by
the laws of the State of California, as applied to agreements made, entered into
and performed entirely in California by California residents. All disputes
arising out of this Agreement shall be subject to the exclusive jurisdiction and
venue of the California state courts of San Francisco County, California (or, if
there is exclusive federal jurisdiction, the United Stated District Court for
the Northern District of California), and the parties consent to the personal
and exclusive jurisdiction of these courts. This Agreement shall not be governed
by the United Nations Convention on the International Sale of Goods.
9.7 Severability. Any term or provision of this Agreement held to be
illegal or unenforceable shall, if possible, be interpreted so as to be
construed as valid, but in any event the validity or enforceability of the
remainder hereof shall not be affected.
9.8 Legal Compliance. Licensee may not download or otherwise export or re-
export the WebXpress Software or any underlying information or technology except
in full compliance with all United States and other applicable laws and
regulations. In particular, but without limitation, none of the Software or
underlying information or technology may be downloaded or otherwise exported or
re-exported (i) into (or to a national or resident of) Cuba, Iran, Iraq, Libya,
North Korea, Syria, or Sudan, or (ii) to anyone on the US Treasury Department's
list of Specially Designated Nationals or the US Commerce Department's Table of
Deny Orders. By licensing the Software, Licensee is agreeing to the foregoing
and Licensee are representing and warranting that Licensee are not located in,
under control of, or a national or resident of any such country or on any such
list.
9.9 Waiver. The waiver of, or failure to enforce, any breach or default
hereunder shall not constitute the waiver of any other or subsequent breach or
default.
9.10 Independent Contractors. The relationship of the parties hereunder
shall be that of independent contractors, and nothing herein shall create or be
deemed to create a joint venture, partnership, agency or employer/employee
relationship. In no event will either party be permitted to make any agreement,
or represent that it is authorized to make any agreement, on behalf of the other
party, without the prior written consent of such other party.
10.
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9.11 Escrow. Within thirty (30) days of the Effective Date of this
Agreement. WebXpress and Licensee shall enter into a source code escrow
agreement (the "Escrow Agreement") with an independent third party escrow agent
in the business of providing escrow services (the "Escrow Agent"), which
agreement shall provide as follows:
9.11.1 Deposit. The Escrow Agreement shall provide that WebXpress
shall deposit the source code for the WebXpress Software and any updates
provided to Licensee hereunder with the Escrow Agent promptly after final
delivery of the corresponding object or executable code to Licensee.
9.11.2 Release. The Escrow Agreement shall provide that the Escrow
Agent shall release WebXpress's source code to Licensee if any one of the
following circumstances remains uncorrected for more than 30 days: (i)
appointment of a trustee under Chapter 7 of Title 11 of the United States Code;
(ii) the making by WebXpress of a general assignment for the benefit of
creditors; (iii). WebXpress is in material breach of its support obligations
pursuant to Schedule E and has failed to cure such breach within thirty (30)
days after notification by Licensee.
9.11.3 License. The Escrow Agreement shall provide that WebXpress
grants Licensee a worldwide, non-exclusive, paid-up and royalty-free, perpetual,
non-transferable license to use, reproduce and modify the released source code,
solely for the purpose of supporting and maintaining the WebXpress Software.
Licensee will agree in the Escrow Agreement not to exercise this license unless
the source code is released.
9.11.4 Fees. Licensee shall pay all reasonable fees and expenses for
such escrow arrangement, including set-up fees, not to exceed fifteen hundred
dollars ($1,500), and annual maintenance fees, not to exceed seven hundred fifty
dollars ($750). WebXpress shall pay amounts above such limits.
11.
<PAGE>
9.12 Entire Agreement. This Agreement, along with the Schedules attached
hereto which are incorporated herein by reference, sets forth the entire
Agreement between the parties and supersedes any and all prior proposals,
agreements, and representations between them, whether written or oral. This
Agreement may be changed only by mutual agreement of the parties in writing.
In Witness Whereof, the parties hereto have caused this Agreement to be
signed by duly authorized officers or representatives as of the Effective Date.
BEA WebXpress, Inc. Licensee
By: /s/ Randy Risher By: /s/ William Evans
-------------------------- -------------------------
Name: Randy Risher Name: William Evans
----------------------- -----------------------
Title: Director F + A Title: VP, Marketing
---------------------- ----------------------
Date: 1/29/99 Date: January 29, 1999
----------------------- -----------------------
12.
<PAGE>
Schedule A
WEBXPRESS SOFTWARE
WebXpress Software covered by this Agreement:
WebLogic Application Server (formerly Tengah) on all supported platforms
License Restriction: Licensee will incorporate code provided by WebXpress into
the Integrated Products which will make tine WebXpress Software nonfunctional
without the presence of the Integrated Products. In addition, Licensee will
insure the WebXpress API's are not accessible to Licensee's customers.
13.
<PAGE>
Schedule B
INTEGRATED PRODUCTS
Integrated Products covered by this Agreement:
All products of the Blue Martini Software E-Merchandising System (known by this
or some other name as shall be designated by Blue Martini Software from time to
time) including the Merchandise Management Module, the Customer Management
Module, the WebStore Operations Module, the Micro Marketing Module, and the
Tools Module.
The following describes the function and purpose of each of the Integrated
Products covered by this Agreement:
Blue Martini Software E-Merchandising System is a software solution for direct-
to-consumer e-commerce and includes all the functionality of an Internet
commerce server for displaying catalog items, descriptions and prices;
calculating tax; managing sales and returns; managing the definition of
merchandise assortments, promotions, and cross-product relationships; and
managing customer identities and attributes and programs specific to customers
such as frequent- buyer programs.
14.
<PAGE>
Schedule C
ROYALTIES AND SUPPORT FEES
C.1. Royalties:
----------
Licensee will pay royalties based upon a percentage of [...***...] in accordance
with the following schedule (subject to a minimum royalty per transaction as
stated below):
Minimum
Cumulative Percent of Royalty
Royalties Paid [...***...] Per Transaction
---------------------- ---------------- ------------------
[...***...] [...***...] [...***...]
[...***...] [...***...] [...***...]
[...***...] [...***...] [...***...]
[...***...] [...***...] [...***...]
For the purposes of this Agreement, [...***...].
The Minimum Royalty shall not apply to those Transactions by Licensee for which
no WebXpress software is included in the software sold. No royalties will be
owed on marketing, demonstration, training and customer evaluation licenses of
the Integrated Product.
C.2. Annual Support Fees:
--------------------
Annual Support Fees are [...***...] of royalties. The annual support fees for
subsequent years will be [...***...] of the royalties paid by Licensee under
Section C.1 for copies of the Integrated Product for which Licensee has a
maintenance agreement in place with the End User during such year. Such fees
will be payable on a quarterly basis. Licensee shall provide to WebXpress,
along with each payment, a report summarizing the number of End Users with
maintenance agreements that form a basis for such payment.
C.3. Royalty for Use of RSA's SSL Product:
-------------------------------------
If in the future Licensee elects to license the RSA SSL Product from WebXpress,
then in addition to the Royalties described above, Licensee must pay [...***...]
and [...***...] per year for unlimited clients to WebXpress pursuant to
WebXpress's License Agreement with RSA.
[...***...] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
15.
<PAGE>
C.4. Commitment:
-----------
Licensee will commit to purchasing [...***...] in royalty and support, which
will be applied towards purchases of WebXpress Software and support licensed
under this agreement. This commitment is non-cancelable. Payment terms for
this commitment are [...***...] net [...***...] days from Effective Date and
[...***...] net [...***...] days. These payments are non-refundable.
C.5. Development Licenses:
---------------------
In order for Licensee to continue to develop and test the WebXpress Software
with the Integrated Product, Licensee will purchase the following development
licenses:
Effective
List Price Discount Unit Price Price
3 Development Servers [...***...] [...***...] [...***...] [...***...]
16 Developer Seats [...***...] [...***...] [...***...] [...***...]
------------
SUBTOTAL [...***...]
Annual Support [...***...]
------------
[...***...]
TOTAL DUE [...***...]
Less Discount on License Fees [...***...]
------------
Total Due on an annual basis for Support [...***...]
------------
Payment for support will be net [...***...] days from initial invoicing by
WebXpress. Subsequent years annual support payments will be net [...***...]
days. WebXpress will deliver license keys for these licenses on the Effective
Date of this agreement.
In addition, when Licensee has shipped the licenses corresponding to the first
[...***...] in royalties paid (or prepaid), Licensee will have the right to
receive licenses for Development Servers and Development Seats at no charge, but
must notify WebXpress of their election to put into service such licenses and
must pay annual support of [...***...] of the Effective Unit Price of the
applicable licenses. The development software is not to exceed [...***...]
Development Servers, and [...***...] Development Seats over the term of the
contract.
These licenses will be subject to WebXpress's Standard Software License
Agreement located on the WebXpress website at
http://www.weblogic.com/licagree.html.
[...***...] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
16.
<PAGE>
Schedule D
RESALE CERTIFICATE
WE HEREBY CERTIFY that we hold a valid seller's permit No.______________ issued
pursuant to laws and regulations governing Sales and Use Tax in the state of
; that we are engaged in the business of selling:______________________________
_______________________________________________________________________________
that the products described within this ISV Software License Agreement, which
we shall license from WebXpress, will be resold by us { licensed to our
customers}, in accordance with the terms of the Agreement. A Description of the
products to be licensed from WebXpress is contained in the relevant schedule of
the Agreement.
___________________________________________
(Signature of Purchaser or Authorized Agent)
___________________________________________
(Title)
17.
<PAGE>
Schedule E
SERVICE AND SUPPORT TERMS
WebXpress shall provide product support to Licensee to support its integration
of WebXpress Software into Licensee's applications. Support means that WebXpress
will provide: (a) software upgrades and product enhancements upon their
commercial release, and appropriate documentation with respect thereto, and (b)
technical assistance with respect to the WebXpress Software, including (i)
clarification of functions and features; (ii) clarification of documentation;
(iii) technical support and guidance in the operation of the WebXpress Software;
and (iv) WebXpress Software error analysis and correction. Major product
releases are not covered by the Service and Support contract, and WebXpress
retains the right to determine in its sole discretion if a release constitutes
an upgrade to an existing product or a new product release. WebXpress will use
commercially reasonable efforts to provide error corrections or work-arounds for
the most severe errors as soon as possible and based upon WebXpress
classification of the severity of the error.
Support shall be provided in compliance with Severity definitions and Escalation
guidelines as defined in Sections IV and V of this Schedule.
I. Engineering Contacts - Licensee will designate no more than 5 individuals
who will be responsible for communicating and escalating support issues
between the companies.
II. Reporting Issues - Licensee will report support requests via email or phone
as convenient. Licensee agrees to provide WebXpress with all the necessary
information to resolve the reported issue. This may include: issue
classification, test cases for isolating and reproducing the issue and
other issue documentation.
III. Phone coverage - WebXpress's Support Center is staffed Monday through
Friday from 7:00 a.m. to 7:00 p.m. Pacific Time. For off-hour emergencies,
procedures can be customized to Licensee's specific needs upon mutual
agreement.
IV. Issue Definition -
. Severity 1 - Issue that impacts Licensee's application development
schedule, or an End-User's production capability. A high severity issue is
an error that causes a major feature of-Licensee's product to be unusable
or causes irreparable loss of data and no recovery or work-arounds are
available.
. Severity 2 - Issue that results when a major feature is operational but
unstable or unreliable. Such error would not stop development.
. Severity 3 - Enhancements or defects that are targeted for updates, but do
not result in the loss of functionality in a major feature.
V. Escalation Guidelines - WebXpress's assigned Engineers will adhere to the
following timeframes for internal escalation of Licensee's support requests
in order to ensure maximum service responsiveness.
18.
<PAGE>
- ---------------------------------------------------------------------------
Severity Severity 1 Severity 2 Severity 3 Escalation Point
Definition for Sev. 1 issues
- ---------------------------------------------------------------------------
Initial Response 4 hours 8 hours 12 hours N/A
- ---------------------------------------------------------------------------
Level 1 - 24 hours 2 days 4 days Support Manager
problem
determination
- ---------------------------------------------------------------------------
Level 2 - 2 days 1 week 2 Support Manager
problem isolation
weeks
- ---------------------------------------------------------------------------
Level 3 - 7 days 3 weeks N/A Support Manager
Engineering
- ---------------------------------------------------------------------------
For Severity 1 Errors WebXpress will promptly initiate the following
procedures: (1) assign WebXpress specialists to correct the Error on an
expedited basis; (2) provide a report on the status of the progress of
correcting the Severity 1 Error every four (4) hours; and (3) commence to
provide a temporary workaround or fix. For Severity 1 issues, WebXpress agrees
to work continuously to resolve the issue.
If a reported Severity Level I Error in the WebXpress Software renders the
WebXpress Software inoperational, and WebXpress fails to make the WebXpress
Software operational, so that it operates in a manner reasonably acceptable to
Licensee and without loss of functionality, within 24 hours after WebXpress's
first response to Licensee's report of such Error, Licensee may request onsite
assistance. Upon this request, WebXpress will use its best efforts to respond
by having at least one (1) maintenance person trained in the WebXpress
Software at the installation site within twenty-four (24) hours of Licensee's
request for onsite service. If such problem is the result of Licensee use of a
WebXpress Software in a manner that is prohibited by its documentation or this
Agreement or unrelated to a WebXpress Software, Licensee shall reimburse
WebXpress at WebXpress's then current published standard rates for such
services and any reasonable and actual travel expenses incurred by WebXpress.
VI. WebXpress Version Support - WebXpress agrees to provide product support
to Licensee for the most current version and the previous two versions of
WebXpress products.. Notwithstanding the aforementioned, WebXpress shall
always support versions released within the last twelve months.
VII. Expanded support or technical assistance is available upon mutual
agreement of the parties at an additional charge in accordance with
WebXpress's then-current policy.
19.
<PAGE>
ADDENDUM TO ISV LICENSE AGREEMENT,
AMENDMENT NO. 1 TO THE
ISV SOFTWARE LICENSE AGREEMENT
THIS AMENDMENT NO.1 TO THE ISV SOFTWARE LICENSE AGREEMENT ("Amendment No. 1") is
made and entered into as of the 28th day of July, 1999 (the "First Amendment
Date"), by and between BEA WEBEXPRESS, INC., a Delaware corporation with offices
at 550 California Street, San Francisco, CA ("WebXpress"), and BLUE MARTINI
SOFTWARE, an Delaware corporation with principal offices at 2600 Campus Drive,
Suite 175, San Mateo, CA 94403 ("Licensee").
RECITALS
WHEREAS, WebXpress and Licensee have entered into that certain ISV
Software License Agreement, dated January 29, 1999 (the "Agreement"), which
Agreement provides for the licensing of certain WebXpress Software (as defined
in the Agreement) for the purpose of integrating such WebXpress Software into
the Integrated Product (as defined in the Agreement) for distribution by
Licensee.
WHEREAS, WebXpress and Licensee would like to modify the license and
support fee terms of the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
representations contained herein, the parties hereby agree to amend the
Agreement as follows.
1. AMENDED WEBXPRESS SOFTWARE AND ROYALTIES AND SUPPORT FEES: Schedule A and
Section C.1. of Schedule C of the Agreement are deleted and replaced with the
following:
SCHEDULE A
WEBXPRESS SOFTWARE
WebXpress Software covered by this Agreement:
WebLogic Application Server
WebLogic Application Server w/clustering
<PAGE>
SCHEDULE C
ROYALTIES AND SUPPORT FEES
C.1. Royalties
Licensee will pay royalties based upon a percentage of [...***...] in
accordance with the following schedules (subject to a minimum royalty per
transaction as stated below):
For Modules Incorporating WebLogic Application Server
- --------------------------------------------------------------------------------
CUMULATIVE ROYALTIES PERCENT OF [...***...] MINIMUM ROYALTY PER
PAID TRANSACTION
- --------------------------------------------------------------------------------
[...***...] [...***...] [...***...]
- --------------------------------------------------------------------------------
[...***...] [...***...] [...***...]
- --------------------------------------------------------------------------------
[...***...] [...***...] [...***...]
- --------------------------------------------------------------------------------
[...***...] [...***...] [...***...]
- --------------------------------------------------------------------------------
For Modules Incorporating WebLogic Application Server w/clustering
- --------------------------------------------------------------------------------
CUMULATIVE ROYALTIES PERCENT OF [...***...] MINIMUM ROYALTY PER
PAID TRANSACTION
- --------------------------------------------------------------------------------
[...***...] [...***...] [...***...]
- --------------------------------------------------------------------------------
[...***...] [...***...] [...***...]
- --------------------------------------------------------------------------------
[...***...] [...***...] [...***...]
- --------------------------------------------------------------------------------
[...***...] [...***...] [...***...]
- --------------------------------------------------------------------------------
For the purposes of this Agreement, [...***...].
The Minimum Royalty shall not apply to those Transactions by Licensee for which
no WebXpress software is included in the software sold. No royalties will be
owed on marketing, demonstration, training and customer evaluation licenses of
the Integrated Product.
[...***...] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
2. FULL FORCE AND EFFECT. Except as specifically modified by this Amendment No.
1, the terms of the Agreement are and shall remain in full force and effect.
IN WITNESS WHEREOF, the each of the parties hereto has caused this
Amendment No. 1 to be executed by a duly authorized officer or representative as
of the First Amendment Date.
BEA WEBXPRESS, INC. BLUE MARTINI SOFTWARE, INC.
By: /s/ Randy Risker By: /s/ William Evans
-------------------------- --------------------------
Name: Randy Risker Name: William Evans
------------------------ ------------------------
Title: Director, F & A Title: VP, Marketing
----------------------- -----------------------
Date: 7/15/99 Date: July 13, 1999
------------------------ ------------------------
<PAGE>
SECOND AMENDMENT
TO
ISV AGREEMENT
This Second Amendment (this "Second Amendment") is entered into as of
January 31, 2000 ("Amendment Date") between Blue Martini Software a Delaware
corporation with offices at 2600 Campus Drive, Suite 175, San Mateo, California
94403 ("Licensee"), and WebXpress, a BEA Company and Delaware Corporation
("WebXpress").
RECITALS
--------
A. License and WebXpress signed an ISV Agreement on January 29, 1999 ("ISV
Agreement") and a First Amendment dated as of July 28, 1999 ("First Amendment")
which ISV Agreement provides for the licensing of certain WebXpress Software (as
defined in the ISV Agreement) for the purpose of integrating such WebXpress
Software into the Integrated Product (as defined in the ISV Agreement) for
distribution by Licensee.
B. WHEREAS, Licensee and WebXpress now desire to amend the ISV Agreement
as hereinafter provided.
NOW, THEREFORE, in consideration of the promises included herein and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT
---------
1. Term. Section 6.1, Initial Term, of the ISV Agreement is revised to
---- ------------
read:
"This Agreement shall become effective on the Effective Date and shall
remain in effect for a period of four (4) years and six (6) months
thereafter unless the Agreement is terminated as provided below.
2. Royalties and Support Fees. Section 3.1, Royalty and Support Fees, of
-------------------------- ------------------------
the ISV Agreement is revised by the addition of the following sentence:
"The royalties and applicable support fees due to WebXpress shall only
accrue against the use or distribution of Licensee's Integrated
Products; that is on those transactions by Licensee for which WebXpress
software is included embedded in Licensee's product."
3. Schedule C. Section C.1, Royalties, of the ISV Agreement is deleted and
---------- ---------
replaced by the following:
<PAGE>
"Licensee will pay royalties based upon a percentage of [...***...] of the
Integrated Product in accordance with the following schedule (subject to a
minimum royalty per transaction as stated below):
For Licensee's Integrated Product incorporating WebLogic Application Server
and WebLogic Application Server with Clustering
Cumulative Percent of Minimum Royalty
Royalties Paid [...***...] Per Transaction
-------------- ----------- ---------------
[...***...] [...***...] [...***...]
[...***...] [...***...] [...***...]
[...***...] [...***...] [...***...]
[...***...] [...***...] [...***...]
For the purposes of this ISV Agreement, [...***...].
The Minimum Royalty shall not apply to those Transactions by Licensee for
which no WebXpress software is included in the software sold. No royalties
will be owed on marketing, demonstration, training and customer evaluation
licenses of the Integrated Product.
In addition, WebXpress acknowledges that Licensee may commingle the
WebLogic Application Server and WebLogic Application Server with Clustering
in their Integrated Products.
Furthermore, for the purposes of this ISV Agreement, WebXpress shall allow
Licensee to distribute their Integrated Products on a rental basis to their
end-users for prototype development, (through Licensee's "Incubator
Program"). So long as any such rental period does not exceed twelve (12)
months for any individual Licensee end user participation in the Incubator
Program there shall be no minimum royalty fee for such Integrated
Product."
4. Schedule C. Section C.4, Commitment, of the ISV Agreement is supplemented
---------- ----------
by the following:
"Pursuant to this Second Amendment Licensee will commit to purchasing
[...***...] in royalty and support, which will be applied towards
additional purchases of WebXpress Software and support licensed under
this ISV Agreement. This commitment is non-cancelable. Payment terms for
this commitment are net 30 days from Effective Date of this Second
Amendment. These payments are non-refundable."
[...***...] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
5. Entire Agreement. This Second Amendment together with the ISV Agreement
----------------
constitutes the entire agreement between the parties with respect to the subject
matter hereof.
6. Effect of Amendment. Except as modified by this Second Amendment, all terms
and conditions of the ISV Agreement, as amended, shall remain in full force and
effect.
Each of the undersigned represents and warrants that he or she is duly
authorized to sign this First Amendment on behalf of the party he or she
represents. Each party has read, understands and agrees to the terms and
conditions of this First Amendment. This first Amendment may be executed in any
number of counterparts, all of which shall constitute together one and the same
agreement.
Blue Martini Software, LICENSEE WEBXPRESS, A BEA COMPANY
by: /s/ Scott D. Hanham By: /s/ Matthison S. Gassu
------------------------------ ---------------------------
Name: Scott D. Hanham Name: Matthison S. Gassu
---------------------------- -------------------------
Title: VP, Product Development Title: SVP WW Ops
--------------------------- ------------------------
<PAGE>
EXHIBIT 10.14
February 24, 2000
John E. Calonico, Jr.
301 Laurel Avenue
Millbrae, California 94030
Re: Employment Terms
Dear John,
Blue Martini Software, Inc. ("BMS") is pleased to offer you the position of
Chief Financial Officer on the terms as described in your offer letter dated
March 10, 2000. In addition to the letter referenced, your employment includes
the following term:
. if you are terminated from BMS without cause at any time in your employment,
you will be eligible to receive a severance payment equal to 6 months of your
base salary at the time of termination. If you resign from the company at any
point, a severance payment will not be paid. This severance payment will be
your only benefit or payment upon termination, and you will not be entitled
to any additional stock vesting upon termination of employment for any
reason. "Cause" shall mean the occurrence of one or more of the following:
(i) your conviction of a felony or a crime involving moral turpitude or
dishonesty; (ii) your participation in a fraud or act of dishonesty against
the Company; (iii) your intentional and material damage to the Company's
property; or (iv) a material breach by you of this Agreement, the Company's
written policies, or the Employee Proprietary Information and Inventions
Agreement that is not remedied by you within fourteen (14) days of written
notice of such breach from the Board. It shall be a condition to your receipt
of such severance that you enter into a release agreement acceptable to the
Company.
We look forward to your favorable reply and to a productive and enjoyable
working relationship.
Very truly yours,
/s/ Monte Zweben
Monte Zweben
CEO and President
I accept the employment terms stated in this letter, and expect to commence
employment on February 24, 2000.
/s/ John Calonico Jr.
- ----------------------------------
Candidate's Signature
Date: 2/24/00
-----------------------------
<PAGE>
Exhibit 23.1
The Board of Directors
Blue Martini Software, Inc.
We consent to the use of our reports included herein and to the references
to our firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.
/s/ KPMG LLP
Mountain View, California
May 2, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999 DEC-31-1999 DEC-31-2000
<PERIOD-START> JUN-05-1998 JAN-01-1999 JAN-01-1999 JAN-01-2000
<PERIOD-END> DEC-31-1998 DEC-31-1999 MAR-31-1999 MAR-31-2000
<CASH> 261 10,362 3,812 11,886
<SECURITIES> 0 2,562 0 1,746
<RECEIVABLES> 130 3,874 932 6,986
<ALLOWANCES> 0 0 0 429
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 439 17,229 5,341 21,672
<PP&E> 144 3,557 746 6,527
<DEPRECIATION> 8 796 43 1,375
<TOTAL-ASSETS> 742 20,360 6,212 27,788
<CURRENT-LIABILITIES> 386 9,521 1,922 20,649
<BONDS> 0 0 0 0
0 0 0 0
1 6 4 6
<COMMON> 30 31 8 35
<OTHER-SE> 286 10,258 4,055 6,496
<TOTAL-LIABILITY-AND-EQUITY> 742 20,360 6,212 27,788
<SALES> 0 0 0 0
<TOTAL-REVENUES> 0 11,232 241 10,681
<CGS> 0 6,148 113 6,779
<TOTAL-COSTS> 1,160 21,413 1,634 22,122
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 1 73 3 78
<INCOME-PRETAX> (1,145) (9,928) (1,362) (11,381)
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> (1,145) (9,928) (1,362) (11,381)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (1,145) (9,928) (1,362) (11,381)
<EPS-BASIC> (0.05) (0.43) (0.06) (0.45)
<EPS-DILUTED> (0.05) (0.43) (0.06) (0.45)
</TABLE>
